FISCAL NOTE



FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to reduce the Consumers Sales and Service Tax on food and food ingredients to 1.5%, beginning on January 1, 2012. As written, this bill would lower the Consumers Sales and Service Tax rate on food and food ingredients for home consumption. According to our interpretation, passage of this bill would establish the tax rate on food and food ingredients for home consumption at 1.5 percent, effective January 1, 2012. The 1.5 percent tax rate represents a reduction from the current tax rate of 3 percent and a reduction from the 2 percent tax rate that was previously enacted for implementation January 1, 2012 and included in the Governor's official revenue estimates for FY2012. The estimated revenue effects are shown below. Due to the mid-fiscal year effective date of the tax rate change and a one-month lag in tax collections, only a partial revenue impact will occur in FY2012 with FY2013 and subsequent years experiencing the full-year revenue reduction. Estimated 3% to 1.5% Fiscal Year Revenue Impact 2012 $16.5 million 2013+ $39.0 million Budgeted 3% to 2% Fiscal Year Revenue Impact 2012 $11.0 million 2013+ $26.0 million This Bill Net Impact Fiscal Year 2% to 1.5% 2012 $ 5.5 million 2013+ $13.0 million Additional administrative costs to the State Tax Department due to passage of this bill would be minimal. The State Tax Department had previously estimated that the tax rate reduction from 3 percent to 2 percent would increase administrative costs by roughly $74,000 in FY2012 due to notifying taxpayers of the rate change and for programming changes.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 74,000 0
Personal Services 0 0 0
Current Expenses 0 48,000 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 26,000 0
2. Estimated Total Revenues 0 -5,500,000 -13,000,000


Explanation of above estimates (including long-range effect):


The stated purpose of this bill is to reduce the Consumers Sales and Service Tax on food and food ingredients to 1.5%, beginning on January 1, 2012. As written, this bill would lower the Consumers Sales and Service Tax rate on food and food ingredients for home consumption. According to our interpretation, passage of this bill would establish the tax rate on food and food ingredients for home consumption at 1.5 percent, effective January 1, 2012. The 1.5 percent tax rate represents a reduction from the current tax rate of 3 percent and a reduction from the 2 percent tax rate that was previously enacted for implementation January 1, 2012 and included in the Governor's official revenue estimates for FY2012. The estimated revenue effects are shown below. Due to the mid-fiscal year effective date of the tax rate change and a one-month lag in tax collections, only a partial revenue impact will occur in FY2012 with FY2013 and subsequent years experiencing the full-year revenue reduction. Estimated 3% to 1.5% Fiscal Year Revenue Impact 2012 $16.5 million 2013+ $39.0 million Budgeted 3% to 2% Fiscal Year Revenue Impact 2012 $11.0 million 2013+ $26.0 million This Bill Net Impact Fiscal Year 2% to 1.5% 2012 $ 5.5 million 2013+ $13.0 million Additional administrative costs to the State Tax Department due to passage of this bill would be minimal. The State Tax Department had previously estimated that the tax rate reduction from 3 percent to 2 percent would increase administrative costs by roughly $74,000 in FY2012 due to notifying taxpayers of the rate change and for programming changes.



Memorandum






    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov