Date Requested: February 18, 2015
Time Requested: 10:24 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1495 Introduced SB34
CBD Subject: Tax


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 exempt sales of precious metals from the sales tax if the purchase is $5,000 or more and is an investment. The bill also defines the term “precious metal.”
    
    As written, the bill does not define “investment purposes.” Also, the bill defines “precious metal” to mean “gold, silver, platinum or other valuable metal.” Without certain definitions and clarifications including the forms in which precious metal can be purchased (e.g., bullion, coin, jewelry, etc.), the items that may be exempt upon passage of this bill may be very broad.
    
    Absent clear and unambiguous definitions as to what passage of this bill would exempt from the Consumers Sales and Service Tax (or complementary Use Tax), we are unable to accurately estimate the loss to the General Revenue Fund, but given the potential for broad application of the exemption the reduction in revenue could be substantial.
    
    Additional administrative costs to the State Tax Department resulting from passage of this bill could be significant due to lack of clear and unambiguous definitions as to what may be exempt.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


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


    As written, the bill does not define “investment purposes.” Also, the bill defines “precious metal” to mean “gold, silver, platinum or other valuable metal.” Without certain definitions and clarifications including the forms in which precious metal can be purchased (e.g., bullion, coin, jewelry, etc.), the items that may be exempt upon passage of this bill may be very broad.
    
    Absent clear and unambiguous definitions as to what passage of this bill would exempt from the Consumers Sales and Service Tax (or complementary Use Tax), we are unable to accurately estimate the loss to the General Revenue Fund, but given the potential for broad application of the exemption the reduction in revenue could be substantial.
    
    Additional administrative costs to the State Tax Department resulting from passage of this bill could be significant due to lack of clear and unambiguous definitions as to what may be exempt.
    



Memorandum


    The stated purpose of this bill is to exempt sales of precious metals from the sales tax if the purchase is $5,000 or more and is an investment.
    
    While the stated intent of this bill is to exempt sales of precious metals when purchased for investment purposes from West Virginia sales tax, for lack of certain definitions and clarification, the bill may lead to administrative difficulty in enforcement. The bill does not define "investment purposes" or "other valuable metal," and defines "precious metals" very broadly. The inclusion of "other valuable metal" might allow for the inclusion and exclusion of metals such as copper, depending on its market value. By including "investment purposes" in the bill, proof of said purpose may pose enforcement difficulties.
    
    The bill does not address the form the "precious metals" may take, for example: bullion, coin, jewelry, etc. In some cases, "collectable" coins may contain "precious metal," but derive some or most of their value as an investment from their rarity.
    



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