Date Requested: February 27, 2015
Time Requested: 02:54 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1351 Introduced HB2262
CBD Subject: Tax


FUND(S):

Local governments

Sources of Revenue:

Other Fund local governments

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 establish a procedure by which local governments may be authorized to levy a sales tax on food and beverages sold at restaurants. The bill provides for county and municipality options. The bill limits the total tax to three percent. The bill limits a municipal tax to two percent. The bill sets forth the procedures for counties and municipalities to use to impose the tax. The bill requires publication. The bill sets forth how the collected tax may be used. The bill sets forth apportionment of the tax between local jurisdictions. The bill sets forth exemptions from the tax. The bill defines terms. The bill provides criminal penalties.
    
    According to our interpretation, the bill does not affect state revenue as the amounts collected are immediately remitted to the county or municipality from which the funds originated. If local governments are able to levy a maximum three percent food and beverage tax, the maximum potential amount of revenue collected Statewide is estimated to be $60 million per year. This amount will be highly variable, as there are caveats to the collection and use of the funds. Municipalities may only collect the tax for themselves if the county has not sought to levy the tax itself. Municipalities are limited to a two percent tax on the gross amount charged for food and beverages. If the counties act first, they can collect the entire three percent of the tax. Twenty-five percent of these funds shall go to the county economic development authority, and, when the restaurants that the tax was collected from are within municipal borders, shall be remitted to the municipalities.
    
    There would be no additional administrative costs for the State Tax Department. However, local tax collectors would incur additional tax administrative costs.



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 60,000,000


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


    According to our interpretation, the bill does not affect state revenue as the amounts collected are immediately remitted to the county or municipality from which the funds originated. If local governments are able to levy a maximum three percent food and beverage tax, the maximum potential amount of revenue collected Statewide is estimated to be $60 million per year. This amount will be highly variable, as there are caveats to the collection and use of the funds. Municipalities may only collect the tax for themselves if the county has not sought to levy the tax itself. Municipalities are limited to a two percent tax on the gross amount charged for food and beverages. If the counties act first, they can collect the entire three percent of the tax. Twenty-five percent of these funds shall go to the county economic development authority, and, when the restaurants that the tax was collected from are within municipal borders, shall be remitted to the municipalities.
    
    There would be no additional administrative costs for the State Tax Department. However, local tax collectors would incur additional tax administrative costs.



Memorandum


    The stated purpose of this bill is to establish a procedure by which local governments may be authorized to levy a sales tax on food and beverages sold at restaurants. The bill provides for county and municipality options. The bill limits the total tax to three percent. The bill limits a municipal tax to two percent. The bill sets forth the procedures for counties and municipalities to use to impose the tax. The bill requires publication. The bill sets forth how the collected tax may be used. The bill sets forth apportionment of the tax between local jurisdictions. The bill sets forth exemptions from the tax. The bill defines terms. The bill provides criminal penalties.
    
    The bill does not conform to the Streamline Sales and Use Tax Agreement nor articles 15, 15A, or 15B of chapter 11. The proposed bill calls for the county commissions to collect the tax, contrary to W. Va. Code Chapter 11-15B-33. There are no provisions of notice as required by the Streamline Agreement. The bill does not provide or refer to requirements of rate and boundary changes under W. Va. Code Chapter 11-15B-35. The bill also does not take into account the exemptions under W. Va. Code Chapter 11-15B-34, which include wholesale sale of gasoline or special fuels, and the retail sale or transfer of vehicles, aircraft, watercraft, modular home, manufactured homes or mobile homes.
    
    Municipalities within a county that has not levied the proposed tax within a year following the effective date of the bill may establish a municipal tax at a rate up to two percent. The procedure is the same though no provision for administration is made. There are also no considerations for the allocation when municipalities move first to instill the two percent tax, and whether the county can then only instill a one percent tax for the rest of the county should the county decide to participate, or whether they can instill the three percent countywide and the municipality increases only one percent. There are no considerations of whether the municipality, upon a county's new involvement, may keep the revenue generated from the two percent in its own funds or whether it must be remitted to the county and then returned at the 25 percent rate.
    
    The amounts collected are immediately remitted to the county or municipality from which the funds originated. The mechanism by which this occurs is unclear.
    
    
    



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