Date Requested: February 23, 2015
Time Requested: 10:11 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2887 Introduced HB2821
CBD Subject: Alcoholic Liquors and Beers


FUND(S):

Sexual Assault Fund to End Rape

Sources of Revenue:

Special Fund

Legislation creates:

A New Fund



Fiscal Note Summary


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


    The stated purpose of this bill is to implement a surcharge on licensed exotic entertainment facilities and adult bookstores in this state to provide funding for rape information and prevention services and rape crisis centers in the state. The bill creates the Sexual Assault Fund to End Rape. The bill provides for the dispersal of grants for rape information and prevention services and rape crisis centers. The bill provides for rule-making, defines a term and provides for a civil penalty.
    
    The bill would impose a one percent surcharge annually on all sales of an exotic entertainment facility operating in this state. All proceeds will be paid to the West Virginia Violence and Injury Prevention Program in the Bureau for Public Health to cover the costs of administering the Sexual Assault Fund to End Rape (SAFER).
    
    The State Tax Department does not currently have readily available information on total annual sales of each exotic entertainment facility. Thus, we are unable to estimate the potential revenue gain attributable to this bill.
    
    Administrative costs to the Tax Department will be $81,000 in the current fiscal year, $42,000 in FY 2016, and $35,000 in each subsequent fiscal year.



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 81,000 42,000 35,000
Personal Services 0 35,000 35,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 7,000 0
Other 81,000 0 0
2. Estimated Total Revenues 0 0 0


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


    The bill would impose a one percent surcharge annually on all sales, as defined in Section 11-24-3a, of an exotic entertainment facility operating in this state. According to the ABCA, there are 42 facilities operating with a license pursuant to Section 60-4-23. Licenses are not required to operate an adult bookstore.
    
    The tax will be remitted to the state Tax Division no later than January 20, and all proceeds will be paid to the West Virginia Violence and Injury Prevention Program in the Bureau for Public Health to cover the costs of administering the Sexual Assault Fund to End Rape (SAFER).
    
    The State Tax Department does not currently have readily available information on total annual sales of each exotic entertainment facility. Furthermore, adult bookstores may classify themselves in numerous categories, under bookstore, video entertainment, and even in some cases as toy sellers. Gross sales at these establishments also may involve more than liquor sales, which is the responsibility of ABCA. We are unable to estimate the potential revenue gain attributable to this bill.
    
    Administrative costs to the Tax Department will be $81,000 in the current fiscal year, $42,000 in FY2016, and $35,000 in each subsequent fiscal year.



Memorandum


    The stated purpose of this bill is to implement a surcharge on licensed exotic entertainment facilities and adult bookstores in this state to provide funding for rape information and prevention services and rape crisis centers in the state. The bill creates the Sexual Assault Fund to End Rape. The bill provides for the dispersal of grants for rape information and prevention services and rape crisis centers. The bill provides for rule-making, defines a term and provides for a civil penalty.
    
    The Tax Code does not generally refer to taxes or fees as “surcharges.” This surcharge appears to be a tax independent from any other taxes or fees imposed.
    
    As written, the proposed bill would apply to all sales of a corporation even if most of its sales occurred out of state, a potential violation of the Due Process and Dormant Commerce Clause of the United States Constitution.
    
    The definition of adult bookstore is overly broad. It does not provide definition for “principal business purpose,” “specified anatomical areas,” or “specified sexual activities.” The overly broad definition becomes even more troublesome when having “other principal business purposes” may not stop classification as an adult bookstore. This could impose the tax on pharmacies that sell condoms or art galleries with certain types of art. This could cause Due Process concerns.
    
    The proposed bill does not have an internal effective date, but it does require the Tax Department to deposit proceeds from the tax beginning January 1, 2016. Even if this provision became effective 90 days from passage, the first return would not be due until January 20, 2016. Furthermore, this would require the taxpayer to pay the tax retroactively, as the previous calendar year (2015) began prior to this proposed bill being introduced.
    



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