Date Requested: February 20, 2015
Time Requested: 02:29 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
3050 Introduced HB2832
CBD Subject: Tax


FUND(S):

State Road Fund

Sources of Revenue:

Other Fund State Road 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 the bill is to reduce the tax on motor fuel.
    
    According to our interpretation, passage of this bill would result in a reduction in the flat rate motor fuel excise tax rate from 20.5 cents per gallon to 20 cents per gallon. Language associated with the calculation of the wholesale motor fuel sales tax was also significantly altered in the language of this bill without a clear direction on intent or outcome. The provisions of this bill would reduce State Road Fund collections by at least $5.4 million per year. If the provisions of the bill are amended to also repeal the 5% wholesale motor fuel sales tax, the revenue decrease to the State Road Fund would grow to roughly $207 million per year at current fuel prices.
    
    There is no internal effective date for the tax changes proposed by this bill. The provisions of West Virginia Code 11-10-5p would control the effective date. Under these provisions, the effective date would be January 1, 2016. State Road Fund collections would decrease by more than $2.2 million in FY2016 and by at least $5.4 million each year thereafter. If the intent of the bill is to also repeal the 5% sales tax, State Road Fund collections would decrease by roughly $86 million in FY2016 and by at least $207 million each year thereafter.
    
    Administrative costs to the Tax Department would be $60,000 in FY2016.



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 60,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 60,000 0
2. Estimated Total Revenues 0 0 0


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


    According to our interpretation, passage of this bill would result in a reduction in the flat rate motor fuel excise tax rate from 20.5 cents per gallon to 20 cents per gallon. Language associated with the calculation of the wholesale motor fuel sales tax was also significantly altered in the language of this bill without a clear direction on intent or outcome. The provisions of this bill would reduce State Road Fund collections by at least $5.4 million per year. If the provisions of the bill are amended to also repeal the 5% wholesale motor fuel sales tax, the revenue decrease to the State Road Fund would grow to roughly $207 million per year at current fuel prices.
    
    There is no internal effective date for the tax changes proposed by this bill. The provisions of West Virginia Code 11-10-5p would control the effective date. Under these provisions, the effective date would be January 1, 2016. State Road Fund collections would decrease by more than $2.2 million in FY2016 and by at least $5.4 million each year thereafter. If the intent of the bill is to also repeal the 5% sales tax, State Road Fund collections would decrease by roughly $86 million in FY2016 and by at least $207 million each year thereafter.
    
    Administrative costs to the Tax Department would be $60,000 in FY2016.



Memorandum


    The stated purpose of this bill is to reduce the tax on motor fuel.
    
    The rate of tax for the “variable rate” and the tax base is unclear or ambiguous to the point of not knowing how much to tax or what to tax. With the average wholesale price calculation deleted, as well as the 5 percent rate in this section, but not in other sections, it is unclear whether the variable rate is maintained at all and what is taxed.
    
    Throughout the sales and use tax sections are mentions of the average wholesale price, the calculation of which has been deleted by this bill. This adds to confusion.
    
    The part applying the “variable component” or sales and use tax on alternative fuels is deleted but the “variable component” for motor fuel other than alternative fuel is retained.
    



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