FISCAL NOTE
Date Requested: February 24, 2016 Time Requested: 10:43 AM |
Agency: |
Tax Department, State |
CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
2869 |
Introduced |
HB4681 |
|
CBD Subject: |
Taxation |
---|
|
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 this bill is to tax attorney’s legal service fees as service taxes, and dedicate the proceeds to the State Road Fund.
Based on our interpretation, the proposed bill would apply the Consumers Sales and Services Tax to any fees collected by licensed attorneys for legal services. This bill is expected to generate roughly $50.0 million per year beginning in FY2017. These collections would benefit the State Road Fund. Absent an internal effective date, the provisions of this bill would take effect 90 days from passage. Under the assumption that the bill would become effective as late as March 12, 2016, the tax increase would be effective June 20, 2016. Timing of the effective date, based on this assumption, would impose a significant burden on retail vendors in the State as well as the State Tax Department, and could cause issues in administrative compliance.
Additional administrative costs incurred by the State Tax Department are expected to be $14,100 for the remainder of FY2016 and $35,000 for FY2017 and each year thereafter.
Fiscal Note Detail
Effect of Proposal |
Fiscal Year |
2016 Increase/Decrease (use"-") |
2017 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
14,100 |
35,000 |
35,000 |
Personal Services |
0 |
35,000 |
35,000 |
Current Expenses |
0 |
0 |
0 |
Repairs and Alterations |
0 |
0 |
0 |
Assets |
0 |
0 |
0 |
Other |
14,100 |
0 |
0 |
2. Estimated Total Revenues |
0 |
50,000,000 |
50,000,000 |
Explanation of above estimates (including long-range effect):
Based on our interpretation, the proposed bill would apply the Consumers Sales and Services Tax to any fees collected by licensed attorneys for legal services. This bill is expected to generate roughly $50.0 million per year beginning in FY2017. These collections would benefit the State Road Fund. Absent an internal effective date, the provisions of this bill would take effect 90 days from passage. Under the assumption that the bill would become effective as late as March 12, 2016, the tax increase would be effective June 20, 2016. Timing of the effective date, based on this assumption, would impose a significant burden on retail vendors in the State as well as the State Tax Department, and could cause issues in administrative compliance.
Additional administrative costs incurred by the State Tax Department are expected to be $14,100 for the remainder of FY2016 and $35,000 for FY2017 and each year thereafter.
Memorandum
The stated purpose of this bill is to tax attorney’s legal service fees as service taxes, and dedicate the proceeds to the State Road Fund.
The proposed bill would benefit from referencing the Consumers Sales and Service Tax in the title and better-defining what is intended by the term “licensed attorney.” Although West Virginia Code §17-3-1 does not specifically include sale tax proceeds as funding options for the State Road Fund, Code does provide that “the proceeds of all taxes imposed upon and collected from any person, firm or corporation and of all taxes or charges imposed upon and collected from any county, district or municipality for the benefit of the fund” and thus sales tax collections would qualify as a funding source. This does not appear to be a conflict in Law.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov