FISCAL NOTE

Date Requested: January 15, 2016
Time Requested: 03:47 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
1234 Introduced HB4009
CBD Subject: Counties


FUND(S):

State Road Fund, Tax Department Sales and Use Tax Operations Fund

Sources of Revenue:

Special 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 give each county commission authority to submit road and bridge construction projects to the Commissioner of Highways. The bill authorizes county commissions to impose a county transportation sales and service tax and a county use tax, at a rate not to exceed one percent, to finance the construction, in whole or in part, thereby accelerating the time for completion of those projects. The bill states that the taxes would be collected by the Tax Commissioner, at same time and in the same manner as the state consumers sales and service tax and use taxes are collected. The bill permits the net county transportation sales and use taxes would be deposited in the County Road Improvement Account, a new account that would be created in the State Road Fund, to the credit of the county’s subaccount in that account. The bill states that the funds in the subaccounts could be used to fund road and bridge construction projects on a cash basis and the Division of Highways would be authorized to issue special revenue bonds to finance construction secured by the county’s subaccount. The bill provides criminal penalties. As written, this bill proposes the potential creation of a subaccount within an account within the State Road Fund. The bill seeks to let counties generate revenue specifically towards road and bridge construction projects by imposing a sales tax on sales in the county. Under the assumption that the sales tax base will soon be broadened to include telecommunications services and non-home use durable medical equipment, it is estimated that all sales and use taxes will generate about $1.3 billion in FY2016 and $1.4 billion in FY2017. According to the bill, and assuming all 55 counties participate in the County Road Improvement Account at the maximum allowable rate of one percent, the Transportation Sales and Use Taxes could potentially generate between $220 million and $240 million. One percent of this total, between $2.2 million and $2.4 million, is to be deposited in the Tax Department Sales and Use Tax Operations Fund. The remainder of the funds would be deposited in the account designated in the State Road Fund and allocated to the Counties in their subaccounts. The formula by which the funds are to be allocated is assumed to be per the individual sales within the County. The administrative costs to the Tax Department will be $396,200 in the current fiscal year, and $158,600 in each subsequent fiscal year.



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 396,200 158,600 158,600
Personal Services 158,600 158,600 158,600
Current Expenses 192,600 0 0
Repairs and Alterations 0 0 0
Assets 20,000 0 0
Other 25,000 0 0
2. Estimated Total Revenues 0 0 0


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


As written, this bill proposes the potential creation of a subaccount within an account within the State Road Fund. The bill seeks to let counties generate revenue specifically towards road and bridge construction projects by imposing a sales tax on sales in the county. Under the assumption that the sales tax base will soon be broadened to include telecommunications services and non-home use durable medical equipment, it is estimated that all sales and use taxes will generate about $1.3 billion in FY2016 and $1.4 billion in FY2017. According to the bill, and assuming all 55 counties participate in the County Road Improvement Account at the maximum allowable rate of one percent, the Transportation Sales and Use Taxes could potentially generate between $220 million and $240 million. One percent of this total, between $2.2 million and $2.4 million, is to be deposited in the Tax Department Sales and Use Tax Operations Fund. The remainder of the funds would be deposited in the account designated in the State Road Fund and allocated to the Counties in their subaccounts. The formula by which the funds are to be allocated is assumed to be per the individual sales within the County. The administrative costs to the Tax Department will be $396,200 in the current fiscal year, and $158,600 in each subsequent fiscal year.



Memorandum


The stated purpose of this bill is to give each county commission authority to submit road and bridge construction projects to the Commissioner of Highways. The bill authorizes county commissions to impose a county transportation sales and service tax and a county use tax, at a rate not to exceed one percent, to finance the construction, in whole or in part, thereby accelerating the time for completion of those projects. The bill states that the taxes would be collected by the Tax Commissioner, at same time and in the same manner as the state consumers sales and service tax and use taxes are collected. The bill permits the net county transportation sales and use taxes would be deposited in the County Road Improvement Account, a new account that would be created in the State Road Fund, to the credit of the county’s subaccount in that account. The bill states that the funds in the subaccounts could be used to fund road and bridge construction projects on a cash basis and the Division of Highways would be authorized to issue special revenue bonds to finance construction secured by the county’s subaccount. The bill provides criminal penalties. The fees to be collected by the State Tax Department for administration of the accounts are not created in the bill. The administrative fees are to be deposited in a fund called the Tax Department Sales and Use Tax Operations Fund, yet no such fund currently exists, nor is provided for in the bill. The Tax Commissioner cannot create a fund not specified in the West Virginia Code. The bill also anticipates that the location of each business will be known by the Tax Commissioner. Though each business has an account, it is not readily known where each business is located. The Commissioner of Highways may requisition funds in any month for the preceding reporting period as soon as practicable as provided in the intergovernmental agreement. This does not allow a period of time to correct errors and to give refunds where applicable. Errors, adjustments or refunds are corrected and adjustments in payments are made over a period of 6 months in increments of 1/6 each month. The 6 month periods would be rolling periods. The accounting for this would be difficult and would allow great latitude for businesses to make the same claim in more than one month. This refund process differs from the Tax Department’s current practice. There is no provision for rulemaking authority for the State Tax Commissioner.



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