FISCAL NOTE
Date Requested: March 06, 2017
Time Requested: 10:30 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2272 |
Introduced |
SB289 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General 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 help level the playing field between local stores in West Virginia and online competitors by clarifying that the sales tax applies to digital goods.
The bill proposes to apply the Consumer Sales and Service and Use Tax to digital goods. Digital goods include items such as e-books, digital music, digital video, and mobile video games. Based on our interpretation, the proposed bill would generate roughly $1.4 million in FY 2018 and $3.5 million for each year thereafter. The bill does not provide an internal effective date for the change. Therefore, according to code should the bill pass, the changes should take effect beginning January 1, 2018.
Additional administrative costs incurred by the State Tax Department are expected to be $3,000 in FY2018.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2017
Increase/Decrease
(use"-") |
2018
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
3,000 |
0 |
| Personal Services |
0 |
1,000 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
2,000 |
0 |
| 2. Estimated Total Revenues |
0 |
1,400,000 |
3,500,000 |
Explanation of above estimates (including long-range effect):
The bill proposes to apply the Consumer Sales and Service and Use Tax to digital goods. Digital goods include items such as e-books, digital music, digital video, and mobile video games. Based on our interpretation, the proposed bill would generate roughly $1.4 million in FY 2018 and $3.5 million for each year thereafter. The bill does not provide an internal effective date for the change. Therefore, according to code should the bill pass, the changes should take effect beginning January 1, 2018.
Additional administrative costs incurred by the State Tax Department are expected to be $3,000 in FY2018.
Memorandum
The stated purpose of this bill is to help level the playing field between local stores in West Virginia and online competitors by clarifying that the sales tax applies to digital goods.
The bill seeks to add a new section to the tax code to clarify that the Consumer Sales and Service and Use Tax applies to digital goods and lists examples of digital goods that shall be taxed. The bill does not provide definitions for the terms used in the bill. The lack of definitions could make this bill difficult to administer and could lead to litigation. The bill also does not specifically provide that the use tax applies to these digital goods, which could cause Constitutional issues. Some of the language of the bill does not agree with the language and definitions of the Streamlined Sales and Use Tax Agreement.
The bill may contain a possible title defect. Since a new Code provision was necessary to impose the tax, the bill title, which states that this bill is “clarifying” the tax, may not be entirely accurate.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov