FISCAL NOTE

Date Requested: March 14, 2017
Time Requested: 01:40 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3085 Introduced HB3085
CBD Subject:


FUND(S):

Medical School 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 change the structure of the tax on bottled soft drinks to 1¢ per ounce and to rededicate the proceeds to all three medical schools in the state. The proposed bill would alter the current structure of the Soft Drinks Tax effective July 1, 2017 such that the tax imposed will be 1 cent per ounce of bottled soft drinks. According to our interpretation, this may effectively remove the current Soft Drinks Tax on soft drink syrups and powders. Funds collected from the new tax, net any administrative costs, will be deposited into the Medical School Fund and distributed to three schools of medicine in the State as follows: the West Virginia School of Medicine will receive the first $20.0 million; the Marshall University School of Medicine will receive the next $5.0 million out of remaining funds; and the West Virginia Osteopathic School will receive the next $5.0 million out of remaining funds. After these conditions are met, any remaining funds are dedicated to the Bureau for Medical Services. The proposed 1 cent per ounce tax on bottled soft drinks is expected to result in a net revenue gain of roughly $70.9 million in FY2018. This estimate accounts for 11 months of collections following the change in tax reduced by anticipated FY2018 revenue collections from the current tax. A net revenue gain of approximately $75.0 million is expected in FY2019. Additional administrative costs incurred by the State Tax Department are expected to be $50,000 for the remainder of FY2017, $20,000 in FY2018, and $10,000 for each year thereafter.



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 50,000 20,000 10,000
Personal Services 0 20,000 10,000
Current Expenses 5,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 45,000 0 0
2. Estimated Total Revenues 0 70,900,000 75,000,000


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


The proposed bill would alter the current structure of the Soft Drinks Tax effective July 1, 2017 such that the tax imposed will be 1 cent per ounce of bottled soft drinks. According to our interpretation, this may effectively remove the current Soft Drinks Tax on soft drink syrups and powders. Funds collected from the new tax, net any administrative costs, will be deposited into the Medical School Fund and distributed to three schools of medicine in the State as follows: the West Virginia School of Medicine will receive the first $20.0 million; the Marshall University School of Medicine will receive the next $5.0 million out of remaining funds; and the West Virginia Osteopathic School will receive the next $5.0 million out of remaining funds. After these conditions are met, any remaining funds are dedicated to the Bureau for Medical Services. The proposed 1 cent per ounce tax on bottled soft drinks is expected to result in a net revenue gain of roughly $70.9 million in FY2018. This estimate accounts for 11 months of collections following the change in tax reduced by anticipated FY2018 revenue collections from the current tax. A net revenue gain of approximately $75.0 million is expected in FY2019. Additional administrative costs incurred by the State Tax Department are expected to be $50,000 for the remainder of FY2017, $20,000 in FY2018, and $10,000 for each year thereafter.



Memorandum


The stated purpose of this bill is to change the structure of the tax on bottled soft drinks to 1¢ per ounce and to rededicate the proceeds to all three medical schools in the state. Current language in West Virginia Code §11-19-2(a) provides for the determination of the current tax on fractional parts of a unit. However, the proposed bill supersedes subsection (a) by levying a 1 cent per ounce tax on bottled soft drinks. This will result in the Tax Department having to extrapolate the tax on liters, dry mixes, or syrups and may be difficult to administer given the subsection outlining this fractional tax is superseded. The proposed bill dedicates revenues remaining after distributions three medical schools in the State to the Bureau for Medical Services, but does not identify the agency in which the Bureau is located. Further, the definitions found in section 1 are not meaningfully updated and does not clarify any definition. The effective date of the proposed bill does not provide sufficient time for the Tax Department to update forms and provide administrative guidance to vendors.



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