FISCAL NOTE
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 establish the Food Tax Relief Act and to eliminate by a three-year phase-out the consumer sales tax on food and food products sold for human consumption off the premises where sold.
As written, the passage of this bill would only reduce the Consumers Sales Tax rate on food sold for human consumption off the premises where sold in two years from 6 percent to 2 percent. According to our interpretation, this bill would apply to food items sold at grocery stores. The following table provides estimates of revenue loss to the General Revenue Fund. Fiscal Year 2008 represents the first full year of the rate reduction of the Consumers Sales Tax on food sold at grocery stores.
Sales of Food Meant for Home Consumption Only
FY2006 -$21.1 million
FY2007 -$71.8 million
FY2008 -$101.3 million
Additional administrative costs to the Tax Department would be about $24,000 per year until the tax is reduced to 2 percent due to notifying taxpayers of the rate changes. Thereafter, there would be no additional administrative costs.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2005
Increase/Decrease
(use"-") |
2006
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
23,925 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
23,925 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-21,100,000 |
-101,300,000 |
Explanation of above estimates (including long-range effect):
As written, the passage of this bill would only reduce the Consumers Sales Tax rate on food sold for human consumption off the premises where sold in two years from 6 percent to 2 percent. According to our interpretation, this bill would apply to food items sold at grocery stores. The following table provides estimates of revenue loss to the General Revenue Fund. Fiscal Year 2008 represents the first full year of the rate reduction of the Consumers Sales Tax on food sold at grocery stores.
Sales of Food Meant for Home Consumption Only
FY2006 -$21.1 million
FY2007 -$71.8 million
FY2008 -$101.3 million
Additional administrative costs to the Tax Department would be $23,925 per year until the tax is reduced to 2 percent due to notifying taxpayers of the rate changes. Thereafter, there would be no additional administrative costs.
Memorandum
The stated purpose of this bill is to establish the Food Tax Relief Act and to eliminate by a three-year phase-out the consumer sales tax on food and food products sold for human consumption off the premises where sold.
There is no mention of Food Tax Relief Act in the bill title or elsewhere within the bill.
The Sales Tax on the affected food is not phased-out, it is phased-down to two percent over a two-year period. Also, the bill does not specifically define food or “food products,” nor does it provide guidance for the requirement that the food be sold for consumption off the premises where sold.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us