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