FISCAL NOTE

Date Requested: February 01, 2019
Time Requested: 12:20 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2845 Introduced HB2813
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Increases Revenue From Existing Sources



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The stated purpose of this bill is to require out-of-state retailers that do not have a physical presence in this state and who have not voluntarily agreed to collect West Virginia use tax but have economic nexus with this State, as defined in this bill, to begin collecting West Virginia state and municipal sales and use taxes on sales to consumers in this State.
    
    Marketplace facilitators are treated as out of state retailers and are subjected to the tax collection and remittance requirements of the provision. A marketplace facilitator in essence contracts with third party sellers to promote their sale of physical property, digital goods, and services through the marketplace.
    
    According to the provisions of this bill, marketplace facilitators or referrers will be considered agents of any marketplace seller (i.e. third-party retailers) making retail sales through the marketplace facilitator’s marketplace. The bill also states that marketplace facilitators have a duty to collect sales and use tax, including sales made by third-party retailers in their marketplace. Marketplace facilitators, referrers or retailers who do not have a physical presence in the state are required to collect sales and use tax if they meet the conditions of having an economic nexus in the state. Conditions of meeting an economic nexus are gross revenue from West Virginia sales equal to or in excess of $100,000 or West Virginia sales in 200 or more separate transactions.
    
    Other states including New Jersey, Pennsylvania, Washington and several others have enacted similar legislation that require marketplace facilitators to collect and remit sales and use taxes on behalf of third-party retailers who make sales in their marketplace. This bill and the similar legislation enacted in other states will reduce the number of entities the state collects sales tax from and will increase overall compliance.
    
    According to our interpretation, the passage of the bill would increase General Revenue Fund collections by roughly $6.3 million in FY2020. Local municipalities collecting sales and use tax would increase their collections by roughly $200,000 in FY2020. The increase in collections are due to the higher compliance rate resulting from marketplace facilitators collecting and remitting sales tax on behalf of the third-party retailers that utilize their marketplace.
    
    Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2019 and $5,000 in FY2020.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 5,000 5,000 0
Personal Services 5,000 5,000 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 6,300,000 6,300,000


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


    According to the provisions of this bill, marketplace facilitators or referrers will be considered agents of any marketplace seller (i.e. third-party retailers) making retail sales through the marketplace facilitator’s marketplace. The bill also states that marketplace facilitators have a duty to collect sales and use tax, including sales made by third-party retailers in their marketplace. Marketplace facilitators, referrers or retailers who do not have a physical presence in the state are required to collect sales and use tax if they meet the conditions of having an economic nexus in the state. Conditions of meeting an economic nexus are gross revenue from West Virginia sales equal to or in excess of $100,000 or West Virginia sales in 200 or more separate transactions.
    
    Other states including New Jersey, Pennsylvania, Washington and several others have enacted similar legislation that require marketplace facilitators to collect and remit sales and use taxes on behalf of third-party retailers who make sales in their marketplace. This bill and the similar legislation enacted in other states will reduce the number of entities the state collects sales tax from and will increase overall compliance.
    
    According to our interpretation, the passage of the bill would increase General Revenue Fund collections by roughly $6.3 million in FY2020. Local municipalities collecting sales and use tax would increase their collections by roughly $200,000 in FY2020. The increase in collections are due to the higher compliance rate resulting from marketplace facilitators collecting and remitting sales tax on behalf of the third-party retailers that utilize their marketplace.
    
    Additional administrative costs incurred by the State Tax Department would be $5,000 in FY2019 and $5,000 in FY2020.
    
    



Memorandum


    



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