FISCAL NOTE

Date Requested: January 19, 2018
Time Requested: 04:07 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2141 Introduced HB2837
CBD Subject: Taxation


FUND(S):

Municipal Funds

Sources of Revenue:

Other Fund Municipal Funds

Legislation creates:

Decreases Existing Revenue



Fiscal Note Summary


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


    The stated purpose of this bill is to exempt vendors delivering goods by common carrier from requirements to collect municipal sales tax and to provide that vendors delivering goods or services directly to a purchaser may only be required to collect tax if the vendor knows or has reason to know that the point of delivery is located within a taxing municipality’s boundaries.
    
    The passage of this bill would limit the liability of a vendor to collect and remit municipal sales tax if the goods are delivered to the purchaser by common carrier or if the goods are delivered by the vendor and the delivery location is not ‘known’ by the vendor to be within a taxing municipality. Currently, there are 36 municipalities in West Virginia imposing a municipal sales and use tax. In FY2017, more than $67.2 million in municipal sales tax was collected. The bill would become effective 90 days from passage unless an effective date is added. Based on our interpretation, the passage of the proposed bill would result in a minimal loss in municipal sales and use tax revenue in FY2018 and a potential loss of at least $1.0 million in subsequent fiscal years.
    
    Additional administrative costs to the State Tax Department would be minimal.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 1,000 1,000
Personal Services 0 1,000 1,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -1,000,000 -1,000,000


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


    The passage of this bill would limit the liability of a vendor to collect and remit municipal sales tax if the goods are delivered to the purchaser by common carrier or if the goods are delivered by the vendor and the delivery location is not ‘known’ by the vendor to be within a taxing municipality. Currently, there are 36 municipalities in West Virginia imposing a municipal sales and use tax. In FY2017, more than $67.2 million in municipal sales tax was collected. The bill would become effective 90 days from passage unless an effective date is added. Based on our interpretation, the passage of the proposed bill would result in a minimal loss in municipal sales and use tax revenue in FY2018 and a potential loss of at least $1.0 million in subsequent fiscal years.
    
    Additional administrative costs to the State Tax Department would be minimal.
    
    



Memorandum


    The stated purpose of this bill is to exempt vendors delivering goods by common carrier from requirements to collect municipal sales tax and to provide that vendors delivering goods or services directly to a purchaser may only be required to collect tax if the vendor knows or has reason to know that the point of delivery is located within a taxing municipality’s boundaries.
    
    The bill adds a new section of code 8-1-5b. The new section creates an exemption, although the municipal sales tax is subject to the same exemptions as the state sales tax per W.Va.Code §8-1-5a(i)(14). The section also contradicts W.Va Code §11-15-8 which imposes vendor liability to collect the tax. The bill appears to duplicate, in part, sections of the code that address issues regarding unclear municipal boundaries. The new section of code provides definitions for terms which are defined in different areas of the code. Administration would be difficult when similar terms that are considered to have the same meaning are defined in different areas of the code, especially when the treatment is not identical.
    
    The bill title is misleading as it fails to indicate that the vendor will be absolved of liability in certain circumstances.
    
    



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