SB 0924 - Fiscal Note

Fiscal Note - SB 0924 - Redefines Point of TaxationFor Motor Fuel

L.R. NO.  3474-01
BILL NO.  SB 924
SUBJECT:  Vehicles, Taxation, Fuel, Oil
TYPE:     Original
DATE:     March 4, 1996



                              FISCAL SUMMARY
                    ESTIMATED NET EFFECT ON STATE FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999

Highway              $6,957,800 to       $8,349,360 to     $8,349,360 to
                       $17,394,500         $20,873,400       $20,873,400

Total Estimated
Net Effect on All
State Funds          $6,957,800 to       $8,349,360 to     $8,349,360 to
                       $17,394,500         $20,873,400       $20,873,400


*  does not include unknown administrative savings.


                   ESTIMATED NET EFFECT ON FEDERAL FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999

None

Total Estimated
Net Effect on All
Federal Funds                   $0                  $0                $0


                    ESTIMATED NET EFFECT ON LOCAL FUNDS


FUND AFFECTED              FY 1997             FY 1998           FY 1999

Local Government     $2,542,200 to       $3,050,640 to     $3,050,640 to
                        $6,355,500          $7,626,600        $7,626,600


                              FISCAL ANALYSIS

ASSUMPTION

Officials of the Office of Administration state the analysis they could
provide would duplicate the analysis already completed by the Department of
Revenue.

Officials of the Department of Highway and Transportation (DHT) state this
proposal redefines the point of taxation for motor fuel. DHT staff assumes
this legislation would increase the collection of motor fuel tax revenues by
moving the point of taxation to the refinery. Based on figures provided by
the Department of Revenue by contacting six other states that have changed
their point of taxation, an increase in revenue could range from 2% to 5%.
DHT's estimate would show an increase of 3.5%, split the following way:
Highway Fund- 73.24%, Cities- 15% and Counties- 11.76%.

Officials of the Department of Revenue (DOR) state this proposal moves the
point of taxation of motor fuel and special fuel from distributors to the
"Rack" (Terminal). The Department of Revenue has read published reports by
other states who have moved the point of taxation of fuel in this manner and
such reports indicate a one to five percent increase in fuel tax collected.
DOR collected $430 million in motor fuel tax and $140 million in special fuel
tax during calendar year 1995 and are therefore hypothesizing an increase of
1%, or $4.3 million in motor fuel tax and $1.4 million in special fuel tax.
DOR staff have not projected any change in compliance staff (Auditors),
stating that even though the number of accounts will be reduced from about
1600 to less than 50, the number of transactions by dealers would remain the
same. Likewise DOR staff have projected no savings in other administrative
expenses for the same reason. It may be possible to realize a savings in both
the compliance and administrative areas approximately two fiscal years after
implementation should businesses be required to file all returns and
transactions using electronic media.

Based on the reduction in the number of accounts, Oversight assumes there
would be a savings to the Highway Fund for the reduction in administrative
costs to the Compliance and the Taxation divisions of the Department of
Revenue. Oversight speculates that of a staff of approximately 20-25 FTE in
Taxation, perhaps a savings of as many as 10 to 12 FTE could result.
Additionally, of 9 FTE Compliance Audit Staff perhaps as many as 3- 6 FTE
could be reduced.  However, Oversight does not possess specific information
necessary to arrive at an estimate of the administrative savings and has
therefore stated these amounts as unknown.  Based on the published reports
from the other states that have moved the point of taxation on fuel,
Oversight has shown a range of 2% to 5% for the increase in fuel tax
collections.


FISCAL IMPACT - State Government       FY 1997      FY 1998      FY 1999
                                      (10 Mo.)
HIGHWAY FUND

Income to Highway Fund
   Increase in fuel tax collections $6,957,800   $8,349,360   $8,349,360
                                            to           to           to
                                   $17,394,500  $20,873,400  $20,873,400
Savings - Department of Revenue
  Administrative Savings               Unknown      Unknown      Unknown

FISCAL IMPACT  - Local Government      FY 1997      FY 1998      FY 1999
                                      (10 Mo.)

Income to Political Subdivisions
   Increase in fuel tax collections $2,542,200   $3,050,640   $3,050,640
                                            to           to           to
                                    $6,355,500   $7,626,600   $7,626,600

DESCRIPTION

This act revises the point at which the state collects the tax on motor fuel.
The point of collection is moved from those who distribute to the retail
stations to those who dispense the fuel from the terminal storage areas.

This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.

SOURCES OF INFORMATION

Department of Revenue
Office of Administration
Department of Highway and Transportation