SB 0791 - Fiscal Note

Fiscal Note - SB 0791 - Allows hospital districts to impose sales tax with voter approval

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3498-01

BILL NO. SB 791

SUBJECT: Hospitals: Sales Tax, Revenue

TYPE: Original

DATE: February 23, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	($23,341)	($3,011)	($3,011)
Partial Estimated Net Effect on All State Funds	($23,341)*	($3,011)*	($3,011)*

*Does not include income to General Revenue from 1% Collection Fee.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government*	$0 to Unknown	$0 to Unknown	$0 to Unknown

*This proposal is permissive. Voter approval would be required before fiscal impact would be realized.

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) assume this proposal would have fiscal impact to the State's General Revenue Fund.

Division of Taxation & Collection

The Division would be responsible for collecting these local sales taxes. These taxes are currently limited to full cities and/or counties. Department of Revenue sales tax collection system operates on city and county boundaries with the exception of the fire district sales tax passed during the last legislation session. The Division anticipates a great amount of administrative difficulty should this proposal become law; however the Division assumes the Information Systems Division will perform the necessary programming changes to automate the partial cities/counties aspect of the proposal and the resulting administrative impact would be handled with existing resources assuming the following:

1. Each city or county would be required to furnish a list of taxpayers subject to the tax

when initially imposed; and,

2. Each city or county would be responsible for maintaining lists of businesses within the

taxing area (notifying DOR when businesses open, close, or move).

Division of Motor Vehicles & Drivers Licensing:

The Division assumes that 5% of taxable motor vehicle transactions will involve customers that do not calculate the correct amount of tax since they may not even be aware they are in an area with the additional local sales tax, resulting in rejected title applications. Assuming this reject rate, approximately 729 rejected title applications are expected annually, requiring approximately $839 in annual overtime costs. In addition, policies would need to be revised, a notice to motor vehicle dealers about the new taxing authority would need to be mailed and costs would be incurred to process the aforementioned rejected title applications.

Information Systems Division:

During the last legislative session, the General Assembly authorized certain local fire protection districts to impose sales taxes that did not have to be imposed within city or county boundaries. The Department of Revenue has requested funding to make the necessary changes to allow implementation of the fire protection district sales taxes and that funding request is currently under consideration. This response assumes funding will be provided for these changes. If funding is not provided, the Information Systems Division would be required to perform additional program changes not shown in this response. The effective date of the first of these taxes could be as early as September 1, 1998, which would not allow sufficient time to

ASSUMPTION (continued)

thoroughly design, test, and implement the new computer system. Overtime costs of approximately $5,475 would be requested along with State Data Center costs of $11,347.

Postage, reject notices, etc. would total $5,680 in FY99, $233 in FY2000; and $233 in FY2001. State Data Center costs in FY2000 and FY2001 would be $2,778 per fiscal year.

REVENUE IMPACT:

The number of additional local sales taxes that would be imposed is unknown; therefore, the amount of revenue that would be collected and the corresponding 1% collection fee that would be deposited to the General Revenue Fund is unknown.

LOCAL GOVERNMENT:

Oversight assumes local governments that establish a Hospital District Sales Tax Trust Fund would have income from the sales tax which could not exceed 1/4 of 1%, and would realize costs of an election, and advertising and promoting hospital districts. The number of cities or counties that would impose a Hospital District sales tax and the rate at which the tax would be imposed is unknown, therefore, annual income and expense cannot be estimated and are unknown. Oversight assumes that costs would not exceed income and would have a total net effect of zero or a positive fund balance.

Officials from the Department of Health and the Cooper County Memorial Hospital assume this proposal would not fiscally impact their agencies.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE
Income to General Revenue Fund
1% collection fee	Unknown	Unknown	Unknown
Cost to Department of Revenue
Expense	($17,027)	($3,011)	($3,011)
Overtime	($6,314)	$0	$0
ESTIMATED NET PARTIAL
EFFECT TO GENERAL
REVENUE FUND*	($23, 341)	($3,011)	($3,011)
*Partial effect to GR Fund does not include income from the 1% collection fee.
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
CITIES AND COUNTIES
Income to Hospital Districts
Sales Tax Trust Funds	Unknown	Unknown	Unknown
Cost for operation of hospital districts	(Unknown)	(Unknown)	(Unknown)
NET EFFECT ON CITIES
AND COUNTIES*	$0 to	$0 to	$0 to
	Unknown	Unknown	Unknown
*Oversight assumes cost would not exceed income resulting with either a zero or positive fund balance.
FISCAL IMPACT - Small Business

Small businesses located in a hospital district that would approve the imposition of a hospital district sales tax could be effected due to costs related to payment and collection of the sales tax.

DESCRIPTION

This proposal grants authority to the board of directors of any hospital district to impose a sales tax of up to one-fourth of one percent on retail sales made in the district, if approved by voters.

Revenue gained from the tax will be collected by the Director of the Department of Revenue, deposited, less a one percent fee into a special trust fund, and then distributed to the hospital

district which levied the tax. Provisions allowing removal or refunds of the tax are included.

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

Department of Health

Cooper County Memorial Hospital

Jeanne Jarrett, CPA

Director

February 23, 1998