SB 0888 - Fiscal Note

Fiscal Note - SB 0888 - Defines "food" to exclude food sold where gross receipts on those sales is more than 50% of total gross receipts

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3738-01

BILL NO. SB 888 with HCA # 1

SUBJECT: Revenue Dept.; Taxation and Revenue-General-Sales and Use

TYPE: Original

DATE: April 27, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	unknown	unknown	unknown
Total Estimated Net Effect on All State Funds	UNKNOWN	UNKNOWN	UNKNOWN

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
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	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state this proposal changes the definition of "food" so that it does not include sales made by restaurants, fast food places, delis, eating houses, cafes, deli departments, or similar establishments. A higher rate would apply to all food sales by businesses with more than 50% of their gross receipts derived from the sale of food prepared by the business for immediate consumption on or off the premises. Deli departments in grocery stores would appear to be subject to the current law, unless they are considered to be a separate establishment. This proposal would generate a positive unknown revenue impact to general revenue.

ADMINISTRATIVE IMPACT:

Division of Taxation and Collection:

The provisions of this bill would be handled with existing resources. The Division estimates between 25,000 and 30,000 businesses currently report food at the lower rate. These businesses would be sent a letter generated by the Information Systems Division. The Division would handle all telephone calls, correspondence, etc., without additional FTE.

Division of Administration:

The Division of Administration would be responsible for postage for approximately 30,000 letters to possibly affected taxpayers. The mailing costs is requested to implement this proposal.

Information Systems Division:

The Information Systems Division would be responsible for generating letters to the 30,000 accounts, processing registration changes in out system so the proper lower rate could be collected and providing reports to the Division of Taxation. These changes would be performed with existing staff and resources.

Officials of the Office of Administration state this proposal would generate a positive unknown revenue impact to general revenue.

This proposal would result in an increase in Total State Revenues.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
Income to General Revenue Fund
Sales tax on food charged at a higher rate
for certain establishments	unknown	unknown	unknown
Cost to General Revenue Fund
Department of Revenue (DOR)
Expense and Equipment	($8,000)	$0	$0
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	UNKNOWN	UNKNOWN	UNKNOWN
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	0	0	0

FISCAL IMPACT - Small Business

Small businesses would expect to be fiscally impacted to the extent that they have already converted their registers to collect the lower rate and will have to change their registers again without compensation.

DESCRIPTION

This act excludes from the definition of food, for purposes of the reduced sales tax rate, food or drink where the gross receipts of selling that food constitutes more than fifty percent of the total gross receipts of that establishment. HCA 1 -- Excludes vending machines from the 50% provision contained within the bill.

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

Jeanne Jarrett, CPA

Director

April 27, 1998