COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 1475-01
Bill No.: SB 501
Subject: Taxation and Revenue - Sales and Use; Transportation Department
Type: Original
Date: March 11, 2003
FISCAL SUMMARY
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| General Revenue | ($5,125,000) | ($7,650,000) | ($7,950,000) |
| Total Estimated
Net Effect on General Revenue Fund |
($5,125,000) | ($7,650,000) | ($7,950,000) |
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Road Fund | $9,780,208 | $14,598,750 | $15,171,250 |
| School District Trust | ($1,708,333) | ($2,550,000) | ($2,650,000) |
| Conservation | ($213,542) | ($318,750) | ($331,250) |
| Parks and Soil | ($170,833) | ($255,000) | ($265,000) |
| Total Estimated
Net Effect on Other State Funds |
$7,687,500 | $11,475,000 | $11,925,000 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 5 pages.
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2004 | FY 2005 | FY 2006 |
| Local Government | ($2,562,000) | ($3,825,000) | ($3,975,000) |
ASSUMPTION
Officials of the Office of Administration, Division of Budget and Planning (BAP) assume this bill would exempt contractors from paying sales tax on Missouri Department of Transportation (MoDOT) projects. This proposal will decrease state revenues. BAP defers to MoDOT to provide an estimate of this bill. This bill would have no impact on BAP.
Officials of the Department of Transportation (MoDOT) assume this legislation exempts contractors from paying sales tax on materials used in MoDOT projects. Section 144.062, RSMo currently exempts sales of personal property and materials used for the purpose of constructing, repairing, or remodeling facilities for counties, other political subdivisions and certain exempt entities from the state sales tax. This bill would add the Department of Transportation as an exempt entity. Therefore, materials could be purchased by a contractor for a MoDOT project on a tax-exempt basis.
The sales tax which contractors currently pay on materials purchased for MoDOT projects is included in the project cost which is paid by MoDOT. Assuming that contractors would reduce their project costs due to the ability to purchase materials on a tax-exempt basis, this bill would result in a cost savings for MoDOT.
ASSUMPTION (continued)
The proposed legislation would result in cost savings beyond the three-year period addressed by this fiscal note. Estimates for other years are as follows:
2007--$12,041,000
2008--$11,618,750
Based on the 2003-2007 Statewide Transportation Improvement Program (STIP); 1/2 construction contracts labor, 1/2 materials; August 31, 2003 effective date; and sales tax rate of 4.225%, the cost savings were calculated as follows:
Fiscal Year STIP Awards % Materials Materials Cost Sales Tax Rate Cost Savings 2004 $410,000,000 50% $205,000,000 4.225% $8,661,250 2005 $510,000,000 50% $255,000,000 4.225% $10,773,750 2006 $530,000,000 50% $265,000,000 4.225% $11,196,250 2007 $570,000,000 50% $285,000,000 4.225% $12,041,250 2008 $550,000,000 50% $275,000,000 4.225% $11,618,750
Officials of the Department of Revenue (DOR) did not respond to our fiscal note request.
Oversight assumes since this bill creates an additional sales tax exemption which will reduce revenue to the state and local government, this legislation would have minimal administrative impact on DOR and any costs could be absorbed.
Oversight calculated the revenue impact to include an impact to cities and counties. Oversight assumes the revenue impact for FY04 would be for ten months. This proposal would create a saving of $9.8 million in FY04, $14.6 million in FY05 and $15.2 million in FY06 for the Road Fund. Combined losses in the General Revenue Fund, School District Trust Fund, Conservation Fund, Parks and Soils Fund and local city/county funds equal the savings in the Road Fund for this proposal.
| FISCAL IMPACT - State Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| GENERAL REVENUE FUND | |||
| Loss to General Revenue Fund | |||
| Exemption for MoDOT projects | ($5,125,000) | ($7,650,000) | ($7,950,000) |
| ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND |
($5,125,000) |
($7,650,000) |
($7,950,000) |
| OTHER STATE FUNDS | |||
| Savings to Road Fund | |||
| Exemption for MoDOT projects | $9,780,208 | $14,598,750 | $15,171,250 |
|
Loss to School District Trust Fund |
|||
| Exemption for MoDOT projects | ($1,708,333) | ($2,550,000) | ($2,650,000) |
|
Loss to Conservation Fund |
|||
| Exemption for MoDOT projects | ($213,542) | ($318,750) | ($331,250) |
| Loss to Parks and Soil Funds | |||
| Exemption for MoDOT projects | ($170,833) | ($255,000) | ($265,000) |
|
ESTIMATED NET EFFECT TO ALL OTHER STATE FUNDS |
$7,687,500 |
$11,475,000 |
$11,925,000 |
| FISCAL IMPACT - Local Government | FY 2004
(10 Mo.) |
FY 2005 | FY 2006 |
| Loss to Cities
Exemption for MoDOT projects |
($1,537,500) |
($2,295,000) |
($2,385,000) |
| Loss to Counties
Exemption for MoDOT projects |
($1,025,000) |
($1,530,000) |
($1,590,000) |
| ESTIMATED NET EFFECT TO
LOCAL GOVERNMENT |
($2,562,500) |
($3,825,000) |
($3,975,000) |
FISCAL IMPACT - Small Business
Small businesses that sell to MoDOT would be expected to be impacted as a result of this proposal.
DESCRIPTION
This proposal exempts contractors from paying sales taxes on materials used in Department of Transportation projects.
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
Office of Administration
Division of Budget and Planning
Department of Transportation
NOT RESPONDING:
Department of Revenue
Mickey Wilson, CPA
Director
March 11, 2003