COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION



FISCAL NOTE



L.R. NO.: 3495-01

BILL NO.: SB 783

SUBJECT: Taxation and Revenue - Sales and Use.

TYPE: Original

DATE: January 28, 2000




FISCAL SUMMARY



ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Various Sales Tax Funds $ 0 to Unknown $0 to Unknown $0 to Unknown
Total Estimated

Net Effect on All

State Funds *

$0 to Unknown $0 to Unknown $0 to Unknown

* Minimal additional revenue is expected

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Total Estimated

Net Effect on All

Federal Funds

$0 $0 $0



ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 2001 FY 2002 FY 2003
Local Government * $0 to Unknown $0 to Unknown $0 to Unknown

* Minimal additional revenue is expected



Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS



ASSUMPTION



Official of the Department of Revenue (DOR) state the proposed legislation will establish a penalty for improperly recording and reporting video rentals on sales tax returns even though total sales are correctly reported on the return and the correct amount is paid. The penalty is a disallowance of the related 2 percent timely filing allowance for a period of 12 months. They state that computer programming changes must be made to the MITS and the MOST systems which administer the sales tax in Missouri. The changes are necessary to keep track of the few (estimated to be less than 100 out of over 100,000 accounts) timely filing discounts that are disallowed and for how long they are to be disallowed. Officials estimate that 4,598 of overtime hours would be needed to make the necessary changes at a cost of $109,378. Additional costs are estimated to be incurred by the State Date Center for testing and implementation, estimated to be $19,139.



The DOR also assumes this proposal will generate no additional revenues for the state because of the estimated few non-compliant tax accounts.



Oversight assumes the Department of Revenue will be able to perform additional audit and compliance efforts with existing staff. Oversight also assumes that minimal additional revenue will be collected by the Department of Revenue from the disallowance of the 2% timely filing allowance from accounts that have been found to be out of compliance. Oversight assumes, based on the limited number of cases expected to be found out of compliance, that a more cost-effective method of tracking the 12 month period of 2% timely filed disallowance could be implemented and is therefore estimating a $0 cost for programming.



Officials from the Department of Higher Education (CBHE) stated in a response to a similar proposal, the Director of Revenue would be allowed to conduct compliance audits regarding payment of a particular sales tax that benefits video instructional development in education. They also stated revenues could potentially be increased if these compliance audits reveal that the relevant tax is presently being under-collected. The increase could result from delinquent taxes being paid and/or increased collections due to stricter voluntary compliance and/or due to the 12 month prohibition of the 2 percent collection fee by all those violating the reporting requirements. The CBHE assumed these proposals would have no fiscal impact on their agency.



Officials from the Department of Elementary and Secondary Education (DESE) assume this proposal will have no administrative impact to DESE, but may increase the amount of funds coming into the VIDEO fund and distributed as grants to eligible recipients (school districts, public colleges and universities, public television statements).



ASSUMPTION (continued)



Oversight assumes this proposal would rescind the 2% timely payment allowance for a period of 12 months for those accounts that were determined to be out of compliance in reporting their taxable video rentals. There could be a minimal amount of additional income received by local governments for disallowing the 2% timely filing allowance on local sales taxes.





FISCAL IMPACT - State Government FY 2001 FY 2002 FY 2003

(10 Mo.)





VARIOUS SALES TAX FUNDS



Income to various sales tax funds:

Revenue from disallowance of 2% $0 to $0 to $0 to

timely filing reduction unknown unknown unknown





ESTIMATED NET EFFECT ON $0 TO $0 TO $0 TO

VARIOUS SALES TAX FUNDS UNKNOWN UNKNOWN UNKNOWN







FISCAL IMPACT - Local Government FY 2001 FY 2002 FY 2003

(10 Mo.)



Increased revenue from disallowance of $0 to $0 to $0 to

2% timely filing reduction. unknown unknown unknown









FISCAL IMPACT - Small Business



A direct fiscal impact could be expected to those small businesses that are not compliant with their reporting of video rentals to the DOR.











DESCRIPTION



This proposal amends Section 170.250, RSMo, by creating additional enforcement mechanisms for the Director of Revenue to quantify and collect the video rental tax.





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 Higher Education

Department of Elementary and Secondary Education



















Jeanne Jarrett, CPA

Director

January 28, 2000