COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 0440-01
Bill No.: SB 228
Subject: Revenue Dept.; Taxation and Revenue - General, Sales and Use
Type: Original
Date: February 7, 2001
FISCAL SUMMARY
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| General Revenue | ($7,321,817) | $0 | $0 |
| School District Trust | ($1,584,912) | $0 | $0 |
| Conservation | ($198,114) | $0 | $0 |
| Parks and Soil | ($158,491) | $0 | $0 |
| Total Estimated
Net Effect on All State Funds |
($9,263,334) | $0 | $0 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| None | |||
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| Local Government | $0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 5 pages.
ASSUMPTION
Officials of the Office of Administration - Division of Budget and Planning (BAP) assume this proposal would allow for a sales tax "holiday" on the purchase of clothing and shoes.
BAP estimates the annual consumer spending in Missouri on clothing and shoes based on national estimates from the U.S. Department of Commerce - Bureau of Economic Analysis. BAP staff assumes Missouri represents 1.9% of U.S. totals. BAP staff estimates taxable sales for FY2002 to be $6,427,700,000, taxable sales for FY 2003 to be $6,686,100,000 and taxable sales for FY 2004 to be $6,953,544,000.
BAP states, as was the case with similar proposals from last year, there is no information available that addresses what percent of these expenditures would qualify for the exemption or how effective this program would be in so far as motivating the public to shop for clothing during the tax "holiday".
Oversight based the revenue estimate on 9/365 of the FY 2002 taxable sales resulting in a loss to state and local funds of $9 million in FY 2002 due to the sales tax holidays. No adjustment was made for the $100 cap. Also, no adjustment was made for any incentive effect this proposal might have on spending habits.
Officials of the Department of Revenue (DOR) state this legislation creates both a state and local sales and use tax holiday for all retail sales of clothing with a taxable value of one hundred dollars or less for the period beginning 12:01 a.m. on the first Saturday in August through midnight on the second Sunday in August.
ADMINISTRATIVE IMPACT:
This legislation will have an administrative impact on DOR since it is assumed that DOR must track the localities for loss of local funds. Division of Taxation in order to track will need to have the retailer separately state on the sales tax returns with a new location code for clothing. The August period will affect annual, quarterly and month registrants and will result in some single and two location voucher filers to report on a long form for one month. Taxation will need a Tax Processing Tech I for every 50,000 errors generated by this new location; One Clerk II for pre-edit of the return and one Data Entry Operator for the additional key entry. The mainframe system will need to be modified for the new location code and for reports. It is estimated that 2,941 hours of programming time will be needed to complete the implementation of this legislation. This fiscal note response differs from last year's response to SB 1016. Programming costs were not included last year and should have been to allow the mainframe system to track.
ASSUMPTION (continued)
DOR will have to notify all sales tax accounts of the holiday period. 127,000 notification letters will have to be sent to the registered accounts at a cost of $43,910.
Oversight, for purposes of this fiscal note, has reflected the loss in sales tax revenue based upon the estimate provided by the Office of Administration, Budget and Planning and the actual impact similar legislation had on other states. Oversight assumes the mailing costs would be incurred in July before the August sales tax holiday. In addition, Oversight has included the programming costs and personnel requested by DOR since this legislation includes a reimbursement to local government for any local sales tax revenue lost.
For a similar prior proposal, Oversight contacted three states that enacted similar legislation, the State of Texas, the State of Florida and the State of New York. Texas had a Sales Tax Holiday on clothing and footwear during a three day period in August, 1999. Florida had a nine
day sales tax holiday period on clothing and footwear in August, 1998, and New York has had several such "holidays" in 1997, 1998 and 1999. Oversight assumes that similar impacts would occur in Missouri and have applied their taxable sales during the holidays to the Gross State
Product in Chained (1992) Dollars, by industry from the U.S. Census Bureau, the Official Statistics, Statistical Abstract of the United States: 1998 to determine what Missouri's taxable sales in a similar period might be. The comparison reveals that by using the Office of Administration, Budget and Planning's estimated sales of clothing and footwear in Missouri for a given fiscal year, a reasonable estimate could be made to the actual impact a sales tax holiday would have. Oversight assumes that the same impact will occur whether the exemption applied to clothing or shoes under $500 as it would for clothing under $100. Oversight also assumes that the results could be applied over a three day exemption as it would for a seven day exemption, as it would for a thirty-one day exemption.
This proposal would result in a decrease in Total State Revenues.
| FISCAL IMPACT - State Government | FY 2002
(10 Mo.) |
FY 2003 | FY 2004 |
| GENERAL REVENUE FUND | |||
| Transfer to Local Government
Reimbursement for loss in local sales tax revenue |
($2,377,368) |
$0 |
$0 |
| Cost to General Revenue Fund
Department of Revenue (DOR) |
|||
| Personnel ( 4 months) | ($20,240) | $0 | $0 |
| Fringe Benefits | ($6,746) | $0 | $0 |
| Postage | ($43,910) | $0 | $0 |
| Programming & State Data Center | ($118,816) | $0 | $0 |
| Total Costs - DOR | ($189,712) | $0 | $0 |
| Loss to General Revenue Fund | |||
| Clothing sales tax exemption | ($4,754,737) | $0 | $0 |
|
ESTIMATED NET EFFECT ON GENERAL REVENUE FUND |
($7,321,817) |
$0 |
$0 |
| Loss to School District Trust Fund | |||
| Clothing sales tax exemption | ($1,584,912) | $0 | $0 |
|
Loss to Conservation Fund |
|||
| Clothing sales tax exemption | ($198,114) | $0 | $0 |
| Loss to Parks and Soil Funds | |||
| Clothing sales tax exemption | ($158,491) | $0 | $0 |
|
ESTIMATED NET EFFECT TO ALL STATE FUNDS |
($9,263,334) |
$0 |
$0 |
| FISCAL IMPACT - Local Government | FY 2002
(10 Mo.) |
FY 2003 | FY 2004 |
| Income from General Revenue
Reimbursement |
$2,377,368 |
$0 |
$0 |
| Loss to Cities
Clothing sales tax exemption |
($1,426,421) |
$0 |
$0 |
| Loss to Counties
Clothing sales tax exemption |
($950,947) |
$0 |
$0 |
| ESTIMATED NET EFFECT TO
LOCAL GOVERNMENT |
$0 |
$0 |
$0 |
FISCAL IMPACT - Small Business
Small businesses who sell clothing would be expected to be fiscally impacted to the extent that they would no longer collect and pay sales tax on these taxable items. Small businesses who would purchase clothing would pay less for such items.
Sales tax paperwork will be increased for the month that the "holiday" sales tax days are exempt.
DESCRIPTION
This bill exempts from state and local sales and use tax the sale of certain clothing when sold during a nine day period in the month of August 2001. Each individual item must sell for $100 or less to qualify for the exemption. The state will reimburse political subdivisions for any revenue lost as a result of the holiday.
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
Division of Budget and Planning
State of Texas
State of Florida
State of New York Jeanne Jarrett, CPA
Director
February 7, 2001