Fiscal Note - SB 0156 - Exempts Food From 3% of State Sales/Use Tax
L.R. NO. 0313-02
BILL NO. SB 156
SUBJECT: Sales and Use Tax: Taxation and Revenue
TYPE: Updated
DATE: February 3, 1997
# Updated to reflect the updated response from the University of Missouri
Research Center.
#FISCAL SUMMARY
#ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue # ($210,852,870) # ($234,548,573) # ($239,239,222)
School District
Trust # ($1,404,819) # ($1,563,181) # ($1,594,444)
#Total Estimated
Net Effect on All
State Funds # ($212,257,689) # ($236,111,754) # ($240,833,666)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
#FISCAL ANALYSIS
ASSUMPTION
Officials of the Department of Revenue (DOR) state this proposal would exempt
the General Revenue portion of the sales tax on retail sales of food. An
additional discount is allowed to retailers equal to 2% of the 1% state sales
tax rate that would be collected on food sales. This would result in an
impact to the School District Trust Fund since that fund receives proceeds of
the 1% rate. "Food" includes only those products for which food stamps may be
redeemed under the federal food stamp program. The exemption only applies
when food is purchased from a retailer that is authorized to participate in
the federal food stamp program.
The Division of Taxation and Collection would request the following personnel
in order to implement this proposal:
2 Tax Processing Technician I's for 6 months initially to identify and
register affected accounts;
1 Tax Processing Technician I for approximately 50% of the time to
handle taxpayer correspondence, telephone inquiries and refund requests;
1 Tax Processing Technician I to process corrections, file maintenance
and taxpayer inquiries in the later stages of collection activity;
1 Data Entry Operator I for approximately 50% of the time to key the
additional locations that will be required to allow taxpayers to separately
account for food sales tax amounts, assuming 10,000 affected accounts or less
filing sales tax returns containing 10 additional fields per return on a
monthly basis. Forms revision costs to add additional lines to single
location voucher returns have been shown as well as postage costs.
The Information Systems Division state the effective date of July 1, 1997 may
not allow sufficient time to perform the necessary programming changes;
therefore, overtime costs would be requested. State Data Center costs would
also be requested.
Oversight has allowed the Department of Revenue 2 FTE, forms revision and
postage costs, overtime costs requested and the State Data Center costs.
Officials of the Office of Administration (COA) assume the purpose of this
proposal is to eliminate the general revenue sales tax on food sold for
off-premise consumption. COA staff based their estimates on the following
assumptions:
1. Missouri food consumption based on Department of Commerce estimate of
"Personal Consumption Expenditure" data for U.S. It is assumed Missouri
accounts for about 1.9% of U.S. totals.
2. Food stamp purchases account for 6% of spending.
3. An additional 2% discount for retailers is based on the 1% sales tax
rate on food.
4. Consumer spending on food is assumed to grow 2% for Fiscal Years 1996
and beyond.
5. Effective date of July 1, 1997 results in one month lag in impact.
This gives eleven months of fiscal impact in FY 98.
# The University of Missouri Research Center has updated their estimates to
concur with the estimates of the Office of Administration.
This proposal would result in a decrease in Total State Revenues since Sales
and Use Tax collections are included in the calculation of Total State
Revenue.
# FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
GENERAL REVENUE FUND
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (2 FTE) ($33,228) ($34,059) ($34,911)
Fringe Benefits ($9,480) ($9,717) ($9,960)
Expense and Equipment ($87,286) ($27,706) ($27,718)
Administrative Cost to DOR ($129,994) ($71,482) ($72,589)
# Loss to General Revenue Fund
General Revenue sales tax exemption
on food ($210,722,876) ($234,477,091)($239,166,633)
#ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND ($210,852,870) ($234,548,573)($239,239,222)
# Loss to School District Trust Fund
2% Discount ($1,404,819) ($1,563,181) ($1,594,444)
#ESTIMATED NET EFFECT TO
SCHOOL DISTRICT TRUST FUND ($1,404,819) ($1,563,181) ($1,594,444)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
0 0 0
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that
they pay sales tax on taxable items. The businesses that are eligible to
accept food stamps would be able to sell their food exempt from sales tax
while those that are not eligible to participate in the food stamp program
would still be required to collect sales tax on food sales.
DESCRIPTION
This proposal reduces the state sales tax rate on food which is authorized
under the federal food stamp program to be purchased with food stamps. The
reduction is 3%. This will change the total state sales tax on qualifying
food from 4.225% to 1.225%. All local sales taxes will continue to be charged
on these food items. The proposal also allows any retailer who collects the
reduced tax rate on food to retain 2% of those collections for cost of
administration.
This proposal contains an emergency clause and would be in full force and
effect upon the date of its passage and approval or upon the date of July 1,
1997, whichever date shall occur later.
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
University of Missouri Research Center
This Fiscal Note is not an official copy and should not be quoted or cited.