Fiscal Note - SB 0124 - Sales/Use Tax on Trade-Ins
L.R. NO. 0584-02
BILL NO. Perfected SB 124
SUBJECT: Motor Vehicles-property - Real and Personal Taxation and Revenue
TYPE: Original
DATE: February 25, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue Unknown Unknown Unknown
Highway Unknown Unknown Unknown
School District
Trust Unknown Unknown Unknown
Conservation Unknown Unknown Unknown
Parks and Soils Unknown Unknown Unknown
Total Estimated
Net Effect on All
State Funds *Unknown *Unknown *Unknown
*Increased revenue in an unknown amount.
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
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 Unknown Unknown Unknown
FISCAL ANALYSIS
ASSUMPTION
Officials of the Office of Administration (COA) state this proposal would
have a small positive impact on state revenue, likely less than $100,000
annually.
Officials of the Department of Revenue (DOR) state this proposal would
require sales tax to be paid on articles used as trade-ins in order to obtain
sales tax credit for the article.
Under current law, credit is given against the sales tax due on a retail
purchase for the value of any article taken in trade, whether tax has been
paid on that item or not. This bill requires tax to have been paid on the
article taken in trade. The effect should be a gain to all state and local
sales tax funds; however, the amount of such gain is unknown.
Motor Vehicle Bureau (MVB) would be required to revise and reprint the
titling manual and revise policies. Mailing costs would also be incurred for
these revisions. Estimated cost to General Revenue for FY98 is $11,265.
REVENUE IMPACT:
DOR stated the proposal would effect a net gain to all state and local sales
tax funds. The amount of such gain is indeterminable for the following
reasons:
1) Motor vehicle trade-in values are not currently tracked;
2) Many title applicants omit the trade-in information from the title
application and simply show the amount they paid as the purchase price; and,
3) The number of persons that will attempt to trade in merchandise for which
they have no proof of payment of the original tax amount is indeterminable.
It is thought that this will result in a substantial gain to all state and
local sales tax funds in all regular sales and use transactions involving
trade-ins since the trade-in will not be allowed unless such proof is
maintained. This will apply to gift transactions as well, meaning that if an
item is given as a gift and later used as a trade-in on a new item, no
trade-in credit would be allowed unless the person proved the giver of the
gift had paid sales tax on the original purchase of the item.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
Income to General Revenue Fund
Tax exempt articles not deducted Unknown Unknown Unknown
Cost: Department of Revenue
Expense & Equipment ($11,265) $0 $0
ESTIMATED NET EFFECT
ON GENERAL REVENUE FUND Unknown Unknown Unknown
Income to Highway Fund
Tax exempt articles not deducted Unknown Unknown Unknown
Income to School District Trust Fund
Tax exempt articles not deducted Unknown Unknown Unknown
Income to Conservation Fund
Tax exempt articles not deducted Unknown Unknown Unknown
Income to Parks & Soils Fund
Tax exempt articles not deducted Unknown Unknown Unknown
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
Income to Cities and Counties
Tax exempt articles not deducted Unknown Unknown Unknown
FISCAL IMPACT - Small Business
No fiscal impact to small businesses would be expected as a result of this
proposal.
DESCRIPTION
Currently, when an item is taken in trade as a credit or part payment of the
purchase price of the article being sold, sales tax is only paid on the
difference between the sale price and the price of the article traded. This
act would allow a reduction for the price of the article traded only if sales
tax has been paid on the article being traded.
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
Department of Revenue
This Fiscal Note is not an official copy and should not be quoted or cited.