SB 0192 - Fiscal Note

Fiscal Note - SB 0192 - Excludes from sales tax food sold constituting over 80% of gross receipts

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1010-01

BILL NO.: SB 192 with HCA 1

SUBJECT: Business and Commerce; Taxation and Revenue-General-Sales and Use

TYPE: Original

DATE: April 26, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	(unknown)	(unknown)	(unknown)
Total Estimated Net Effect on All State Funds*	(UNKNOWN)	(UNKNOWN)	(UNKNOWN)

*Oversight assumes that the net effect of this proposal could result in unknown loss which could exceed $100,000 annually.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state this legislation simplifies the definition of food for sales tax purposes. It somewhat narrows the definition, but should simplify the application of the exemption. This proposal also provides for a credit of income tax for charitable contributions made to another state.

REVENUE IMPACT: DOR staff state that there may be a slight increase in State Revenues because of the definition of food exemption is narrowed in a very minor fashion. This amount is unknown.

The revenue impact of the income tax credit for charitable contributions made to another state is projected to be a unknown loss expected to exceed $100,000 annually.

ADMINISTRATIVE IMPACT: The new definition of food would exclude some and may even add others to the list of those able to sell food tax exempt. To accommodate this change, modifications to DOR's MITS/MOST computer programs would be necessary. This would require 363 overtime programming hours at a cost of $4,524 and the State Data Center would charge $2,363 for program change time and test time.

DOR staff stated that implementing the income tax credit would not administratively impact their agency.

Oversight assumes there would be an unknown fiscal impact on the General Revenue Fund. The State of Kansas was contacted to determine if they allowed tax credits for charitable contributions on their state income tax return. Kansas does allow such tax credits for charitable contributions and according to the Kansas Department of Commerce and Housing, five contributions were made by donors with a Missouri address for FY 1998. These contributions totaled $71,000 and the associated tax credits totaled $40,900. This group of donors consisted of one C corporation, two S corporations, a partnership, and one individual.

Under the FY 1998 Program, Kansas Department of Commerce and Housing processed 751 tax credit applications which involved $5,815,117 of donations and $3,723,414 of tax credits. Therefore, the Missouri donors represent only a very small portion of the donations and tax credits processed in FY 1998. Based on the data provided by the state of Kansas, Oversight is unable to accurately estimate the amount of Missouri residents credits taken in all other states.

ASSUMPTION (continued)

Oversight, for purposes of this fiscal note, assumes that the net effect of this proposal would be an unknown loss that could exceed $100,000 annually.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
Income to General Revenue Fund
Sales tax on food charged at a higher rate
for certain establishments	unknown	unknown	unknown
Cost to General Revenue Fund
Department of Revenue (DOR)
Expense and Equipment	($6,887)	$0	$0
Loss to General Revenue Fund
Deduction of charitable tax credits	(Unknown)	(Unknown)	(Unknown)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	(UNKNOWN)	(UNKNOWN)	(UNKNOWN)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
	0	0	0
FISCAL IMPACT - Small Business
Small businesses would expect to be fiscally impacted to the extent that they have already converted their registers to collect the lower rate and will have to change their registers again without compensation.

DESCRIPTION

This act excludes from the definition of food, for purposes of the reduced sales tax rate, food or drink where the gross receipts of selling that food constitutes more than eighty percent of the total gross receipts of that establishment. Food sold in establishments in which the gross receipts from food is under eighty percent, and food sold in vending machines, would be subject to the lower sales tax rate. This proposal would also allow income tax credits of other states which are based on the federal charitable contribution deduction to be treated as income taxes paid in those

DESCRIPTION

(Continued)

states for purposes of determining a Missouri taxpayer's income tax liability. This portion of the proposal would have an effective date of January 1, 2000, and applies to all taxable years beginning after December 31, 1999.

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

Jeanne Jarrett, CPA

Director

April 26, 1999