SB 0432 - Fiscal Note

Fiscal Note - SB 0432 - Exempts from sales and use tax machinery and equipment used to conduct games of bowling in bowling alleys

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1595-01

BILL NO.: SB 432

SUBJECT: Entertainment, Sports and Amusements; Taxation and Revenue-Sales and Use

TYPE: Original

DATE: March 19, 1999

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	($75,000)	($90,000)	($90,000)
School District Trust	($25,000)	($30,000)	($30,000)
Conservation	($3,125)	($3,750)	($3,750)
Parks and Soil	($2,500)	($3,000)	($3,000)
Total Estimated Net Effect on All State Funds	($105,625)	($126,750)	($126,750)

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

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	($37,500)	($45,000)	($45,000)

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state this legislation exempts all sales of machinery, equipment and other tangible personal property required to conduct games of bowling in bowling alleys where sales tax is collected on the gross receipts of such games. DOR staff state that this proposal would not fiscally impact their agency and that the revenue impact of this proposal would be very slight and unknown.

Officials of the Office of Administration (COA) state capital expenditures by bowling alleys annually in Missouri is $2,500,000, and expenditures on personal property is $160,000 annually according to Missouri bowling alley operators. Therefore their annual expense on machinery and equipment is $2,660,000.

In a similar proposal officials of the Department of Economic Development (DED) stated that there are 167 bowling alleys in Missouri. According to Brunswick Bowling Equipment corporate headquarters, new equipment to establish one lane of bowling costs $44,000. Two thirds of this lane cost (pin setters and lanes) has a 25 year life expectancy and the other one third (seating, scoring equipment, etc.) has a life expectancy of 8 years. Other ancillary costs for balls, shoes, cash register, etc. are not included in the projection. Multiplying $44,000 by 2/3 and dividing by 25 gives a yearly total of $1173.92 per lane per year. The same calculation (44,000 x 1/3) divided by 8 year replacement equals an additional $1831.50 per lane per year for a total replacement cost of $3005.42 per lane per year. No figures were available for the average number on lanes in a bowling alley so the assumption of an average size of 12 lanes was used. Multiplying $3005.42 by 12 lanes and again by 167 bowling alleys gives a total expense per year of $6,022,861.68. The presumption that this replacement schedule is the optimum leads to the assumption that possibly less than one half would replace equipment at these intervals. This produces taxable sales of $3,000,000 annually and does not take into account ancillary costs for balls, shoes, registers, etc.

For purposes of this fiscal note, Oversight has estimated the revenue impact of this proposal based on the Department of Economic Development data.

This proposal would result in a decrease in Total State Revenues.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
GENERAL REVENUE FUND
Loss to General Revenue Fund
Bowling Alley Sales tax exemption	($75,000)	($90,000)	($90,000)
Loss to School District Trust Fund
Bowling Alley Sales tax exemption	($25,000)	($30,000)	($30,000)
Loss to Conservation Fund
Bowling Alley Sales tax exemption	($3,125)	($3,750)	($3,750)
Loss to Parks and Soil Funds
Bowling Alley Sales tax exemption	($2,500)	($3,000)	($3,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(10 Mo.)
Loss to Cities
Bowling Alley Sales tax exemption	($22,500)	($27,000)	($27,000)
Loss to Counties
Bowling Alley Sales tax exemption	($15,000)	($18,000)	($18,000)
ESTIMATED NET EFFECT ON
LOCAL GOVERNMENTS	($37,500)	($45,000)	($45,000)
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that they purchase bowling machinery and equipment and pay sales tax on taxable items.

DESCRIPTION

This act exempts from sales and use tax sales of machinery and equipment required to conduct games of bowling in bowling alleys if sales tax is collected on the gross receipts of the game.

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

Jeanne Jarrett, CPA

Director

March 19, 1999