COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. No.:         5100-01

Bill No.:          HB 2250

Subject:           Taxation and Revenue - Sales and Use; Education, Elementary and Secondary

Type:              Original

Date:               March 5, 2008

Bill Summary:            Would create a sales tax holiday for retail sales of certain energy efficient products.

FISCAL SUMMARY

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 7 pages.

☐ Estimated Total Net Effect on All funds expected to exceed $100,000 savings or (cost).

☒ Estimated Net Effect on General Revenue Fund expected to exceed $100,000 (cost).

FISCAL ANALYSIS

ASSUMPTION

Officials from the Office of Administration, Division of Budget and Planning (BAP) assume this proposal would not result in additional costs or savings to their organization.

The proposal would exempt purchases of "Energy Star" certified appliances from sales tax for the seven day period in November, starting in 2009. Based on Personal Consumption data as provided by the United States Bureau of Economic Analysis, sales of qualifying appliances would be approximately 0.04% of annual retail sales. Gross GR sales tax collections in FY07 were $1,977.7 million. Therefore, general and total state revenues could be reduced in the following ways, beginning in FY09:

                                    General Revenue        $791,000

                                    Prop C                        $264,000

                                    Conservation               $33,000

                                    DNR                            $26,000

                                    Total                $1,114,000

Officials from the Department of Elementary and Secondary Education defer to the Department of Revenue as to the fiscal impact of the proposal.

Officials from the Department of Conservation (MDC) assume this proposal would create a sales tax holiday for retail sales of certain energy efficient products. This proposal would have a negative impact on MDC funds since it would create a seven-day sales tax holiday in November for certain energy efficient products. However, MDC is unable to provide an estimated impact and will rely on DOR for the fiscal impact of this legislation.

Officials from the Department of Natural Resources (DNR) assume the proposal would establish the "Show-Me Green Tax Holiday Act" which would authorize a state sales and use tax exemption on the purchase of energy efficient products costing $1,500 or less and purchased for personal use during a seven-day period each November, beginning January 1, 2008.

The DNR Parks and Soils Tax Fund is derived from a one-tenth of one percent sales and use tax.

Therefore, any additional sales and use tax exemption would be a loss to the Parks and Sales Tax Fund.

ASSUMPTION (continued)

Officials from the Department of Revenue (DOR) assume this proposal would not have a fiscal impact on their organization.

DOR officials provided an estimate of the IT cost to implement the proposal.

The Office of Administration, Information Technology Services Division (ITSD/DOR) estimates

that this legislation could be implemented utilizing two FTE existing CIT III for two months at a total cost of $16,744. ITSD/DOR assumes the IT portion of this proposal could be implemented with existing resources; however, if priorities shift, additional FTE/overtime would be needed.

Oversight has estimated part of the fiscal impact of the proposal as follows. According to information provided by the State Tax Commission, there are an average of 25,500 new homes constructed each year in Missouri. Assuming that each new home would have $5,000 in new energy-efficient appliances there would be $127.5 million in taxable sales for an estimated $7.7 million in sales tax revenues. Weekly sales would be $2.5 million. The sales tax would be distributed among taxing authorities as follows.

            State of Missouri

            General Revenue Fund ($2.5 million x 3%)                                       $73,600

            School District Trust Fund ($2.5 million x 1%)                                 $24,500

            Conservation Commission Fund ($2.5 million x1/8%)                       $3,100

            Parks, and Soils and Water Fund ($2.5 million x 1/10%)                   $2,500

            Local governments

            Local Governments ($2.5 million x 2%)                                            $49,000

Oversight assumes that sales to other consumers would be several times sales to new home buyers, and that a sales tax holiday would tend to concentrate sales in the fax-free period. Accordingly, Oversight will assume that this proposal would have an unknown fiscal impact, and that impact would exceed $100,000 for the General Revenue Fund, the School District Trust Fund, and local governments.

FISCAL IMPACT - Small Business

No direct fiscal impact to small businesses would be expected as a result of this proposal.

FISCAL DESCRIPTION

This proposal would create a sales tax holiday for retail sales of certain energy efficient products.

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

            Division of Budget and Planning

Department of Elementary and Secondary Education

Department of Conservation

Department of Natural Resources

Department of Revenue

                                                                                                Mickey Wilson, CPA

                                                                                                Director

                                                                                                March 5, 2008