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F I S C A L I M P A C T R E P O R T

SPONSOR Neville

ORIGINAL DATE

LAST UPDATED

2/6/06

HB

SHORT TITLE Expand Tax Definition of Retail Food Store

SB 461

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(234.0)

Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates,Relates to,Conflicts with, Companion to

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 461 expands the definition of retail food store so that businesses that sell bottled wa-

ter can receive the gross receipts tax deduction for food, provided that 90 percent of a business’

total sales are bottled water for home consumption.

The effective date of these provisions is July 1, 2006.

FISCAL IMPLICATIONS

TRD estimates the bill will reduce gross receipts tax revenue to the general fund by $234 thou-

sand per year.

The bill will not affect local government gross receipts tax revenue unless taxpayers who claim

the deduction file their taxes incorrectly.

Senate Bill 461 – Page

2

ADMINISTRATIVE IMPLICATIONS

TRD will need to troubleshoot systems, revise forms and instructions, prepare taxpayer educa-

tion materials and instructions, and retrain personnel.

Implementation of the food and medical deductions has been unusually complicated and expen-

sive for TRD because of the programming needed to do hold harmless distributions for local

governments. Increasing the list of food items eligible for the food gross receipts tax deduction

will increase the cost of administering the local hold harmless distributions.

TECHNICAL ISSUES

TRD notes that the original intent of Section 7-9-92 was to include food for home consumption

as defined by the federal Food Stamp program. Senate Bill 461 would include receipts from

companies that sell water to businesses as well as to individuals for home consumption. Compa-

nies delivering bottled water to homes and businesses will have to separate home and business

sales to qualify for the deduction.

SS/yr