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

SPONSOR Jennings

ORIGINAL DATE

LAST UPDATED

2/13/07

HB

SHORT TITLE Health Service Gross Receipts Reporting

SB 258

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($54.0)

Recurring General Fund

($36.0)

Recurring

Local

Governments

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates SB 356

SOURCES OF INFORMATION

LFC Files

Response Received From

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 258 amends Section 7-1-71.2, which currently provides a reporting penalty for food

retailers and health practitioners who misreport the gross receipts tax deductions for food and

medical services enacted in 2004. The bill would remove health practitioners who misreport the

medical services deduction. Food retailers who misreport would still be subject to penalty.

The effective date of these provisions is July 1, 2007.

FISCAL IMPLICATIONS

TRD reports that about $90 thousand in penalties were paid by medical service providers

pursuant to Section 7-1-71.2 in the last year. Of the $90 thousand that would no longer be

collected, about 60 percent would be a loss to the general fund and the remaining 40 percent

would be a loss to local governments.

Senate Bill 258 – Page

2

SIGNIFICANT ISSUES

The food and medical services gross receipts tax deductions enacted in 2004 contained the

penalty provision that is amended in this bill. Under current law, health care practitioners and

food retailers pay a penalty in the amount of the difference between the incorrect deduction and

the correct deduction amount, multiplied by twice the total local option tax rates in effect in the

reporting period.

TRD is uncertain whether the penalty amended by this bill is currently contributing to more or

less accurate reporting of the medical services deduction. TRD reports that the “double local

option penalty" was enacted to ensure correct reporting because the provision holding local

governments harmless from the deduction depends on it. However, many taxpayers view the

penalty as unfair. As a consequence, it appears they have not voluntarily disclosed misreporting

that would be subject to the penalty. Many assessed penalties have been protested, which are

costly for TRD to resolve.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 258 duplicates Senate Bill 356.

SS/nt