· Sales of the following items for off-premise consumption: (a) meals and sandwiches (heated or not); (b) heated food or heated beverages; (c) soda fountain items such as sundaes, milk shakes, malts, ice cream cones and sodas; and (d) candy, chewing gum, lozenges, popcorn and confections.
·
In addition, specify that paper and similar disposable products provided by a restaurant to its employes to use in the consumption of food, food products and beverages while at work would be exempt from the sales tax.
Specify that the provisions would be effective on the first day of the second month beginning after publication of the bill. Because the current provision is difficult to enforce, it is estimated that the exemption would have a minimal fiscal impact on sales tax collections.
[Act 9 Sections: 1812Lr and 9443(7fg)]
9. USE TAX ON BOATS BERTHED IN STATE BOUNDARY WATERS
Senate: Modify the current use tax exemption for a boat purchased in a state contiguous to this state by a person domiciled in that state if the boat is berthed in this state's boundary waters adjacent to the state of the domicile of the purchaser if the transaction was an exempt occasional sale under the laws of the state in which the purchase was made. Expand the provision to apply to a boat purchased anywhere (rather than in a contiguous state), as long as the other conditions still apply. Specify that these provisions would take effect on the first day of the second month beginning after publication. It is estimated that this provision would have a minimal fiscal effect.
Conference Committee/Legislature: Delete provision.
Excise Taxes
1. CIGARETTE TAX REFUNDS: CURRENT LAW REESTIMATE [LFB Paper 120]
Governor: Reduce funding for cigarette tax refunds by $1,800,000 in 1999-00 and $1,300,000 in 2000-01 to reflect lower estimates of the amount required to reimburse Native American tribes under present law. Currently, the tribes receive a refund of 100% of the cigarette tax on cigarettes sold to Native Americans and 70% of the tax on sales made to non-Native Americans on reservations or trust lands. The reduced funding reflects estimates of lower cigarette tax collections, primarily as a result of anticipated reductions in cigarette consumption following price increases associated with the settlement of the tobacco lawsuit.
Joint Finance/Legislature: Reestimate funding for cigarette tax refunds under current law at $9,520,000 in 1999-00 and $9,320,000 in 2000-01. The reestimates are based on assumed 1% annual reductions in cigarette consumption, with additional reductions related to increases in cigarette prices and federal taxes as described above. Compared to the Governor's recommendation, the revised estimates decrease funding for the refunds by $880,000 in 1999-00 and $1,580,000 in 2000-01.
2. CIGARETTE TAX REFUNDS [LFB Paper 121]
Governor: Reduce, from 70% to 50%, the percentage of cigarette tax collections from sales of cigarettes on reservations or trust lands that would be refunded to Indian tribes. In addition, clarify that "Indian tribe" means an American Indian tribe or band.
Under current law, the Department of Revenue refunds 70% of cigarette tax collections in respect to sales on reservations or trust lands of an Indian tribe under specified conditions. State law further authorizes DOR to enter into agreements with Indian tribes to provide for the refunding of cigarette taxes paid on cigarettes sold on reservations to enrolled members of the tribe residing on the tribal reservation.
Federal law prohibits states from imposing a cigarette tax on sales by Native Americans to Native Americans on reservations. Ten of the 11 Indian tribes in the state have signed agreements with the state in which the tribes agree to sell only stamped (taxed) cigarettes and the state agrees to provide refunds to the tribes of 100% of taxes paid on cigarette sales to tribal members living on the reservation. For these tribes, DOR refunds 100% of tax collections on cigarettes sold to tribal members, and 70% of taxes on cigarettes that are sold to non-tribal members.
The remaining tribe, which does not have an agreement with the state, sells unstamped (untaxed) cigarettes to tribal members and stamped cigarettes to non-tribal members. For this tribe, the 70% refund applies only to tax collections from the sale of stamped cigarettes to non-tribal members.
The provision to reduce the refund rate from 70% to 50% would first apply to taxes imposed on the first day of the second month beginning after publication of the bill. The fiscal effect is estimated to be a reduction in refunds to Indian tribes of $2,500,000 in 1999-00 and $3,000,000 in 2000-01.
Joint Finance: Delete the Governor's recommendation to reduce the refund rate for taxes collected on tribal sales of cigarettes to non-tribal members from 70% to 50%. However, retain the provision that would clarify that an "Indian tribe" means an American Indian tribe or band. In addition, specify that "trust lands" means any lands in this state held in trust by the United States government for the benefit of a tribe or a member of a tribe.
For the cigarette tax refund on sales to non-tribal members, specify a maximum refund rate of 70% and require DOR to negotiate the exact rate in individual agreements with the tribes (at or below the 70% maximum). The statutes would continue to specify that such agreements would provide for the refunding of 100% of cigarette taxes imposed on sales to tribal members.
Under these provisions, estimated cigarette tax refunds for 1999-01 would be the same as the modified estimates under current law (which would be $2,500,000 greater in 1999-00 and $3,000,000 greater in 2000-01 than the estimates included in the bill). Savings would occur if agreements are negotiated with a refund rate of less than 70%.
Assembly: Retain the Joint Finance Committee provisions. However, establish the maximum rate at 50%, rather than 70%. Estimate reductions in cigarette tax refunds of $1,836,000 in 1999-00 and $2,397,000 in 2000-01. The estimated fiscal effect assumes that the tribes that are currently selling only stamped cigarettes would continue to do so and that refunds would be made at the 50% rate. If new agreements were negotiated at rates below the maximum, the refund expense to the state could be lower. However, if the tribes did not continue selling taxed cigarettes to non-tribal members, the state could see reductions in both tax collections and refunds from cigarette sales on reservations.
Senate/Legislature: Delete the provisions of the Joint Finance Committee that would specify the 70% refund rate for cigarette taxes collected from sales of cigarettes to non-tribal members as a maximum rate, with the exact rate to be negotiated in individual agreements with the tribes. Instead, maintain the 70% refund rate for cigarette taxes collected from sales of cigarettes to non-tribal members, as under current law.
Under these provisions, there would be no change in refunds from the estimates for the Joint Finance Committee, which assumed that refunds would be the same as under current law.
[Act 9 Sections: 2171, 2171m and 9343(6)]
3. TOBACCO PRODUCTS TAX [LFB Paper 122]
Governor: Convert the tobacco products tax from an occupational tax to an excise tax. Require DOR to refund 50% of tobacco products tax collections on sales by Indian tribes to non-tribal members under certain conditions as described below.
Current Law. Under current law, the Wisconsin tax on tobacco products is an occupational tax imposed on distributors of tobacco products. For domestic tobacco products sold by distributors, the distributors are required to pay a tax at the rate of 20% of the manufacturer's established list price (for imported products, federal tax is added to the list price before applying the 20% tax rate). However, the statutes provide exceptions to the tobacco products tax for the following:
a. tobacco products sold to or by post exchanges of the U.S. armed forces;
b. tobacco products sold to or by state-operated veterans hospitals in this state;
c. tobacco products sold to an interstate carrier of passengers for hire to be resold to bona fide passengers of such carriers;
d. tobacco products sold for shipment outside this state in interstate commerce; and
e. tobacco products that, under the Constitution and laws of the United States, may not be taxed by this state.
The U.S. Constitution and federal law have been interpreted in a manner that would exempt sales of tobacco products by distributors to Indian tribes from the tobacco products tax. According to DOR, in-state distributors of tobacco products typically claim exemptions from the tobacco products tax for their sales to Indian tribes. As a result, there may be retail sales on reservations of tobacco products to non-tribal members on which no tobacco products tax has been paid.
Change from an Occupational to an Excise Tax. The bill would change the tobacco products tax from an occupational tax to an excise tax. The tax would continue to be imposed at the distributor level. However, the bill would specify that the tax be passed on to the ultimate consumer of the tobacco products.
The bill would also eliminate the current exemption for sales that may not be taxed under the U.S. Constitution or federal law [item (e) above]. The bill would further specify that all tobacco products received in this state for sale or distribution in this state would be subject to the tax, unless they were specifically exempted. Under these provisions, it appears that sales of tobacco products by distributors to Indian tribes would not be exempt from the tax.
The bill would provide that a distributor of tobacco products who failed to file required reports and to collect and remit the tax on all tobacco products not specifically exempted would be subject to the following: (a) a fine of not less than $1,000 nor more than $5,000; (b) imprisonment for not less than 90 days nor more than one year; or (c) both types of penalties.
50% Refund to Tribes. The bill would require DOR to refund 50% of tobacco products tax collections in respect to sales on reservations or trust lands of an Indian tribe to the tribal council having jurisdiction over the reservation or trust land if all of the following conditions were met: (a) the tribal council had filed a claim for the refund with DOR; (b) the tribal council had approved the retailer; (c) the land on which the sale occurred had been designated a reservation or trust land on or before January 1, 1983; (d) the tobacco products had not been delivered by the retailer to the buyer by means of a common carrier, a contract carrier or the U.S. postal service; and (e) the retailer had not sold tobacco products to another retailer or to a subjobber. The bill would also expand the sum sufficient appropriation for cigarette tax refunds to include refunds related to the tobacco products tax.
Agreements with Tribes. The bill would authorize DOR to enter into agreements with Indian tribes to refund the tobacco products tax imposed on tobacco products sold on reservations or trust lands to enrolled members of the tribe residing on the tribal reservation.
These provisions on tobacco tax refunds and agreements with tribes would parallel current provisions related to cigarette tax collections.
Effective Date. The changes in the tobacco products tax would first apply to tobacco products taxes imposed, and to claims for refunds of such taxes filed, on the first day of the second month beginning after publication of the bill.
_Hlt444936206 Fiscal Impact. The fiscal effect of these provisions is estimated to be a reduction in refunds to Indian tribes of $208,500 in 1999-00 and $250,00
0
in 2000-01. It should be noted that these estimates reflect the net effect on the general fund, rather than an actual decrease in refunds to Indian tribes. The components of this estimate are an estimated increase in tobacco products tax collections of $417,000 in 1999-00 and $500,000 in 2000-01 and a corresponding increase in refunds equal to 50% of such collections. The difference between the estimated increases in collections and refunds results in the estimated net positive effect on the general fund of $208,500 in 1999-00 and $250,000 in 2000-01, which is shown by the administration as a reduction in the refund expense.
Joint Finance: Approve the Governor's recommendation with a modification to provide that the refund rate would be a maximum of 70% of taxes collected on sales to non-tribal members and authorize DOR to enter into agreements that would specify the refund rate at or below the maximum. In addition, specify that "trust lands" means any lands in this state held in trust by the United States government for the benefit of a tribe or a member of a tribe.
With the change in the tobacco products tax to an excise tax, general fund tax collections would increase by an estimated $375,000 in 1999-00 and $500,000 in 2000-01. However, there would be no funding for refunds, as negotiations with the tribes would have to occur before the refund process could be implemented.
Assembly: Retain the Joint Finance Committee provision. However, establish the maximum refund rate at 50%, rather than 70%. There is no fiscal effect of this provision, as there are no agreements in place for such refunds. However, it is estimated that if all of the tribes received refunds at the rate of 50%, the refund expense to the state would be $250,000 GPR annually.
Senate: Delete the provisions of the Joint Finance Committee that would specify a 70% maximum refund rate for tobacco products taxes collected from sales of tobacco products to non-tribal members, with the exact rate to be negotiated in individual agreements with the tribes. Instead, specify a refund rate of 70%, in provisions that would parallel current law for cigarette tax refunds.
Estimate increased refunds of taxes collected from sales of tobacco products to non-tribal members of $262,500 in 1999-00 and $350,000 in 2000-01. Under the Joint Finance Committee provision, which specified the 70% refund rate as a maximum, it was assumed that no refunds would be issued until agreements were negotiated with the tribes. Under these provisions, the 70% refund would apply to all taxes paid on sales of tobacco products to non-tribal members.
Conference Committee/Legislature: Include the Assembly provision. (The bill mistakenly included a provision that would generally authorize refunds of 70% of taxes on sales of tobacco products by the tribes to non-tribal members. However, the bill would also limit refunds of taxes on such sales to a maximum of 50% under provisions related to agreements with the tribes.)
Veto by Governor [F-7]: Delete the provision that would specify the 50% refund rate for taxes collected from sales by the tribes to non-tribal members as a maximum rate. In addition, delete the reference to 70% of taxes on such sales, which was mistakenly included under the bill. As a result of this partial veto, the refund rate that the Department of Revenue may use in agreements with the tribes is 50% for refunds of tobacco products taxes collected from sales to non-tribal members.
Under the bill, no funding was provided for tobacco products tax refunds to the tribes, as the precise rate for refunds of taxes collected on sales to non-tribal members would first have been determined in individual agreements between the tribes and the state (up to the maximum rate of 50%). The partial veto sets the rate at 50%. The administration did not increase the appropriation for cigarette and tobacco tax refunds as a result of the partial veto. However, based on the estimated increases in tobacco products taxes under these provisions and on the 50% refund rate, the projected increase in cigarette and tobacco products tax refunds to the tribes is $187,500 in 1999-00 and $250,000 in 2000-01.
[Act 9 Sections: 610, 2173 thru 2182 and 9343(7)]
4. CIGARETTE DISCOUNT FOR MANUFACTURERS AND DISTRIBUTORS
[Act 9 Vetoed Sections: 2178 and 2179]
[Bill Sections: 610, 2171 thru 2182 and 9343(6)&(7)]
Senate/Legislature: Restore the 2% discount for cigarette manufacturers and distributors that was reduced to 1.6% under the 1997-99 biennial budget bill. Specify that this provision would take effect on July 1, 2000. Estimate the fiscal effect to be a reduction in general fund revenues of $950,000 in 2000-01.
5. LIQUOR TAX AND MEMBERS OF THE MILITARY
Veto by Governor [F-6]: Delete provision.
[Act 9 Vetoed Sections: 2171p and 9443(8d)]
Assembly/Legislature: Specify that a person who is a member of the national guard, the United States armed forces or a reserve component of the United States armed forces may bring into the state an aggregate amount of 16 liters of intoxicating liquor and wine without payment of the state occupational tax on intoxicating liquor if the person: (a) is a state resident; and (b) leaves a foreign country for the purpose of entering into this state after spending at least 48 hours in that foreign country on duty or for training. Currently, all individuals entering this state after spending more than 48 hours in a foreign country may bring into this state four liters of tax-free intoxicating liquor and wine. These provisions would raise the limit to 16 liters for military personnel meeting the qualifications described above. The fiscal effect is estimated to be a minimal revenue loss.
These provisions would take effect on the first day of the second month beginning after publication.
Veto by Governor [F-5]: Reduce the amount of intoxicating liquor that a Wisconsin resident returning from active duty in a foreign country for a minimum of 48 hours may bring into the state without payment of the state intoxicating liquor tax from 16 to six liters.
[Act 9 Sections: 2170s, 2170t and 9443(3tx)]
[Act 9 Vetoed Section: 2170t]
Other General Fund Taxes
GPR-REV - $870,000
1. TAXES ON TELECOMMUNICATIONS COMPANIES: TRANSITIONAL ADJUSTMENT FEE
Joint Finance/Legislature: Provide that, for a telecommunications company subject to a transitional adjustment fee for 1999 and 2000 under 1995 Act 351, if the calculation of the transitional adjustment fee results in a negative amount, a portion of the amount calculated could be used as a credit against the ad valorem tax assessment (under current law, the calculation of a negative transitional adjustment fee would mean that the fee would be zero). However, specify that the credit would only be available for a company with "total Wisconsin gross revenues" under s. 76.38, 1993 statutes of less than $10.0 million. Limit the credit to 60% of the positive value of the negative transition fee amount calculated for the first year of the transition period under Act 351 and 40% of the positive value of the amount calculated for the second year of the transition period. Specify that these provisions would be retroactive to include taxes for the first year of the transition period under Act 351 and would sunset at the end of the transition period
Under current law, telecommunications utilities in Wisconsin are subject to state taxation on the basis of property value (ad valorem), in lieu of local property taxation. However, prior to taxes due for 1997, telecommunications companies were assessed a gross revenues license fee. Act 351 repealed the gross revenues license fee on telecommunications companies on May 15, 1998, and imposed an ad valorem tax beginning with taxes due for 1998. Act 351 also imposed a transitional adjustment fee on each cellular telecommunications utility and local exchange company for 1999 and 2000.
