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COMMITTEE REPORT
May 16, 2007
S. 310
S. Printed 5/16/07--S.
Read the first time January 23, 2007.
To whom was referred a Bill (S. 310) to amend Section 12-36-2120, as amended, Code of Laws of South Carolina, 1976, relating to sales tax exemptions, so as to exempt the gross, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass with amendment:
Amend the bill, as and if amended, by striking all after the enacting words and inserting:
/ SECTION 1. Section 12-36-2120 of the 1976 Code, is amended by adding an appropriately numbered item at the end to read:
"( ) durable medical equipment and related supplies;
(a) as defined under federal and state Medicaid and Medicare laws;
(b) which is paid directly by funds of this State or the United States under the Medicaid or Medicare programs, where state or federal law or regulation authorizing the payment prohibits the payment of the sale or use tax, and
(c) sold by a provider who holds a South Carolina retail sales license and whose principal place of business is located in this State."
SECTION 2. Notwithstanding the sales and use rates imposed pursuant to Chapter 36, Title 12 of the 1976 Code, the rate of tax imposed pursuant to that chapter on the gross proceeds of sales of items described in SECTION 1 is five and one-half percent for such sales from July 1, 2007, through June 30, 2008, four percent for such sales from July 1, 2008, through June 30, 2009, three percent for such sales from July 1, 2009, through June 30, 2010, two percent for such sales from July 1, 2010, through June 30, 2011, one percent for such sales from July 1, 2011, through June 30, 2012, and as of July 1, 2012, there shall be no sales and use rates on the gross proceeds of sales of items described in SECTION 1. Eighty percent of the revenues of the sales taxes raised by the special tax rates provided pursuant to this section must be credited to the general fund of the State and used as sales taxes are used and the remainder must be credited to the Education Improvement Act Fund.
SECTION 3. Beginning with the February 15, 2008, forecast by the Board of Economic Advisors of annual general fund revenue growth for the upcoming fiscal year, and annually thereafter, if the forecast of that growth equals at least five percent of the most recent estimate by the board of general fund revenues for the current fiscal year, then the applicable state sales and use tax rate imposed on items described in SECTION 1 is reduced, effective the following July first, by one and one-half percent in the first year, and one percent every year thereafter. That reduced rate applies until a subsequent reduction takes effect. If the February fifteenth forecast meets the requirement for a rate reduction, the board promptly shall certify this result in writing to the Department of Revenue. On the July first that the rate attains zero, the provisions of this subsection no longer apply.
SECTION 4. This act takes effect July 1, 2007. /
Renumber sections to conform.
Amend title to conform.
HUGH K. LEATHERMAN, SR. for Committee.
REVENUE IMPACT 1/
This bill is expected to reduce general fund sales and use tax revenue by an estimated $10,931,840 in FY2007-08.
Explanation
This bill would exempt durable medical equipment (DME) and related supplies from sales and use tax when such equipment is purchased under a certificate of medical necessity and is reimbursable under the Medicare and/or Medicaid program. This exemption applies whether or not such purchases are made by Medicare and/or Medicaid beneficiaries. Based upon historic data provided by the Centers for Medicare and Medicaid Services (CMS) and the SC Department of Health and Human Services (DHHS), it is estimated that combined Medicare and Medicaid DME related expenditures will total an estimated $252,930,270 in South Carolina in FY2007-08. Under current law, two major DME product categories, oxygen and related supplies and diabetic supplies, are already exempt from sales and use tax liability. According to data obtained from CMS and DHHS, oxygen and related supplies and diabetic supplies comprise roughly half of Medicare's and Medicaid's combined total DME expenditures annually. Removing an estimated 50 percent of Medicare and Medicaid DME expenditures already exempt under current law from estimated FY2007-08 Medicare and Medicaid total DME expenditures and applying a six percent sales and use tax rate to the remaining amount reduces total sales and use tax revenue by an estimated $7,327,584. It is also estimated that non-Medicare and/or Medicaid beneficiaries will spend an estimated $60,070,939 on eligible DME equipment and related supplies in FY2007-08, excluding purchases of oxygen and related supplies and diabetic supplies already exempt from sales and use tax liability. Applying a six percent sales and use tax rate to estimated eligible DME equipment and related supply purchases by non-Medicare and/or Medicaid beneficiaries in FY2007-08 reduces total sales and use tax revenue by an additional $3,604,256 in FY2007-08. In total, exempting eligible purchases of DME equipment and related supplies by Medicare and/or Medicaid beneficiaries and non-beneficiaries is expected to reduce general fund sales and use tax revenue by an estimated $10,931,840 in FY2007-08.
Approved By:
William C. Gillespie
Board of Economic Advisors
1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact by the BEA, or Section 2-7-76 for a local revenue impact or Section 6-1-85(B) for an estimate of the shift in local property tax incidence by the Office of Economic Research.
TO AMEND SECTION 12-36-2120, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO SALES TAX EXEMPTIONS, SO AS TO EXEMPT THE GROSS PROCEEDS OF SALES OR SALES PRICE OF DURABLE MEDICAL EQUIPMENT AND RELATED MEDICAL SUPPLIES ELIGIBLE FOR MEDICARE OR MEDICAID REIMBURSEMENT AND WHICH ARE SOLD BY WRITTEN PRESCRIPTION OR CERTIFICATE OF MEDICAL NECESSITY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-36-2120 of the 1976 Code is amended by adding an appropriately numbered item at the end to read:
"( ) durable medical equipment and related medical supplies, any part of the cost of which is reimbursable under Medicare or Medicaid and which are sold on either a certificate of medical necessity or a written prescription of a physician, dentist, or other professional person licensed to prescribe. This exemption applies whether or not the item is purchased by a Medicare or Medicaid beneficiary."
SECTION 2. This act takes effect July 1, 2007.
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