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COMMITTEE REPORT
April 18, 2007
S. 656
Introduced by Senators Leatherman, Moore, Leventis, McGill, Cleary, Setzler, Elliott and Land
S. Printed 4/18/07--S.
Read the first time April 5, 2007.
To whom was referred a Bill (S. 656) to amend Section 12-36-910, as amended, Code of Laws of South Carolina, 1976, relating to the imposition of the state sales and use tax and, 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 subsection (D) of Section 12-36-910, as contained in SECTION 1, beginning on page 1, and inserting:
/ "(D)(1) Notwithstanding the rate of the tax imposed pursuant to subsection (A) of this section or the rate of any other sales tax imposed pursuant to this chapter and the rate of any use tax imposed pursuant to this chapter, effective November 1, 2007, the sales and use tax on the gross proceeds of sales or sales price of unprepared food which lawfully may be purchased with United States Department of Agriculture food coupons is three two percent.
(2) There is transferred from the general fund of the State to the EIA Fund in fiscal year 2006-2007 the revenue estimated by the Board of Economic Advisors to equal EIA revenue not received as a result of the two percent sales tax differential provided pursuant to this subsection. 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, the then applicable state sales and use tax rate imposed on unprepared food which lawfully may be purchased with United States Department of Agriculture food coupons is reduced, effective the following July first, by one-half of one percentage point. 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.
(3) Twenty percent of the sales and use tax revenue attributable to the then applicable special rate imposed pursuant to this subsection, as estimated by the Board of Economic Advisors, must be credited to the EIA Fund. The balance of the revenue must be credited to the general fund of the State and used for the purposes provided for pursuant to Section 59-21-1010(A)." /
Amend further, as and if amended, page 2, by striking SECTION 3 and inserting:
/ SECTION 3. Except where otherwise stated, 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 would reduce sales and use tax revenue by an estimated $40,000,000 in FY2007-08. This bill would reduce general fund sales and use tax revenue by an estimated $32,000,000 and would reduce EIA revenue by an estimated $8,000,000 in FY2007-08.
Explanation
This bill would amend Section 12-36-910(D) to reduce the sales and use tax on the sale of unprepared food which is purchased with United States Department of Agriculture food coupons to two percent beginning January 1, 2008. Based upon the Department of Revenue's survey of food sales tax remitters, each one percentage point reduction in the sales tax on food purchased at grocery stores for home consumption from the current three percentage point sales tax rate would reduce state sales tax revenue by an estimated $80,000,000 in FY2007-08. Because the effective date of the sales tax rate reduction is not until January 1, 2008, state sales tax revenue would be reduced by one-half of a full fiscal year's amount, or an estimated $40,000,000 in FY2007-08. Beginning with the February 15, 2008 forecast by the BEA, if the growth rate in general fund revenue for the upcoming fiscal year is at least five percent compared to the current fiscal year's estimate, then the sales and use tax rate on food purchased at grocery stores may be reduced by one-half of one percentage point beginning the following July 1. The BEA would notify the Department of Revenue in writing that this requirement has been met. That rate would remain in effect until another formal review of general fund growth rates is undertaken by the following February 15th forecast. This process would continue in one-half of one percentage point increments until the sales and use tax on food purchased at grocery stores is wholly eliminated. This bill also removes language pertaining to an EIA hold harmless clause that would replace revenue in the EIA for any revenue reduction caused by sales tax rate reduction on food.
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 12-36-910, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE IMPOSITION OF THE STATE SALES AND USE TAX AND THE SPECIAL THREE PERCENT SALES AND USE TAX IMPOSED ON UNPREPARED FOOD, SO AS TO REDUCE THIS SPECIAL RATE ON UNPREPARED FOOD FROM THREE PERCENT TO TWO PERCENT EFFECTIVE JANUARY 1, 2008, TO DELETE AN OBSOLETE PROVISION, AND TO REDUCE THIS TWO PERCENT RATE IN INCREMENTS OF ONE-HALF OF ONE PERCENTAGE POINT IF THE FEBRUARY FIFTEENTH FORECAST OF ANNUAL GENERAL FUND GROWTH FOR THE UPCOMING FISCAL YEAR EQUALS AT LEAST FIVE PERCENT OF THE MOST RECENT ESTIMATE OF GENERAL FUND REVENUE FOR THE CURRENT FISCAL YEAR; AND TO AMEND SECTION 12-36-2120, AS AMENDED, RELATING TO SALES TAX EXEMPTIONS, SO AS TO PROVIDE A PERMANENT EXEMPTION FOR UNPREPARED FOOD WHICH LAWFULLY MAY BE PURCHASED WITH UNITED STATES DEPARTMENT OF AGRICULTURE FOOD COUPONS BEGINNING THE JULY FIRST THAT THE PHASE-DOWN OF THE STATE SALES TAX RATE ON UNPREPARED FOOD ATTAINS ZERO.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 12-36-910(D) of the 1976 Code, as added by Act 388 of 2006, is amended to read:
"(D)(1) Notwithstanding the rate of the tax imposed pursuant to subsection (A) of this section or the rate of any other sales tax imposed pursuant to this chapter and the rate of any use tax imposed pursuant to this chapter, the sales and use tax on the gross proceeds of sales or sales price of unprepared food which lawfully may be purchased with United States Department of Agriculture food coupons is three two percent.
(2) There is transferred from the general fund of the State to the EIA Fund in fiscal year 2006-2007 the revenue estimated by the Board of Economic Advisors to equal EIA revenue not received as a result of the two percent sales tax differential provided pursuant to this subsection. 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, the then applicable state sales and use tax rate imposed on unprepared food which lawfully may be purchased with United States Department of Agriculture food coupons is reduced, effective the following July first, by one-half of one percentage point. 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 2. Section 12-36-2120 of the 1976 Code is amended by adding a new item at the end appropriately numbered to read:
"( ) effective on the July first that the provisions of Section 12-36-910(D) no longer apply, unprepared food that lawfully may be purchased with United States Department of Agriculture food coupons. However, the exemption allowed by this item applies only to the state sales and use tax imposed pursuant to this chapter."
SECTION 3. This act takes effect January 1, 2008.
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