2002 BR 863/HB 61/HFA 1

March 13, 2002

Page 2

COMMONWEALTH OF KENTUCKY

STATE FISCAL NOTE STATEMENT

GENERAL ASSEMBLY / LEGISLATIVE RESEARCH COMMISSION
2002 REGULAR SESSION / 2000-2001 INTERIM

MEASURE

(X) 2002 BR No. / 863 / (X) / House / Bill No. / 61
() Resolution No. / (X) Amendment No. / HFA1
SUBJECT/TITLE / AN ACT relating to sales and use tax.
SPONSOR / Rep. Mike Denham

NOTE SUMMARY

Fiscal Analysis: / X Impact / No Impact / Indeterminable Impact
Level(s) of Impact: / X State / Local / Federal
Budget Unit(s) Impact
Fund(s) Impact: / X General / Road / Federal
Restricted Agency (Type) / (Other)

FISCAL SUMMARY

______

Fiscal Estimates / 2001-2002 / 2002-2003 / 2003-2004 / Future Annual
Rate of Change
Revenues (+/-) / less than $200,000 / less than $200,000
Expenditures (+/-)
Net Effect / less than $200,000 / less than $200,000

______

MEASURE'S PURPOSE: Exempts straw, wood shavings, and sawdust used in equine pursuits from the sales and use tax.

PROVISION/MECHANICS: Amends KRS 139.482 to exempt straw, wood shavings, and sawdust used in equine pursuits. The exemption applies to sales made on or after August 1, 2002.

FISCAL EXPLANATION: Straw, wood shavings, and sawdust are currently used for agricultural, equine, construction, and residential purposes. This amendment would add an exemption for these items used in equine pursuits. Sales tax are to be collected and remitted on sales of these items by in-state sellers; buyers purchasing these items at an out-of-state seller are to remit the use tax.

Based on estimates of the acres of wheat baled as straw as well as the amount of wood shavings and sawdust produced in Kentucky, approximately $1 million would be lost in sales tax revenue if these items were exempt for all purposes and if all applicable taxes were being collected. However, assuming only a portion of these items are used in equine pursuits and that some taxes are not being collected (particularly the use tax which is difficult to compliance), it is estimated that the fiscal impact would be less than $200,000. The fiscal impact in 2002-2003 will be slightly less because the exemption only applies to sales made on or after August 1, 2002.

DATA SOURCE(S) / Perry Nutt; '97 Census of Agriculture; Agricultural Statistics 2001; Kentucky Agricultural Statistics; County Business Patterns; Annual Survey of Manufacturers; USDA's Forest Service, "Kentucky's Timber Industry -- An Assessment of Timber Product Output and Use, 1997";
USDA Forest Service; and the Kentucky Department of Agriculture.
NOTE NO. / 5.3 / PREPARER / Susan Viers Wobbe / REVIEW / DATE / 03/13/02

LRC 2002-863-hhb61-hfa1