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COMMITTEE REPORT
April 5, 2001
H. 3442
Introduced by Reps. Robinson, Wilkins, W.D. Smith, Quinn, Koon, Knotts, Allison, Altman, Barfield, Barrett, Bingham, Campsen, Cato, Chellis, Coates, Cooper, Cotty, Dantzler, Davenport, Delleney, Easterday, Edge, Fleming, Frye, Gilham, Gourdine, Hamilton, Harrell, Harrison, Haskins, Hinson, Huggins, Jennings, Keegan, Kelley, Kirsh, Klauber, Law, Leach, Limehouse, Littlejohn, Loftis, Lucas, Martin, McGee, Meacham-Richardson, Merrill, Owens, Perry, Rhoad, Rice, Riser, Rodgers, Sandifer, Scarborough, Sharpe, Simrill, Sinclair, D.C. Smith, F.N. Smith, G.M. Smith, J.R. Smith, Stille, Talley, Taylor, Thompson, Tripp, Trotter, Vaughn, Walker, Webb, Whatley, White, Witherspoon, A. Young and J. Young
S. Printed 4/5/01--H. [SEC 4/9/01 9:16 AM]
Read the first time February 1, 2001.
To whom was referred a Bill (H. 3442) to amend Section 12-36-2120, as amended, Code of Laws of South Carolina, 1976, relating to sales and use tax exemptions, so as to reduce at the rate of one percent a year, 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 the unnumbered item added in Section 12-36-2120 as contained in SECTION 1, page 1, and inserting:
/ ( ) effective January 1, 2005, food items eligible for purchase with United States Department of Agriculture food coupons. The exemption allowed by this item does not extend to a local sales and use tax imposed pursuant to a referendum held before July 1, 2001, except where a local sales and use tax specifically exempts these items. The exemption allowed by this item applies to a local sales and use tax imposed pursuant to a referendum held after June 30, 2001. An amount of general fund revenue not derived from the state sales and use tax equal to the amount of state sales and use tax revenue not collected because of the exemption allowed by this item is deemed state sales and use tax revenue and must be used as provided in Section 59-21-1010(A) and (B), including the appropriate amount required to be credited to the Education Act Improvement Fund; /
Amend further, as and if amended, beginning on page 2, by striking SECTION 3 and inserting:
/ SECTION 3. Notwithstanding the rates of tax 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, or the sale price of food items eligible for purchase with United States Department of Agriculture food coupons, is four percent for sales from July 1, 2001, through December 31, 2001, three percent for such sales from January 1, 2002, through December 31, 2002, two percent for such sales from January 1, 2003, through December 31, 2003, and one percent for such sales from January 1, 2004, through December 31, 2004. An amount of general fund revenue not derived from the state sales and use tax equal to the state sales and use tax not collected because of the reduced state sales tax rate allowed by this section is deemed state sales and use tax revenue and must be used as provided in Section 59-21-1010(A) and (B) of the 1976 Code, including whatever amount is necessary to be credited to the Education Act Improvement Fund so that the total in that fund is not reduced by the reduced rates allowed by this section. Except where otherwise exempt, the local sales and use taxes authorized by law continue to apply to those sales subject to the reduced state rate of tax provided in this section, but such a tax imposed pursuant to a referendum held after June 30, 2001, does not apply to those sales subject to the reduced state rate of tax provided in this section. /
Amend title to conform.
ROBERT W. HARRELL, JR. for Committee.
REVENUE IMPACT1
This bill is expected to reduce general fund revenue an estimated $77,100,000 in FY 2001-02. Of this amount, general fund sales and use tax revenue would be reduced by $61,700,000, and E.I.A. funds would be reduced by $15,400,000 in FY 2001-02.
Explanation
This bill provides for a four-year graduated reduction in the sales tax rate on food purchases until food is wholly exempt from sales taxation by January 1, 2005. The sales tax on food was lowered from five percent to four percent beginning January 1, 2001 by passage of H.B. 3649, Part 1B, Section 32(a),(b) as part of the FY 2000-01 Appropriations bill. This section expires June 30, 2001. H.B. 3442 would delete the language in the temporary provision, and amend Section 12-36-2120 reducing the sales tax on food by one percent each calendar year until the sales tax on food is eliminated by January 1, 2005. This bill would reduce sales and use tax revenue by an estimated $77,100,000 in FY 2001-02. Of this amount, general fund sales and use tax revenue would be reduced by an estimated $61,700,000, and Education Improvement Act (E.I.A.) funds would be reduced by an estimated $15,400,000 in FY 2001-02. This bill does not contain an E.I.A. hold-harmless provision. The BEA subtracted these amounts from its November 10, 2000 general fund revenue forecast in FY 2001-02, and no further adjustment to the BEA estimate is needed for this bill. When the legislation is fully phased-in by FY 2004-05, the proposed legislation would reduce sales and use tax revenue on grocery store items by an estimated $264,000,000.
Explanation of Amendment
Section 3 of the amendment contains an E.I.A. hold-harmless provision and will make the E.I.A. whole by transferring $15,400,000 from the general fund to the E.I.A. The BEA subtracted these amounts from its November 10, 2000 general fund revenue forecast in FY 2001-02 and no further adjustment is needed for this amendment.
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, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.
TO AMEND SECTION 12-36-2120, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO SALES AND USE TAX EXEMPTIONS, SO AS TO REDUCE AT THE RATE OF ONE PERCENT A YEAR THE FOUR PERCENT STATE SALES TAX ON FOOD ITEMS WHICH LAWFULLY MAY BE PURCHASED WITH UNITED STATES DEPARTMENT OF AGRICULTURE FOOD COUPONS, TO EXEMPT COMPLETELY FROM THE STATE PORTION OF THE TAX ALL SUCH FOOD AND MEALS EFFECTIVE JANUARY 1, 2005, TO PROVIDE FOR THE USE OF THE REVENUE FROM THE REDUCED RATES OF TAX DURING THE PHASE-IN PERIOD, AND TO AMEND AN ACT OF 2000 BEARING RATIFICATION NUMBER 453, RELATING TO SUPPLEMENTAL APPROPRIATIONS, SO AS TO DELETE A SALES TAX EXEMPTION FOR FOOD ITEMS MADE OBSOLETE BY THE PROVISIONS OF THIS ACT.
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:
"( ) effective January 1, 2005, food items eligible for purchase with United States Department of Agriculture food coupons, but this exemption does not apply for local sales and use taxes except where such taxes specifically exempt these items;"
SECTION 2. Part IB of an act of 2000 bearing ratification number 453 is amended by deleting Section 32(a) which reads:
"(32)(a) The General Assembly finds that it is appropriate to provide certain forms and levels of tax reduction when at the same time it has determined that every reasonable effort has been made and accomplished to fund, to the fullest extent possible, adequate and comprehensive programs in education and health care which are fundamental to progress, growth, and economic development. The General Assembly herein provides for a twenty percent reduction in the rate of sales tax imposed on the gross proceeds of sales, or the sale price of food items eligible for purchase with United States Department of Agriculture food coupons, beginning in January 1, 2001. Eighty percent of the revenues from sales taxes raised subsequent to imposition of the special sales tax rates provided by this section must be credited to the general fund of this State and used as sales taxes are used, and the remainder must be credited to the Education Improvement Act Fund. It is the further intent of the General Assembly that, provided the funds are authorized for the fiscal year in which the following schedule is eligible to be implemented, and notwithstanding the rate of tax 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, or the sale price of food items eligible for purchase with United States Department of Agriculture food coupons, is four percent for sales from January 1, 2001, through December 31, 2001; three percent for such sales from January 1, 2002, through December 31, 2002; two percent for such sales from January 1, 2003, through December 31, 2003; one percent for such sales from January 1, 2004, through December 31, 2004; and on and after January 1, 2005, the gross proceeds of sales, or the sale price of food items eligible for purchase with United States Department of Agriculture food coupons shall be exempt from the tax imposed pursuant to Chapter 36, Title 12 of the 1976 Code."
SECTION 3. Notwithstanding the rates of tax 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, or the sale price of food items eligible for purchase with United States Department of Agriculture food coupons, is four percent for sales from July 1, 2001, through December 31, 2001, three percent for such sales from January 1, 2002, through December 31, 2002, two percent for such sales from January 1, 2003, through December 31, 2003, and one percent for such sales from January 1, 2004, through December 31, 2004. Eighty percent of the revenues from sales taxes raised by the special tax rates provided by this section must be credited to the general fund of this State and used as sales taxes are used, and the remainder must be credited to the Education Improvement Act Fund. Except where otherwise exempt, the local sales and use taxes authorized by law continue to apply to those sales subject to the reduced state rate of tax provided in this section.
SECTION 4. This act takes effect July 1, 2001.
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