Committee Meeting Information

June 28^th and 29^th  2006

Game & Fish Department, 3030 Energy Lane

Casper, Wyoming

 

Committee Members Present

Senator Robert Peck, Cochairman

Representative Rodney “Pete” Anderson, Cochairman

Senator Pat Aullman

Senator Stan Cooper

Senator Bill Hawks

Senator Jayne Mockler

Representative Gerald Gay

Representative Mary Meyer Gilmore

Representative John Hastert

Representative Mark Semlek

Representative Tom Walsh

Representative Steve Harshman

 

Committee Members Absent

Representative Kurt Bucholz

Representative David Miller

 

 

Legislative Service Office Staff

Mark Quiner, Assistant Director

Don Richards, Senior Research Analyst

Joe Rodriguez, Staff Attorney

Dean Temte, Legislative Analyst

 

Others Present at Meeting

Please refer to Appendix 1 to review the Committee Sign-in Sheet
for a list of other individuals who attended the meeting.

Wednesday, June 28, 2006

 

Executive Summary

The Committee met for two days in Casper, Wyoming.  The Committee heard testimony on the first day regarding Department of Transportation issues regarding fuel tax collection and distribution including dyed diesel, electronic filing, propane, biodiesel/alternative fuels and taxed volume.  The Committee voted to consider draft legislation raising the fuel tax.  The Committee also heard testimony regarding the veteran's property tax exemption and voted to consider draft legislation regarding the veteran's property tax exemption.  The Committee also received an update from the state assessed property tax task force.

 

The Committee heard testimony on the second day concerning Department of Revenue issues concerning the collection and distribution of state sales tax including the streamlined sales tax initiative and the food sales tax exemption.

 

The next meeting will be December 11-12, 2006 in Cheyenne, Wyoming. 

 

Call To Order

Representative Anderson called the meeting to order at 8:30 a.m.    Please refer to Appendix 2 to review the Committee meeting agenda.

 

Fuel tax distribution

Representative Cohee provided background information stating that the topic involves both tax administration and tax collection.  It is going to take some time for the Committee to prepare the bill for the upcoming legislative session.  Based upon conversations with the Department of Transportation the current fuel tax language is archaic due to the rapid evolution of the industry.  As things change the terminology needs to change.  The Committee also needs to look at dyed diesel fuel.  Dyed diesel fuel is exempt for a lot of reasons but it is being used for nonexempt purposes resulting in a huge tax loss for the state. 

 

Sharon Gostovich of the Wyoming Department of Transportation provided a presentation on fuel tax administration.  DOT licenses all people who buy and sell fuel in Wyoming.  She discussed the role of DOT in administering fuel tax in the State of Wyoming.  She gave the Committee Appendix 3, which mirrored her power point presentation regarding fuel accountability.  There are problems with point of sale distribution according to Mrs. Gostovich.  The fuel tax flows all of the way through the distribution process, this means every transaction.  Anyone who buys and sells fuel in Wyoming has to report to the state.  They have to track fuel throughout the entire process.  Problems arise regarding the number of times the gallons are reported in the system.  Fuel can be purchased or sold on a gross volume system or a billed gallons system.  The problem with the billed gallons system is that marketers feel that the state is getting too deep into their businesses.  She suggested that the Committee consider either a net approach or a gross volume system.  The statutes would need to be amended to make it clear that the fuel tax is imposed on gross volume.  She suggested the following revisions to the statutes: 1) jet fuel should be removed from the definition of gasoline and added to the definition of diesel;  2) propane should not be excluded from fuel tax; 3) gasohol and ethanol based motor fuel should mean a blend of gasoline and alcohol in which 10% or more of the product is alcohol; 4) there should be uniform bulk plant definitions in both the gasoline and diesel articles.  Additionally, the Committee should consider adding statutes pertaining to biodiesel/alternative fuels and taxed volume.  While DOT does not have the exact numbers regarding dyed diesel they do receive information from the federal government.  DOT asked the Committee to consider civil penalties in addition to the already existing criminal penalties for dyed diesel violations.  The statutes should be amended to mandate electronic filing of fuel tax reports and electronic funds transfers.  She indicated this would increase efficiency, reduce errors and facilitate sharing of information with other states.  She indicated that this is supported by the fuel tax filers.  The Department would have to phase in implementation of the system and make exceptions in the law for the smaller businesses.  The statutes could allow the Department to promulgate this system by rule and regulation. 

 

Roy Turner of the Colorado/Wyoming Petroleum Marketers Association stated he has worked with the State of Colorado in an electronic filing system.  He thinks that there is a problem regarding fuel tax evasion in regard to drip gas or well head casing gas.  Drip gas or well head casing gas should be included in the statutes.  Colorado passed two laws to address the problem.  The first makes it illegal for consumers to put drip gas or well head casing gas in their car and the second makes it illegal for retailers to put it in their tanks.  The law should also make it illegal for distributors to use it as well, according to Mr. Turner. 

 

Sheila Foertsch of the Wyoming Truckers Association provided testimony regarding the misuse of dyed diesel fuel.  When Nevada started enforcing dyed diesel laws there were a lot of initial fines but it seems to have leveled out.  The misuse of dyed diesel fuel requires enforcement at the state level. 

 

A motion was made by Cochairman Anderson to have the industry and the Department get together with the Legislative Service Office to draft necessary legislation and bring it back to the Committee for review.  The motion passed unanimously. 

 

Kevin Hibbard, WYDOT,  provided information on Wyoming motor fuel facts and history. (Appendix 4)  The emphasis is not where the tax is collected but where the fuel is burned.  He gave the Committee a history of the gasoline tax.  Wyoming's tax is 14 cents a gallon.  Since 1989,  1 cent is imposed for the LUST tax (leaking underground storage tank program).  The LUST revenue is sent to DEQ.  Total collections are about equal between gasoline and diesel.  Counties receive 13.5% of the fuel tax collected which they can use any way they please.  Cities get 15% of gasoline distribution, 75% of that is distributed based on where the tax is paid and 25% is distributed based on population.  14% of the fuel tax also goes to counties for county road construction.  Mr. Hibbard gave a detailed explanation of how gasoline fuel tax is being distributed.  Gasoline consumption is an elective choice - what the consumers want to do.  Diesel consumption is based on the economy – right now a much more stable demand for use.  DOT would like to work closely with the cities and the counties to minimize economic impact.  DOT suggested basing distribution on numbers of registered vehicles might be an equitable solution to the distribution dilemma.

 

Joe Evans, Wyoming County Commissioners Association, related that distribution of fuel tax to cities does not affect the counties.  According to Mr. Evans, some counties say there are discrepancies in the distributions.  Some counties like the system and some do not.  About 30% of the fuel tax distribution comes from the area of the county;  37% comes from population;  assessed value accounts for about 20%; inverse assessed value is only about 6% of the money.  He indicated that generally the counties are happy with the way things are. 

 

George Parks, Wyoming Association of Municipalities related that the cities have spoken about this specific topic.  He did not hear any complaints regarding the fuel tax distribution system.  He further indicated that fuel tax is not a real big part of the revenue picture for the cities. 

 

Dean Temte of the LSO presented the Committee with information regarding the distribution of fuel taxes. (See Appendix 5).  The handout expands on information presented by WYDOT regarding distribution.  The numbers used are the most recent numbers available.  Many counties are not adding roads or miles to existing roads but they are improving the existing roads.  Mr. Temte also provided the Committee information regarding fuel tax distribution comparisons by county. (See Appendix 6). 

 

Senator Mockler moved to add an additional two cents to the fuel tax for all fuels in 2007 and an additional three cents of fuel tax in 2008 for all fuel with no exemptions.  The motion failed for lack of a second. 

 

Cochairman Peck moved to advance legislation to increase fuel tax by 5 cents a gallon, keeping traditional exemptions in place.  The motion passed 7-4 to have the legislation drafted and to consider it at the next meeting. 

 

veterans property tax exemption

Jana Howard- Ginter, Wyoming Veterans Commission, related that historically veterans have been granted a property tax exemption by the State of Wyoming.  The current statutory exemption maximums were first placed in Wyoming law in 1917 and have not been revisited since.  She proposed revisions to the statutes.  (See Appendix 7)  The proposed statutory revisions change the amount of the exemption from $800 to $15,000 for a lifetime.  County assessors are trying to create a statewide database so that they have more information regarding who is claiming the exemption statewide according to Mrs. Ginther.  She suggested that the committee may want to do away with the lifetime cap.

 

Bob Craft of the Wyoming Veterans Commission stated the Commission has had several discussions on the bill draft.  The Commission feels that the bill would be supportable in the Legislature, and given the amount of the exemption set out in the proposed bill, would be sustainable over time.  He discussed with the Committee the disability provisions of the proposed bill.  There was also a discussion of dates and widows and those having been injured on December 7, 1941 (Pearl Harbor) who may not qualify for the exemption. 

 

Representative Walsh moved that the Committee have the property tax bill for veterans exemptions drafted.  The bill should also include provisions for those individuals at Pearl Harbor.   The motion carried.  Representative Walsh also handed out to the Committee a working draft of another bill for veteran's exemptions he has had drafted. (See Appendix 8)

 

Wade Hall, Department of Revenue, testified regarding the fiscal impact of the proposed veteran's exemption bill.  He claimed it would be difficult to determine the fiscal impact and nobody really knows who has used their lifetime exemption.  According to Mr. Hall not all veterans use the exemption for property tax.  

 

State Assessed Property Task Force Update:  Senator Mockler provided an update regarding the state assessed property tax task force meeting.    The Task Force is looking at intangibles and the telecommunications industry.   The Task Force will carry forward the discussion regarding intangibles from last year.  While people are not happy with the amount of taxes they pay, the real issue is for the Task Force to determine what is equitable.  The Task Force will attempt to broaden the definitions regarding communications.

 

Director Schmidt, Wyoming Department of Revenue provided the Committee with an intangible exemption analysis.  (Appendix 9)  Wade Hall of the Department of Revenue explained the handout for the Committee. 

 

Public comment

George Parks, Wyoming Association of Municipalities, provided the Committee with Appendix 10, Appendix 11 and Appendix 12.    Appendix 10 is a needs survey from the State Loan and Investment Board for transportation projects in the counties.  The total amount of projects for the next couple of years is $399,603,533.  The handout indicates there is a lot of need statewide in the area of transportation.  Appendix 11 is a summary of the top ten tax type revenues that go to cities and towns annually.  The Appendix was provided to the Committee for informational purposes.  The State Loan and Investment Board recently approved over $26 million in projects.  There appears to be sufficient money to cover the rest of the biennium.  The State Loan and Investment Board is in the process of adopting emergency rules regarding grants and money.  Appendix 12 is the legislative agenda of the Wyoming Association of Municipalities for the 2007 legislative session.  To estimate future costs cities and towns have not considered an inflation factor.  There was discussion of a hardship mechanism for equalizing funding between rich and poor counties and municipalities. 

 

Director Schmidt, Department of Revenue indicated there are only two counties left to implement the CAMA system.  The CAMA system, by nature, changes the relationship between the Department of Revenue and the Counties.

 

Thursday, June 29, 2006

 

sales tax collection & distribution

Dan Noble, Wyoming Department of Revenue, Excise Tax Division, spoke to the Committee regarding the streamlined sales tax initiative.  The initiative just celebrated its 6^th anniversary.  There is an agreement in place and conforming legislation has been passed.  There may be some other legislative issues to arise.  Since October of last year centralized registration has licensed 500 vendors, 200 of which are from Wyoming.  The state has collected $237,000 from those voluntary licensees.  Wyoming has invested $100,000 in dues, travel and expenses to get the project going.  The Department of Revenue has contracted with 2 certified service providers to assist taxpayers in participating in the program; the fee is 8% of the tax collected which is reduced the more tax they collect.  Of the 46 states which impose sales tax, 20 have become members of the SSTA.  To make collection of sales tax mandatory on a national level will take an Act of Congress.  Under the SSTA, the contracted service providers (CSPs) will handle all phases such as collection and returns and then distribute to the states.  Overall there are 7500 different sales tax rates in existence.  The challenge is imposing the correct rate within a particular geographic boundary.  According to Mr. Noble, as of yesterday the state has collected $801 million in sales tax.  He estimated that Wyoming loses $73 million in sales tax annually to sales in which no tax is imposed.

 

Mr. Noble also provided information on the food sales tax exemption which goes into effect on July 1, 2006.  Food is defined as any substance which is ingested for taste or nutrition.  The sales tax exemption is complicated by what is not considered food.  Food that is to be prepared and consumed in the home will be exempt.  Items that are not exempt include; tobacco, items bought and sold from a vending machine and bought or prepared food.  The exemption is for grocery items but not restaurant food.  The Department of Revenue held 6 seminars throughout the state to educate vendors.  Mr. Noble provided the Committee a spreadsheet regarding sales tax exemption on food. (Appendix 13).  The state will augment lost revenue to cities and towns based upon historical data, and this will be a challenge in implementing the exemption.  The Department of Revenue will need additional staff if the exemption is going to continue.

 

Dean Temte, Legislative Service Office, provided information regarding distribution of sales and use taxes. (See Appendix 14).  Thirty-one percent (31%) of entire sales and use tax revenue is distributed to local governments.  The tax is distributed based on point of sale and that can vary from one year to the next.    Senator Mockler suggested that the committee needs to work on the hardship formula for funding to the cities and counties.  She would like to see at the next meeting how the hardship formulas are working. 

 

Next Meeting

It was decided that the next meeting will be December 11 & 12, 2006.  The meeting will be held in Cheyenne.  Tax relief programs, grant programs and State Land and Investment Board will be on the agenda for the next meeting. 

 

Public comment

George Parks, Wyoming Association of Municipalities, testified that stability of revenue sources is one of WAM'S biggest concerns.  WAM is looking for permanent changes in the revenue streams to the cities; not revenue streams based upon appropriations.  Regarding the potential fuel tax increase, WAM would request consideration of what the distribution of the additional monies would be. 

 

Sheila Foertsch, Wyoming Trucking Association stated truckers are paying fuel tax in Wyoming for every gallon they use in the state of Wyoming.  They are paying for their share of the roads.  According to Mrs. Foertsch truckers also pay registration fees for commercial vehicles doing business in Wyoming. 

 

Representative Gerald Gay, referring back to Appendix 3 and the discussion of net versus gross accounting for fuel tax purposes, stated petroleum liquids expand and contract based upon temperature.  The state of Kansas used the net or 60 degree standard, and he suggested the Committee consider using the net method in Wyoming.

 

Dan Neal, Equality State Policy Center, testified that moderate increases in severance taxes would not stifle production of minerals.  He stated this gives the Committee another option for raising revenue for the state.  He feels the state could receive more revenue from the production of minerals. 

 

Representative Ann Robinson testified in regard to the food tax exemption.  According to Representative Robinson, the actual cost of the exemption has not been determined.  She believes that the estimates are much higher than what the actual cost is going to be.   She indicated that the overall picture of sales tax in Wyoming has increased and food is not causing the increase. 

 

Tom Forslund, City of Casper, expressed concern over the food tax exemption reimbursement.  If the appropriation is less than the actual loss in revenues, then he hopes that the legislature will make good on reimbursing the local governments for what they will be losing in taxes foregone on food.    

 

Meeting Adjournment

There being no further business Cochairman Peck adjourned the meeting at 11:00 a.m.

 

Respectfully submitted

 

 

 

 

Representative Rodney "Pete" Anderson, Cochairman