2004 Legislation
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SENATE BILL NO. 1447 – Beer/wine, tax revised

SENATE BILL NO. 1447

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S1447................................................by JUDICIARY AND RULES
TAXATION - BEER/WINE - Amends existing law to revise the tax imposed upon
beer and wine; to define "wholesale sales price"; to impose a surcharge; to
provide for credits and refunds; and to provide that any wholesaler or
brewer who sells to a retailer beer upon which taxes have not been paid
shall be guilty of a misdemeanor.
                                                                        
03/15    Senate intro - 1st rdg - to printing
03/16    Rpt prt - to Loc Gov

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-seventh Legislature                 Second Regular Session - 2004
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1447
                                                                        
                              BY JUDICIARY AND RULES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO TAXATION AND TAX REVENUES; AMENDING SECTION 23-1008,  IDAHO  CODE,
  3        TO  REVISE  DESCRIPTIVE  LANGUAGE, TO REVISE THE TAX IMPOSED UPON BEER, TO
  4        DEFINE "WHOLESALE SALES PRICE," TO IMPOSE A SURCHARGE, TO PROVIDE FOR CRE-
  5        DITS AND REFUNDS, TO PROVIDE THAT ANY WHOLESALER OR BREWER WHO SELLS TO  A
  6        RETAILER  BEER  UPON  WHICH  TAXES HAVE NOT BEEN PAID SHALL BE GUILTY OF A
  7        MISDEMEANOR, TO PROVIDE CORRECT  TERMINOLOGY,  TO  PROVIDE  REFERENCES  TO
  8        SURCHARGES  AND  TO  MAKE  TECHNICAL  CORRECTIONS;  AND  AMENDING  SECTION
  9        23-1319,  IDAHO  CODE,  TO  REVISE DESCRIPTIVE LANGUAGE, TO REVISE THE TAX
 10        IMPOSED UPON WINE, TO DEFINE "WHOLESALE SALES PRICE,"  TO  IMPOSE  A  SUR-
 11        CHARGE AND TO MAKE TECHNICAL CORRECTIONS.
                                                                        
 12    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 13        SECTION  1.  That  Section 23-1008, Idaho Code, be, and the same is hereby
 14    amended to read as follows:
                                                                        
 15        23-1008.  TAX -- SURCHARGE -- REFUNDS -- DISTRIBUTION -- RULES -- REPORTS.
 16        (1) A tax of four dollars and  sixty-five  cents  ($4.65)  per  barrel  of
 17        thirty-one  (31)  gallons, and a like rate for any other quantity or frac-
 18        tion thereof, is hereby levied and imposed upon each and every  barrel  of
 19        beer  sold  for  use  within the state of Idaho. (a)  On and after July 1,
 20        2004, there is levied and there shall be collected a tax upon  the  whole-
 21        sale  sale  of beer in this state at the rate of three percent (3%) of the
 22        wholesale sales  price  of  such  beer.  For  purposes  of  this  section,
 23        "wholesale  sales price" means the net invoice price for which the beer is
 24        sold to the retailer, exclusive of any rebates  or  discounts  for  prompt
 25        payment.  Such  tax  shall be imposed at the time the wholesaler or brewer
 26        ships or transports beer to retailers in this state to be  sold  by  those
 27        retailers  and  shall  be  paid by the wholesaler or brewer who sells such
 28        beer to the retailer. In the case of beer sold at retail by a brewer,  the
 29        tax  imposed  by  this section shall be three percent (3%) of the brewer's
 30        costs of goods sold, computed in accordance with  the  provisions  of  the
 31        Internal Revenue Code, as defined in section 63-3004, Idaho Code, relating
 32        to  income  taxation. Sales of beer by a wholesaler or brewer for the pur-
 33        pose of and resulting in export of beer from this state for resale outside
 34        this state shall be exempt from the taxes on beer imposed by this chapter.
 35        (b)  In addition to the tax set forth in subsection (a) of this section, a
 36        surcharge equal to two percent (2%) of the wholesale sales price  of  beer
 37        shall be imposed and shall be distributed as follows:
 38             (i)   An  amount  of  money  shall be distributed to the state refund
 39             account sufficient to pay current refund claims. All  refunds  autho-
 40             rized  by  law to be paid by the tax commission shall be paid through
 41             the state refund account and those moneys are continuously  appropri-
 42             ated;
 43             (ii)  The  balance  remaining  after distributing the amount in para-
                                                                        
                                           2
                                                                        
  1             graph (b)(i) of this subsection shall be distributed as follows:
  2                  (A)  Sixty-eight percent (68%) shall be distributed to the  com-
  3                  munity  mental  health services fund, which is hereby created in
  4                  the state treasury.  The  fund  shall  be  administered  by  the
  5                  department  of  health and welfare for use by Idaho counties for
  6                  purposes of community intervention in the treatment of  mentally
  7                  ill  individuals. Moneys in the community mental health services
  8                  fund may be expended pursuant to appropriation;
  9                  (B)  Sixteen percent (16%) shall be  distributed  to  the  cata-
 10                  strophic health care cost fund, created in section 57-813, Idaho
 11                  Code; and
 12                  (C)  Sixteen  percent  (16%) shall be distributed to the alcohol
 13                  beverage control fund, which is  hereby  created  in  the  state
 14                  treasury.  The  fund  shall  be  administered by the Idaho state
 15                  police for purposes of ensuring compliance with alcohol beverage
 16                  laws and rules. Moneys in the alcohol beverage control fund  may
 17                  be expended pursuant to appropriation.
 18        (c)  Every sale of beer by a wholesaler or brewer to a retailer shall con-
 19        stitute  a  sale  of beer for resale or consumption in this state, whether
 20        the sale is made within or without this  state,  and  such  wholesaler  or
 21        brewer shall be liable for the payment of taxes.
 22        (d)  When  beer has been destroyed by breakage or has spoiled or otherwise
 23        become unfit for beverage purposes prior to payment of taxes or surcharges
 24        on it, the wholesaler or brewer, upon satisfactory proof of destruction or
 25        spoilage, shall be entitled to deduct from existing  inventories,  subject
 26        to tax and surcharge, the amount of beer so destroyed or spoiled.
 27        (e)  If the tax commission determines that any amount due under this chap-
 28        ter has been paid more than once or has been erroneously or illegally col-
 29        lected  or  computed,  the  commission  shall  set  forth that fact in its
 30        records and the excess amount paid or collected may  be  credited  on  any
 31        amount  then  due  and  payable to the commission from that person and any
 32        balance refunded to the person by whom it was paid or to  his  successors,
 33        administrators  or  executors.  The commission is authorized and the state
 34        board of tax appeals is authorized to order the commission in proper cases
 35        to credit or refund such amounts whether or not  the  payments  have  been
 36        made under protest and certify the refund to the state board of examiners.
 37        (f)  No  credit  or  refund shall be allowed or made after three (3) years
 38        from the time the payment was made, unless before the expiration  of  that
 39        period a claim is filed by the taxpayer. The three (3) year period allowed
 40        by  this subsection for making refunds or credit claims shall not apply in
 41        cases where the tax commission asserts a deficiency of tax imposed by law,
 42        and taxpayers desiring to appeal or otherwise seek  a  refund  of  amounts
 43        paid  in obedience to deficiencies must do so within the time limits else-
 44        where prescribed by law.
 45        (g)  Any wholesaler or brewer who shall sell to any  retailer  beer,  upon
 46        which the tax or surcharge herein imposed has not been paid and any person
 47        who  shall purchase, receive, transport, store or sell any beer upon which
 48        the tax or surcharge herein imposed has not been paid, shall be guilty  of
 49        a misdemeanor, and any beer so purchased, received, transported, stored or
 50        possessed  or  sold  shall  be  subject  to seizure by the commission, any
 51        inspector or investigator of  the commission, or by any sheriff, constable
 52        or other police officer, and same may be removed and  kept  for  evidence.
 53        Upon  conviction  of  any  person  for violation of this section, the said
 54        beer, and all barrels, kegs, cases, cartons and cans containing  the  same
 55        shall  be forfeited to the state of Idaho, and, in addition, the person so
                                                                        
                                           3
                                                                        
  1        convicted shall be subject to the other penalties in this act chapter pre-
  2        scribed.
  3        (h)  Beer and all barrels, kegs, cases, cartons or cans so forfeited    to
  4        the  state  of Idaho shall be sold by  the commission at public auction to
  5        any brewer, wholesaler or retailer, licensed under the provisions of  this
  6        act chapter, making the highest bid. Such sale shall be held at such place
  7        and  time  as may be designated by  the commission after reasonable notice
  8        thereof given in such manner and for such time as  the commission  may  by
  9        regulation  rule  prescribe.  From  the  purchase price received upon such
 10        sale, the commission shall first deduct an amount sufficient  to  pay  the
 11        tax  or  surcharge due on such beer, and to pay all costs incurred in con-
 12        nection with such sale. The commission shall deposit the balance remaining
 13        with the state treasurer, who shall place the same in the general  account
 14        of the state of Idaho, and it shall become a part thereof.
 15        (2)  The  revenues received from the taxes imposed by subsection (1)(a) of
 16    this section, and any interest, penalties, or deficiency payments  imposed  by
 17    this section, shall be distributed as follows:
 18        (a)  An  amount  of money shall be distributed to the state refund account
 19        sufficient to pay current refund claims.  All refunds authorized by law to
 20        be paid by the tax commission shall  be  paid  through  the  state  refund
 21        account and those moneys are continuously appropriated.
 22        (b)  The  balance remaining after distributing the amount in paragraph (a)
 23        of this subsection shall be distributed as follows:
 24             (i)   Twenty percent (20%) shall be  distributed  to  the  alcoholism
 25             treatment account;
 26             (ii)  Thirty-three  percent  (33%) shall be distributed to the perma-
 27             nent building account; and
 28             (iii) The remainder shall be distributed to the general account.
 29        (3)  The commission is empowered, and it shall be the commission's duty to
 30    prescribe rules: and regulations:
 31        (a)  For reports by carriers for hire and also all  other  carriers  owned
 32        and/or  employed, directly or indirectly, by out of state brewers, dealers
 33        or other persons, of all deliveries of beer  in  and  into  the  state  of
 34        Idaho,  stating  especially  the  origin  and destination of the beer, the
 35        quantity thereof, and also the names and addresses,  respectively  of  the
 36        consignors and consignees.
 37        (b)  For reports by out of state brewers and manufacturers of beer, of all
 38        shipments  by them of beer into the state of Idaho, stating especially the
 39        matters mentioned in paragraph (a) of this subsection.
                                                                        
 40        SECTION 2.  That Section 23-1319, Idaho Code, be, and the same  is  hereby
 41    amended to read as follows:
                                                                        
 42        23-1319.  EXCISE  TAX  --  SALES  INCLUDED  --  REFUND FOR EXPORT SALES --
 43    REFUND FOR BREAKAGE OR SPOILAGE -- DISTRIBUTION OF REVENUE -- SURCHARGE.  Upon
 44    all  wines  sold  by a distributor or winery to a retailer or consumer for use
 45    within the state of Idaho pursuant to this act  there  is  hereby  imposed  an
 46    excise tax of forty-five cents (45ยข) per gallon (1) On and after July 1, 2004,
 47    there  is levied and there shall be collected a tax upon the wholesale sale of
 48    wine in this state at the rate of two and  one-tenth  percent  (2.1%)  of  the
 49    wholesale  sales  price of such wine. For purposes of this section, "wholesale
 50    sales price" means the net invoice price for which the wine  is  sold  to  the
 51    retailer,  exclusive  of any rebates or discounts for prompt payment. Such tax
 52    shall be imposed at the time the distributor or  winery  ships  or  transports
 53    wine  to  retailers  in  this state to be sold by those retailers and shall be
                                                                        
                                           4
                                                                        
  1    paid by the distributor or winery which sells such wine to  the  retailer.  In
  2    the  case  of wine sold at retail by a winery, the tax imposed by this section
  3    shall be two and one-tenth percent (2.1%) of the winery's costs of goods sold,
  4    computed in accordance with the provisions of the Internal  Revenue  Code,  as
  5    defined  in section 63-3004, Idaho Code, relating to income taxation. Sales of
  6    wine by a distributor or winery for the purpose of and resulting in export  of
  7    wine  from  this  state for resale outside this state shall be exempt from the
  8    taxes on wine imposed by this chapter.
  9        (a2)  Every sale of wine by a distributor to a retailer shall constitute a
 10    sale of wine for resale or consumption in this state, whether the sale is made
 11    within or without this state, and the distributor shall be liable for the pay-
 12    ment of taxes. In every transfer of wine by a licensed winery to its  licensed
 13    retail outlet, the winery shall be liable for payment of taxes.
 14        (b3)  When wine has been destroyed by breakage or has spoiled or otherwise
 15    become  unfit  for beverage purposes prior to payment of taxes on it, the dis-
 16    tributor, upon satisfactory proof of destruction or spoilage, shall  be  enti-
 17    tled  to  deduct from existing inventories, subject to tax, the amount of wine
 18    so destroyed or spoiled.
 19        (c4)  If the tax commission determines that  any  amount  due  under  this
 20    chapter has been paid more than once or has been erroneously or illegally col-
 21    lected  or  computed,  the commission shall set forth that fact in its records
 22    and the excess amount paid or collected may be credited on any amount then due
 23    and payable to the commission from that person and any balance refunded to the
 24    person by whom it was paid or to his successors, administrators or  executors.
 25    The  commission is authorized and the state board of tax appeals is authorized
 26    to order the commission in proper cases  to  credit  or  refund  such  amounts
 27    whether  or  not  the  payments  have  been made under protest and certify the
 28    refund to the state board of examiners.
 29        (d5)  No credit or refund shall be allowed or made after three  (3)  years
 30    from  the  time  the  payment  was  made, unless before the expiration of that
 31    period a claim is filed by the taxpayer. The three (3) year period allowed  by
 32    this  subsection  for making refunds or credit claims shall not apply in cases
 33    where the tax commission asserts a deficiency of tax imposed by law, and  tax-
 34    payers desiring to appeal or otherwise seek a refund of amounts paid in obedi-
 35    ence to deficiencies must do so within the time limits elsewhere prescribed by
 36    law.
 37        (e6)  All revenue received from the taxes imposed pursuant to this chapter
 38    subsection (1) of this section shall be distributed as follows:
 39        (1a)  An  amount of money shall be distributed to the state refund account
 40        sufficient to pay current refund claims as authorized in  subsection  (c4)
 41        of this section and those moneys are continuously appropriated.
 42        (2b)  The  balance  remaining  after  distributing the amount in paragraph
 43        (1a) of this subsection shall be distributed as follows:
 44             (i)   Twelve percent (12%) shall be  distributed  to  the  alcoholism
 45             treatment account;
 46             (ii)  Five percent (5%) shall be distributed to the Idaho grape grow-
 47             ers and wine producers commission account; and
 48             (iii) The remainder shall be distributed to the general account.
 49        (7)  In addition to the tax set forth in subsection (1) of this section, a
 50    surcharge equal to two percent (2%) of the wholesale sales price of wine shall
 51    be imposed and shall be distributed as follows:
 52        (a)  An  amount  of money shall be distributed to the state refund account
 53        sufficient to pay current refund claims as authorized in subsection (4) of
 54        this section and those moneys are continuously appropriated.
 55        (b)  The balance remaining after distributing the amount in paragraph  (a)
                                                                        
                                           5
                                                                        
  1        of this subsection shall be distributed as follows:
  2             (i)   Sixty-eight percent (68%) shall be distributed to the community
  3             mental health services fund, created in section 23-1008, Idaho Code;
  4             (ii)  Sixteen  percent (16%) shall be distributed to the catastrophic
  5             health care cost fund, created in section 57-813, Idaho Code; and
  6             (iii) Sixteen percent (16%) shall be distributed to the alcohol  bev-
  7             erage control fund, created in section 23-1008, Idaho Code.
  8        (f8)  Any person who is not a distributor or winery but who makes, whether
  9    as  principal,  agent  or  broker, any sales of wine not otherwise taxed under
 10    this section and not exempt from such tax, shall  be  liable  for  payment  of
 11    taxes  imposed  by  this section. This subsection shall not impose tax on wine
 12    sold pursuant to section 23-1336, Idaho Code.

Statement of Purpose / Fiscal Impact


                       STATEMENT OF PURPOSE
                                 
                              RS14271
                                 
This legislation changes the basis of excise taxation on beer and
wine from volume-based to the more fair and equitable method of
price-based. More importantly, it stops the further erosion in the
beer and wine excise tax base as follows:

      In 1961, the last time the excise tax on beer was changed,
      the excise tax on an average-priced can of beer was eleven
      percent (11%).  Today it has eroded to two percent (2%).
      Expressed in terms of the actual tax on a can of beer, the
      excise tax was 1.4 cents per can in 1961 and remains at 1.4
      cents per can today. This tax has remained frozen for 43
      years.
      
      In 1971, the last time the excise tax on wine was changed,
      the excise tax on an average-prices bottle of wine was nine
      percent (9%).  Today it has eroded to two percent (2%).  This
      tax has remained frozen for 33 years.
           
This legislation also imposes a 2% surcharge on wholesale sales of
beer and wine for the purpose of funding costs attributable to the
use or abuse of these products.
    
                            FISCAL NOTE
                                 
Conversion to Price-Based: The conversion from volume to price-
based excise tax is designed to produce the same amount of excise
tax paid by the beer and wine wholesale distributors in FY2005 as
they paid in FY2004. In the future excise tax revenues will
increase as beer and wine sales prices increase.
    
The conversion wholesale tax rate of 3% for beer, and 2.1% for wine
was selected based upon an analysis of the historical volume of
beer and wine distributed in the state, a general understanding of
the marketplace, and certain information supplied by the wholesale
industry. Actual wholesale beer and wine sales information is not
publicly known at this time. With this bill, the excise tax rates
on beer and wine will be treated the same.
    
Under the volume-based method, higher priced beer and wine products
pay a lower percentage of excise tax on value than the lower-priced
beer and wine. This legislation levels that playing field.

The following table shows the distribution of the excise tax:

Distribution of Tax on Beer:             Percent          Dollars

Alcoholism Treatment Fund                  20%          $  836,600
Perm Bldg Fund                             33%           1,380,400
General Fund                               47%           1,966,000
3% Tax on Beer                            100%          $4,183,000 

Distribution of Tax on Wine:             Percent          Dollars

Alcoholism Treatment Fund                  12%          $  285,000
Grape Growers/Wine                          5%             118,700
General Fund                               83%           1,971,100
2.1% Tax on Wine                          100%           2,374,800

TOTAL EXCISE TAX/DISTRIBUTION                           $6,557,800

Surcharge on Wholesale Price of Beer & Wine: The 2% surcharge authorized 
in this bill will be dedicated to pay the treatment costs of alcohol-related 
mental and physical illnesses.  The funding will also be dedicated for law 
enforcement and regulatory functions needed to reduce the illegal use 
of alcohol.

Distribution of 2% Surcharge on 
Wholesale Price on Beer & Wine:           Percent         Dollars

Community Mental Health Services            68%         $3,400,000
Catastrophic Health Care Fund               16%            800,000
Alcohol Beverage Control Fund               16%            800,000
TOTAL SURCHARGE/DISTRIBUTION               100%         $5,000,000


Contact: Senator Hal Bunderson, 332-1000
         Senator Joe Stegner, 332-1000


Statement of Purpose/Fiscal Impact                            S 1447