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F I S C A L I M P A C T R E P O R T
SPONSOR Jennings
ORIGINAL DATE
LAST UPDATED
2/13/07
HB
SHORT TITLE Health Service Gross Receipts Reporting
SB 258
ANALYST Schardin
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
FY09
($54.0)
Recurring General Fund
($36.0)
Recurring
Local
Governments
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates SB 356
SOURCES OF INFORMATION
LFC Files
Response Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
Senate Bill 258 amends Section 7-1-71.2, which currently provides a reporting penalty for food
retailers and health practitioners who misreport the gross receipts tax deductions for food and
medical services enacted in 2004. The bill would remove health practitioners who misreport the
medical services deduction. Food retailers who misreport would still be subject to penalty.
The effective date of these provisions is July 1, 2007.
FISCAL IMPLICATIONS
TRD reports that about $90 thousand in penalties were paid by medical service providers
pursuant to Section 7-1-71.2 in the last year. Of the $90 thousand that would no longer be
collected, about 60 percent would be a loss to the general fund and the remaining 40 percent
would be a loss to local governments.
pg_0002
Senate Bill 258 – Page
2
SIGNIFICANT ISSUES
The food and medical services gross receipts tax deductions enacted in 2004 contained the
penalty provision that is amended in this bill. Under current law, health care practitioners and
food retailers pay a penalty in the amount of the difference between the incorrect deduction and
the correct deduction amount, multiplied by twice the total local option tax rates in effect in the
reporting period.
TRD is uncertain whether the penalty amended by this bill is currently contributing to more or
less accurate reporting of the medical services deduction. TRD reports that the “double local
option penalty" was enacted to ensure correct reporting because the provision holding local
governments harmless from the deduction depends on it. However, many taxpayers view the
penalty as unfair. As a consequence, it appears they have not voluntarily disclosed misreporting
that would be subject to the penalty. Many assessed penalties have been protested, which are
costly for TRD to resolve.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Senate Bill 258 duplicates Senate Bill 356.
SS/nt