Fiscal Impact Summary	FY 1999/2000	FY 2000/2001
State Revenues General Fund	-$73,667,596	-$151,369,616
State Expenditures General Fund
FTE Position Change	0.0 FTE	0.0 FTE
Other State Impact: TABOR Impact
Effective Date: 90 days after adjournment; applies to sales and purchases on or after January 1, 2000.
Appropriation Summary for FY 1999-2000: None required
Local Government Impact: Statutory cities and counties and other districts that are statutorily authorized to impose a sales tax will experience a revenue reduction in the collection of local sales tax revenue on items exempted by the bill unless they choose to continue to tax food marketed for immediate consumption through the adoption of a local ordinance. Home rule cities would be unaffected by the bill.

This fiscal note has been revised to reflect updated information. Effective January 1, 2000, this bill expands the current law exemption from the state sales and use tax covering food purchased for domestic home consumption to also include purchases of prepared food or food marketed for immediate consumption. The exemption includes all food or drink furnished or served for consumption by a retailer, food or drink sold on a “take out” or “to go” order, or food or drink served or furnished in or by restaurants and other like places of business. The exemption does not apply to alcoholic beverages or tobacco products.

The bill reduces state General Fund revenues, but is permissive for statutory cities and counties, and certain special districts. The bill is assessed as having state and local fiscal impact.

The 1997 Consumer Expenditure Survey estimates that, on average, U.S. families spent $1,557 per year on food away from home. This includes meals at restaurants, carry-outs, and catered affairs. The average family income in 1997 was $39,926. Therefore, 3.90 percent of family income was spent on food away from home.

In calendar year 2000, it is estimated that total food consumption by Colorado residents that would be exempted by the bill is $4.06 billion. In addition, an estimated $1.02 billion will be spent on food in this category by nonresident tourists in Colorado. The bill is effective for sales or purchases on or after January 1, 2000. Based on a total of $5.08 billion in sales of prepared food or food marketed for immediate consumption, the estimated reduction is state General Fund sales tax revenues for the six-month period from January through June in FY 1999-00 is estimated to be $73,667,596. While the state sales tax rate is 3.0 percent , this estimate accounts for the vendor’s discount of 3.33 percent of sales tax collections that would have otherwise been retained by the retailer on these purchases. The net reduction in revenue to the state is therefore based on an effective revenue loss rate of 2.9 percent. For FY 2000-01, the full year revenue reduction is estimated to be $151,369,616.

Under current law, SB97-1 requires the diversion of 10 percent of sales tax revenues to the Highway User Tax Fund for use on highway projects. This bill will reduce state sales tax revenues beginning in FY 1999-00, and will therefore, reduce the amount of state funds available for the SB 97-1 diversion. Additionally, the reduced state revenues will mean a reduction of the amount of state funds required to be refunded to taxpayers under the terms of TABOR, and less state funds will be available for capital construction needs. Table 1 summarizes the net impact of this bill on these state obligations. The changes in Table 1 are changes from a base that includes continuing capital construction projects.

	FY 1999-00	FY 2000-01
General Fund Revenue	-$73.67	-$151.37
General Fund Appropriations SB 97-1 Diversion	0.00 -19.04	0.00 -34.44
Controlled Maintenance Trust Fund Appropriations Excess General Fund Reserve	0.00 -54.63	0.00 -97.90
Federal Income Taxes Paid by Colorado Taxpayers Additional Money Available for New Capital or Rebates	0.00 -78.53	0.00 0.00
TABOR Refund (from prior year)	0.00	-73.67

Except for specific exceptions, sales and use tax exemptions authorized at the state level also apply to statutory cities, counties, and other districts that are statutorily authorized to impose a sales tax. These local governments would also experience a reduction in the collection of local sales tax revenue for food purchased for domestic home consumption, as defined in the bill, unless they choose to continue to tax food marketed for immediate consumption through the adoption of a local ordinance. Home rule cities and counties would be unaffected by the bill since they may determine their own sales and use tax base.

The fiscal note implies that no new state appropriations or spending authority are required to implement the provisions of the bill in FY 1999-00.