Agenda Item 1
March 31, 2011
Public Hearing
MEMORANDUM
TO:
County Council
FROM:
SUBJECT:
~
Michael Faden, Senior Legislative Attorney
Public Hearing:
Bill 8-11, Taxation
Excise Tax - Disposable Carryout Bags
Bill 8-11, Taxation Excise Tax - Disposable Carryout Bags, sponsored by the Council
President at the request of the County Executive, was introduced on March 15, 2011. At
introduction, Councilmembers Rice and EIrich asked to be listed as co-sponsors.
A
Transportation, Infrastructure, Energy and Environment Committee worksession is tentatively
scheduled for April 4 at 3:30 p.m.
Bill
8-11
would impose an excise tax on certain carryout bags provided to customers at
certain retail establishments, and require certain retail establishments to collect the carryout bag
tax and remit the tax to the County.
This packet contains
Bill
8-11
Legislative Request Report
Memo from County Executive
Fiscal Impact Statement
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Bill No,
8-11
Concerning: Taxation - Excise Tax ­
Disposable Carryout Bags
Revised: 3-10-11
Draft No. _1_
Introduced:
March 15.2011
Expires:
September 15,2012
Enacted: _ _ _ _ _ _ _ _ __
Executive:
_ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
-!.!.=:...-_ _ _ _ __
Ch, _ _, Laws of Mont. Co, _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request ofthe County Executive
AN
ACT to:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
impose an excise tax on certain carryout bags provided to customers at certain retail
establishments;
require certain retail establishments to collect the carryout bag
tax
and remit the tax
to the County;
authorize payment ofa fee to compensate certain retail establishments for collecting
the carryout bag tax;
allow certain exemptions from the carryout bag
tax;
authorize imposition of an estimated carryout bag tax under certain circumstances;
authorize the imposition of interest and penalties for failure to collect and remit the
carryout bag tax; and
generally amend County law to provide for an excise tax on certain bags.
By adding
Montgomery County Code
Chapter 52, Taxation
Article XIV, Carryout Bag Tax
Sections 52-101, 52-102,52-103,52-104,52-105,52-106, and 52-107
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Addedto existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unqffected by bill.
The County Councilfor Montgomery County, Maryland approves the following Act:
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BILL NO.
8-11
1
2
Sec.
1.
Article XIV is added to Chapter 52 as follows:
Article XIV. Carryout Bag Tax.
52-101.
Definitions.
3
4
In
this Article, the following tenns have the following meanings:
Director
means the
Director
of the Department of Finance.
Carryout bag
means
establishment
to
~
~
~
5
6
paper or plastic bag provided
Qy
retail
7
customer at the point of sale, pickup, or delivery to
fill!Y.
8
9
10
11
12
purchased items.
Carryout bag
does not include:
ill
ill
ill
{±}
~
bag provided
Qy
~
phannacist that contains
~
prescription drug;
~
any newspaper bag or bag intended for initial use as
waste, or yard waste bag;
~
~
garbage, pet
bag provided at the point of sale at
~
stand at
~
seasonal event, such as
fanners market; or
paper bag that
~
restaurant
gives
~
customer to take prepared food or
13
14
~
15
16
17
18
19
drink from the
restaurant.
Restaurant
means any lunchroom, cafe, or other establishment located in
~
~
pennanent building for the accommodation of the public, equipped with
kitchen containing facilities and utensils for preparing and serving meals to the
public, and outfitted with
~
public dining area. A
restaurant
does not include
any area of
~
supennarket, department store, or other
retail establishment
beyond the kitchen and public dining area.
Retail establishment
means any person engaged in the retail sale of goods.
Retail establishment
includes any supennarket, convenience store, shop,
20
21
22
23
24
25
service station, or restaurant, and any other sales outlet where
buy goods.
52-102.
Tax imposed.
~
customer can
26
27
A tax in the amount of
~
cents is levied and imposed on each customer
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BILL
No. 8-11
28
29
30
31
for each
carryout bag
that !!
retail establishment
provides to the
customer.
@
Each
retail establishment
that provides!!
carryout bag
to !! customer
must collect the amount of the tax imposed under subsection
ill).
when
the customer makes any payment for goods in person, through the
Internet,
Qy
telephone,
Qy
facsimile, or
Qy
any other means. The
retail
establishment
must hold the taxes required to be collected under this
32
33
34
35
36
37
38
Section in trust for the County until remitted as required under Section
52-103.
{£}
Each
retail establishment
may retain
1
cent from each 5-cent tax that
the
retail establishment
collects to cover the administrative expense of
collecting and remitting the tax to the County.
39
40
41
42
43
44
45
@
A
retail establishment
must indicate on the customer's transaction
receipt the number of
carryout bags
that the
retail establishment
provided to the customer and the total amount of tax levied under this
Section.
52-103.
ill).
Remittance.
Except as provided in subsection
(Q1
on or before the 25th day of each
month, each
retail establishment
must remit the full amount of the tax
collected for all
carryout bags
provided to !! customer during the
previous month, less the amount retained under Section 52-102
(£1
46
47
48
49
50
51
52
@
A
retail establishment
is only required to remit the taxes to the
Director
when the cumulative taxes collected under Section 52-102(a)
since the previous remittance, ifany, exceed $100.
{£}
Each remittance must be accompanied
Qy
!! report of all transactions
that involve bags subject to the tax. The report must be on !! form
supplied
Qy
the
Director
and must contain the number of bags supplied
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53
54
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BILL
No. 8-11
55
56
57
or provided to customers, the amount of tax required
Qy
this Section to
be collected and any other information the
Director
requires to assure
that the proper tax has been remitted to the County.
@
58
59
ill
If the
retail establishment
does not file g required report
Qy
the
deadline established under subsection
estimate the amount of tax due.
~
the
Director
may
60
61
62
63
The
Director
may base the
estimate on g reasonable projection of bags supplied or provided
and may consider taxes reported
Qy
other
retail establishments.
ill
The
Director
may send g notice of the estimated tax due,
including interest and penalty, to the
retail establishment's
last
known address. The
retail establishment
must
pgy
the estimated
tax, including any interest and penalty assessed
Qy
the
Director,
within 10 days after the notice is sent.
64
65
66
67
68
ill
ill
(g)
Each
retail establishment
must preserve for
J
years all records
necessary to determine the amount of the tax due under this Section.
The
Director
may inspect any records required to be kept under this
Section at any reasonable time.
The
Director
must deposit all taxes remitted under this Section into the
stormwater management fund created under Section 19-35, after
deducting the cost of administering this Article.
69
70
71
72
73
74
75
76
77
52-104.
Interest and penalties.
W
If g
retail establishment
does not remit to the
Director
any tax owed
under Section 52-103 when due, the
retail establishment
is liable for:
78
79
ill
ill
interest on the collections at the rate of one percent per month for
each month or part of g month after the remittance is due; and
g penalty of
~
percent of the amount of the collections per month
or part of g month after the remittance is due,
!ill
to 25 percent of
80
81
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tax\bill
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BILL
No. 8-11
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
the tax
- -
collected.
®
52-105.
The
Director
must collect any interest and penalty as part of the
remittance due.
Prohibited conduct.
A
retail establishment
must not:
W
neglect or refuse to collect or remit the tax levied under this Article;
file an incomplete, false, or fraudulent report to the
Director;
neglect or refuse to keep complete and accurate records; or
refuse to allow the
Director
to inspect and audit the
retail
establishment's
records.
®
W
@
52-106.
Regulations.
The County Executive may adopt regulations under method
ill
to implement
this Article.
52-107.
Enforcement.
Any violation of this Article is
£!:
Class A civil violation. Each violation is
£!:
separate offense. A conviction under this Section does not relieve
£!:
retail
establishment
from paying
£!:
remittance owed to the County.
Sec. 2. Effective Date.
98
99
100
101
102
103
This Act takes effect on January 1,2012.
Approved:
Valerie Ervin, President, County Council
104
105
106
Date
Approved:
Isiah Leggett, County Executive
Date
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LEGISLATIVE REQUEST REPORT
Taxation
Bill 8-11
Excise Tax - Disposable Carryout Bags
DESCRIPTION:
This bill would establish an excise tax to be levied on carryout bags that
retail establishments provide to customers. The tax is set at 5 cents for each
carryout bag that a retail establishment provides to a customer, ·of which I
cent may be retained by the retailer to cover administrative costs. Revenues
would be deposited into the Water Quality Protection Fund created under
County Code Chapter 19 and used for watershed protection activities,
including litter prevention and removal.
Disposable carryout bags handed out by retail businesses are among the top
items found in the litter and trash stream in County neighborhoods and
rivers. Litter is a public health nuisance, degrades property values, pollutes
the Anacostia and Potomac Rivers, and drives up taxpayer-funded cleanup
costs. The County is bound to meet a regulatory limit on trash and litter
established in the Anacostia River Total Maximum Daily Load (TMDL)
under the Clean Water Act. The County is also a signatory to the Potomac
River Watershed Trash Treaty, committing the County to a regional effort
to achieve a Trash Free Potomac by 2013. Both the Anacostia TMDL and
the Trash Treaty are included as regulatory requirements in the County's 3
rd
Municipal Separate Storm Sewer (MS4) Stormwater Permit. Funds are
needed to address these problems.
To create a tax to help fund the County's stormwater management program
to support the goals of a cleaner environment, cleaner streams and rivers in
the County. Effectively transfer the burden of litter cleanup costs from tax
payer to consumers, while offering consumers a choice to avoid disposable
bags and bag charges by bringing their own bags.
Department of Environmental Protection, Department of Finance
See Fiscal and Economic Impact Statement
See Fiscal and Economic Impact Statement
To be requested.
The District of Columbia has a similar law (Anacostia River Clean Up and
Protection Act of 2010).
Ansu John, Division of Environmental Policy and Compliance, Department
of Environmental Protection (240-777-7786).
Revenue measures apply in all municipalities in the County.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Class A civil
F:\LAW\BILLS\1108 Bag Tax\LRR.Doc
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0'61.060
OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
ROCKVILLE, MARYLAND 20850
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TO:
Valerie Ervin, President
Montgomery County
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Isiah Leggett
County Executive
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FROM:
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SUBJECT:
Legislation to create a Carryout Bag Tax
I am submitting for Council introduction a bill that establishes a 5-cent excise tax
on carryout bags provided by retailers to customers on or after January 1,2012. I am also
submitting a Legislative Request Report and Fiscal Impact Statement for the bill. I am grateful
that seven Councilmembers, including yourself and Councilmembers Andrews, Berliner, EIrich,
Navarro, Reimer, and Rice have agreed to co-sponsor this bill.
Disposable bags handed out by retail businesses are among the top items
persistently found in the litter and trash stream in County neighborhoods and rivers. Litter is a
public health nuisance, degrades property values, pollutes the Anacostia and Potomac Rivers
(our source of drinking water), and drives up taxpayer-funded cleanup costs.
The aim of the bill is to effectively transfer the burden ofpublic1y-funded litter
cleanup to consumers, while offering the consumer a choice to avoid disposable carryout bags
and the bag tax by using their own bags. Tax revenues would be deposited in the County's
Water Qualtiy Protection Fund to be used for watershed protection activities including litter
prevention and removal.
This bill will assist the County in funding compliance with both the Anacostia
River Total Maximum Daily Load (TMDL) for trash and litter and the Potomac River Watershed
Trash Treaty, under which the County agreed to participate in a regional effort to achieve a Trash
Free Potomac by 2013. The Anacostia TMDL and the Trash Treaty are both included as
regulatory requirements in the County's Municipal Separate Storm Sewer System (MS4) Permit.
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Valerie Ervin, President
Montgomery County Council
Page 2
I look forward to working with the Council as it considers this legislation. For
questions about this bill, please contact Bob Hoyt, Director, Department of Environmental
Protection at 240-777-7700.
Attachments
c: Bob Hoyt, DEP Director
Jennifer Barrett, Finance Director
Marc Hansen, County Attorney
(j)
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OFFICE OF MANAGEMENT AND BUDGET
Isiah Leggett
County Executive
Joseph
F.
Beach
Director
MEMORANDUM
March 4,2011
TO:
FROM:
SUBJECT:
Valerie Ervin, President, County Council
Joseph F.
Beach.~
Council Bill XX-II, Tixation - Carryout Bag Tax
The purpose ofthis memorandum is to transmit a fiscal and economic impact statement
to the Council on the subject legislation.
LEGISLATION SUMMARY
Bill XX-II would impose an excise tax of 5 cents on all carryout bags (with the
exceptions described below) provided to customers in retail establishments, and would require that those
retail establishments collect the tax and remit it to the County, less I cent per bag that the retailer may
retain to offset the administrative cost of collecting the
tax.
"Carryout bags" are defined as paper or
plastic bags provided by the retailer and used to
carry
purchases from the premises. Several types of bags
are excluded from the tax: bags provided by a pharmacist containing prescription drugs; newspaper bags;
bags used for garbage, pet waste, or yard waste disposal; bags provided by a restaurant for taking away
prepared food or drink; and bags provided at the point of sale at a stand for a farmers market or other
seasonal event.
The 5 cent bag tax is to be levied on each carryout bag the retail establishment provides
to the customer (with the exclusions noted above). The taxes collected must be remitted
to
the County,
less the I cent per bag retained by the retailer, on a monthly basis when cumulative bag tax collections
exceed $100 per month. For lower collection rates, remittances are not required until the cumulative tax
collected since, the last remittance exceeds $100.
Bill XX-II also specifies requirements for customer receipts provided by the retailer
when the bag tax is assessed and for recordkeeping by the retail establishment, as well as interest and
penalties if the tax is not remitted as required. Any violation ofthis bill would be punishable as a Class A
civil violation.
FISCAL AND ECONOMIC SUMMARY
Fiscal Impact
Revenues: The number of carryout bags currently used in Montgomery County in one
year is estimated to be 82,950,000. This figure was derived using figures from the District of Columbia's
Office of the Director
101 Monroe Street, 14th Floor' Rockville, Maryland 20850 • 240-777-2800
www.montgomerycountymd.gov
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Valerie Ervin, President, County Council
March 4, 2011
Page 2
bag tax program and adjusting them for the number of retail establishments in Montgomery County. The
District's fIrst year bag tax collections of $2.1 million translate into 52,500,000 bags (@ 5 cents per bag).
Using fIgures from the U.S. Bureau of the Census, the ratio of the 2009 population ofMontgomery
County to that of the District is 1.62, and the ratio of retail trade establishments in Montgomery County to
the number of such establishments in the District is 1.57. It was assumed that a comparable factor (1.58)
represents the ratio ofcarryout bags used in the County in a year to the number used in the District.
Multiplying the District's 52,500,000 bags by 1.58 yields an estimate of 82,950,000 for the number of
carryout bags currently used per year in Montgomery County.
The attached spreadsheet shows how bag tax revenues have been estimated; assuming
that the number of bags needed is 82,950.000. It is conservatively assumed that consumers will reduce
their use of retailer-provided carryout bags by 50% during FY12, when the bag tax takes effect (the
District found that bag usage fell by 80% during the fIrst year). The remaining 50% ofthe bags will be
provided by the retailer and will be taxed at 5 cents per bag, with the retailer allowed to retain 1 cent per
bag for administrative costs. It is assumed that initially 15% of the potential bag tax revenue would be
lost due to startup and collection issues, leaving the County with revenue of about $562,000 for the 6
months ofFY12 that the tax will apply.
In
subsequent years, consumers are expected to increasingly avoid the need for carryout
bags, resulting in the bag reduction percentage growing from 50% in FY12 to 60% in FY13 and reaching
85% in FY17. Likewise, the percentage of revenue lost to startup and collection factors is expected to fall
from 15% in FY12 to 12% by FY17.
The net result is that revenue to the County from the bag tax is expected to rise to nearly
$1.08 million in FY13 (the fIrst full year of the tax) and to fall steadily in subsequent years to about
$423,000 by FY17 as consumers use fewer and fewer non-reusable carryout bags.
The cost to the County to implement and administer the bag tax includes the
development and maintenance of a web site for collecting the tax, publicity and education to be provided
before and after implementation of the tax (including making free reusable bags available to seniors and
others), and the addition of a position in the Department of Finance to administer the tax and the
associated website. These costs are estimated to total $354,000 in FY12 (which includes development of
the web site) and $236,200 in FY13 (the frrstfull year of the tax), with somewhat lower amounts in the
succeeding years (see the attached spreadsheet).
Net Fiscal Impact:
In
FY12, when the bag tax will only be in effect for 6 months and a
number oflarge one-time startup costs will be incurred (e.g. for web site design and implementation), the
net revenue produced by the
tax
is estimated at $207,640.
In
FY13 (the fIrst full year of the tax),
projected net revenue from the tax will be $842,150. Net revenue is projected to decline in each
succeeding year as consumers use fewer and fewer non-reusable carryout bags, reaching $216,845 in
FY17. All revenue from the bag tax is to be deposited into the Water Quality Protection Fund, where it
will be used to support the County's many programs and initiatives to improve water quality in the
County's lakes, streams, and rivers.
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Valerie Ervin, President, County Council
March 4, 2011
Page 3
Economic Impact
Bill XX-11 establishes a carryout bag tax of 5 cents for each carryout bag that a retail
establishment provides to a customer, 1 cent of which may be retained by the retailer to cover
administrative costs. This tax is based on the customer's economic activity, i.e., retail purchases of
goods, and the cost of the tax is borne by the customer, not by County taxpayers. The economic cost to
the consumer is contingent on the consumer's choice to use reusable bags or other means to carry
purchases from the point of sale, rather than non-reusable plastic or paper bags. Retailers may incur
operating costs to reprogram their checkout stations, train employees, upgrade their accounting systems,
perform necessary recordkeeping, and send their tax collections to the County, some or all ofwhich
would be offset by the 1 cent out of the 5 cent tax per bag retained by the retailer.
Plastic bags are a persistent and consistently-found item in the litter stream, and in 2009
County agencies spent approximately $3.3 million on litter prevention and removal programs. The goal
of imposing this tax is to defray the costs of cleanup and to encourage the use of environmentally friendly
options. This bill will shift the cost of cleanup from County taxpayers to the retail customers using such
bags.
The following persons contributed to and concurred with this analysis: John Greiner,
Office of Management and Budget; Ansu John and Bob Hoyt, Department of Environmental Protection;
Robert Hagedoorn and David Platt, Department of Finance.
JFB:jg
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Bob Hoyt, Director, Department ofEnvironmental Protection
Ansu John, Department ofEnvironmental Protection
Jennifer Barrett, Director, Department of Finance
Robert Hagedoorn, Department ofFinance
David Platt, Department of Finance
Marc Hansen, County Attorney, County Attorney's Office
Walter Wilson, County Attorney's Office
John Greiner, Office ofManagement and Budget
John Cuff, Office ofManagement and Budget
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ESTIMATED FISCAL IMPACT OF THE BAG TAX
FY12
REVENUE
Number of Bags
Bag Reduction Based on Consumer Behavior
Bags Subject to Tax
Projected Gross Bag Revenues
@
$0.05 per Bag
Less Retailer Share of Revenue
@
$0.01 per Bag
less Revenue Lost to Startup and Collection Factors
Montgomery County Share of Revenue
GROSS PROJECTED COUNTY REVENUE*
COSTS
Publicity/Bag Distribution/Education
Administrative Costs, Finance: Online Tax System
Administrative Costs, Finance: OSC for Administrative Support**
Administrative Costs, Finance: Operating Expenses for OSC***
TOTAL COST
Net Fiscal Impact
*Five months in FY12, full yearfor FY13-17.
**Half a year in FYI2.
***Operating expenses include computer, telephone, etc.
$120,000
$190,000
$40,000
$4,000
$354,000
$207,641
$100,000
$55,000
$80,000
$1,200
$236,200
$842,150 ,
$95,000
$55,000
$80,000
$1,200
$231,200
$602,448
$80,000
$55,000
$80,000
$1,200
$216,200
$478,506
$70,000
$55,000
$80,000
$1,200
$206,200
$3S7,860
$70,000
$55,000
$80,000
$1,200 '
$206,200·
$216,845
82,950,000
50%
41,475,000
$2,073,750
($414,750}
($311,063}
$1,347,938
$561,641
82,950,000
60%
33,180,000
$1,659,000
($331,800)
($248,850)
$1,078,350
$1,078,350
82,950,000
70%
24,885,000
$1,244,250
($248,850)
($161,753)
$833,648
$833,648
82,950,000
75%
20,737,500.00
$1,036,875
($207,375)
($134,794)
$694,706
$694,706
82,950,000
80%
16,590,000.00
$829,500
($165,900)
($99,540)
$564,060
. $564,060
82,950,000
85%
12,442,500.00
$622,125
{$124,425}
($74,655)
$423,045
$423,045
FY13
FY14
FY15
FY16
FY17
®