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The Proposed Exemptions

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EXEMPTIONS PROPOSED FOR ELIMINATION TO REDUCE
THE SALES TAX RATE AND BROADEN THE SALES TAX BASE

 

This citizen-generated ballot initiative proposes to provide new state revenue that can be used to more adequately fund critical state obligations, most specifically public education.

This new revenue will come from elimination of 22 special-interest sales tax exemptions related to purchases and 12 exemptions on services. These changes will align Idaho with emerging national trends for broadening the sales tax base by adding sales taxes to some services and lowering the overall sales tax rate to encourage consumer demand.

Left in place are current exemptions connected to medical care, education, heating, churches, tribes, donations and government.

Also used in the citizen review of exemptions was guidance from two national taxpayer organizations, the Council on State Taxation and the Tax Foundation. They describe sound sales tax base criteria this way:

What should be in the base?  - Goods and services - purchased by final consumers.

What shouldn’t be in the base? - Goods and services - purchased by businesses that will be used in the production process.

The dollar amounts listed with the descriptions below are the state’s FY2017 estimates of the revenue lost to the General Fund from specific current exemptions. These amounts are based upon the current 6% sales tax. The calculation of the general revenue that will be recovered at the proposed lowered rate of 5%, is provided on page 6.

DELETIONS from SALES and USE TAXES EXEMPTIONS

Estimated FY2017 amounts from General Fund Revenue Book, FY2016, State of Idaho.

Idaho Code 63-3622:

2.1.09 Interstate Trucks $ 8,566,000

Exempts trucks weighing over 26,000 pounds when registered in the international registration plan, as well as their trailers, when miles accumulated by the fleet outside of Idaho are minimally 10% of the total fleet miles in any annual registration period. Failure to meet the mileage requirement in any annual registration period invalidates the exemption and results in a tax liability based on the fair market value of the value of the vehicles at the end of the nonconforming period. Enacted in 1989.

(pgs. 85-86, General Fund Revenue Book, FY 2016)

2.1.10 Out-of-State Contracts $ 5,110,000

Exempts goods purchased by contractors to install into real property in non-taxing states

Enacted in 1965. (pg. 86, General Fund Revenue Book, FY 2016)

2.1.24 Research and Development Equipment $ 7,200,000

Exempts tangible personal property used in research and development activities. Enacted in 2005.

(pg. 88, General Fund Revenue Book, FY 2016)

Idaho Code 63-4408

2.1.26 Small Employer Headquarters Construction $ 115,000

Rebate for taxpayer qualifying under the “Idaho Small Employer Incentive Act of 2005.”Qualification criteria are at least $500,000 in new facilities and addition of at least ten new jobs paying at least $19.23 per hour. The average wage for job beyond the ten new jobs, must be at least $15.50 per hour. Enacted in 2005, amended in 2006, 2008, 2009. (pg. 88, General Fund Revenue Book, FY 2016)

Idaho Code 63-3622:

2.1.27 Glider Kit Vehicles $ 376,000

Glider kit vehicles as defined in Idaho Code 49-123(f) Enacted in 2006.

(pg. 88, General Fund Revenue Book, FY 2016)

Idaho Code 63-3641:

2.1.29 State Tax Anticipation Revenue $ 6,000,000

Rebates sales tax paid to developer for the costs of building or improving qualified freeway exchanges. To qualify, the developer must spend at least $6 million on a freeway interchange or interchange improvements. Enacted in 2007, amended in 2009 to lower minimum expense. (pg. 89, General Fund Revenue Book, FY 2016)

Idaho Code 63-3621:

2.1.32 Beverage and Food Samples $ 17,000

Exempts beverages including wine and beer, and food if given as a free tasting to a potential customer. Enacted in 2012. (pg. 89, General Fund Revenue Book, FY 2016)

Idaho Code 63-3622:

2.2.07 Funeral Caskets $ 1,623,000

Exempts goods sold in conjunction with a funeral. Enacted in 1977.

(pg. 90, General Fund Revenue Book, FY 2016)

2.2.11 Precious Metal Bullion $ 558,000

Exempts sales of precious metal bullion and coins. Enacted in 1982.

(pg. 91, General Fund Revenue Book, FY 2016)

2.2.12 Idaho Commemorative Silver Medallions $ 2,000

Exempts sales of Idaho commemorative silver medallions. Enacted in 2003.

(pg. 91, General Fund Revenue Book, FY 2016)

Idaho Code 63-3613:

2.2.13 New Manufactured/Modular Buildings $ 2,597,000

Excludes 45% of the sales price of new manufactured homes and modular buildings from the taxable sales price. Enacted in 1965 at 60%, amended in 1976 to 45%.

(pg. 91, General Fund Revenue Book, FY 2016)

Idaho Code 63-3613; 63-3621:

2.2.14 Telecommunications Equipment $ 2,745,000

Exempts amount of discount or price reduction that is offered as an inducement to commence or continue telecommunications service. Enacted in 1996. (pg. 91, General Fund Revenue Book, FY 2016)

Idaho Code 63-3622:

2.2.15 Personal Property Tax on Rentals $ 400,000

Exempts the amount of property tax included in a rent payment for tangible personal property. To be eligible, the property must initially be leased for at least a year. Enacted in 2008.

(pg. 91, General Fund Revenue Book, FY 2016)

Idaho Code 63-3616:

2.2.16 Remotely Accessed Digital Media $ 8,487,500

Exempts certain computer software and other digital media defined as not tangible personal property by statute. Enacted in 2014, amended in 2015 to expand media exempted. (pg. 91, General Fund Revenue Book, FY 2016 plus amount listed in Fiscal Note from 2015 amendment)

Idaho Code 63-3609:

2.3.01 Construction (45%) $ 69,582,000

Sales tax is paid on the cost of materials used in construction projects, but the labor component

Is generally not taxed which is presumed to be 45%. Mobile and manufactured homes are taxed at 55% of the sales price to give then equivalent treatment. (pg. 92, General Fund Revenue Book, FY 2016)

Idaho Code 63-3613:

2.3.03 Transportation Services $ 47,094,000

Exempts most charges for transportation of freight and passengers. Air charter services were made taxable in 1988. Enacted in 1965. (pg. 92, General Fund Revenue Book, FY 2016)

2.3.04 Information Services $ 83,550,000

Exempts subscriptions or charges for one-way and two-way transmissions of signals containing information and information services. Enacted in 1965. (pg. 92, General Fund Revenue Book, FY 2016)

2.3.05 Repairs $ 48,222,000

Exempts labor charges associated with repairing or installing tangible personal property as long as they are separately stated on the bill. NAICS labor major group 811 is included in this category. Enacted in 1965. (pg. 92, General Fund Revenue Book, FY 2016)

2.3.06 Professional Services $264,402,000

Exempts NAICS major labor group 541 including legal, accounting, engineering, architectural, consulting, scientific research and advertising services. Enacted in 1965. (pg. 93, General Fund Revenue Book, FY 2016)

2.3.07 Business Services $133,131,000

Exempts office services, employment services, building services, employment agencies, facility services and security agencies. NAICS labor major groups 561 and 562 are in this category. Enacted in 1965.

(pg. 93, General Fund Revenue Book, FY 2016)

2.3.08 Personal Services $ 11,536,000

Exempts laundry and dry cleaning, barbers and beauticians, shoe repair, funeral services, massage parlors and escort services. NAICS major labor group 812 is this category. Enacted in 1965.

(pg. 93, General Fund Revenue Book, FY 2016)

2.3.10 Social Services $ 82,558,000

Exempts adult and child day care, residential care and adoption services and NAICS major group 624.

Enacted in 1965. (pg. 93, General Fund Revenue Book, FY 2016)

Idaho Code 67-7439:

2.3.12 Lottery Tickets and Pari-Mutuel Betting $ 12,267,000

Exempts the sale and purchase of lottery tickets and pari-mutuel betting. Also exempts any equipment used in lottery operations. Enacted in 1988. (pg. 93, General Fund Revenue Book, FY 2016)

Idaho Code 63-3622:

2.3.13 Media Measurement Services $ 77,000

Exempts sale and purchase of any television, radio, newspaper or other media measurement service.

Enacted in 1997. (pg. 94, General Fund Revenue Book, FY 2016)

2.3.14 Miscellaneous Services $ 3,213,000

Exempts all personal service industries not classified elsewhere. This includes pet care, photofinishing, parking lots and garages. Enacted in 1965. (pg. 94, General Fund Revenue Book, FY 2016)

2.3.15 Nonprofit Shooting Range Fees $ 43,000

Exempts fees and memberships of nonprofit shooting and hunting organizations. Enacted in 2006.

(pg. 94, General Fund Revenue Book, FY 2016)

Idaho Code 63-3622:

2.4.04 Canal Company Purchases $ 1,080,000

Exempts purchases by canal companies defined as nonprofit corporations whose sole purpose is operating and maintaining dams, reservoirs, canals, lateral and drainage ditches, pumps and pumping plants. Enacted in 1967. (pg. 95, General Fund Revenue Book, FY 2016)

2.4.08 Centers for Independent Living $ 6,000

Exempts sales to and purchases by centers for independent living which are defined as private, nonprofit, nonresidential organizations where at least 51% of the governing boards are individuals with disabilities. Enacted in 1997. (pg. 95, General Fund Revenue Book, FY 2016)

2.4.11 INL Research and Development Purchases $ 6,204,000

Exempts goods used for research and development at the Idaho National Laboratory.

Enacted in 1967. (pg. 96, General Fund Revenue Book, FY 2016)

2.4.12 Motor Vehicles Purchased by Family Members $ 2,397,000

Exempts sales of motor vehicles between family members related within the second degree of consanguinity. (pg. 96, General Fund Revenue Book, FY 2016)

2.4.13 Sales by 4-H and FFA Clubs at Fairs $ 28,000

Exempts sales of animals by any 4-H club or FFA club held in conjunction with a fair or the Western Idaho Spring Lamb Sale. Enacted in 1979. (pg. 96, General Fund Revenue Book, FY 2016)

Idaho Code 63-3613:

2.4.18 Sales Through Vending Machines $ 2,896,000

Allows retailers selling products through vending machines for $1.00 or less to pay tax on 117% of their acquisition cost of the products rather than on the retail sales price. Enacted in 1977.

(pg. 97, General Fund Revenue Book, FY 2016)

2.4.19 Auto Manufacturer Rebates $ 791,000

Allows dealers to deduct the amount of a rebate given to the buyer by the motor vehicle manufacturer, from the taxable sales price of the vehicle. Enacted in 1990. (pg. 97, General Fund Revenue Book, FY 2016)

Idaho Code 63-3622:

2.4.25 Senior Citizen Centers $ 55,000

Exempts purchases made by senior citizen centers. Enacted in 2002.

(pg. 98, General Fund Revenue Book, FY 2016)

 

BOTTOM LINE:

 Projected Sales Tax Revenue at 6% for FY2016 $1,517,275,700
 Projected Sales Tax Revenue at 5% for FY2016 $1,264,396,400
 Gain from Elimination of Exemptions at 6% rate   $812,928,500
 Gain from Elimination of Exemptions at 5% rate  $677,440,400
 Loss from Overall 1% Sales Tax Reduction $252,879,300

 NEW FUNDS $424,561,100
Fair Share Idaho

P.O. Box 7018
Boise, Idaho 83707

208.488.2070 

team@fairshareidaho.org