The Senate has voted 25-9 in favor of HB 95a, the Senate-amended version of HB 95, to exempt materials used in public roads from the sales tax. Sen. Jim Rice, R-Caldwell, the bill’s sponsor, said, “I think it’s important if we’re asking the citizens of Idaho to reach into their pockets and pay something more to take care of our roads, I think it’s important to make sure that 100 percent of the funds … will be used to repair roads, to maintain roads, not something else.” He argued that when contractors pay sales tax on road materials, they’re indirectly spending state transportation money on sales tax, which goes to the state general fund – not to roads.
Sen. Dan Johnson, R-Lewiston, disagreed, and cited an Idaho Attorney General’s opinion that found nothing unconstitutional in the use of transportation funds for contractors’ full costs, including sales tax on their materials. “We may see a 6 percent decline on the up-front cost of those materials, but I don’t believe that is going to be transferred 100 percent,” Johnson said. “I don’t support moving these funds off of the general funds.”
Sen. Grant Burgoyne, D-Boise, called the bill “imprudent in a year when we’re trying to do all we can for education.” Sen. Shawn Keough, R-Sandpoint, said the bill is nothing more than a sales tax exemption. “I don’t think the sales tax exemption is warranted at this point, and for that reason I will be voting no,” she said.
Senate Transportation Chairman Bert Brackett, R-Rogerson, called HB 95a “just good common-sense legislation.” He said, “It corrects a quirk in the tax code. One of the criticisms I’ve heard of this bill is that it will not result in lower bids, and that the contractors will just pocket the difference.” He said competition would keep contractors from doing that. “I submit to you that over time, the competition will work its way into those bids,” he said.
The bill has an estimated fiscal impact to the state general fund of up to $20 million a year in lost sales taxes, though it also estimates that a like amount would be saved on road work at the state and local level.
Since the bill was amended in the Senate – to push its effective date out a year, to July 1, 2016 – it still needs to go back to the House for possible concurrence in the Senate amendments.