Print Friendly HOUSE BILL NO. 494 – Schools, finance, utility sales tax
HOUSE BILL NO. 494
View Bill Status
View Bill Text
View Statement of Purpose / Fiscal Impact
Text to be added within a bill has been marked with Bold and
Underline. Text to be removed has been marked with
Strikethrough and Italic. How these codes are actually displayed will
vary based on the browser software you are using.
This sentence is marked with bold and underline to show added text.
This sentence is marked with strikethrough and italic, indicating
text to be removed.
UTILITIES - SALES TAX - Repeals and amends existing law relating to the
sales and use tax exemption for utilities to provide that the sales and use
tax on utilities shall be paid to the school district building accounts.
01/27 House intro - 1st rdg - to printing
01/30 Rpt prt - to Rev/Tax
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-eighth Legislature Second Regular Session - 2006
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 494
1 AN ACT
2 RELATING TO PROVIDING MONEYS FROM THE SALES AND USE TAX TO PROVIDE FOR BUILD-
3 ING AND REPAIR OF SCHOOL BUILDINGS; PROVIDING A SHORT TITLE; PROVIDING
4 LEGISLATIVE INTENT; AMENDING SECTION 63-3622D, IDAHO CODE, TO DELETE REF-
5 ERENCE TO THE SALES TAX EXEMPTION ON UTILITIES WITHIN THE PRODUCTION
6 EXEMPTION; REPEALING SECTION 63-3622F, IDAHO CODE, RELATING TO THE SALES
7 AND USE TAX EXEMPTION FOR THE SALE OR PURCHASE OF NATURAL GAS, ELECTRIC-
8 ITY, AND WATER WHEN DELIVERED TO CONSUMERS AT THE PLACE OF CONSUMPTION BY
9 MEANS OF PIPES, WIRES, MAINS OR SIMILAR SYSTEMS; AMENDING SECTION 63-3616,
10 IDAHO CODE, TO DEFINE "TANGIBLE PERSONAL PROPERTY"; AMENDING CHAPTER 36,
11 TITLE 63, IDAHO CODE, BY THE ADDITION OF A NEW SECTION 63-3638B, IDAHO
12 CODE, TO PROVIDE THAT THE SALES AND USE TAX ON UTILITIES SHALL BE PAID TO
13 THE SCHOOL DISTRICT BUILDING ACCOUNT; AND TO PROVIDE SEVERABILITY.
14 Be It Enacted by the Legislature of the State of Idaho:
15 SECTION 1. This act shall be known as the "Public School Plant Facilities
16 and Property Tax Relief Act of 2006."
17 SECTION 2. (1) Although it is desirable to maintain local control and
18 local responsibility for the construction and operation of Idaho's public
19 schools, it is evident that reliance on local property taxes as the sole
20 source of revenue for plant facility construction and maintenance is no longer
21 adequate or equitable; and
22 (2) Idaho can meet its responsibility to provide each public school stu-
23 dent with a thorough education only if a portion of the funding for plant
24 facility construction and maintenance is provided from broad-based taxes col-
25 lected at the state level; and
26 (3) Provision of funds for maintenance and renovation of school facili-
27 ties will, over time, reduce the need for, and incidence of, school plant
28 facilities levies, thus reducing property taxes at the local levels.
29 SECTION 3. That Section 63-3622D, Idaho Code, be, and the same is hereby
30 amended to read as follows:
31 63-3622D. PRODUCTION EXEMPTION. There are exempted from the taxes imposed
32 by this chapter:
33 (a) The sale at retail, storage, use or other consumption in this state
35 (1) Tangible personal property which will enter into and become an ingre-
36 dient or component part of tangible personal property manufactured, proc-
37 essed, mined, produced or fabricated for sale.
38 (2) Tangible personal property primarily and directly used or consumed in
39 or during a manufacturing, processing, mining, farming, or fabricating
40 operation, including, but not limited to, repair parts, lubricants,
41 hydraulic oil, and coolants, which become a component part of such tangi-
1 ble personal property; provided that the use or consumption of such tangi-
2 ble personal property is necessary or essential to the performance of such
4 (3) Chemicals, catalysts, and other materials which are used for the pur-
5 pose of producing or inducing a chemical or physical change in the product
6 or for removing impurities from the product or otherwise placing the prod-
7 uct in a more marketable condition as part of an operation described in
8 subsection (a)(2) of this section, and chemicals and equipment used in
9 clean-in-place systems in the food processing and food manufacturing
11 (4) Safety equipment and supplies required to meet a safety standard of a
12 state or federal agency when such safety equipment and supplies are used
13 as part of an operation described in subsection (a)(2) of this section.
14 (5) Plants to be used as part of a farming operation.
15 (b) Other than as provided in subsection (c) of this section, the exemp-
16 tions allowed in subsections (a)(1), (2), (3) and (4) of this section are
17 available only to a business or separately operated segment of a business
18 which is primarily devoted to producing tangible personal property which that
19 business will sell and which is intended for ultimate sale at retail within or
20 without this state. A contractor providing services to a business entitled to
21 an exemption under this section is not exempt as to any property owned,
22 leased, rented or used by it unless, as a result of the terms of the contract,
23 the use of the property is exempt under section 63-3615(b), Idaho Code.
24 (c) The exemptions allowed in subsections (a)(1), (a)(2), (a)(3) and
25 (a)(4) of this section shall also be available to a business, or separately
26 operated segment of a business, engaged in farming or mining, whether as a
27 subcontractor, contractor, contractee or subcontractee, when such business or
28 segment of a business is primarily devoted to producing tangible personal
29 property which is intended for ultimate sale at retail within or without this
30 state, without regard to the ownership of the product being produced.
31 (d) As used in this section, the term "directly used or consumed in or
32 during" a farming operation means the performance of a function reasonably
33 necessary to the operation of the total farming business, including, the
34 planting, growing, harvesting and initial storage of crops and other agricul-
35 tural products and movement of crops and produce from the place of harvest to
36 the place of initial storage. It includes disinfectants used in the dairy
37 industry to clean cow udders or to clean pipes, vats or other milking equip-
39 (e) The exemptions allowed in this section do not include machinery,
40 equipment, materials and supplies used in a manner that is incidental to the
41 manufacturing, processing, mining, farming or fabricating operations such as
42 maintenance and janitorial equipment and supplies.
43 (f) Without regard to the use of such property, this section does not
45 (1) Hand tools with a unit purchase price not in excess of one hundred
46 dollars ($100). A hand tool is an instrument used or worked by hand.
47 (2) Tangible personal property used in any activities other than the
48 actual manufacturing, processing, mining, farming or fabricating opera-
49 tions such as office equipment and supplies, and equipment and supplies
50 used in selling or distributing activities.
51 (3) Property used in transportation activities.
52 (4) Machinery, equipment, tools or other property used to make repairs.
53 This subsection does not include repair parts that become a component part
54 of tangible property exempt from tax under this section or lubricants,
55 hydraulic oil, or coolants used in the operation of tangible personal
1 property exempt under this section.
2 (5) Machinery, equipment, tools or other property used to manufacture,
3 fabricate, assemble or install tangible personal property which is:
4 (i) Not held for resale in the regular course of business; and
5 (ii) Owned by the manufacturer, processor, miner, farmer or fabrica-
7 provided, however, this subsection does not prevent exemption of machin-
8 ery, equipment, tools or other property exempted from tax under subsection
9 (a)(2) or (a)(3) of this section.
10 (6) Any improvement to real property or fixture thereto or any tangible
11 personal property which becomes or is intended to become a component of
12 any real property or any improvement or fixture thereto.
13 (7) Motor vehicles and aircraft.
14 (8) Tangible personal property used or consumed in processing, producing
15 or fabricating tangible personal property exempted from tax under this
16 chapter in sections 63-3622F, 63-3622G and 63-3622I, Idaho Code.
17 (9) Tangible personal property described in section 63-3622HH, Idaho
19 (g) Any tangible personal property exempt under this section which ceases
20 to qualify for this exemption, and does not qualify for any other exemption or
21 exclusion of the taxes imposed by this chapter, shall be subject to use tax
22 based upon its value at the time it ceases to qualify for exemption. Any tan-
23 gible personal property taxed under this chapter which later qualifies for
24 this exemption shall not entitle the owner of it to any claim for refund.
25 SECTION 4. That Section 63-3622F, Idaho Code, be, and the same is hereby
27 SECTION 5. That Section 63-3616, Idaho Code, be, and the same is hereby
28 amended to read as follows:
29 63-3616. TANGIBLE PERSONAL PROPERTY. (a) The term "tangible personal
30 property" means personal property which may be seen, weighed, measured, felt
31 or touched, or which is in any other manner perceptible to the senses.
32 (b) The term "tangible personal property" includes any computer software
33 which is not a custom computer program.
34 (i) As used in this subsection, the term "computer software" means any
35 computer program, part of a program or any sequence of instructions for
36 automatic data processing equipment or information stored in an electronic
37 medium. Computer software is deemed to be tangible personal property for
38 purposes of this chapter regardless of the method by which the title, pos-
39 session or right to use the software is transferred to the user.
40 (ii) As used in this subsection, the term "custom computer program" means
41 any computer software (as defined in this subsection) which is written or
42 prepared exclusively for a customer and includes those services repre-
43 sented by separately stated charges for the modification of existing
44 prewritten programs when the modifications are written or prepared exclu-
45 sively for a customer. The term does not include a "canned" or prewritten
46 program which is held or existing for general or repeated sale, lease or
47 license, even if the program was initially developed on a custom basis or
48 for in-house use. Modification to an existing prewritten program to meet
49 the customer's needs is custom computer programming only to the extent of
50 the modification, and only to the extent that the actual amount charged
51 for the modification is separately stated on invoices, statements, and
52 other billing documents supplied to the purchaser.
1 (c) The term "tangible personal property" does not include advertising
2 space when sold to an advertiser or its agent by the publisher of the news-
3 paper or the magazine in which the advertisement is displayed or circulated.
4 (d) The term "tangible personal property" includes electricity, natural
5 gas and water when delivered to consumers at the place of consumption by means
6 of pipes, wires, mains or similar systems.
7 SECTION 6. That Chapter 36, Title 63, Idaho Code, be, and the same is
8 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
9 ignated as Section 63-3638B, Idaho Code, and to read as follows:
10 63-3638B. SALES AND USE TAX ON UTILITIES TO BE PAID TO SCHOOL DISTRICT
11 BUILDING ACCOUNT. Notwithstanding the provisions of section 63-3638, Idaho
12 Code, the sales and use tax, net of refunds and in compliance with section
13 63-3709, Idaho Code, collected on the retail sale of natural gas, electricity
14 and water by a public utility regulated under title 61, Idaho Code, shall be
15 credited directly to the school district building account and shall not become
16 a part of the sales tax account.
17 SECTION 7. SEVERABILITY. The provisions of this act are hereby declared
18 to be severable and if any provision of this act or the application of such
19 provision to any person or circumstance is declared invalid for any reason,
20 such declaration shall not affect the validity of the remaining portions of
21 this act.
STATEMENT OF PURPOSE
This bill enacts the "Public School Plant Facilities and Property Tax
Relief Act of 2006". The bill repeals the Idaho Sales Tax exemptions
applicable to Utility Sales which will result in approximately $67.1 million
increased revenue to the State at the 5% tax rate.
The funds are dedicated to public school plant facilities, with the
funds to be applied in the following order:
(1) first available revenues each year are allocated to public schools
as matching funds for amortizing bonded indebtedness on all bonds issued on
and after September 15, 2002; and
(2) next available revenues each year to provide matching funds for
school facility maintenance to a maximum of three quarters of one percent
(3) any excess to be utilized by the Permanent Building Fund as may be
provided by law.
The bill will result in an increase in revenue to the State of Idaho of
approximately $67.1 million per year commencing July 1, 2006, at the rate of
5% sales tax rate.
Implementation will be accomplished with in-house staff and in-house
printing service, thus requiring an appropriation of less than $10,000.
Name: Nicole LeFavour
STATEMENT OF PURPOSE/FISCAL NOTE H 494