Editorial: Legislature thick as thieves exploiting nonprofit groups
The fine print proves state government is not stealing millions of dollars from nonprofit organizations.
Thank goodness for that fine print because, without it, theft would be the only word to describe accurately the state’s collecting sales taxes from cities, schools and other nonprofit groups that should be exempt from paying the tax on construction materials for their projects.
The state collects those sales taxes, but it does so only by exploiting a loophole in the law it created. According to the law, the exemption applies only when the nonprofit organization buys the materials.
That means if a contractor working on one of those projects buys, say, the concrete, the state’s 5 percent sales tax applies. The contractor, naturally, then passes that extra cost to the supposed-to-be-exempt owner.
Some owners are equipped to manage the material purchases. Others are not and either rely on guidance from the contractor or choose to swallow the sales tax.
Either way, the state wins. And it can thoughtlessly cite policy to excuse its greed.
Technically, it is not collecting a sales tax from nonprofit groups. Realistically, however, the state is collecting millions of dollars per year in sales taxes from those projects.
The state Department of Revenue on Monday estimated that closing that loophole would cost the state $6 million per year.
It is astounding how such a large number can distort perspective, turning money the state never should have had into a loss if the state gives it up.
If a business accumulated money it did not have a right to, that would be theft. In this case, the state calls it revenue.
And it seems revenue must be protected, even if its collection violates the spirit of the law.
Lawmakers in 2001, 2005 and 2011 tried to change the law, justifiably pointing out that the original intent simply was to protect all nonprofit groups from paying the sales tax, no matter the means by which the materials for their projects were acquired. The bills would have extended the exemption to the contractors who step in on behalf of the owners.
Now comes state Rep. Andre Jacque, R-De Pere, the latest to try to erase the fine print. He says he likes his chances because the state is in much better financial shape, and lawmakers might be willing to accept the loss.
Each previous bill failed because lawmakers argued, and no doubt will again, that the state could not afford to sacrifice the revenue. Of course, it is easier to pass that sacrifice on to those who, by law, should not be required to make it.