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Lawmakers look to extend sales-tax exemption to UW, technical college projects

When lawmakers passed a law in 2016 preventing contractors from having to pay sales and use taxes on materials bought for certain tax-exempt entities, they excluded the UW System and technical colleges.

A bill scheduled for a committee hearing starting at 10 a.m. Thursday would make up for that omission. Lawmakers on the state Assembly’s Ways and Means Committee plan to gather in Room 417 North of the state Capitol to hear testimony on Assembly Bill 174, which would extend the state’s current sales-tax exemption for certain construction materials to projects commissioned by technical colleges and University of Wisconsin campuses and extension offices.

As they did with last year’s bill granting the current sales-tax exemption, lawmakers will have to overcome concerns about the new proposal’s likely cost. A memo from the Wisconsin Department of Revenue estimates the state would be out $2.5 million a year in sales tax should Assembly Bill 174 become law; counties and baseball-stadium districts would be out $196,000.

For years, similar forecasts had been the biggest obstacle standing in the way of the adoption of the current exemption, which applies to local governments, school districts, nonprofit organizations, city and county hospitals and local sewerage districts and water authorities. Before their success last year, contractors groups had long argued in vain that such entities – being ostensibly tax-exempt – should not have to pay sales taxes on construction materials; those taxes, they argued, ultimately add to the cost of public projects.

The same groups also noted that many contractors now avoid additional costs of that sort by setting up separate but affiliated entities that exist solely to help tax-exempt entities purchase construction materials directly. One advantage of the exemption adopted last year is that it makes such arrangements unnecessary – except when the project has been commissioned by a technical college or the UW System.

In comments state Rep. Bob Kulp, a Republican from Stratford and the chief sponsor of AB 174, planned to present to Ways and Means Committee on Thursday, he said now is the time to extend the same benefits to technical college and UW projects.

“Living with higher costs is not the option this Legislature would want to take,” Kulp wrote.

As was the case with the current sales-tax exemption, contractors groups have lined up behind AB 174. Among the formally registered supporters of the bill, the Wisconsin Ethics Commission lists the Associated Builder and Contractors of Wisconsin, the Associated General Contractors of Greater Milwaukee and the Wisconsin Society of Architects all as supporters, as well as the Wisconsin Technical College District Boards Association.

Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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