A state legislative panel gave a favorable recommendation Thursday to a bill that would extend a sales-tax exemption to construction materials bought for UW System and technical college projects.
Members of the state Assembly’s Committee on Ways and Means unanimously threw their support behind Assembly Bill 174, which would prevent contractors from having to pay sales and use taxes on materials used for projects commissioned by technical colleges and University of Wisconsin campuses and extension offices. With that endorsement, the proposal will next go before the full state Legislature, which has yet to schedule a vote on the bill.
Supporters of AB 174 say it is needed to prevent ostensibly tax-exempt entities from having to bear tax expenses. Citing similar arguments, lawmakers last year passed legislation providing a sales-tax exemption to materials bought for projects commissioned by local governments, school districts, nonprofit organizations, city and county hospitals and local sewerage districts and water authorities.
When pushing last year for that law, construction groups had 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 a sales-tax exemption is that it makes such arrangements unnecessary.
Yet, as was with the case with previous attempts at adopting similar proposals, AB 174 has a high hurdle to overcome. The biggest concern is about the 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 lawmakers, that price tag could prove difficult to accommodate in a state budget that already promises to be tight.