Bill would exempt gear for certain out-of-state projects from sales taxes

A new bill introduced this week would eliminate sales tax on construction equipment that’s temporarily parked in Wisconsin before being sent out of state for certain types of projects.

The proposal would prevent contractors that plan to work outside Wisconsin on specific sorts of project from having to pay sales taxes on equipment that’s temporarily stored in state. To qualify for the exemption, property could be stored in Wisconsin for no more than 120 days and would have to be for use in out-of-state projects related to public schools, nonprofit groups or business districts that are receiving public support.

The bill is meant to help Wisconsin contractors compete across state lines. Wisconsin companies now have to pay a 5% sales tax on gear that’s stored in state for eventual use in out-of-state projects.

Such additional costs tend to drive up bid prices, said John Jacobson, government and member-relations director for the Wisconsin Association of Property Taxpayers, a group that supports the bill.

Many nearby states already provide tax exemptions for temporarily stored equipment. Jacobsen said it’s “crucial” that Wisconsin have a similar policy to ensure in-state companies can continue competing with their out-of-state rivals.

“WPT is supporting this bill because, simply put, it’s the practical thing to do, and several of our business members could benefit from such a law,” he said.

The bill authors, Sen. Howard Marklein, R-Spring Green, and Rep. Travis Tranel, R-Cuba City, did not return messages seeking comment by press time Friday. Their proposal was introduced in the

State Senate in mid-August and assigned to the Committee on Agriculture, Revenue and Financial Institutions.

According to a fiscal estimate published on Thursday, the Wisconsin Department of Revenue estimates the bill would reduce tax collections by “no more than” $15.3 million. WisDOT, though, cautions that the actual savings are likely to be smaller. Contractors know these sorts of sales taxes are collected according to where equipment is delivered and, for that reason, will often have gear sent directly to out-of-state job sites.

This is not the first time Wisconsin lawmakers have taken up personal property this year. Sen. Duey Stroebel, R-Cedarburg, began circulating a bill this spring to eliminate personal-property taxes on office equipment and other gear.

Very little personal property – which is often defined as property that can be easily moved – is still subject to a direct tax. Previous laws, passed over the course of decades, have done away with about 94 percent of the state’s personal -property taxes.

The biggest obstacle to the full repeal of personal-property taxes is usually the worry that local governments won’t have a way to replace the money they would lose. The latest bill proposes to mitigate such concerns by setting aside $320 million a year as compensation for any forgone revenue. But the bill hasn’t moved beyond the committee level since being introduced in June. Follow @natebeck9