Yesterday the House passed the Houses finance committee’s tax bill (ESHB 2038) with one amendment, which concerned section 401. (My previous posts on this bill are here and here.)

As it passed the House finance committee, section 401 of the bill eliminated the sales tax exemption for goods (other than motor vehicles, boats and trailer to be licensed in other states) sold for consumption out of state to residents of those other states or Canadian provinces that have sales tax rates less than 3 percent. (Whew!)

The amendment rewrote section 401. As amended, the bill requires retailers to collect sales taxes on purchases by nonresidents in all cases where tax is collected on purchases by residents. If the purchase is for consumption out of state, and the nonresident hails from a state or province where the sales tax rate is less than 3 percent, he or she would be able to apply for a sales tax rebate from the department of revenue.

A person would be allowed to make only one sales tax rebate request per year, although that request could encompass multiple purchases. A rebate request for purchases made in a specific calendar year would be required to be submitted during the following year (e.g. requests for rebates of sales tax paid in 2013 could only be submitted in 2014). Thus it might take more than a year from the date of purchase for the buyer to receive the sales tax rebate from DOR. Because of this delay, car dealers will find the rebate system much less attractive than the outright exemption for automobiles contained in the bill passed by the finance committee.

A fiscal note on the amended bill has yet to be released. However, it is likely that relatively few out-of-state residents will go through the hassle of applying for the rebate. During the debate, one member of the House described the rebate system as “functionally disallowing” the nonresident exemption.

The budget passed by the House assumes that HB 2038 would provide $1,068 million in additional revenue for the 2013-15 biennium. As the bill passed the House, the gain is less than $900 million. With this reduction, the projected ending balance for the House budget is less than $165 million. And reaching this ending balance assumes that $575 million will be transferred to the general fund from the budget stabilization account. Such a transfer would require the approval of 60 percent of the members of both the Senate and the House.  Reaching this threshold will be extremely unlikely with the members the Senate and tough with the members of the House.