Tax Update for June 2015
Here's the June 2015 issue of Tax Update — our newsletter for the business community. This edition features articles about new tax laws, enhanced security for our Taxpayer Access Point, changes to our email and RSS news service, and sales tax information for contractors.
The 2015 Idaho Legislature passed tax laws affecting fuels tax rates, eyeglasses and contact lenses, digital goods, and more. Below are some of the highlights. For more details about the legislation, see the Legislature's Web page.
Fuels tax rates increase
As of July 1, 2015, the following fuels tax rates will increase:
- Gasoline, diesel, ethanol blends, and biodiesel blends to 32 cents per gallon.
- Propane to 23.2 cents per gallon.
- Compressed natural gas to 32 cents per gallon (gas gallon equivalent).
- Liquefied natural gas to 34.9 cents per gallon (diesel gallon equivalent).
(H.B. 312a, Motor Fuels Rule 110 – Effective July 1, 2015)
Gaseous fuels decal eliminated
Owners of motor vehicles powered by gaseous special fuels can no longer use a gaseous fuels decal permit instead of paying the motor fuels tax. Now, they'll pay the tax using a gas gallon equivalent for compressed natural gas and a diesel gallon equivalent for liquefied natural gas. (H.B. 132 – Effective July 1, 2015)
Idaho law conforms to Internal Revenue Code (IRC)
Idaho law conforms to the IRC as of Jan. 1, 2015. (H.B. 77 – Effective Jan. 1, 2015)
More capital gains deductions allowed
Three new laws allow capital gains deductions:
- A partner can "tack" the holding period of a pass-through entity in the event of a liquidating distribution for capital gains purposes. (H.B. 85 – Effective Jan. 1, 2015)
- Easements, grazing permits, and 1250 property (defined in IRC 1250(c)) are qualifying property for capital gains purposes. (H.B. 109a – Effective Jan. 1, 2010)
- If pass-through entities meet the 50% gross income test relating to farming and ranching, owners qualify for a capital gains deduction on sales of livestock by the entity. (H.B. 133 – Effective July 1, 2015)
Certain vehicles sold to nonresidents are exempt from tax
Sales of utility-type vehicles and specialty off-highway vehicles to nonresidents are exempt from sales tax if the vehicles are used outside Idaho, even if they're delivered in Idaho. (H.B. 12 – Effective July 1, 2015)
Hand tools may now qualify for production exemption
Hand tools costing $100 or less are no longer excluded from the production exemption from sales tax. (H.B. 39 – Effective July 1, 2015)
Prescription eyeglasses, contact lenses exempt from tax
Purchases of prescription eyeglasses and eyeglass component parts are exempt from sales tax as of July 1, 2015. Purchases of prescription contact lenses are exempt from sales tax as of July 1, 2016. (H.B. 75)
Use tax exemption for food retailers
A retailer that sells prepared food or beverages, such as a restaurant, doesn't have to pay use tax on prepared food or beverages supplied free of charge to its employees. (H.B. 237 – Effective April 2, 2015)
Subscriptions to digital goods not subject to tax
Buyers of digital music, books, videos, or games must have a "permanent right to use" to be subject to sales and use tax, regardless of the method of delivery. If using a digital good is conditioned on continued payment, like a subscription service, it's not a permanent right to use and isn't subject to the sales tax. Also, broadcast television services through cable, satellite, and traditional methods aren't subject to sales and use tax. (H.B. 209 – Effective April 1, 2015)
The Tax Commission has implemented a second layer of security to protect the identity and account information of taxpayers who use TAP, our online system for filing and paying taxes.
When you log into TAP with your username and password, you'll also be required to enter a code to complete your login. This is called 2-factor authentication. You can choose to receive the code by text message, email, or both.
If you typically use a computer that isn't shared with others, you can select "Trust this browser," and a cookie will be stored on your computer so you can log in without receiving the 2-factor authentication prompt. The cookie is tied only to that browser and computer.
For more information about TAP, see our Using Taxpayer Access Point Web page.
We've changed our news notification service to provide a method that's easier for you to manage.
The new and improved service is more streamlined. Instead of choosing from 25 topics, you can select from two—a General Tax News newsletter or a Tax Professionals newsletter—or choose both. You'll receive the newsletters by email.
- General Tax News will notify you about office hour changes, tax deadlines, news releases, e-file news, updated publications, and other general-interest tax information.
- Tax Professionals will provide information about forms and specifications changes, publication of tax decisions, rules meetings, and other news tidbits for tax preparers and others who regularly deal with tax issues.
Visit our Keep Me Updated page to sign up now. If you received news under our old service, you'll need to sign up for the new service.
If you're a contractor improving real property, remember: You shouldn't charge sales tax to your customers for materials used to improve the real property. You should pay tax to your vendor or pay a use tax to Idaho on all purchases of materials used in these projects. Your contract bid should be high enough to cover any sales or use tax you paid without itemizing these taxes on the bid or the billing for the work done.
If you charge sales tax on the bill, the customer can refuse to pay it or request a refund for it later. If you charge tax in error and your customer pays it, you must report and pay the sales tax collected to the state. You're still required to pay tax on the materials installed into the real property project.
For more information, visit our Contractors Working in Idaho Web page.