Idaho – Recently Amended Sales and Use Tax Rules

SALT Report 2451 – Amendments to the following sales and use tax rules were approved by the Idaho State Legislature during its 2013 session. The rule changes are final and became effective April 4, 2013.

Rule 024 – Rentals or Leases of Tangible Personal Property

A rental of tangible personal property with an operator who is provided by the equipment owner will be treated as a fully operated rental regardless of whether the hired operator is an employee of the equipment owner.

A rental of equipment without operator is considered a bare equipment rental and is a taxable sale. The owner of the equipment is a retailer and must get a seller’s permit and collect and remit sales taxes. The equipment owner must collect sales tax on each rental payment and remit the taxes to the Commission.

If the equipment or property has value to the customer without an operator, then the lease or rental of the equipment or property is a transaction that is subject to sales or use tax and its price must be stated separately from the price of the service provided by the operator.

Rule 037 – Aircraft

This rule is amended to clarify the exemption for aircraft primarily used to transport freight or passengers, and to amend the definitions of common carrier and public.

Sales of aircraft repair parts are exempt from tax when they are installed on an aircraft owned by a nonresident individual or business.

Aircraft that is purchased, rented, or leased for aerial contracting are subject to tax. Sales or use tax also applies to the purchase of repair parts, oil, and other tangible personal property.

Rule 043 – Sales Price

This rule is amended to clarify whether certain fees or charges added to the sale of tangible personal property, such as fuel surcharges or environmental fees, are included in the taxable sales price.

Rule 044 – Trade-Downs and Barter

This rule has been amended to reflect that when a retailer sells merchandise from his resale inventory and lets its customer trade in other goods the taxable sales price of the merchandise is reduced by the amount allowed as trade-in. To qualify for the trade-in allowance, the property traded in must be delivered by the buyer to the seller. The sales documents must identify the tangible personal property being purchased and the trade-in property being delivered to the seller. The delivery of the trade-in and the purchase must be a single transaction.

A trade-down is a transaction in which the vendor accepts a trade-in from the customer that equals or exceeds the value of the merchandise sold to the customer. In this case, the taxable sales price is reduced to zero and no sales tax is due on this transaction.

Rule 072 – Use Tax

This rule is amended to clarify the taxability of tangible personal property removed from inventory held for resale. Generally, the retailer or wholesaler may use inventory in a display or for demonstration for purposes of selling the inventory. If the retailer or wholesaler uses the inventory for any purpose other than display or demonstration, the retailer or wholesaler owes use tax. If inventory is consumed in a display or demonstration, the retailer or wholesaler owes use tax. The use tax must be calculated on the value of the tangible personal property.

Inventory held for resale is subject to use tax once the retailer or wholesaler removes it from inventory. If a retailer or wholesaler removes tangible personal property from inventory and then performs additional manufacturing or processing labor, the retailer or wholesaler should calculate use tax on the acquisition cost before the labor. However, if a retailer or wholesaler removes tangible personal property after the additional manufacturing or processing labor, the retailer or wholesaler must calculate use tax on the total cost, including the labor.

Rule 101 – Vehicles Used in Interstate Commerce

This rule is amended to reflect that a sales and use tax exemption is provided for the sale or lease of motor vehicles and trailers to commercial or private carriers for use in interstate commerce. This exemption is called the IRP Exemption. Commercial or private carriers are in the business of transporting persons or commodities owned by the carrier or another.

The exemption does not apply to parts, supplies, or other tangible personal property purchased by those engaged in interstate commerce. Likewise, farm vehicles and noncommercial vehicles do not meet the requirements of the IRP exemption.

Any vehicle or fleet that qualifies for the IRP exemption will become taxable as of June 30 if the fleet’s out-of-state mileage is less than 10% of the total fleet mileage during the previous four quarters.

Rule 128 – Exemption Certificates
A qualified buyer is a retailer or wholesaler doing business in Idaho who holds a current and valid Idaho seller’s permit number.

In order to be valid, all certificates must be legible and include a date, the purchaser’s name, signature, title, and address. If the purchaser has a federally issued Employer Identification Number (EIN), the purchaser must also include that EIN on the form. If the purchaser does not have an EIN, the form must include the purchaser’s driver’s license number and the state of issue. The purchaser must comply with any additional requirements provided in these rules.

For Further Information

Idaho State Tax Commission – Sales and Use Tax Administrative Rules