Once again, the Idaho Legislature is considering adding a tax to real estate transactions in the state. The bill, sponsored by Democrat Shirley Ringo of Moscow and supported by Thomas Trail a Republican from the same city will add a tax to many services, including the sales commission paid to Realtors.
The bill recommends that a sales tax be levied on services, excepting medical or health care as follows: "In determining what is a service, the intended use, principal objective or ultimate objective of the contracting parties shall not be controlling. The term 'services' also includes the constructing, repairing, decorating or improving of new or existing buildings or other structures under, upon or above real property, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, and shall also include the clearing of land and the moving of earth." So for builders at least, this means paying a sales tax for the lot preparation needed to start building and on everything that goes into the building process.
These new taxes are touted as a way to reduce the overall sales tax rate in Idaho to 5 percent. By lowering the tax on normal retail purchases the sponsor hopes to raise additional revenue, almost $400,000,000, by taxing non-traditional services. As with any tax, this will be passed along to consumers.
Imagine listing your property at a higher rate because the real estate broker has increased their cost of doing business by 5 percent. You may have to ask for a higher price to cover this new fee which will either price you above the market or cause you to net less at closing. Since it will affect all properties alike, it stands to reason that buyers will ultimately bear the increase.
This isn't the first time we have seen such attempts by state legislators to seek filling the coffers with taxes on services. Historically though, the legislation has been defeated due in no small part to the Realtor members of our state. Our Realtor Action Committee collects voluntary contributions from our members just for occasions like this.
On a local level, a mere $30 is requested from each Realtor member as a part of their annual dues. Those funds are then used to fight issues that infringe upon private property rights, including the right to freely exchange real property. Other services are also covered under this bill but the brunt of the language seems to address real estate. Our Idaho Association of Realtors has made the following observations about this tax as it affects our industry:
• Closing costs would increase to an average of $2,257.
• The Attorney General has issued an opinion that the proposal may require the tax to be charged on the selling price of a newly constructed home ($150,00 + 5 percent = $157,500).
• The real estate economy is slowly improving.
• The Idaho Legislature can help by providing incentives for job creation and avoiding pitfalls of a sales tax on services.
Our Idaho Association of Realtors has already sprung into action to protest this bill. Last year's contributions to our PAC were less than normal, reflecting a more difficult real estate market. Those funds are needed to fight this battle and other threats to our industry and your free trade rights to your property.
Be sure to ask your Realtor if they have contributed to RPAC. If they haven't, ask them why.
Trust an expert... call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.
Kim Cooper is a real estate broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling (208) 667-0664.