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House Bill 540 — Sales tax rebate for fulfillment centers

House Bill 540 — Sales tax rebate for fulfillment centers

Lindsay Atkinson
February 26, 2020

Bill description: HB 540 would offer a tax rebate to fulfillment centers that construct highway projects (roads).

Rating: -2

Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments? 

HB 540 rebates sales tax money to fulfillment centers — specifically to centers that build roads leading from their development to a highway (termed a highway project in this bill). In essence, through this bill, fulfillment centers can have the government pay them back for taking the initiative to construct a road themselves instead of waiting for a city or highway district to do so.

A fulfillment center is essentially a warehouse and shipment center that e-commerce businesses use to fulfill their orders. Under this bill,  owners or developers of fulfillment centers in Idaho can spend their own money to build a road leading from their development to a highway and get reimbursed for that expense by the government.

To qualify for the money under this legislation, the owner or developer would have to strike an agreement with the Idaho Transportation Board before construction begins. A highway project would qualify only if the owner/developer spends more than $6 million for the “installation of an interchange from an interstate highway or expended on the improvement of a highway.”

Thus, HB 540 provides an indirect tax cut, via a rebate process, to fulfillment centers. 


Does it violate the principle of equal protection under the law? Examples include laws which discriminate or differentiate based on age, gender, or religion or which apply laws, regulations, rules, or penalties differently based on such characteristics. Conversely, does it restore or protect the principle of equal protection under the law? 

HB 540 would provide for a direct redistribution of wealth. The rebate offered to fulfillment centers through this bill would not be a traditional rebate. It would not mean partially refunding the center’s own tax dollars back to them. Instead, it would take some of the sales and use tax paid to the Idaho government by nearby retailers and give it to fulfillment centers. 

After a fulfillment center constructs a highway project, the center could receive 60% of the sales tax revenue that the state collects from new, nearby retailers. It could also receive some of the sales tax revenue from nearby retailers that existed before the highway project was constructed. That is, it could take up to 60% of any increase in sales tax compared to an existing retailer’s sales tax paid over the prior 12 months.

In essence, this bill assumes that any sales that would be enjoyed by a new retailer (or increased sales for an existing one) would be the result of the highway project constructed by the nearby fulfillment center. Thus, it would give 60% of the sales tax money from these nearby retailers to the fulfillment center.

The bill would cap the total rebate at the actual cost for the highway project or $35 million, whichever is less. 


Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?

HB 540 would use tax money to encourage a specific free market activity. This bill would give a financial inducement to fulfillment centers to construct highway projects that they otherwise might not have built. The bill would also entice fulfillment centers to come to Idaho instead of another state.


Does it in any way restrict public access to information related to government activity or otherwise compromise government transparency or accountability? Conversely, does it increase public access to information related to government activity or increase government transparency or accountability? 

HB 540 presents problematic language relating to whether the rebate amount given to fulfillment centers would be exempt from public records. This bill specifically includes that “All sales and use tax information remitted by retailers shall be deemed a trade secret, shall be confidential, and shall not be disclosed by the state tax commission.” Since the size of the rebate given to a center depends on how much money nearby retailers pay in sales tax, it appears the amount of tax money given to fulfillment centers through this bill would not be disclosed to the public. 


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