Bill description: HB 86 would apply the sales tax exemption for labor charges to the labor charges for installing accessories on new vehicles.

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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?

Under current law, labor charges are not assessed Idaho’s 6 percent sales tax. A person who gets a haircut, purchases landscaping services for the family home, or buys a car wash does not pay sales tax on those service. But anyone who purchases groceries, a vehicle, or other goods must pay sales tax on the full value.

Not all services are exempt from the sales tax, however. The labor that goes into installing accessories on a new vehicle—such as Line-X bedliners, stereos, or lightbars—is assessed the state sales tax. Since the labor, accessories, and the cost of the vehicle are all wrapped up in one charge, customers end up with the sales tax on all of it. This does not apply to accessories installed on a used vehicle or even a brand-new vehicle if it is driven off the lot to an accessory shop.

HB 86 would exempt the labor charges for installing accessories on new vehicles sold at a dealership, thus applying the sales tax exemption uniformly across all labor charges. In total, this exemption would save Idaho taxpayers as much as $1,000,000 per year, according to the fiscal note.

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