Nevada Legislature: Lawmakers debate bill restricting tax-free purchases of construction materials by local governments

Bill wouldn’t allow tax-free construction purchases by local governements

Assembly Minority Leader Marilyn Kirkpatrick, D-North Las Vegas, told the Ways and Means Committee Tuesday local governments are cheating the state out of sales tax by buying materials for construction projects and providing them to the contractors.

That avoids paying sales taxes on those materials.

She urged passage of Assembly Bill 332 which would close that door and make contractors buy their own materials for public projects.

But lobbyist Mary Walker, representing Carson City and other small counties, said the bill would effectively increase the cost of public building projects by making local government pay sales taxes.

Darren Schulz, head of Carson’s Public Works Department, said buying the cement block for the new gymnasium instead of having the contractor do so made the project possible within the available budget. He said not only does that save the 7-8 percent in sales taxes on the cost of those materials but the “mark-ups” by the contractor.

Those mark-ups not only include the charge for getting the materials but a profit margin contractors typically build in, making the total difference as much as 20 percent of costs.

He said Carson City saved some $150,000 by purchasing the materials for the contractor.

“The value to our citizens is we don’t have to tax them,” he said.

He said there also are specialty products such as large butterfly valves purchased for a waterline project that should be allowed by local government.

Assemblywoman Maggie Carlton, D-Las Vegas, joined Kirkpatrick arguing local governments are getting services form the state but trying to avoid their share of taxes that support those services including school funding, public safety and road construction.“If you’re not going to contribute, you’re not going to get the benefit,” she said.

There also were concerns raised by officials from rural hospitals who said hospitals have to buy specialized equipment that makes much more sense for them, not the contractor, to purchase. The Truckee Meadows Water Authority cited its need to purchase specialty pumps, valves and other equipment. But they were told by lobbyist Skip Daly those types of specialty purchases would be allowed without being taxed under an amendment to AB332.

The committee took no action on the measure.