QUESTION 8: SALES TAX

Thursday, Oct. 14, 2004 | 1:22 a.m.

The Nevada Legislature wants voters to follow its lead in granting tax exemptions on such things as the sale of cars, fine art for public display and parts for professional racing cars.

Question 8 would extend the sales tax break of 4.5 percent to 5.5 percent that the Legislature has already given in those cases to the full amount of the sales tax.

The need for the question lies in how the state sales tax is made up. The tax started with a base of 2 percent that goes to the state, approved by voters in the mid-1950s. That amount can be changed only by voters.

Another 2.25 percent is levied for public schools and 2.25 percent is for cities and counties. Local governments can impose another 1 percent, adding up to the 6.5 percent to 7.5 percent sales tax paid in Nevada's counties.

The Legislature over the years has created exemptions for the trade-in value of used cars in a car deal; fine art for public display; parts for professional race cars; farm machinery; and eyeglasses and other eyesight devices. Those items are not subject to the 4.5 percent to 5.5 percent portion of the sales tax that goes to local governments and school districts.

Question 8 asks voters to exempt those items from the 2 percent sales tax that goes to the state as well.

The question is designed to make all of the exemptions consistent, according to Rick Combs of the Legislative Counsel Bureau.

If the initiative fails, the full sales taxes -- 6.5 percent to 7.5 percent -- would be imposed on all of the previously exempted items with one exception, Combs said.

The question would have the opposite effect on private used-car sales, called "occasional sales," from parties who are not in the business of selling cars.

Passage of Question 8 would take away a partial exemption such sales now have. Defeat of the question would provide a full exemption to such sales, Combs said. Sales of used cars between family members, which are now exempt from the sales tax, would not be affected either way, he said.

The question also would change the way aircraft and their parts are taxed. Currently engine parts and tools used to repair aircraft are taxed at 2 percent, and the full aircraft and major parts are fully exempt, Combs said.

If the question is approved, repair parts would become fully exempt. If it fails, the exemption would be lost for aircraft engine parts and tools, he said.

If Question 8 passes, the state Taxation Department estimates Nevada coffers would lose $8.5 million a year in taxes, according to the secretary of state's office. The state is expected to collect more than $700 million from its share of the sales tax this fiscal year.

If Question 8 fails, local governments and school districts would collect an estimated $22.1 million more a year.