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Basic Business Taxes

Sales and use tax:
Sales and use tax is collected at a rate of 6 percent for most items purchased or consumed in the state. Idaho's Production Exemption exempts equipment used in manufacturing, processing, mining, farming, fabricating operations, and clean rooms (used to make semiconductors and semiconductor manufacturing equipment) from the sales and use tax. Most services are exempt from the sales and use tax. With the exception of a few resort communities, Idaho cities have no local option sales tax.

Property tax:
Property tax varies according to the needs of Idaho's local taxing districts with a statewide average urban property tax levy of 1.205 percent of market value. Items exempt from property tax include inventories, livestock, property in transit, pollution control facilities, properly licensed motor vehicles, vessels, aircraft, and the first $50,000 of the value of a primary residence. Taxing districts may not increase their annual budget requests more than 3 percent plus any increase in market value resulting from new construction. The property tax revenue limitation does not include revenue from levies that are voter approved.

New employer unemployment insurance tax:
For 2005, 1.67 percent ($29,200 base)

Idaho Corporate Advantage tax credit:
Large companies that relocate headquarters or make a major administrative expansion in Idaho will benefit from this package. Qualifying companies receive a 6 percent tax credit with no limitation, and an enhanced new jobs tax credit starting at $1,000 and climbing to $3,000 per position. A 10 percent real property improvement tax credit of up to $500,000 in any one year is also available, along with temporary tax abatement for new headquarters and administrative buildings of up to $2 million per year. Companies also receive temporary sales tax abatement for materials used in the construction of new buildings.

Idaho Business Advantage tax credit:
Smaller businesses that don't qualify for the Idaho Corporate Advantage but meet reduced requirements for new investment in headquarters or administrative buildings can receive a 3.75 percent investment tax credit with a credit limitation of 62.5 percent, and a new jobs tax credit starting at $1,000 and climbing to $3,000 per job. A 2.5 percent real property improvement tax credit of up to $125,000 in any one year is also available, along with a temporary 25 percent sales tax abatement for materials used in the construction of new buildings.

Investment tax credit:
A provision adopted by the Idaho legislature allows a 3 percent credit for new investments made in the state, not to exceed 50 percent of the tax liability for the year. The credit may be carried forward up to 14 years. In lieu of this income tax credit, a two-year exemption from property tax on the qualified personal property is available. The exemption is available only if a loss was incurred in the second preceding tax year in which the property is placed in service. The loss must have been computed without regard to any carry over or carry back of net operating losses.

5 percent research and development credit:
• • 5 percent of basic research costs;
• • 5 percent of excess qualified research costs;
• • defined by IRS, Section 41;
• • research must be performed in Idaho;
• • credit is transferable.

100 percent research and development tax exemptions:
Businesses can claim a 100 percent sales and use tax exemption for any property used in research and development activities.

Broadband telecomm credit:
• • 3 percent transferable state income tax credit;
• • qualified investments in broadband equipment throughout Idaho;
• • up to $750,000.

New jobs credit:
Businesses that produce, assemble, fabricate, manufacture, or process natural resource products will be allowed a $500 credit against Idaho income tax for each additional employee hired starting January 1, 2000. The credit cannot exceed 3.25 percent of the business' net income and, together with other credits, cannot exceed 45 percent of the tax due for the year.

Net operating losses credit:
Net operating losses may be carried back two years, with a limit of $100,000 loss per tax year. If the loss is not absorbed in the two-year carry-back period, it may be carried forward until absorbed, not to exceed 20 years. The taxpayer may choose instead to carry a loss forward only and can carry it forward until absorbed, but not to exceed 20 years.

$800 million property value tax cap:
Companies with property values that exceed $800 million are exempt from paying additional property taxes on the excess value if they make a yearly capital investment of at least $25 million and employ a minimum of 1,500 full-time employees.

Business inventory:
Business inventories are exempt from all taxation within the state.

Goods in transit:
The state's Freeport law provides that goods in transit are exempt from taxation. An additional exemption from the sales and use tax is provided for goods purchased by a carrier and delivered outside the state under a bill of lading for use by the carrier in its business.

Pollution-control equipment:
Pollution-control equipment required by state or federal regulation is exempt from the sales and use tax. Pollution control facilities are exempt from property tax.

Industrial machinery and equipment:
Registered motor vehicles, vessels, and aircraft are exempt from property tax. In addition, the following equipment is exempt from the sales and use tax:
• • personal property used by broadcasters in producing or broadcasting television or radio programs;
• • motor vehicles and trailers delivered in-state for use out of state;
• • aircraft primarily engaged in the transport of passengers or freight for hire;
• • equipment used directly in manufacturing, processing, mining, fabricating, or logging operations;
• • clean rooms used in semiconductor and semiconductor equipment manufacturing.
  
  

Industrial fuels and raw materials:
The following materials are exempt from the sales and use tax:
• • personal property directly used or consumed in manufacturing, processing, mining, or producing fabricated property;
• • certain containers for packing;
• • delivered utilities including water, electricity, and natural gas;
• • heating fuel;
• • property used in the production of certain advertising newspapers.

Property tax exemptions:
Fully exempt: inventories, livestock, stored property in transit, pollution control equipment, household belongings, clothing, licensed vehicles and RVs, and property of religious, fraternal, or education groups.

Partially exempt: improvements on residential property, farms.