Sales Tax Accidentally Raised by Legislators, Governor During Special Session

(Phillip Moyer) – In the waning hours of the special session this past February, legislators hurriedly introduced and passed Senate Bill 5, a bill intended, among other things, to remove the sunset on part of a half-percent sales tax passed in 2003.

But in their haste, nobody noticed that the bill did more than just remove the sunset. Because of the way legislators worded the bill, they unintentionally raised the sales tax by another three-eighths of a percent.

Before its alteration, the statute stated that a one-half percent sales tax would last until either 2028 or the year the tax’s proceeds reach $1.7 billion, and that there would then be a three-eighths percent sales tax “during each subsequent fiscal year.”

However, when removing the language that described the tax’s sunset date, legislators forgot to also remove the language defining the amount of the tax after the sunset. Because removing the sunset language also removed the dates that originally applied to the three-eighths percent sales tax, the bill increased sales tax by that amount upon its approval by Governor Jim Gibbons on March 11.

The bill made it through both the Senate and the Assembly, and was signed by Gibbons, without anyone pointing out the error.

Fortunately, the accidental tax hike won’t go into effect. According to Legislative Counsel Bureau Director Lorne Malkiewich, the language of the clause’s title makes it clear that legislators didn’t intend to raise taxes, so the law will simply be interpreted as a removal of the sunset.

“I think this is one of those things that came pushing the bill through very quickly at the end of the special session — they knew what they intended, and maybe [the language] didn’t quite reflect that,” he said, later adding, “You would not have had an almost-unanimous vote to increase taxes three eighths of a percent on sales tax.”

Malkiewich says the most likely course of action is to create a clean-up bill that would change the language to reflect the legislator’s intent. In the meantime, a supplement will be added to the statute clarifying that no tax increase was intended.

The bill was introduced to the Senate at 11:08 pm on the final day of the special session, February 28, after being added to the agenda by the governor earlier that day.

It passed unanimously in the Senate within an hour and a half. Five members of the Assembly voted against the bill when the Assembly passed it within an hour of receiving it from the Senate. The session ended in the early hours of the morning on March 1

The offending portion is section 6-b.