Relating to the taxation of state and federal financial assistance programs addressing the impacts of COVID-19 and future state or national emergencies - 21-23 budget proposal
Prepared by the Department of Revenue
Summary of proposed legislation
This proposal would provide an exemption from state business and occupation (B&O) tax, state public utility tax (PUT), and retail sales tax for “qualifying grants,” which are government funded financial assistance given to address the impacts of conditions giving rise to a national emergency or state of emergency, including COVID-19. Qualifying grants may be amounts received or relief from debt, and must be received directly from a government entity or through a non-governmental third-party authorized to distribute program funds.
This proposal also updates the definition of “retail sale” to clarify that purchases of tangible personal property or certain services by the recipient of qualifying grants are subject to sales tax.
Government grants are generally considered gross income of the business, and are subject to B&O tax or PUT, unless a specific exemption or deduction applies. Grants provided in exchange for retail goods or services may also be subject to retail sales tax. Some COVID-19 related grants may be subject to B&O tax or PUT under current law depending on whether the grantee is obligated to provide something of value in exchange for the grant.
State government impact: The revenue impact of this proposal is indeterminate because the amount of loan forgiveness under the federal programs for COVID-19 is unknown.