FISCAL NOTE

House Bill 340 as passed the House of Representatives allows the purchase of construction materials and supplies by a contractor for the construction of a highway, road, or bridge project on behalf of a tax-exempt government entity to be exempt from state and local sales and use taxes, effective for contracts entered into on or after January 1, 2022.

Based on the estimated materials cost for construction contracts awarded by the Alabama Department of Transportation over the last 10 years, this bill would reduce sales and use tax receipts to the Education Trust Fund by an estimated $11.5 million annually.

This bill would also reduce sales and use tax receipts of local governments for (1) state projects by a similar amount and (2) any project undertaken by a local governmental entity dependent upon: (1) the number of governmental entities that enter into contracts subject to the provisions of this bill; (2) the value of the building materials, construction materials and supplies, and other tangible personal property purchased for these contracts; and (3) the applicable sales/use tax rate of the respective local government.

Pursuant to the provisions of the Education Trust Fund Rolling Reserve Act contained in Section 29-9-3(b)(3), Code of Alabama 1975, this act will reduce the fiscal year appropriation cap for FY 2022 by $8.6 million.