SENATE BILL REPORT

SHB 1751

As of March 24, 2009

Title: An act relating to the time period during which sales and use tax for public facilities in rural counties may be collected.

Brief Description: Concerning the time period during which sales and use tax for public facilities in rural counties may be collected.

Sponsors: House Committee on Finance (originally sponsored by Representatives Kessler, Van De Wege, Takko, Kenney, Finn, Haigh and Blake).

Brief History: Passed House: 3/10/09, 94-2.

Committee Activity: Agriculture & Rural Economic Development: 3/17/09 [DPA].

Ways & Means: 3/23/09.

Majority Report: Do pass as amended.

Signed by Senators Hatfield, Chair; Ranker, Vice Chair; Schoesler, Ranking Minority Member; Becker, Haugen, Morton and Shin.

Staff: Bob Lee (786-7404)

Staff: Dean Carlson (786-7305)

Background: Sales tax is imposed on retail sales of most items of tangible personal property and some services, including construction and repair services. Sales and use taxes are imposed by the state, counties, and cities. Sales and use tax rates vary between 7 and 8.9 percent, depending on location.

Rural counties may impose a local options sales and use tax of up to 0.09 percent. The tax is deducted from the state's 6.5 percent sales tax and, thus, the consumer does not see an increase in the amount of the tax paid. Revenues from this local option tax may only be used to finance public facilities serving economic development purposes and finance personnel in economic development offices. Public facilities are those listed as an item in an officially adopted county's overall economic development plan, the economic development section of the comprehensive plan, or listed in the capital facilities plan.

"Rural counties" are defined, for purposes of the tax credit, as counties with a population density of less than 100 persons per square mile, or smaller than 225 square miles.

This crediting mechanism for economic development of rural counties was first enacted in 1997. The maximum tax/credit rate at that time was 0.04 percent, could commence on July 1, 1998, and last for a period of 25 years after the date it was first imposed.

Summary of Bill (Recommended Amendments): Rural counties that collect the tax at the rate of 0.09 percent rate may do so for 25 years after the date the county first imposed the tax at the 0.09 percent tax rate. Counties that are not yet at the 0.09 percent rate but adopt the 0.09 percent rate by August 1, 2009, may collect at that rate for 25 years from the date the 0.09 percent rate is first imposed. Counties that haven't adopted the 0.09 percent rate by August 1, 2009, continue under existing law and may continue to collect the revenue until 25 years after the initial lower rate was first imposed.

EFFECT OF CHANGES MADE BY AGRICULTURE & RURAL ECONOMIC DEVELOPMENT COMMITTEE (Recommended Amendments): Clarifications are made that the tax credit mechanism expires 25 years after the date that the 0.09 percent tax was first imposed by that county.

Appropriation: None.

Fiscal Note: Available.

Committee/Commission/Task Force Created: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony on Substitute House Bill (Agriculture & Rural Economic Development): PRO: The bill will allow the funds to be used for local economic development projects for which bonding is needed. Local economic development projects are even more important as the unemployment rates increase, such as in Gray Harbor County that has a 13.4 percent unemployment rate.

Persons Testifying (Agriculture & Rural Economic Development): PRO: Representative Kessler, prime sponsor.

Staff Summary of Public Testimony (Ways & Means): None.

Persons Testifying (Ways & Means): No one.