HOUSE BILL REPORT

HB 2900

BYRepresentatives R. King, Silver, Vekich, Basich, Jones, Haugen, Bowman and Youngsman

Exempting certain commercial fishermen from the business and occupation tax.

House Committe on Fisheries & Wildlife

Majority Report:  Do pass.  (10)

      Signed by Representatives R. King, Chair; S. Wilson, Ranking Republican Member; Basich, Bowman, Brooks, Cole, Haugen, Smith, Spanel and Vekich.

Minority Report:  Do not pass.  (1)

      Signed by Representative Morris, Vice Chair.

House Staff:Pamela Madson (786-7310)

AS REPORTED BY COMMITTEE ON FISHERIES & WILDLIFE

FEBRUARY 2, 1990

BACKGROUND:

Commercial fishers are subject to an enhanced food fish tax and the business and occupation (B&O) tax.

The enhanced food fish tax is assessed on the value of food fish and shellfish at the point of sale between the commercial harvester and the processor.  This tax is also known as the landing tax.  The commercial fisher and the seafood processor each pay one-half the tax due. Typically, when a fisher sells his or her catch to a seafood processor, the processor deducts from the purchase price an amount equal to the fisher's share of tax.  The processor then reports and pays the full amount to the state.  The rates vary depending on the species of food fish or shellfish.

The B&O tax is collected on the gross income of a business.  The tax rate varies with the classification of the business.  Commercial fishers fishing in state territorial waters are subject to the classification of extractor (approximate rate .00484).  Those fishers catching fish outside of Washington waters but selling their catch in Washington are subject to the classification of wholesaler (approximate rate .00484) or retailer (approximate rate .00471).

A business pays no tax for a given quarter (three month period) if it has a gross income of less than $3,000 that quarter.  Even if no tax is due, a business must register with the Department of Revenue.

The Department of Revenue indicates that prior to July 1, 1989, it had not actively enforced the registration requirement or the payment of B&O taxes by commercial fishers.  The discovery was made through the recently implemented Unified Business Identifier Program, that several commercial fishing business were not registered with the department.  The department sent letters notifying commercial fishers, that as of July 1, 1989, they must register with the department and pay the B&O tax, if eligible.  The department met with fishing associations and sent notice to legislators of this change.  Because of a sincere confusion on the part of commercial fishers over whether or not they were subject to payment of B&O taxes, the department is not seeking payment of back taxes or interest that might be due prior to July 1, 1989.

SUMMARY:

Licensed commercial fishers who are subject to collection of a tax on enhanced food fish, more commonly known as a landing tax, are not subject to payment of business and occupation taxes (B&O tax).

Revenue:    The bill has a revenue impact.

Fiscal Note:      Requested January 22, 1990.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Doug Bohlke, Washington Coalition of Ocean Fishermen; Ernie Summers, Washington Dungeness Crab Fishermen's Association; Ray Toste, West Coast Shrimp Fisherman's Marketing Association; Correy Spooner, Coast Dragger's Association; Toimi Maki, Grays Harbor Gillnetter's Association; Bob Lake, Willapa Gillnetter's Association; Steve Gray, Northwest Gillnetters Association; Doug Fricke, Washington State Trollers Association; and Bill Wade, commercial fisherman.

(Testifying for informational purposes only and not in support or opposition to the bill):  Russ Brubaker and Skeets Johnson, Department of Revenue.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    Since 1949, commercial fishers' tax liability under the Enhanced Food Fish Tax has increased to a rate that is now over 5 percent for some species of salmon.  Additionally, these fishers pay license fees that were increased last year and may be increased again this year.

Fishers indicated they were told by the Department of Revenue in the early 70s that they did not have to pay the B&O tax.  If the B&O tax is imposed on commercial fishers, the state may loose revenue because fishers will sell their catch in other states, thereby avoiding payment of the enhanced food fish tax.  By avoiding landing their catch in Washington, the state would lose other revenue from purchases like fuel and food.

Fishers pay a more comprehensive tax through payment of the landing tax (enhanced food fish tax) and license fees.  License fee increases and B&O tax enforcement efforts both happened at the same time, placing a burden on some fishers.

Some commercial fishers who sell their catch directly to the public are registered with the Department of Revenue and pay B&O tax, but do not pay the enhanced food fish tax because there is no sale to a processor.

House Committee - Testimony Against:      None.