SENATE BILL REPORT

ESHB 1574

BYHouse Committee on Revenue (originally sponsored by Representatives Wang, D. Sommers, Haugen and Nealey)

Authorizing cities and towns to impose an excise tax on brokered natural gas.

House Committe on Revenue

Senate Committee on Ways & Means

Senate Hearing Date(s):March 31, 1989; April 3, 1989

Majority Report:  Do pass as amended.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bailey, Bluechel, Cantu, Hayner, Johnson, Lee, Moore, Niemi, Saling, Smith, Talmadge, Williams, Wojahn.

Senate Staff:William Bafus (786-7715)

                  April 4, 1989

AS REPORTED BY COMMITTEE ON WAYS & MEANS, APRIL 3, 1989

BACKGROUND:

The state and some cities levy a public utility tax on the gross income received by natural gas utilities from the production or distribution of gas in Washington State.  The state public utility tax rate for natural gas utilities is 3.852 percent.  Cities may levy a utility tax at a rate not exceeding 6 percent unless city voters approve a higher rate.

Until recently, federal regulations required users of natural gas to purchase directly from in-state natural gas utilities.  Due to changes in these regulations, large companies may now bypass in- state utilities and obtain natural gas directly from an out-of- state producer or broker.  Purchases of brokered natural gas are not subject to public utility taxation, and are subject to sales or use tax instead.

Manufactured gas is treated the same as natural gas for tax purposes.

SUMMARY:

Brokered natural gas is exempt from both state and local sales and use taxation.  A new state tax is imposed for the privilege of using natural gas in the state, with a rate equal to the state public utility tax on non-brokered natural gas.  Cities are authorized to impose a new tax for the privilege of using natural gas in the city, with a rate equal to the city public utility tax on natural gas.

These new state and city use taxes do not apply to the use of natural gas if the seller of the gas has paid a state or city public utility tax on the gas.  The tax base does not include charges for the transmission of gas that is subject to the new use taxes. 

Credits are allowed against the new use taxes for 1) taxes similar to Washington's state and local public utility taxes that are paid by the seller to another state, and 2) taxes similar to the use taxes imposed by this bill that are paid by the consumer to another state.

The consumer of the gas is responsible for payment of taxes to the Department of Revenue.  The person delivering the gas to the consumer must make a quarterly report to the department containing the volume of gas delivered and the name of the consumer to whom the gas was delivered.

Appropriation:    none

Revenue:    yes

Fiscal Note:      available

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

SUMMARY OF PROPOSED SENATE AMENDMENT:

The emergency clause is removed.  The bill takes effect on July 1, 1990.

Senate Committee - Testified: Representative Sommers (for); Stan Finkelstein, Association of Washington Cities (for); Scott Nelson, Washington Natural Gas (for); Tom Payne, Washington Water Power Company (for)