HOUSE BILL REPORT
SHB 2708
As Passed Legislature
Title: An act relating to the impact of taxes on warehouse and distribution activity.
Brief Description: Requiring a warehouse tax study.
Sponsors: House Committee of Finance (originally sponsored by Representatives Sheldon, Schoesler, Hatfield, Van Luven, B. Thomas, Silver, D. Schmidt, Cairnes, Cooke and Johnson).
Brief History:
Committee Activity:
Finance: 1/31/96, 2/1/96 [DPS].
Floor Activity:
Passed House: 2/6/96, 96-0.
Senate Amended.
House Concurred.
Passed Legislature.
HOUSE COMMITTEE ON FINANCE
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 12 members: Representatives B. Thomas, Chairman; Carrell, Vice Chairman; Boldt, Vice Chairman; Morris, Ranking Minority Member; Dickerson, Assistant Ranking Minority Member; Hymes; Mason; Mulliken; Pennington; Schoesler; Sheldon and Van Luven.
Staff: Rick Peterson (786-7150).
Background: The sales tax is imposed on retail sales of most items of tangible personal property and some services. The state tax rate is 6.5 percent and is applied to the selling price of the article or service. In addition, local sales taxes apply. The total rate is between 7 percent and 8.2 percent, depending on the location.
Sales tax applies when items are purchased at retail in the state. Sales tax is paid by the purchaser and collected by the seller. Use tax is imposed on the use of an item in this state, when the acquisition of the item has not been subject to sales tax. Use tax applies to items purchased from sellers who do not collect sales tax, items acquired from out of state, and items produced by the person using the item. Use tax is equal to the sales tax rate multiplied by the value of the property used.
Generally, businesses pay sales and use tax on machinery, equipment, and construction of industrial facilities. However, sales and use tax exemptions are available for certain investments.
Buildings, machinery and equipment, and installation labor are exempt on manufacturing, research and development, and computer-related businesses in distressed areas. An exemption is available for new or expanded facilities and machinery and equipment for research and development and pilot-scale manufacturing businesses involved in biotechnology, advanced computing, electronic device technology, advanced materials, and environmental technology. The manufacturing sales and use tax exemption is available state-wide for new and replacement machinery and equipment used directly in a manufacturing operation, including installation labor and services.
These exemptions do not include buildings and machinery and equipment used in a warehouse facility.
Washington's major business tax is the business and occupation (B&O) tax. The B&O tax is imposed on the gross receipts of business activities conducted within the state, without any deduction for the costs of doing business. The B&O tax is a multi‑stage tax. The B&O tax generally applies at the wholesale and retail levels. There are several different B&O tax rates, the principal rates are
Manufacturing, wholesaling, & extracting - 0.506 percent
Retailing - 0.471 percent
Services:
- Business Services - 2.0 percent
- Financial Services - 1.6 percent
- Other activities - 1.83 percent
Summary of Bill: The Department of Revenue is required to study the impact of warehouse and distribution activity on the Washington economy. As it relates to warehouse and distribution activity, the study shall analyze the current tax structure, evaluate alternative methods of taxation, identify the effects of tax incentives, and evaluate the potential tax changes for warehouse and distribution activity on equity among other industries and on the overall state tax structure.
The department is required to form an advisory study committee with representation from warehouse and distribution interests, local government, and other interest groups. The advisory committee shall include at least two members from the House of Representatives and two members from the Senate.
The Department of Revenue is required to present a final report to the legislative committees that deal with revenue matters by December 31, 1996. The study is contingent upon a contribution of $45,000 towards the study's cost from public and private sources other than the state.
Appropriation: None.
Fiscal Note: Available.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Testimony For: A careful look at the importance of the warehousing and distribution industry to the state's economy is needed. Recently, a large retail chain located its distribution facility in Oregon rather than Washington. All factors favored the Washington site except the sales tax on investment. With this study we have an opportunity to create jobs in Washington.
Testimony Against: None.
Testified: (in favor) Representative Tim Sheldon, prime sponsor; Scott Taylor, WPPA; Gary Alexander, Port of Olympia; Donald P. Lorentz, Port of Seattle; Russ Segner, Kidder Mathews and Segner; Dennis Matson, Washington Association of Economic Development Council; Enid Layes, Washington State Horticultural Association; Jeff Cox, Washington Retail Association; Mike Lawrence, Harbor Wholesale Grocery; and (with concerns) Maureen Morris, Association of Cities.