FINAL BILL REPORT

                  HB 2789

                         C 111 L 96

                     Synopsis as Enacted

Brief Description:  Simplifying tax reporting and registration requirements for small businesses.

Sponsors:  Representatives Van Luven, Sheldon, Schoesler, Morris, Silver, Ogden, Thompson, Blanton, Patterson, Tokuda, Romero, Conway, Cole and Poulsen; by request of Governor Lowry.

House Committee on Trade & Economic Development

Senate Committee on Ways & Means

Background:  The Department of Revenue (DOR) is responsible for the administration of the state's tax system.  The state imposes a business and occupation (B&O) tax, a retail sales tax, a use tax, and a public utility tax.  Local governments are authorized to impose local retail sales and use taxes.

Any person who engages in a business or performs an act that is taxable must have a registration certificate issued by the DOR.  Registration is not required for a person whose income from all business activities is less than $12,000 per year.  There are no similar provisions for a person or business subject to the public utility tax.

Businesses with gross incomes that exceed $12,000 per year, public utilities with gross incomes that exceed $6,000 per year, or businesses that collect sales tax are required to file an annual tax return with the DOR.

Summary:  The Department of Revenue's certificate of registration process and annual tax filing requirements for small businesses are revised.

A person or business, subject to the public utility tax, with a gross income from the business of less than $12,000 per year, is exempt from obtaining a certificate of registration.  Only gross income generated from business activities subject to business and occupation taxation (B&O) is considered income.

The threshold for a person or business filing an annual tax return with the department is raised from $12,000 per year to $24,000 per year.  This applies to businesses subject to the B&O tax or the public utility tax.  This exemption does not apply to a person or business that is a retailer or is required to collect state or local sales tax.

Votes on Final Passage:

House     92 0

Senate    48 0

Effective:  July 1, 1996