House of Representatives                     P.O. Box 40600

Office of Program Research            Olympia WA 98504-0600

Finance Committee                        Phone 360-786-7100

1

HB 2335

Bill Analysis

January 14, 1998

Brief Description: Consolidating business and occupation tax rates into fewer categories.

Bill Sponsors: B. Thomas, Mulliken and Thompson, Morris, Gardner, Linville, Backlund, Cooke, Carrell, Kastama, Schoesler, Van Luven, Dunn and Lambert; by request of Department of Revenue

Staff: Rick Peterson (786-7150)

Background: 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. There are many different tax rates. 

In 1997 the Legislature eliminated the distinction between financial services, selected business services, and other services and consolidated these activities into a single tax rate.  These changes will take place July 1, 1998.  After July 1, 1998, the business and occupation tax will have 10 different rate as follows:

0.011%Wholesaling wheat, oats, corn, barley;

0.138%Manufacturing wheat into flour, soybean oil, seafood manufacturing, slaughter, breaking and processing meat‑wholesale;

0.275%Dry pea splitting, nuclear fuel sales, nuclear fuel manufacturing, travel agent commissions, international investment management;

0.330%    Manufacturing fresh fruits and vegetables;

0.363%    International charter freight brokers, stevedoring;

0.471%    Retailing;

0.484%Extracting, extracting for hire, manufacturing, retailing interstate transportation products, nonprofit research and development, wholesaling, internal distribution, newspaper printing, road and street improvements for government, storage warehouses, independent general insurance agents, radio and TV broadcasting, construction for federal government;

0.55%Insurance‑agents/brokers commissions;

1.50%     Nonprofit hospitals, real estate brokers, and services; and

3.30%     Low‑level radioactive waste disposal

Summary of Bill:The number of B&O rates is reduced to six rates by:

CEliminating the 0.011 percent rate for wholesaling wheat, oats, corn, and barley, and exempting these activities from tax;

CConsolidating agricultural activities at the 0.138 percent rate.  Dry pea splitting (formerly 0.275 percent) and manufacturing fresh fruits and vegetables (formerly 0.330 percent) join manufacturing wheat into flour; soybeans into oil, seafood manufacturing, and processing and selling meat at wholesale in this category;

CMoving international charter freight brokers and stevedoring (formerly 0.363 percent) to join travel agent commissions, nuclear fuel sales and manufacturing and international investment management at 0.275 percent;

CMoving insurance agent/broker commissions (formerly 0.55 percent) to 0.484 percent together with manufacturing, wholesaling, extracting and others; and

The resulting six B&O rate categories are:

0.138%Manufacturing wheat into flour, soybean oil, seafood manufacturing, slaughter, breaking and processing  meat‑wholesale, dry pea splitting, manufacturing fresh fruits and vegetables;

0.275%Nuclear fuel sales, nuclear fuel manufacturing, travel agent commissions, international investment management, international charter freight brokers, and stevedoring;

0.471% Retailing;

0.484%Extracting, extracting for hire, manufacturing, retailing interstate transportation products, nonprofit research and development, wholesaling, internal distribution, newspaper printing, road and street improvements for government, storage warehouses, independent general insurance agents, radio and TV broadcasting, construction for federal government, insurance‑agents/brokers commissions;

1.50%Nonprofit hospitals, real estate brokers, and services; and

3.30%  Low‑level radioactive waste disposal.

Appropriations: None

Fiscal Note: Available

Effective Date:  July 1, 1998