February 4, 1998
BILL ANALYSIS
TO: Members, Committee on Trade and Economic Development
FROM: Kenny Pittman, Research Analyst (786-7392)
RE: HB 2852 - Exempting new businesses in distressed areas from business and occupation tax.
BACKGROUND:
The state of Washington has developed various incentives that are designed to assist in job creation or retention in economically distressed areas. The incentives available to businesses located in distressed areas include a sales and use tax exemption on equipment purchases and building construction, a tax credit for employee training, and a tax credits for job creation. A distressed area is a geographic area characterized by high unemployment rates, low median household income levels, or substantial job loss in major industries.
Washington=s major business tax is the business and occupation (B&O) tax. The tax is imposed on the gross receipts of business activities conducted within the state, without any deductions for the cost of doing business. Businesses are taxable according to the activities they engage in and therefor may be subject to more than one tax rate. After July 1, 1998, the business and occupation tax will have 10 different rates.
SUMMARY:
A business and occupation (B&O) tax exemption is provided to a new small business that has gross receipts of less than $5 million per year and is located in an economically distressed area. The business is exempt from all B&O tax liability for the first 36 months of operation. The business is not eligible for the B&O tax exemption after 36 months of operation.