Washington State House of Representatives Office of Program Research	BILL ANALYSIS
Technology, Telecommunications & Energy

HB 1239

Brief Description:  Encouraging the development of advanced telecommunications services in rural areas.

Sponsors:  Representatives DeBolt, Reardon, Bush, Crouse, Wood, Schoesler, Casada, Linville, Anderson, Santos, Grant, Hatfield, B. Chandler, Kessler, Keiser, O'Brien, Kagi and Haigh.

Brief Summary of Bill

$Provides sales, use, B&O, and property tax exemptions for telecommunications equipment and facilities that provide advanced telecommunications services in rural areas.

Hearing Date:  2/7/01

Staff:  Bob Longman (786‑7139).

Background:

Sales tax is imposed on retail sales of most items of tangible personal property and some services, including construction and repair services.  Use tax is imposed on the use of an item in Washington when the acquisition of the item has not been subject to sales tax, such as items acquired from out‑of‑state and items produced by the person using the item.  Sales and use taxes are imposed by the state, counties, and cities.  Sales and use tax rates vary between 7 and 8.6 percent, depending on location. 

The state business and occupation tax (B&O) is levied for the privilege of doing business in Washington.  The tax is imposed on the gross receipts from all business activities conducted within the state. 

All real and personal property is subject to property tax each year based on its value, unless a specific exemption is provided by law.  There are two classes of property.  Real property consists of land and the buildings, structures, and improvements that are affixed to the land.  Personal property consists of all other property.

Summary of Bill: 

Sales and use tax exemptions are created for acquisitions by telecommunications companies of

machinery and equipment, and for services in respect to constructing, repairing, and improving telecommunications structures and facilities.  The exemptions apply only if the  structure, machinery, equipment, or facility is used for advanced telecommunications services in rural areas.  Rural areas are defined as areas outside first class cities and areas outside of a corridor three miles on either side of Interstate 5 in Snohomish, King, and Pierce counties.

A B&O tax credit is created, equal to 50 percent of the costs of constructing structures or acquiring equipment that is eligible for sales and use exemptions under this legislation. The credit may not exceed the taxpayers B&O liability and may not be carried forward to future years.

A telecommunications company taking these sales and use exemptions and B&O credits must keep records to verify eligibility and provide the seller with an exemption certificate.

These sales and use exemptions and B&O credits exemptions expire January 1, 2008.

Personal property that is eligible for sales and use tax exemption under this legislation is also exempt from property tax.  This exemption is for taxes collected in years 2002 through 2008.

Effective Date:  Ninety days after adjournment of session in which bill is passed.

Appropriation:  None.

Fiscal Note:  Requested on January 25, 2001.