Washington State House of Representatives Office of Program Research

BILL ANALYSIS

HB 2260

Brief Description:  Changing the tax treatment of grocery distribution cooperatives.

Sponsors:  Representatives Cairnes (co‑prime sponsor), Morris (co‑prime sponsor), Kessler, Linville, McMorris, Doumit, Anderson, Hatfield, Poulsen, Crouse, Veloria, Benson, DeBolt, Reardon, Ericksen, Armstrong, Dunshee, Mastin and Delvin.

Brief Summary of Bill

$Provides reduced wholesaling business and occupation taxes for grocery distribution cooperatives.

Staff:  Rick Peterson (786‑7150).

Background: 

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

Although there are several different B&O tax rates, the principal rates are:  manufacturing and wholesaling - 0.484 percent; retailing - 0.471 percent; and services - 1.5  percent.

Summary of Bill: 

Grocery distribution cooperatives are taxed at a rate of 1.5 percent on sales to their customer-owners rather than at the usual 0.484 percent wholesaling tax rate.  A deduction from taxable wholesales equal to the cost of merchandise sold to the cooperative=s customer-owners is allowed.

Grocery distribution cooperatives eligible for this treatment must:  (1) sell groceries and related items to customer-owners of the cooperative or to customer-owners of a firm which has at least a 50 percent controlling interest in the grocery distribution cooperative; (2) make at least $300 million in annual sales to customer-owners in Washington; and (3) be majority owned by customer-owners.

Appropriation:  None.

Fiscal Note:  Requested on May 16, 2001.

Effective Date:  The bill contains an emergency clause and takes effect on July 1, 2001.