HOUSE BILL REPORT
SHB 2778
As Passed House:
February 14, 2006
Title: An act relating to the business and occupation taxation of payments and contributions to nonprofit convention and tourism promotion corporations by public entities.
Brief Description: Exempting certain amounts received by nonprofit convention and tourism promotion corporations from business and occupation tax.
Sponsors: By House Committee on Finance (originally sponsored by Representatives Murray, Kristiansen, Dickerson, Clements, Chase, McDonald and Dunn).
Brief History:
Finance: 1/25/06, 1/27/06 [DPS].
Floor Activity:
Passed House: 2/14/06, 96-0.
Brief Summary of Substitute Bill |
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HOUSE COMMITTEE ON FINANCE
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 10 members: Representatives McIntire, Chair; Hunter, Vice Chair; Orcutt, Ranking Minority Member; Roach, Assistant Ranking Minority Member; Ahern, Condotta, Conway, Ericks, Hasegawa and Santos.
Staff: Mark Matteson (786-7145).
Background:
Business and Occupation tax. 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. The tax is
imposed on the gross receipts from all business activities conducted within the state.
Revenues are deposited in the State General Fund. A business may have more than one B&O
tax rate, depending on the types of activities conducted. Retailing activities, for example, are
taxed at a 0.471 percent rate, while general services are taxed at a 1.5 percent rate.
The B&O tax does not permit deductions for the costs of doing business, such as payments
for raw materials and wages of employees. Payments received by non-governmental entities
from governments are subject to tax unless expressly exempt. One example of an exemption
is for payments received by an artistic or cultural organization from a governmental entity.
Hotel-motel taxes and room charges. Several local hotel-motel taxes are authorized under
statute on charges for lodging at hotels, motels, rooming houses, private campgrounds,
recreation vehicle parks, and similar facilities for continuous periods of less than one month.
In general, receipts from these taxes are required to be used for the promotion of tourism or
the construction and operation of tourism-related facilities. In calendar year 2004, about
$48.5 million was distributed to local jurisdictions for these purposes.
In 2003, the Legislature authorized the creation of tourism promotion areas. Counties with
populations between 40,000 and 1,000,000, and all incorporated cities and towns located in
such counties, are authorized to impose a charge on lodging to increase tourism and
conventions within such areas. A fee of up to $2 per day per lodging unit if rented may be
assessed. Funding must be used for advertising, publicizing or otherwise distributing
information to attract and welcome tourists, and operating tourism destination marketing
organizations, in order to increase convention and tourism business.
In calendar 2004, after the passage of the legislation, $932,000 was collected in four cities
and one county imposing the charge.
Governmental convention and tourism promotion. Governments allocate portions of budgets
for the purpose of promoting conventions and tourism. According to data received in the
Budgeting, Accounting, and Reporting System (BARS), local governments in Washington
spent about $12.4 million in operating funding in calendar year 2004 on conventions and
tourism, and an additional $3 million for the purposes of marketing events at fairgrounds and
stadia.
Governments may contract with private entities to assist with the promotion of tourism or
conventions. Many local governments establish contracts with local convention and visitors
bureaus or local chambers of commerce for the purposes of promoting tourism or
conventions.
Summary of Substitute Bill:
Payments received by nonprofit businesses from governments for the purpose of promoting
conventions and tourism are exempt from B&O tax.
Appropriation: None.
Fiscal Note: Available.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.
Testimony For: The tourism and convention business is a growing industry. At the state
level, we don't support this industry as do other states, in part because of constitutional
restrictions. This is an opportunity to show state support.
The state does not provide sufficient funding for tourism. I've seen really big estimates of
return-on-investment. This is a rural issue as well as an urban issue.
The Washington Convention and Visitors Bureaus Association is bringing this to clean up
uncertainty in the law concerning this industry. A few of our members have been paying tax
but most have not. The bill makes it clear that funds, derived from hotel-motel taxes and
lodging fees, would in fact be used for tourism purposes.
The state receives about $12 billion annually from tourism. In addition to the Governor's
support for creating a "Washington" brand, Mayor Nickels also wants to create a brand for
Seattle.
Testimony Against: None.
Persons Testifying: Representative Murray, prime sponsor; Representative Kristiansen; Becky Bogard, Washington Convention and Visitors Bureau; and Dan Welsh, Seattle Convention and Visitors Bureau.