| Washington State House of Representatives Office of Program Research |
BILL ANALYSIS |
| Finance Committee | |
HB 3244
This analysis was prepared by non-partisan legislative staff for the use of legislative members in
their deliberations. This analysis is not a part of the legislation nor does it constitute a
statement of legislative intent.
Brief Description: Clarifying the definition of customer location for purposes of municipal business and occupation taxes.
Sponsors: Representatives Kessler, Orcutt, Grant, Ericks, Hinkle, Linville, McDonald and Kelley.
Brief Summary of Bill |
|
Hearing Date: 2/5/08
Staff: Don Taylor (786-7388).
Background:
Cities are authorized to tax general business activities occurring within their boundaries.
(County government has no such authority). Municipal business taxes are typically based on
gross business receipts, although many cities impose a business license fee measured by the
number of employees or a flat dollar fee for various types of activities. Some cities impose a fee
according to the square footage occupied by the firm. Some cities impose multiple forms of local
business taxes. Approximately 40 cities currently impose local business taxes which are
measured by gross receipts. The rates of such taxes are generally limited to 0.2 percent, unless a
higher rate prevailed prior to 1982 or the voters have authorized a higher rate.
In 2003 the Legislature directed that a model local business tax ordinance be developed which
provides greater ties to state B&O tax definitions. That statute also directed that, starting on
January 1, 2008, cities must provide for allocation and apportionment of gross receipts, so that
more than one municipality does not tax the same income.
Summary of Bill:
The allocation and apportionment requirement for municipal business taxes is amended. It adds
a presumption that the location of a customer is the customer's billing address as reflected in the
seller's records. However, if the majority of the contacts between the taxpayer and the customer
take place at a location different from the billing address, then the location of the taxpayer's
office may be used as the customer's location. In situations where there is clear and convincing
evidence that the taxpayer has manipulated the customer's billing address in order to reduce the
municipal tax liability, then the city may require that a different location for the customer be
used.
Appropriation: None.
Fiscal Note: Requested on January 28, 2008.
Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.