BILL REQ. #:  H-3972.3 

Read first time 01/18/08.   Referred to Committee on Finance.

     AN ACT Relating to developing a feasibility plan for authorizing state administration and collection of local business and occupation taxes; amending RCW 35.102.010; and adding a new section to chapter 35.102 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 35.102.010 and 2003 c 79 s 1 are each amended to read as follows:
     The legislature finds that businesses in Washington are concerned about the potential for multiple taxation that arises due to the various city business and occupation taxes and are concerned about the lack of uniformity among city jurisdictions. The current system has a negative impact on Washington's business climate. The legislature further finds that local business and occupation tax revenue provides a sizable portion of city revenue that is used for essential services. The legislature recognizes that local government services contribute to a healthy business climate.
     The legislature intends to provide for a more uniform system of city business and occupation taxes that eliminates multiple taxation, while allowing for some continued local control and flexibility to cities. Therefore, the legislature further finds that developing a plan that analyzes the feasibility of a uniform system for the collection and administration of local business and occupation taxes is necessary.

NEW SECTION.  Sec. 2   A new section is added to chapter 35.102 RCW to read as follows:
     (1) The department must review the feasibility of a uniform system for the collection and administration of local business and occupation taxes.
     (2) In developing its plan, the department must include a feasibility analysis for implementing the administration of a uniform system, which must, at a minimum, include an analysis of the following:
     (a) Requiring cities and towns to fully conform, to the extent possible, to the state business and occupation tax definitions. For example, state definitions for classifications and due dates;
     (b) Providing the department with full authority to act on behalf of cities and towns for tax-related administrative and legal matters such as, but not limited to: Tax-related rulings, interpretations, appeals, and adjudications, but allowing cities and towns to retain authority to set their own tax rates, within existing legal limits;
     (c) Requiring that provisions similar to chapter 82.32 RCW are applicable to local business and occupation taxes in order to allow the department to audit, adjust, collect, and file liens on behalf of cities and towns;
     (d) Requiring local business and occupation tax information to be included within the confidentiality provisions of RCW 82.32.330 and included under the statute of limitations provisions under RCW 82.32.050;
     (e) Requiring the department to have final authority for administrative decisions of individual accounts, such as determining taxpayer reporting frequency for the local business and occupation tax to ensure that the local assigned frequency matches the state assigned frequency for filing state business and occupation taxes;
     (f) Requiring that all local business and occupation taxes appeals must be administered by the department, the board of tax appeals, or the courts, as currently provided for state taxes under chapter 82.32 RCW;
     (g) Requiring that the department will determine the procedures and timing for filing local business and occupation taxes;
     (h) Providing the department with rule-making authority for the purpose of state administration and collection of local business and occupation taxes;
     (i) Requiring taxpayers to apportion their gross receipts among the local jurisdictions imposing local business and occupation taxes upon the taxpayer;
     (j) Requiring a city or town to begin collection or administration of the tax, or both, on the January 1st following the first date the city or town initially enacted the local business and occupation tax, if the local enactment is completed between the months of January and June. If the enactment of the initial tax occurs between the months of July and December, the tax must become effective for collection and administration, or both, on the second January 1st following the enactment;
     (k) Requiring the timing and distribution of local tax revenues from business and occupation taxes to be substantially similar to those procedures currently in effect for the administration of local sales taxes;
     (l) Requiring taxpayers with three or more cities or towns to which they report to file electronic tax returns and to remit their tax payments electronically; and
     (m) Prohibiting cities and towns from applying a minimum tax; local governments that impose a business and occupation tax must maintain a "true" gross receipts tax, as determined by the department.
     (3) In developing its plan, the department must include an analysis on the development, implementation, and feasibility of the tax structure necessary to implement a uniform system, which must, at a minimum, include the following:
     (a) A method for standardizing local tax reporting thresholds;
     (b) A mitigation plan to maintain revenue neutrality;
     (c) A review of whether state-applied penalties and interest for the administration and collection of unpaid or delinquent taxes should be deposited in the state general fund;
     (d) A review, in conjunction with the cities and towns, of conforming local business and occupation tax classifications to state classifications; and
     (e) A determination of a deadline for compliance with a state-administered system.
     (4) "Department" means the department of revenue for the purposes of this section.
     (5) Staff support must be provided by the department.
     (6) The department must provide a final report, with specific recommendations on the best practices and feasibility to effectively implement a uniform system of state administration and collection of local business and occupation taxes, to the house of representatives finance committee and the senate ways and means committee by December 1, 2008.