HOUSE BILL REPORT

HB 1680

BYRepresentatives Nutley, Peery, Butterfield, Cooper and Sutherland

Revising permit requirements on sales tax exemptions for nonresidents.

House Committe on Ways & Means/Revenue

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (9)

      Signed by Representatives Appelwick, Chair; Basich, Dellow, Grimm, Holland, Schoon, Taylor, Valle and Winsley.

House Staff:Bill Freund (786-7136)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/REVENUE

FEBRUARY 6, 1988

BACKGROUND:

An exemption from the sales tax is provided to certain nonresidents of Washington who obtain a Nonresident permit.  The exemption is available for the purchase of tangible personal property for use outside this state.

The permits are available to residents of states and provinces of Canada only if the applicant's state or province does not impose a sales tax of three percent or more.  For example, it is available to residents of Alaska, Oregon, Montana, and Alberta, but not to residents of British Columbia or Idaho.

Vendors making a tax exempt sale must ensure that the permit is valid, and maintain records showing the permit number on each sale.  A vendor has two options when requested to make a tax exempt sale, either refuse to make the sale, or make the sale and keep the appropriate records.

In 1987 approximately 87,400 permits were sold.  They were sold at 106 locations throughout the state.  Of the 106 locations, 36 were banks, 28 chambers of commerce, 16 revenue field offices an d the remainder are mostly mall offices, hotels and motels and visitor's bureaus.  The Department of Revenue does not allow retail firms to sell the permits if they sell the type of goods for which the customer could use the permit.  The reason for this policy is that a retailer could gain a competitive advantage if they sold the permits and a nearby competitor did not.

SUMMARY:

SUBSTITUTE BILL:  Eliminates the nonresident permits.  An eligible nonresident may procure a sales tax exemption through the use of a current out-of-state driver's license or photo I.D. and one other piece of identification.

Vendors are not required to make tax exempt sales.  Vendors making tax exempt sales must maintain records showing the type of I.D. used including identification numbers where appropriate.

A person using fraudulent identification to make a tax exempt purchase shall be guilty of a misdemeanor and in addition shall be liable for the tax and a penalty equal to the greater of $100 or the tax due.

A vendor knowingly making a tax exempt sale to a person not entitled to a tax exemption shall be guilty of a misdemeanor and in addition shall be liable for the tax and a penalty equal to the greater of $1,000 or the tax due on such sale.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The original bill continued the nonresident permits, the substitute eliminates the permits.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Requested January 27, 1988.

Effective Date:The bill takes effect on July 1, 1989.

House Committee ‑ Testified For:    Representative Busse Nutley, prime sponsor.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Washington merchants bordering Oregon are at a competitive disadvantage because Oregon has no sales tax.  The nonresident permits are not available for sale on weekends and after 5:00 p.m.  There are enforcement problems because the permits do not constitute good I.D.

House Committee - Testimony Against:      None Presented.