SENATE BILL REPORT

SHB 1680

BYHouse Committee on Ways & Means/Revenue (originally sponsored by Representatives Nutley, Peery, Butterfield, Cooper and Sutherland)

Revising permit requirements on sales tax exemptions for nonresidents.

House Committe on Ways & Means/Revenue

Senate Committee on Ways & Means

Senate Hearing Date(s):February 27, 1988; February 29, 1988

Majority Report:  Do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bauer, Cantu, Gaspard, Hayner, Johnson, Lee, Saling, Smith, Warnke, Zimmerman.

Senate Staff:Gary Benson (786-7715)

                  February 29, 1988

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 29, 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 retailers could gain competitive advantages if they sold the permits and nearby competitors did not.

SUMMARY:

Nonresident permits are eliminated.  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.

Appropriation:    none

Revenue:    yes

Fiscal Note:      available

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

Senate Committee - Testified: Representative Busse Nutley (for); Jan Gee, Washington Retailer Association (for); Bill Wilkerson, Department of Revenue; Greg Pierce, Department of Revenue