SENATE BILL REPORT

SHB 347

BYHouse Committee on Transportation (originally sponsored by Representatives Baugher, Schmidt, Walk, S. Wilson and Meyers)

Modifying payment provisions on motor vehicle and special fuel taxes.

House Committe on Transportation

Senate Committee on Transportation

Senate Hearing Date(s):March 25, 1987

Majority Report:  Do pass.

      Signed by Senators Peterson, Chairman; Hansen, Vice Chairman; Tanner, Vice Chairman; Bender, Conner, DeJarnatt, Garrett, Halsan, Johnson, Nelson, Smitherman.

Senate Staff:Gene Schlatter (786-7316)

                  March 26, 1987

AS REPORTED BY COMMITTEE ON TRANSPORTATION, MARCH 25, 1987

BACKGROUND:

The motor vehicle fuel tax is paid to the state by distributors of motor vehicle fuel.  Payments of taxes on fuel distributed during a month are due by the 25th day of the following month.  Most tax payments are made by check and sent to the state by mail.  The Department of Licensing (the agency responsible for administration of the fuel tax) currently contracts with a Washington-based bank to process motor vehicle fuel tax payments.  Revenues from the motor vehicle fuel tax are deposited in the Motor Vehicle Fund.

While state law establishes the 25th day of the month as the due date for motor vehicle fuel taxes, most of the moneys paid by distributors are not deposited in the Motor Vehicle Fund until later dates.  In fact, a large percentage of the total amount due in a month generally is not available for use by the state until the first few days of the following month.

There are two major reasons for the time lag between the tax due date of the 25th of a month and the dates on which funds from tax payments are deposited in the Motor Vehicle Fund.  They are:

(1) Under the current state law, a payment that is mailed is considered to be received by the 25th of the month if the postmark date is no later than the 25th.  Distributors generally take advantage of this provision and mail their payments on the 25th day or shortly before that date.  As a result, most payments are received by the Department of Licensing or its bank during the one- to four-day period after the due date.

(2) Most payments of motor vehicle fuel taxes by check are not available for deposit in the Motor Vehicle Fund until they are cleared through the banks on which they are drawn.  The clearing process generally requires one to three business days after a check is received in the mail.

The combined mailing and check clearing process usually involves only a two-day period for checks mailed from locations in the state and drawn on in-state banks.  Longer periods frequently are required for payments mailed, and drawn on banks, from out-of-state locations.

The state could ensure that most payments of motor vehicle fuel taxes would be deposited in the Motor Vehicle Fund during the month in which they are due by requiring payment by electronic funds transfer (EFT).  Under this payment alternative, a taxpayer would instruct his or her bank to initiate transfers of funds by means of telephone, wire, or other electronic communications devices directly to the bank in which funds earmarked for the Motor Vehicle Fund are deposited.

Typically, when funds are sent by EFT, they are available for deposit in the recipient's bank account on the day on which they are transferred.

If a payment is late, a 1 percent penalty not to exceed $500 must be charged by the Department of Licensing.  If a payment is not received by the end of each month, an additional 10 percent penalty must be charged by the Department.  Interest charges of .5 percent per month on delinquent payments must also be charged by the Department.

The Department may waive only the interest charges when the interest charge is less than $5.00 or when the cost of collection exceeds the amount due.

SUMMARY:

Motor vehicle fuel distributors and special fuel taxpayers (primarily diesel fuel) are required to pay taxes by electronic funds transfer (EFT) when tax payments of $50,000 or more are due.  Taxpayers owing smaller amounts have the option of making payments by EFT.  For payments made by EFT, the tax due date is changed from the 25th of the month to the second to last state business day of the month.

The due date for payments made by EFT ensures that funds received by this payment means will be available for deposit in the Motor Vehicle Fund by the last day of the month.  Under the requirement that tax payments of $50,000 or more be made by EFT, between 90 percent and 95 percent of total motor vehicle fuel tax payments will be made by EFT and received by the end of the month in which they are due.

The penalty for the failure to meet the due date for motor vehicle fuel tax payments is increased from 1 percent to 2 percent.  The current 10 percent penalty on taxes that are not paid by the last business day of the month in which they are due is repealed.  The monthly interest charge on unpaid taxes is increased from 1/2 percent to 1 percent.

The director of the Department of Licensing may waive penalties for late filing of monthly motor vehicle fuel reports, late payment of motor vehicle fuel excise tax, or both, when it is shown that the failure to report or the failure to pay fuel taxes due was because of reasonable cause.

The filing of a fraudulent monthly gallonage return with intent to evade the taxes lawfully due shall result in a 25 percent penalty.

The bill shall be effective June 1, 1987.  An emergency is declared.

Fiscal Note:      none requested

Effective Date:The bill contains an emergency clause and takes effect on June 1, 1987.

Senate Committee - Testified: George Ides, DOL