SENATE BILL REPORT

SB 5182

BYSenators Hansen, Barr, Gaspard, Bauer, Anderson, Bailey, Lee and Patterson

Revising the administration of the business and occupation tax statutes.

Senate Committee on Agriculture

Senate Hearing Date(s):January 29, 1987; February 10, 1987; January 14, 1988

Majority Report:  That Substitute Senate Bill No. 5182 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Barr, Chairman; Anderson, Vice Chairman; Bailey, Halsan, Hansen, Rinehart.

Senate Staff:Kaleen Cottingham (786-7415); John Stuhlmiller (786-7446) January 14, 1988

AS REPORTED BY COMMITTEE ON AGRICULTURE, JANUARY 14, 1988

BACKGROUND:

Due to recent cases regarding seed cleaning and barley pearling, concern has been raised over the ability of the Department of Revenue to collect back taxes on processes not previously taxed.

These industries were assessed taxes never before assessed (seed cleaning) or assessed at a higher rate (barley pearling).  The Department also made claims against the processors for back taxes.

During the 1987 session, laws were enacted which affected the taxation of both of these industries.  These laws affected future taxation issues but did not retroactively address the back taxes issue on these or other newly taxed industries.

SUMMARY:

For purposes of the Business & Occupation tax, the Department of Revenue is precluded from claiming back taxes owed on industries which have not previously been taxed.

The Department of Revenue shall pay attorneys fees to prevailing taxpayers who challenge the Department of Revenue in Business & Occupation tax cases.

EFFECT OF PROPOSED SUBSTITUTE:

The limits on the collection of back taxes are to be based on a good faith reliance on the Department of Revenue's written instructions.  Those instructions are to be based on all material facts concerning the person's business activities.

Appropriation:    none

Revenue:    yes

Fiscal Note:      available

Senate Committee - Testified: Don Taylor, Barney McClure, Department of Revenue