SENATE BILL REPORT

SB 6064

BYSenators McDermott and Deccio

Changing provisions relating to the local excise tax on lodgings.

Senate Committee on Ways & Means

Senate Hearing Date(s):March 9, 1987

Majority Report:  That Substitute Senate Bill No. 6064 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McDermott, Chairman; Gaspard, Vice Chairman; Bauer, Bluechel, Craswell, Deccio, Fleming, Hayner, Kreidler, Lee, McDonald, Moore, Owen, Rasmussen, Rinehart, Saling, Talmadge, Vognild, Warnke, Williams, Wojahn.

Senate Staff:Gary Benson (786-7441)

                  March 9, 1987

AS REPORTED BY COMMITTEE ON WAYS & MEANS, MARCH 9, 1987

BACKGROUND:

Cities and counties are allowed to levy a special excise tax of up to 2 percent on hotels and motels.  These tax revenues are to be used for constructing or operating stadium facilities, convention center facilities, performing arts center facilities, visual arts center facilities, or to pay for tourism promotion activities.

Revenues collected by the cities and counties imposing this tax are deducted from the state sales tax on hotels and motels within the city or county.  For example, in King County the state sales tax of 6.5 percent on hotels and motels is split 4.5 percent for the state and 2.0 percent for the county.

Counties that impose this tax must allow a credit against their tax for any tax collected by a city within the county.  This is to prevent "double dipping."  However, if a county is using the tax for debt service on bonds sold prior to June 26, 1975, then that county does not need to offer the credit.  This occurs in two counties:  King and Yakima.  No city within these counties may impose the tax unless they are using the tax for debt service on bonds sold prior to June 26, 1975.  Bellevue and the city of Yakima fall into this category.

The Yakima County bonds will be paid off in the 1990s.  When the county tax revenue is no longer needed for debt service on these bonds, the county will need to credit against their tax any tax collected by the city of Yakima.

This local option 2 percent hotel/motel tax is separate and distinct from:  (1) the "Seattle Convention and Trade Center hotel/motel tax" at 5 percent in Seattle and 2 percent in the rest of King County for the convention center; (2) the optional Bellevue 3 percent hotel/motel tax for convention and trade facilities; and (3) the repealed optional 3 percent hotel/motel tax for cities with a population over 25,000 for convention and trade facilities.

SUMMARY:

The original bill was not considered.

EFFECT OF PROPOSED SUBSTITUTE:

In addition to paying debt service on bonds issued prior to June 26, 1975, non-AA counties may use any surplus tax revenues for county-owned facilities for agricultural promotion.  If the money is used in this manner, then the county does not need to credit against their revenue any revenues collected by a city within the county.  Cities within the county are prohibited from imposing the tax unless the money is used to pay debt service on bonds sold prior to June 26, 1975.

Revenue:    yes

Fiscal Note:      none requested

Senate Committee - Testified: No one