SENATE BILL REPORT

SB 6484

BYSenators Zimmerman, Smith, DeJarnatt and Bauer

Revising provisions on sales tax exemption permits for nonresidents.

Senate Committee on Ways & Means

Senate Hearing Date(s):February 5, 1988; February 8, 1988

Majority Report:  That Substitute Senate Bill No. 6484 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bauer, Bluechel, Cantu, Deccio, Fleming, Hayner, Johnson, Lee, Saling, Smith, Zimmerman.

Senate Staff:Gary Benson (786-7715)

                  February 9, 1988

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 8, 1988

BACKGROUND:

Bona fide nonresidents may buy permits to allow them to purchase tangible personal property in Washington for use outside the state without paying the sales tax.  Only nonresidents who are residents of a state, possession or Canadian province which either does not impose a sales tax of more than 3 percent or if it does, allows Washington residents exemption from the tax may purchase the permits.  The principal states where these nonresidents reside are Oregon, Montana, Alaska and Alberta.  The permit costs $5.  Two pieces of identification are required.

Permits are available from Department of Revenue offices, chambers of commerce, financial institutions and other locations.  However, department policy does not allow retail firms to sell the permits because of possible preferential treatment vis a vis competitors that do not sell the permits.  Approximately 87,000 permits have been issued to individuals plus some 400 for nonresident corporations.

SUMMARY:

Any business (which includes every trade, occupation or profession including retailers) that desires to sell nonresident tax exemption permits is to be designated as an agent by the Department of Revenue.  A current driver's license or other form of identification is sufficient proof of residency in another state for the purposes of obtaining a nonresident sales tax exemption permit.

EFFECT OF PROPOSED SUBSTITUTE:

Nonresident sales tax exemption permits are eliminated.  A nonresident may claim a sales tax exemption if they reside in a state that has a sales tax of less than 3 percent or Washington residents are exempt from that state sales tax.  They must be able to prove they are a nonresident.  Proof includes two pieces of identification including a valid driver's license and a credit card, check, or other reliable identification.

Retailers are not required to make tax exempt sales.  A consumer making fraudulent claims is liable for the tax and a penalty equal to $100 or the amount of tax, whichever is greater.  A retailer making a sale without collecting the sales tax and has knowledge of fraud is liable for the tax and a penalty equal to $1,000 or the amount of tax, whichever is greater.

The bill takes effect on July 1, 1989.

Appropriation:    none

Revenue:    yes

Fiscal Note:      requested February 4, 1988

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