SENATE BILL REPORT

ESSB 6653

BYSenate Committee on Ways & Means (originally sponsored by Senators Deccio and Newhouse)

Revising provisions on the lodgings tax.

Senate Committee on Ways & Means

Senate Hearing Date(s):February 8, 1988

Majority Report:  That Substitute Senate Bill No. 6653 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bauer, Cantu, Deccio, Gaspard, Hayner, Johnson, Lee, Newhouse, Saling, Smith, Williams.

Senate Staff:Gary Benson (786-7715)

                  February 17, 1988

AS PASSED SENATE, FEBRUARY 16, 1988

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 facilities such as stadiums, convention centers, performing arts centers, visual arts centers, 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 are not allowed to impose this tax within cities that also impose the tax.  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 may impose the tax countywide.  This occurs in King and Yakima Counties.  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.  Prior to passage of a 1987 law, when the county tax revenue was no longer needed for debt service on these bonds, the county would no longer be allowed to levy the tax within cities that also impose the tax.  With the passage of the 1987 act, Yakima County can sell additional bonds and use any surplus tax revenues for county-owned facilities for agricultural promotion.  If the new bonds and surplus money are used in this manner, then the county can continue to levy the tax within all cities in 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.

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; (3) the optional Pierce County and cities within Pierce County 2 percent hotel/motel tax for visitor and convention promotion and development; and (4) the repealed optional 3 percent hotel/motel tax for cities with a population over 25,000 for convention and trade facilities.

SUMMARY:

Non-AA counties that qualify to levy the 2 percent hotel/motel tax countywide (due to selling bonds prior to June 26, 1975) -- Yakima County - and cities within such counties may levy another 2 percent hotel/motel tax.  This optional tax is not a credit against the state sales tax.  No city may impose this new tax at the same time it is levying the original 2 percent hotel/motel tax that is credited against the state sales tax.  The county may not levy the tax until those cities in the county containing at least one-half of the total incorporated population have imposed the tax.  The uses of the money from this new tax are the same as those for the original 2 percent tax.

In addition to all the other uses of the 2 percent hotel/motel tax, the tax proceeds may be used for the refurbishing and operation of a steam railway.

Appropriation:    none

Revenue:    yes

Fiscal Note:      available

Senate Committee - Testified: No one