FINAL BILL REPORT

SHB 1574

                                  C 384 L 89

BYHouse Committee on Revenue (originally sponsored by Representatives Wang, D. Sommers, Haugen and Nealey)

Authorizing cities and towns to impose an excise tax on brokered natural gas.

House Committe on Revenue

Senate Committee on Ways & Means

SYNOPSIS AS ENACTED

BACKGROUND:

The state and some cities levy a public utility tax on the gross income received by natural gas utilities from the production or distribution of gas in Washington State.  The state public utility tax rate for natural gas utilities is 3.852 percent. Cities may levy a utility tax at a rate not exceeding 6 percent unless city voters approve a higher rate.

Until recently, federal regulations required users of natural gas to purchase directly from in-state natural gas utilities.  Due to changes in these regulations, large companies may now bypass in- state utilities and obtain natural gas directly from an out-of- state producer or broker.  Purchases of brokered natural gas are not subject to public utility taxation, and are subject to sales or use tax instead.

Manufactured gas is treated the same as natural gas for tax purposes.

SUMMARY:

Brokered natural gas is exempted from both state and local sales and use taxation.  A new state tax is imposed for the privilege of using natural gas in the state, with a rate equal to the state public utility tax on non-brokered natural gas.  Cities are authorized to impose a new tax for the privilege of using natural gas in the city, with a rate equal to the city public utility tax on natural gas.

These new state and city use taxes do not apply to the use of natural gas if the seller of the gas has paid a state or city public utility tax on the gas.  The tax base does not include charges for the transmission of gas that is subject to the new use taxes. 

Credits are allowed against the new use taxes for (1) taxes similar to Washington's state and local public utility taxes that are paid by the seller to another state, and (2) taxes similar to the use taxes imposed by this bill that are paid by the consumer to another state.

The consumer of the gas is responsible for payment of taxes to the Department of Revenue.  The person delivering the gas to the consumer must report quarterly to the department on the volume of gas delivered and the name of the consumer to whom the gas was delivered.

VOTES ON FINAL PASSAGE:

      House 93   4

      Senate    45     0 (Senate amended)

      House 92   5 (House concurred)

EFFECTIVE:July 1, 1990