BILL REPORT

ESHB 2344

BYHouse Committee on Revenue (originally sponsored by Representatives Wang, Holland, Horn, Grant, Schoon, Van Luven and Phillips; by request of Department of Revenue)

Requiring electronic transfer of funds for certain large tax payments.

House Committe on Revenue

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (14)

      Signed by Representatives Wang, Chair; Pruitt, Vice Chair; Holland, Ranking Republican Member;  Horn, Assistant Ranking Republican Member; Basich, Fraser, Fuhrman, Grant, Haugen, Morris, Phillips, Rust, H. Sommers and Van Luven.

Minority Report:  Without recommendation.  (1)

      Signed by Representative Silver.

House Staff:Robin Appleford (786-7093)

AS PASSED HOUSE FEBRUARY 6, 1990

BACKGROUND:

The Department of Revenue (DOR) collects the state's major excise taxes, such as the retail sales and business and occupation taxes.  DOR collections comprise approximately 90 percent of state general fund revenues.  The taxes collected by DOR are reported on one form, the combined excise tax return.  Taxpayers who report on this form with tax liability greater than $4,800 a year are required to pay taxes by the 25th of each month.  The majority of these taxpayers mail in their payments, and DOR may assess penalties and interest against taxpayers whose returns are not postmarked by the due date.

Many corporations and some state governments use an Electronic Funds Transfer (EFT) process instead of check transactions to make various payments.  EFT payments are made electronically from one financial institution to another, thus eliminating the need to process a check or other paper instrument.  The Department of Licensing currently requires taxpayers with more than $50,000 a month of motor vehicle fuel tax liability to pay taxes through EFT. DOR estimates that at least 10 other states will have implemented EFT for payment of taxes by the end of 1990.

SUMMARY:

The Department of Revenue (DOR) is authorized to require large taxpayers who report on the combined excise tax form to pay taxes through an Electronic Funds Transfer (EFT) process.  DOR may require payment by EFT from those taxpayers with annual tax liability of $240,000 or more, and may establish a higher annual tax threshold by rule.  The first year's threshold is set at $1.8 million of annual tax liability. After the first year, DOR may set thresholds between $240,000 and $1.8 million by rule. The EFT process is to be completed so that the state receives the funds on or before the next banking day following the due date.  Taxpayers who pay taxes through EFT and who receive refunds are to receive these refunds through EFT.

DOR estimates that approximately 2,000 taxpayers have annual tax liability greater than $240,000.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Available.

Effective Date:The bill takes effect on January 1, 1991.

House Committee ‑ Testified For:    Lucille Christensen, Director, Efficiency Commission, Office of Financial Management.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    This was recommended by the governor's Efficiency Commission to improve efficiency in DOR operations.  Washington's excise tax reporting operations will be made consistent with those of many other states.

House Committee - Testimony Against:      None.