SB 6329



BYSenators Newhouse and Gaspard



Clarifying business and occupation taxation of travel charter and tour operators.



Senate Committee on Ways & Means


      Senate Hearing Date(s):February 5, 1989; February 6, 1990


Majority Report:  That Substitute Senate Bill No. 6329 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Amondson, Bailey, Bauer, Bluechel, Cantu, Gaspard, Hayner, Johnson, Lee, Moore, Newhouse, Niemi, Saling, Smith, Warnke, Williams, Wojahn.


      Senate Staff:Terry Wilson (786-7715)

                  February 7, 1990







The business and occupation tax is imposed for the privilege of engaging in business in the state.  It is not a single tax but is composed of nine rates depending on the activity engaged in.  The tax is applied against gross receipts with no deductions for the costs of doing business.


A travel agent is a person who makes arrangements for clients with specific carriers, hotels, and the like, and receives a commission from the service provider for making the arrangements.  Travel agents are taxed at the rate of .275 percent.


A tour operator is a person who packages travel arrangements and the like and then resells them as a packaged tour.  Tour operators sometimes act as agents for other service providers in connection with packaged tours.  In 1985, the Department of Revenue issued letters to the travel industry which stated that travel agents and tour operators were to be taxed under the travel agent rate.  As a result of a taxpayer appeal, in 1989 the department reviewed the matter and determined that tour operators were to be taxed at the service rate of 1.5 percent for activities occurring after the ruling because they were not acting as agents for a third party service provider but were instead directly providing the tour service.  The service rate only applies to the sale of packaged tours by tour operators.  Deductions are authorized for expenses for which the tour operator is merely a conduit.  Amounts received by tour operators as commissions from third party service providers are taxed at the travel agent rate.




Travel charter and tour operators are taxed at the rate of .275 percent.





The rate is not lowered on travel chartering.


Appropriation:    none


Revenue:    yes


Fiscal Note:      available


Senate Committee - Testified: Joe Daniels, Holland America/Westours, Inc.;  Tony Thien, Holland America/Westours, Inc.; Ed Faker, Department of Revenue