SENATE BILL REPORT

SB 6433

BYSenators von Reichbauer, Smitherman, Matson, Moore, Johnson, Stratton, West, Patrick, Sellar, Saling, McCaslin, Metcalf, Bailey, Craswell, Owen, Sutherland, McMullen, Hansen, Conner, Anderson, Kreidler, Bluechel, Barr, Wojahn, Amondson, Lee, Madsen, Nelson, Gaspard, Newhouse and Bauer

Exempting insurance agents, brokers, and solicitors from the business and occupation tax.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):January 25, 1990; January 26, 1990

Majority Report:  Do pass and be referred to Committee on Ways & Means.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; Fleming, McCaslin, McMullen, Moore, Rasmussen, Sellar, Smitherman, West.

Senate Staff:Walt Corneille (786-7416)

                  January 29, 1990

Senate Committee on Ways & Means

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

Majority Report:  Do pass.

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

Senate Staff:Terry Wilson (786-7715)

                  February 12, 1990

AS PASSED SENATE, FEBRUARY 10, 1990

BACKGROUND:

Insurance agents, brokers and solicitors who operate as independent contractors must pay business and occupation tax on their gross income.  The income received by these individuals is often paid in the form of commissions which are usually calculated as a percentage of the premium paid for a given policy.  The premiums that must be paid for a policy are set by the insurance company, as are the commissions.  As a result, an insurance agent, broker or solicitor is unable to pass the cost of the B&O tax onto the consumer.  Insurance agents, brokers and solicitors pay B&O tax at a rate of 1.1 percent of their gross earnings.

It has been suggested that the B&O tax, as it applies to insurance agents, functions more like an income tax in light of the fact that it cannot be passed on or reflected in the price of the product.

SUMMARY:

Insurance agents, brokers or solicitors are exempted from any obligation to pay the business and occupation tax.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: FINANCIAL INSTITUTIONS & INSURANCE:  Mark B. Ness; Gary Aliment; Carol Sorsdahl; Russ Brubaker, Will Rice, Dept. of Revenue; Tim Held; James Hansen, Bankers Life & Casualty Co.; Frank Keller, Agents & Brokers Legislative Committee; Matt Ryan, WSALU; Curtis T. Mohr, TCALU; Fred Rapp, Insurance Agents & Brokers; Martin M. Burton, New York Life; Abe Person, Waddell & Reed; Jack A. Thomas, New York Life; Dick Van Hollebeke, B & R Insurance

Senate Committee - Testified: WAYS & MEANS:  Russ Brubaker, Department of Revenue; Will Rice, Department of Revenue; Floyd Watkins, Washington State Association of Life Underwriters; Fred Rapp, Agents and Brokers Legislative Council