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SENATE BILL 6573
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Passed Legislature - 1994 Regular Session
State of Washington 53rd Legislature 1994
Regular Session
By
Read first time 01/31/94. Referred to Committee
on Ways & Means.
Directing a study to examine the
effect of the tax system on manufacturers.
AN ACT Relating to the
impact of taxes on manufacturing; and creating new sections.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
WASHINGTON:
NEW SECTION. Sec.
1. (1) The legislature finds
that:
(a) Washington's tax
structure as it applies to manufacturers is often cited as a deterrent to
economic development;
(b) The retail sales
tax applies to labor and materials used to construct new manufacturing
facilities and to renovate existing facilities. The tax also applies to new
and replacement manufacturing equipment and machinery. Because of the broad
tax base and because of the high tax rate, the retail sales tax may inhibit the
development of new manufacturing businesses and expansion of existing
businesses, especially those in capital intensive industries; and
(c) The business and
occupation tax applies to gross receipts from engaging in business regardless
of whether the business is profitable. The tax may be more beneficial to
established manufacturers, since it tends to favor high-profit businesses.
However, the tax may impose a heavy burden on new manufacturers that may not
have reached their maximum level of operating efficiency, have yet to fully
develop their markets, and as a result are unprofitable.
(2) The intent of this
act is to require a study to:
(a) Analyze how the
current tax structure affects manufacturers;
(b) Consider
alternative methods of taxing manufacturing investment;
(c) Identify the
effects of tax incentives for manufacturers; and
(d) Recommend to the
legislature sales and use tax changes that might result in more equitable
taxation of manufacturers while preserving a stable source of revenue for
funding public services in the future.
NEW SECTION. Sec.
2. (1) The department of
revenue shall conduct a study of the current state tax structure as it applies
to manufacturers. The study shall address but is not limited to the following:
(a) What taxes
currently apply to manufacturers? What tax incentives are available to
manufacturers?
(b) How do taxes affect
a manufacturer over the various stages of its business cycle? How does the tax
treat new manufacturers as compared with established manufacturers?
(c) How much does the
retail sales tax on construction and acquisition of machinery and equipment add
to the cost of capital?
(d) How are
manufacturers taxed in other states? What tax incentives are available to the
manufacturing industry in other states? Does Washington's tax structure place
manufacturers at a competitive disadvantage compared with manufacturers in
other states?
(e) Do tax incentives
for manufacturers stimulate economic development? Do tax incentives help
overcome disparate treatment between new and established manufacturers? Do tax
incentives have an effect in eliminating a competitive disadvantage suffered by
in-state as opposed to out-of-state manufacturers?
(2) To perform this
study, the department shall form an advisory study committee with balanced
representation from different segments of government and the manufacturing
industries. The advisory committee shall include, but need not be limited to,
two members from the house of representatives, two members from the senate, and
representatives of both small and large manufacturing businesses. The advisory
committee may also include representatives of local government, and tax policy
experts from the academic, legal, and business communities.
(3) The department of
revenue shall provide staff for the purpose of the study.
(4) The
department of revenue shall present a final report of the findings of the study
to the committees of the legislature that deal with revenue matters no later
than December 31, 1994.
