HOUSE BILL REPORT
HB 2971
As Passed House:
February 18, 2002
Title: An act relating to establishing a business and occupation tax rate for certain FAR part 145 certificated repair stations.
Brief Description: Establishing a business and occupation tax rate for certain FAR part 145 certificated repair stations.
Sponsors: By Representatives Reardon, Pearson, Lovick, Cooper, Dunshee, Sehlin, Edwards, O'Brien and Sullivan.
Brief History:
Floor Activity:
Passed House: 2/18/02, 91-7.
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Brief Summary of Bill |
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$Reduces business and occupation tax rate from 0.484 percent to 0.275 percent on the sale and repair of equipment used in interstate or foreign commerce by certain FAA certificated aircraft repair facilities.
$Ends the lower rate on June 30, 2005.
$Requires businesses using the special tax rate to report information on jobs and wages.
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Majority/Minority Report: None.
Staff: Rick Peterson (786‑7150).
Background:
Sales tax is imposed on retail sales of most items of tangible personal property and some services, including construction and repair services. Sales and use taxes are imposed by the state, counties and cities. Sales and use tax rates vary between 7 and 8.9 percent, depending on location.
Washington's major business tax is the business and occupation (B&O) tax. The B&O tax is imposed on the gross receipts of business activities conducted within the state, without any deduction for the costs of doing business. The tax is imposed on the gross receipts from all business activities conducted within the state.
The sale and repair of goods is taxable under the sales tax and the B&O tax but there are some exemptions. The sale and repair of boats, airplanes, railroad cars, and locomotives or their components that are used in instate or foreign commerce is exempt from sales tax. However, the sales tax exemption does not extend to the B&O tax. The B&O rate for these sales and repairs is 0.484 percent.
Summary of Bill:
The B&O tax rate is reduced from 0.484 percent to 0.275 percent on the sale and repair of equipment used in interstate or foreign commerce by persons classified by the Federal Aviation Administration as a FAR part 145 certificated repair station with an airframe class 4 rating and limited capabilities in instruments, radio equipment, and specialized services. The lower rate ends June 30, 2005.
Businesses using this special tax rate are required to report information on job creation/retention goals, actual jobs created/retained, average wages, average wages for employees hired after using the reduced rate, and the dollar value of the reduced rate.
Appropriation: None.
Fiscal Note: Requested February 19, 2002.
Effective Date: The bill takes effect August 1, 2002.
Testimony For: (Testimony on similar bill, HB 2267)This is necessary legislation to help with rehiring persons that have been laid off. The fiscal impact is minimal. We are confident that this exemption will create jobs and improve productivity. Reduced profit to airlines has caused them to postpone maintenance. Goodrich employs 2000 workers in Washington. The competitive environment in third-party aircraft maintenance has become more intense. Goodrich Aviation Technical Services is not currently profitable. We need to reduce the cost of doing business. Given the nature of repairs for both commercial airlines and cargo carriers charges for repair parts should be treated separately from charges for repair labor. This bill provides a more fair and equitable tax treatment.
(Concerns) Washington business tax applies to gross receipts. It is a tax on gross without any deductions. Operating costs and overhead costs are not deducted from the measure of the tax. Allowing a deduction for costs makes the B&O tax more like an income tax.
Testimony Against: None.
Testified: (Testified on similar bill, HB 2267) Representative Reardon, prime sponsor; Michael Zubovic, Goodrich Aviation Technical Services; Steve Gano, Goodrich Aviation Technical Services; and Julie Sexton, Department of Revenue.