SENATE BILL REPORT
SB 5915
As of January 17, 2024
Title: An act relating to extending an existing hazardous substance tax exemption for certain agricultural crop protection products that are temporarily warehoused but not otherwise used, manufactured, packaged, or sold in the state of Washington.
Brief Description: Extending an existing hazardous substance tax exemption for certain agricultural crop protection products that are temporarily warehoused but not otherwise used, manufactured, packaged, or sold in the state of Washington.
Sponsors: Senators Torres, Schoesler, Wagoner and Warnick.
Brief History:
Committee Activity: Ways & Means: 1/18/24.
Brief Summary of Bill
  • Extends the expiration date by ten years for the hazardous substance tax exemption for pesticides sold out of state.
SENATE COMMITTEE ON WAYS & MEANS
Staff: Jeffrey Mitchell (786-7438)
Background:

Washington's hazardous substance tax (HST) was established in 1988. The tax applies to the first possession of hazardous substances, including petroleum products, certain pesticides, and certain chemicals. Until 2020 the tax rate for any hazardous substance was 0.7 percent of its wholesale value.  The 2019 Legislature changed the HST rate for liquid petroleum products from a value-based tax to a volumetric one, in other words per barrel. For fiscal year 2023 the tax rate on petroleum products was $1.20 per barrel. Non-liquid petroleum products and all other hazardous substances continue to be taxed at 0.7 percent of their wholesale value.

 

The 2015 Legislature enacted a tax preference to exempt agricultural crop protection products (pesticides) from the HST. These products are chemicals used to prevent or control diseases, weeds, or other pests. Under the preference, pesticides warehoused in Washington or transported to or from Washington are exempt from the state's hazardous substance tax, as long as they are not manufactured, packaged, sold, or used in the state.  In the 2015 legislation, the Legislature expressed an intent to incentivize agricultural pesticide storage in Washington and that if a tax preference performance review by the Joint Legislative Audit and Review Committee (JLARC) found an average increase in revenue of the hazardous substance tax, then the Legislature intends to extend the expiration date of the tax preference.  In its review, JLARC found that the preference provides tax relief to Washington businesses distributing pesticides to other states by reducing storage costs and making Washington a more competitive location for storing and distributing pesticides in the Pacific Northwest.  However, JLARC found that the metric of increasing HST revenue was established before the Legislature changed the tax rate for liquid petroleum products, which lead to a significant increase in HST revenue. JLARC found that the preference likely had no effect on the revenue increase and recommended that the Legislature consider new metrics.

 

The exemption is scheduled to expire on January 1, 2026.
Summary of Bill:

The expiration date for the HST exemption for pesticides sold out of state is extended from January 1, 2026, to January 1, 2036.

 

The existing tax preference performance statement will be used by JLARC to evaluate the exemption as it approaches its expiration date.
Appropriation: None.
Fiscal Note: Available.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.