State Public Utility Tax.
The gross income derived from the operation of publicly and privately owned utilities is subject to the public utility tax (PUT), unless otherwise exempt. The tax is imposed in lieu of business and occupation (B&O) tax and is applied only on sales to consumers. Other income of the utility, such as retail sale of tangible personal property, is subject to the B&O tax. There are six different PUT rates, depending on the specific utility activity. The rates are:
Municipal Taxes.
Any city or town may impose a B&O tax upon the income of public and private utilities providing services within the boundaries of a city as well as upon the city's own municipal utilities.
Cities and towns are also authorized to impose taxes upon public utility districts that operate works, plants, or facilities within the city or town for the sale of electricity.
There are no statutory restrictions on the tax rates for water, sewer, solid waste, and stormwater utilities. The tax rate for electric, gas, steam, and telephone utilities may not exceed 6 percent without voter approval.
The legislative authority of a county may impose a tax on a utility providing service to customers within the unincorporated portion of the county. The county PUT may be up to 3 percent of the gross income of the utility derived from providing services to customers within the county. A utility means an electrical power utility, gas utility, telephone utility, water utility, sewer utility, solid waste utility, or cable service utility. At least 0.2 percent of the tax revenues from the county PUT must be used for utility assistance for the low-income residents.
The utility's billing must include the county PUT with the rates and charges for utility services as well as separately stating the county PUT being charged. The state PUT does not apply to the PUT imposed by a county.
The imposition of this county PUT may only begin on the first day of a quarter that is at least 75 days from the date the county adopts the ordinance or resolution imposing the county PUT.
A county may authorize county PUT exemptions for business customers; however, a county may not authorize a general county PUT exemption for residential customers only. A county may authorize a credit against the county PUT for the amount of any similar utility tax imposed by a city or town on the same taxable event.
The substitute bill requires that 0.2 percent of the county PUT revenues be used for utility assistance for low-income residents. The substitute bill also clarifies that the county PUT applies only to unincorporated areas of the county and that the state PUT may not be imposed on the taxes collected by a county PUT.
(In support) Due to decisions made decades ago, counties lost the funding source for important programs, including monitoring of sex offenders, subsidizing transit rides for disabled persons, and public health. Counties have more mandated responsibilities and few taxing authorities. Eighteen years ago the Legislature commissioned a study that found counties did not have adequate funding to meet the needs for ongoing operations, and this problem has not been solved. Unlike cities, counties lack the diversified funding sources.
This is a local option tax that local county commissioners can choose to implement. We have been facing inflation just like the rest of the state, whether it is basic insurance costs, technology needs, or law enforcement costs. We need more revenue streams.
We realize that this is a regressive tax and counties are sensitive to that criticism. Cities are authorized to impose a PUT of 6 percent; counties are only seeking authorization to impose a tax of 3 percent. If we want to invest more in law enforcement and public safety, it is time to give counties another revenue option and not rely as heavily on property tax revenues.
(Opposed) This is a regressive tax in a time where the Legislature has been working on ways to keep utilities affordable. We do not disagree that the counties have challenges in their revenue model, but this bill is not the way to address it. This is a tax on an essential service and will adversely impact people with low incomes.
This will also put more pressure on the existing energy assistance programs and put additional pressure on rates. These are essential services ensuring people get safe drinking water and a sanitary sewer system. Ultimately, the harm from this proposed county PUT far outweighs the revenue.
This tax would make Washington the state with the highest tax on telecommunications services.
(In support) Representative Sharon Wylie, prime sponsor; Island County Commissioner Jill Johnson, Island County; Clallam County Commission Mark Ozias, Clallam County; and Paul Jewell, Washington State Association of Counties.