Sales and Use Taxes. Retail sales taxes are imposed on retail sales of most articles of tangible personal property, digital products, and some services. If retail sales taxes were not collected when the user acquired the property, digital products, or services, then use tax applies to the value of property, digital product, or service when used in this state. The state, all counties, and all cities levy retail sales and use taxes. The state sales and use tax rate is 6.5 percent. State sales and use tax revenues are deposited into the State General Fund.
An additional 0.3 percent sales and use tax on motor vehicle purchases was enacted in 2003. Revenue generated from the 0.3 percent sales and use tax on vehicles is deposited into the Multimodal Transportation Account for transportation purposes.
Move Ahead Washington Public Works Assistance Account Transfers. Chapter 182, Laws of 2022 (ESSB 5974) required the state treasurer to make annual transfers of $57 million from the Public Works Assistance Account to the Move Ahead Washington Account for fiscal year 2024 through fiscal year 2038.
Move Ahead Washington State General Fund Transfers. ESSB 5974 required the state treasurer to make annual transfers of $57 million from the State General Fund to the Move Ahead Washington Flexible Account for fiscal year 2024 through fiscal year 2038.
Connecting Washington Transfers. The Connecting Washington transportation proposal in 2015 included a quarterly transfer from the State General Fund to the Connecting Washington Account over the 12-year period between fiscal year 2020 and fiscal year 2031 that totaled $518 million. The amount was calculated based on the sales and use tax associated with Connecting Washington projects.
Hazardous Substance Tax Distribution. The hazardous substance tax is imposed on the first possession of hazardous substances in the state. The tax is generally imposed on a per-barrel basis and applies to petroleum products, certain pesticides, and certain chemicals.
Until the biennium after the enactment of an additive transportation funding act, $50 million per biennium is transferred from hazardous substance tax collections to the Motor Vehicle Fund for stormwater activities. "An additive transportation funding act" means an act in which the combined total of new revenues deposited into the Motor Vehicle Fund and the Multimodal Transportation Account exceed $2 billion per biennium.
Tacoma Narrows Bridge Transfers and Sales Tax Deferral. The eastbound Tacoma Narrows Bridge (TNB) opened to traffic in July 2007 as a toll bridge. The bridge cost $735 million to complete and was funded by selling general obligation bonds that were backed by the Motor Vehicle Account and the full faith and credit of the state of Washington.
State and local sales and use tax due on the site preparation, construction, acquisition of related machinery and equipment, and the rental of equipment related to the TNB project was deferred until the 24th calendar year after the project is operationally complete, and is then due in equal yearly installments over the following decade. These payments are currently scheduled to begin by the end of fiscal year 2031.
The bridge was financed with an escalating debt structure, resulting in multiple toll rate increases over the years as debt payments have increased. Over the life of the bridge, the Legislature has adjusted the funding structure in the following ways:
State Route 520 Floating Bridge Sales Tax Deferral. The original Evergreen Point Floating Bridge was a toll bridge across Lake Washington that opened to traffic in 1963, with two general-purpose lanes in each direction. The replacement floating bridge, which opened to traffic in 2016, was constructed by the State Route 520 Bridge Replacement and High-Occupancy Vehicle (SR 520 Bridge Replacement) project. State and local sales and use tax due on site acquisition, construction, and equipment related to the SR 520 Bridge Replacement project was deferred until the 24th calendar year after the project is operationally complete, and is then due in equal yearly installments over the following decade. These payments are currently scheduled to begin by the end of fiscal year 2041.
The bill as referred to committee not considered.
Sales and Use Taxes. Beginning July 1, 2027, 0.3 percent of the 6.5 percent state sales and use tax must be deposited in the Multimodal Transportation Account rather than the State General Fund.
Move Ahead Washington Public Works Assistance Account Transfers. The $57 million in annual transfers from the Public Works Assistance Account to the Move Ahead Washington Account are limited to fiscal years 2024 and 2025.
Move Ahead Washington State General Fund Transfers. The $57 million in annual transfers from the State General Fund to the Move Ahead Washington Flexible Account are eliminated, including those for the 2023-25 biennium.
Connecting Washington Transfers. The State General Fund transfers to the Connecting Washington Account totaling $111.9 million for the 2023-25 biennium are cancelled.
Hazardous Substance Tax Distribution. The $50 million per biennium transfer from hazardous substance tax collections to the Motor Vehicle Fund for stormwater activities is terminated at the end of the 2025-27 biennium.
Tacoma Narrows Bridge Transfers. The $13 million in annual transfers from the State General Fund to the Tacoma Narrows Toll Bridge Account are ended July 1, 2025.
Tacoma Narrows Bridge Transfers and Sales Tax Deferral. The deferral period for sales and use taxes associated with the TNB project is advanced from the 24th year after completion of the project to the end of fiscal year 2026.
State Route 520 Floating Bridge Sales Tax Deferral. The deferral period for sales and use taxes associated with the SR 520 Bridge Replacement project is advanced from the 24th year after completion of the project to the end of fiscal year 2026.
PRO: The operating budget will need additional reserves in the upcoming 2025-27 biennium. This Proposed Substitute takes additional steps by advancing the repayment of deferred sales tax and also reversing what had previously been scheduled transfers. This provides a net $500 million in support to make sure that we have healthy reserves for the operating budget. The transportation budget also gets improved long term sustainability as a result of the shift of a portion of the state sales tax. This demonstrates a balanced and holistic approach to the budget for the state which allows for strong schools, good health care, and infrastructure improvements.
CON: The Legislature has a solemn constitutional responsibility to uphold Washington's paramount duty and to prepare budgets that ensure the needs of the people of our state are met by adhering to sound fiscal principles. By funding transportation through the sales use tax diversion, this bill is allocating future money that could be going to our K-12 schools, colleges, and universities. Particularly with potential federal funding reductions, this is not something the state should be doing. While we appreciate the negotiations to develop this year's budget, this bill does not make sense and we should not be doing it.