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.

Tacoma Narrows Bridge 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.

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.

Sales and Use Taxes.  Beginning July 1, 2027, 0.1 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 and Public Works Assistance Account Transfers.  The $57 million in annual transfers from the Public Works Assistance Account to the Move Ahead Washington Account are eliminated for the 2025-27 biennium.   Two $57 million annual transfers from the Public Works Assistance Account to the State General Fund are established for the 2025-27 biennium. 

Move Ahead Washington Flexible Account and State General Fund Transfers.   A $114 million transfer from the Multimodal Transportation Account to the State General Fund is established for fiscal year 2026.  The $57 million in annual transfers from the State General Fund to the Move Ahead Washington Flexible Account are suspended for the 2025-27 biennium.

Connecting Washington and State General Fund Transfers.  A $111.9 million transfer from the Multimodal Transportation Account to the State General Fund is established for fiscal year 2026. 

Tacoma Narrows Bridge 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.   Legislative intent is expressed that any non-toll accounts used to pay the deferred sales and use taxes on the TNB project will be reimbursed by toll revenues by December 31, 2032.   

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.  Legislative intent is expressed that any non-toll accounts used to pay the deferred sales and use taxes on the SR 520 Bridge Replacement project will be reimbursed by toll revenues by December 31, 2050.

State General Fund Transfers.  Two $304.7 million annual State General Fund transfers are established for the 2027-29 biennium.

The committee recommended a different version of the bill than what was heard.  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.

The committee recommended a different version of the bill than what was heard. CON:  The operating budget is already facing staff furloughs, facility closures, and other deep cuts.  Recognizing the need to stabilize the transportation budget, this bill does that at the expense of the important program and activities funded in the operating budget.  It is important to protect our general fund capacity, particularly because of the federal funding outlook.  This will redirect hundreds of millions of dollars in operating funds to transportation which will impact the ability to meet the state's paramount duty and other important obligations.  With the existing $16 billion shortfall and the ominous threats coming from the other Washington, the proposed funds transfers to transportation budget should not be made.