HOUSE BILL REPORT

EHB 1507

BYRepresentatives Appelwick, Taylor, Grimm, Haugen, Holland and Locke; by request of Governor Gardner

Revising the sales and use tax exemptions for food products sold by vendors required to have a worker's permit under RCW 69.06.010.

House Committe on Ways & Means/Revenue

Majority Report:  Do pass.  (9)

      Signed by Representatives Appelwick, Chair; Basich, Dellwo, Holland, Rust, Schoon, Taylor, Valle and Winsley

House Staff:Bill Freund (786-7136)

AS PASSED HOUSE FEBRUARY 15, 1988

BACKGROUND:

Food sold for human consumption is generally exempt from the retail sales tax.  The exemption does not apply for the following:

1.  When the food product is sold in an establishment having tables, chairs or counters; or

2. When the food product is sold for immediate consumption on or near the premises even though the food may be packaged or wrapped; or

3.  When the food product is sold for consumption within a place having an admission charge; or

4.  When the food product is sold from a vending machine, (in which case the tax is levied on 57% of the sales).

These provisions can result in unequal application of the tax.  For example, a deli having eating facilities has to charge tax on sandwiches even though they may be sold on a take out basis.  On the other hand, the same sandwich sold from a super market not having eating facilities is not subject to tax.

SUMMARY:

Extends the sales tax to sales of prepared food items for which retail vendors are required to have a food handler's permit in order to prepare the item for sale.  Included are sandwiches prepared or chicken cooked on the premises, deli trays, home delivered pizzas or meals, and salad bars.

Exemptions from the sales tax even though a food handler's permit is required are: raw meat and fish; meat and cheese sliced and wrapped by store employees; bakeries which only sell baked goods; baked goods when not sold as part of meals by bakeries; bulk foods sold from bins and barrels such as flour, fruits and vegetables; and food products prepared on the premises requiring further preparation, (except for uncooked pizzas).

EFFECT OF SENATE AMENDMENT(S):  Deletes the sales tax exemption for foods prepared on the premises which require further preparation.

Adds an emergency clause and provides a June 1, 1988 effective date.

Requires the Department of Revenue to conduct a study of costs and problems faced by retailers as a result of sales tax base and rate changes by state and local governments.  The Department is required to report to the House and Senate Ways and Means Committees by October 1, 1988.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Available.

House Committee ‑ Testified For:    Bill Wilkerson, Dept. of Revenue.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    There are equity problems because of different tax treatment for essentially the same product.  For example a pizza delivered from an establishment without tables and chairs is not subject to tax.  One delivered from an establishment with tables and chairs is subject to tax.

The purpose of the bill is to treat takeout food in the same way irrespective of the presence of tables and chairs.

House Committee - Testimony Against:      None Presented.

VOTE ON FINAL PASSAGE:

      Yeas 71; Nays 25; Excused 2

Voting Nay: Representatives Amondson, Ballard, Barnes, Beck, Betrozoff, Bumgarner, Butterfield, Chandler, Doty, Ferguson, Fuhrman, Hankins, King P, Lewis, Miller, Padden, Patrick, Sanders, Schmidt, Schoon, Silver, Sommers D, Walker, Williams B, Williams J

Excused:    Representatives Smith C, Vekich