HOUSE BILL REPORT

HB 66

BYRepresentatives Rayburn, Nealey, Prince, Kremen, McLean, Fuhrman, Betrozoff, P. King, Chandler, Lewis and Doty

Lowering the business and occupation tax rate on the manufacture of barley into pearl barley.

House Committe on Agriculture & Rural Development

Majority Report:     Do pass.  (14)

     Signed by Representatives Rayburn, Chair; Kremen, Vice Chair; Baugher, Bristow, Brooks, Chandler, Doty, Grant, Holm, Jacobsen, McLean, Moyer, Nealey and Rasmussen.

House Staff:Kenneth Hirst (786-7105)

Rereferred House Committee on Ways & Means/Revenue

Majority Report:     Do pass.  (9)

     Signed by Representatives Appelwick, Chair; Basich, Grimm, Holland, Madsen, Rust, Schoon, Valle and Winsley.

House Staff:    Susan Kavanaugh (786-7145)

AS PASSED HOUSE MARCH 16, 1987

BACKGROUND:

State law imposes a business and occupation (B & O) tax on manufacturing activities at a rate equal to 0.484 percent of the value of the products manufactured.  The rate is composed of a base rate of 0.44 percent plus a 10 percent tax surcharge.  The activities that qualify as manufacturing activities for the purpose of that tax are defined broadly by statute.

State law provides exemptions from B & O taxation for certain activities and reduced rates of taxation for others.  The milling of wheat and the manufacturing of soybeans into soybean oil and sunflower seeds into sunflower oil are among the activities that have been granted a reduced rate.  These activities are taxed at the rate equal to 0.138 percent of the value of the product manufactured (that is, a base rate of one eighth of one percent plus the ten percent tax surcharge and rounded to the nearest one-thousandth of one percent).

SUMMARY:

The business and occupation tax on the manufacturing of barley into pearl barley is set at 0.138 percent of the value of the product manufactured (that is, a base rate of one eighth of one percent plus the ten percent tax surcharge and rounded to the nearest one-thousandth of one percent).

Revenue:   The B & O tax rate on the manufacturing of barley into pearl barley is reduced from 0.484 percent to 0.138 percent.

Fiscal Note:    Attached.

House Committee ‑ Testified For:     (Agriculture & Rural Development)  Representative Nealey; Mike Schwisow, Department of Agriculture.

(Ways & Means/Revenue)  Representative Rayburn.

House Committee - Testified Against: (Agriculture & Rural Development)  None Presented.

(Ways & Means/Revenue)  None Presented.

House Committee - Testimony For:     (Agriculture & Rural Development)  The activity was being taxed at the wholesale rate but has recently been designated by the state as a manufacturing activity.  The activity more closely resembles the milling of wheat; the bill would set the B & O tax for the activity at the same rate as is set for milling wheat.

(Ways & Means/Revenue)  Pearling barley is akin to milling wheat.

House Committee - Testimony Against: (Agriculture & Rural Development)  None Presented.

(Ways & Means/Revenue)  None Presented.