AWC Legislative Bulletin - Volume 31, No. 2
January 18, 2008 (Plain Text Version)

Return to Graphical Version | Search back issues

In this issue:
What you Need to Know Now
From the Director: I-960 Causes Chilling Effect for Introduction of Tax or Fee Legislation
Energy & Telecommunications
Environment & Water
General Local Government
Infrastructure, Transportation & Economic Development
Land Use & Housing
Law & Justice
Municipal Finance
Personnel & Labor Relations
Online Legislative Advocacy Tools
AWC Legislative Contacts & Officers
City Legislative Action Conference (CLAC)

Municipal Finance

Governor’s Proposed Supplemental Budget

On December 18, 2007 the Governor released her proposed 2007-09 supplemental budget. During the first week of the legislative session, work sessions and public hearings of the proposed supplemental budget were held by the House Appropriations Committee and Senate Ways & Means Committee.

As was noted in last week’s Bulletin, the supplemental budget focuses on the state’s fiscal health, public safety, housing, ferries and storm recovery. For more information about how the proposed budget impacts cities visit AWC’s website at www.awcnet.org/fiscalhealth.

Streamlined Sales Tax Implementation Continues (HB 2543)

A few additional issues related to the streamlined sales tax agreement are expected to be considered this session.

On Tuesday, January 22 at 3:30 pm the Senate Ways & Means Committee will hold a work session on the progress of the streamlined sales tax agreement and the mitigation advisory committee. Jim Justin, AWC, will be a member of the panel along with representatives from the Department of Revenue (DOR) and business. A similar panel presentation was made to members of the House Finance Committee in November 2007.

AWC believes DOR is doing an outstanding job of educating the business community regarding the upcoming change to destination based sourcing. DOR is also working very closely with cities and counties to ensure mitigation is calculated and distributed as envisioned when the bill was passed. We appreciate their effort and attention to this very important tax policy change.

On Tuesday, January 22 at 10 am, the House Finance Committee will hear HB 2543, which was brought at the request of DOR. This legislation implements a national agreement amendment approved in July 2007 extending an exemption from compliance for florist wire-transfer flower deliveries until January 1, 2010. This would continue current practice in the industry, which had worked out a national agreement for consistent tax treatment several years ago.

In addition, in December 2007, the National Streamlined Sales Tax (SST) Governing Board voted unanimously to amend the SST agreement to provide an alternative method of sourcing in addition to the current requirement of destination-based sourcing under the agreement. Washington’s representatives did not have a vote on the proposal, but did speak in opposition to this alternative method. AWC also sent a letter to the Governing Board expressing concern with the alternative proposals, and their potential to impact the success of implementation efforts in our state.

The addition of this alternative will enable states to fully comply with the SST national agreement under either of two different sourcing alternatives. The current destination sourcing rules our state adopted last session with SSB 5089 remain the same. The new alternative adopted with this amendment would permit a version of origin-based sourcing for intrastate sales. This version of origin-based sourcing is not the same as currently exists in Washington State, so it would still result in tax shifts between a different set of jurisdictions and the need for a different mitigation system.

In addition, states that choose the origin-based sales tax option will not be eligible for full membership in national SST agreement until January 1, 2010, at the earliest, and then only if a total of at least five states have enacted this option. This would cost Washington several years of anticipated revenue.

AWC supports the Governor’s decision to stay the course and implement destination-based sourcing on July 1, 2008, with full mitigation of local impacts. We would oppose any efforts to delay or change our state’s implementation of the sourcing changes approved in SSB 5089.

Finally, the DOR mitigation advisory committee met in January to finalize recommendations for the implementation of mitigation for local governments as a result of the sourcing change. Later this spring DOR will take this information out to local governments for feedback and explanation in anticipation of full implementation of destination-based sourcing on July 1, 2008. Information about mitigation can be found on DOR’s website at www.destinationtax.dor.wa.gov.

If you have any questions, please contact Jim Justin or Sheila Gall at jimj@awcnet.org or sheilag@awcnet.org.

Voter-Approved Increases in Property Tax Levy Limitations (HB 2545)

HB 2545 is a "fix" to ESB 5498, which passed during the 2007 legislative session. ESB 5498 was intended to make a few simple changes to the voter-approved levy lid lift and three-tenths percent sales and use tax:

To modify non-supplanting language with both revenue sources; and
Extend the six-year levy lid lift authority to special purpose districts.

After ESB 5498 passed, DOR interpreted the law to mean that at the end of any multiple year lid lift the levy rate would continue at the then current rate unless the ballot title explicitly called for the rate to be rebased. This was not AWC’s interpretation of the bill nor our intention.

On Friday, January 18 the House Committee on Finance held a public hearing on HB 2545. This bill clarifies that voter-approved six-year levy lid lifts will not permanently increase a taxing district’s levy base, unless it is explicitly stated in the ballot title.

Annual Property Revaluation (HB 2611)

On Friday, January 25 at 8 am the House Finance Committee will hold a public hearing on a number of property tax bills. The bill of most interest to cities is HB 2611, which would require all counties to conduct an annual revaluation of property by 2012. The mandate is conditional upon the DOR providing guidance and financial assistance to counties that are not yet on an annual revaluation cycle. We will work with the counties to secure the funds necessary for implementation of this bill.

AWC supports annual evaluations to ensure new construction is placed on the tax rolls in a timely fashion and to avoid significant swings in valuations that may occur if an evaluation is only conducted every four years.

Sales and Use Tax Exemptions for Prescribed Mobility Enhancing Equipment (SHB 1324)

The House Finance Committee held a public hearing on SHB 1324 on Tuesday, January 15 and executive action on Friday, January 18. Currently, certain prescribed medical devices, nebulizers and medicines are exempt from sales and use tax. This bill would amend the law to provide an additional exemption for components of prosthetic devices and prescribed mobility enhancing equipment such as wheel chairs and walkers. Purchasers would be required to pay sales tax to the vendor and then apply to the DOR for a refund. The impact to local governments is expected to be $3.8 million by the 2011-2013 biennium.