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The following bills have been passed by the 2011 Legislature and signed by the Governor.

Retail sales tax

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Narrowing the nonresident sales tax exemption

Narrowing the nonresident sales tax exemption

Senate Bill (SB) 5763 (Chapter 7, Laws of 2011)

Effective July 1, 2011

Modifies the nonresident retail sales tax exemption (RCW 82.08.0273) to explicitly disallow nonresidents from claiming the exemption if they reside in a jurisdiction that imposes a value added tax, gross receipts tax on retailing activities, or similar generally applicable tax, and the rate of the tax is 3 percent or more. The statute previously excluded only residents of jurisdictions imposing a retail sales or use tax of 3 percent or more.

Last year the Department of Revenue determined that residents of British Columbia, which replaced its provincial sales tax with a value added tax, referred to as the harmonized sales tax (HST), were eligible for the nonresident retail sales tax exemption. The Skagit County Superior Court subsequently issued a preliminary injunction ordering the Department to advise retailers that residents of Canadian provinces with an HST do not qualify for the nonresident retail sales tax exemption. This legislation permanently disqualifies residents of Canadian provinces with an HST from the nonresident retail sales tax exemption.

B&O tax

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B&O tax deduction for mental health service providers

B&O tax deduction for mental health service providers

2nd Engrossed Substitute House Bill (2ESHB) 1224 (Chapter 19, Laws of 2011 1st Special Session)

Effective August 24, 2011

Provides a B&O tax deduction for health or social welfare organizations for amounts received as compensation for mental health services provided under a government-funded health program.

The bill also provides regional support networks a B&O tax deduction for pass-through amounts. Amounts qualifying for a deduction are those received from the state for distribution to a health or social welfare organization that is entitled to deduct the distribution as described in the previous paragraph.

These deductions apply to amounts received on or after August 1, 2011.

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B&O tax deduction for health and social welfare organizations

B&O tax deduction for health and social welfare organizations

Engrossed Substitute House Bill (ESHB) 1902 (Chapter 163, Laws of 2011)

Effective July 22, 2011

Provides a business and occupation (B&O) tax deduction for health and social welfare organizations for amounts received as compensation for providing child welfare services under a government-funded program. 

A deduction from B&O tax is also provided to taxpayers for amounts received from the state of Washington for distribution to a nonprofit health or social welfare organization that is eligible to deduct the distribution as described in the previous paragraph.

These deductions apply to amounts received on or after August 1, 2011.

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Real Estate Brokerage Commissions

Real Estate Brokerage Commissions

Senate Bill (SB) 5083 (Chapter 322, Laws of 2011)

Effective July 22, 2011

Addresses the basis for determining taxable income for businesses providing real estate brokerage services in this state. The bill also updates terms and definitions for consistency with real estate licensing laws.

The legislation provides that when a real estate commission on a particular transaction is divided among real estate firms at the closing of the transaction, each firm receiving part of the commission must pay business and occupation (B&O) tax only upon its respective share of the total commission.

Incentives

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Sales tax exemption for manufacturing machinery & equipment (M&E) clarified

Sales tax exemption for manufacturing machinery & equipment (M&E) clarified

House Bill (HB) 1347 (Chapter 23, Laws of 2011)

Effective April 11, 2011

Clarifies that for the purposes of the manufacturing machinery and equipment sales and use tax exemption (commonly referred to as the “M&E exemption”), public service businesses, for activities taxable under the state public utility tax, and state agencies are not manufacturers. The bill also clarifies that the production of class A or exceptional quality bio-solids by a wastewater transfer/treatment facility is considered a manufacturing activity.

 The bill also defines printing newspapers or other materials as a manufacturing activity for purposes of the M&E exemption. This bill is effective retroactively to any tax period open for assessment or refund of taxes.

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Property Management B&O Tax Deduction

Property Management B&O Tax Deduction

Senate Bill (SB) 5289 (Chapter 26, Laws of 2011 1st Special Session)

Effective August 24, 2011

Repeals the existing B&O tax exemption under RCW 82.04.394 for certain payments received by qualifying property management companies related to on-site personnel. The bill replaces that exemption with a B&O tax deduction for qualifying property management companies. The new deduction is available for amounts received for gross wages, benefits, and payroll taxes paid to, or for, “personnel performing on-site functions.” The new deduction allows for personnel to perform on-site functions at the property owner’s property or to centrally perform on-site functions for the owner’s property. The new deduction applies to nonprofit property management companies providing property management services for low-income housing. It also applies to for-profit property management companies that either provide property management services to a housing authority or to a limited liability company or limited partnership of which the sole managing member or sole general partner is a housing authority. 

Special Notice - New Law Expands Property Management B&O Tax Exemption (pdf)

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Employee Meals

Employee Meals

Senate Bill (SB) 5501 (Chapter 55, Laws of 2011)

Effective July 1, 2011

Provides an exemption from sales tax, use tax, and business and occupation tax for restaurant operators  on employee meals  when the meals  are provided to employees without a specific charge. Previously such meals were taxed based on the value of the meals.

This exemption extends only to “restaurants.” Restaurant is defined to be any establishment having special space and accommodation where food and beverages are regularly sold to the public for immediate, but not necessarily on-site, consumption.

The term restaurant excludes grocery stores, mini-markets, and convenience stores or businesses making sales through vending machines or through mobile sales units such as catering trucks or sidewalk vendors of food or beverage items.

Miscellaneous

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Master Licensing Service

Master Licensing Service

Substitute House Bill (SHB) 2017 (Chapter 298, Laws of 2011)

Effective July 1, 2011

Transfers administration of the Master License Service (MLS) program from the Department of Licensing to the Department of Revenue (DOR). MLS staff will join DOR by July 1, 2011. Responsibilities transferred include:

  • Administering nearly 300 state and local business licenses through the MLS.
  • Establishing application and renewal fees by rule, subject to new statutory maximums ($19 and $11 respectively).
  • Administering a grant program to provide funding assistance to counties and cities that issue business licenses and want to join the MLS.
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Quarterly taxpayers required to file and pay electronically

Quarterly taxpayers required to file and pay electronically

Engrossed House Bill (EHB) 1357 (Chapter 24, Laws of 2011)

Effective July 22, 2011

Requires quarterly taxpayers to file and pay their business excise taxes electronically.   The change goes into effect with the Quarter 2, 2011 excise tax return, due July 31.  
E-file, our online filing tool, is found on our web site at http://dor.wa.gov. If you are a new user, you will need to create a logon ID and password. If you are new to paying electronically, the Department offers these options:

  • Electronic funds transfer (EFT)
  • E-check
  • Credit cards (Visa, MasterCard, American Express or Discover)

For more information on this new legislation, visit http://dor.wa.gov/mandatorye-file or call 1-877-345-3353.

 

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High Tech R&D Credit Voluntary Donation Program

High Tech R&D Credit Voluntary Donation Program

Engrossed Substitute House Bill (ESHB) 2088 (Chapter 13, Laws of 2011 1st Special Session)

Effective June 6, 2011

Authorizes persons eligible for the high technology research and development B&O tax credit to contribute all or any portion of the credit to the “Opportunity Expansion Program,” which provides funding for state institutions of higher education to implement innovative programs to increase the number of bachelor’s degrees in certain programs of study. 

The bill also created the Opportunity Scholarship Program. Together, these programs are intended to ease the impact of tuition increases, increase the number of baccalaureate degrees in high employer demand and other programs of study, and invest in programs and students to meet labor market demands.

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Tax statute clarifications and technical corrections

Tax statute clarifications and technical corrections

Substitute Senate Bill (SSB) 5167 (Chapter 174, Laws of 2011)

Effective July 22, 2011 – except section 206, which is effective July 1, 2012

Various statutes contain out of date references and definitions, technical errors, multiple amendments to certain statutes, and obsolete language.  This bill amends certain excise tax and property tax statutes to update references and definitions to reflect current law, provide numerous clarifications and technical corrections and merge certain tax statutes removing obsolete language simplifying statutes. This bill has no state revenue impact.

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Retainage of federally funded transportation projects

Retainage of federally funded transportation projects

Substitute House Bill (SHB) 1384 (Chapter 231, Laws of 2011)

Effective July 22, 2011

This bill was requested by the Department of Transportation.  It exempts public improvement contracts for highway, road and street project funded by federal transportation funds from the retainage requirement.  Contract bonds will be used instead of retainage in the event there are claims or unpaid taxes. 

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Notice of lien to secure payment of delinquent taxes in lieu of a warrant

Notice of lien to secure payment of delinquent taxes in lieu of a warrant

House Bill (HB) 1239 (Chapter 131, Laws of 2011)

Effective January 1, 2012

In lieu of filing a tax warrant with a superior court, the Department of Revenue may file a notice of lien for any real property in which the taxpayer has an ownership interest if the total amount of the warrant exceeds $25,000, and DOR determines that issuing the notice of lien would best protect the state's interest in collecting the amount due on the warrant. A notice of lien is a lien against specific real property as opposed to all of the taxpayer’s real property in the county in which the tax warrant was filed.

If a tax warrant has already been filed with a superior court, DOR may issue and record a notice of lien against real property and file a conditional satisfaction of the warrant with the court if DOR determines that this is in the best interest of collecting the amount due on the warrant. The filing of a conditional satisfaction releases any liens on real or personal property.

The filing of a notice of lien or a conditional satisfaction of a tax warrant does not prevent the Department from filing or re-filing the tax warrant secured by the notice of lien if the warrant remains unpaid for six months following the issuance of the notice of lien or the Department determines that filing or re-filing the tax warrant is in the best interest of collecting the balance due on the warrant.

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Tax Laws – housekeeping bill

Tax Laws – housekeeping bill

House Bill (HB) 1346 (Chapter 20, Laws of 2011)

Effective August 24, 2011

This bill corrects errors and clarifies tax statutes.  Specifically, the bill clarifies that nexus, once established under the statutory nexus standards, lasts through the following tax year.  The bill also repeals the statutes that mandate two studies that are redundant:

  • Renewable energy system cost recovery incentive study and
  • Aluminum smelter tax incentives annual report.

This bill also temporarily narrows the scope of the Tax Exemption Study conducted by the Department.  For the study due in January 2012, the Department does not have to prepare or update any tax exemption that would not be likely to increase state revenue if the exemption was repealed.