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Ericksen applauds measure
providing tax relief for
Bellingham businesses
Rep. Doug Ericksen, R-
Ferndale, is applauding the initial projections of a 2003 law intended
to provide uniformity and fairness to businesses that pay a municipal
business and occupation (B&O) tax.
House Bill 2030 overhauled the municipal B&O tax structure to provide
more uniformity and allow businesses to allocate and apportion their
income for city B&O tax purposes only to those cities in which they do
business. This prevents double taxation on the same activity.
For example, if a furniture store in Bellingham sells a couch to a
resident who lives in another city and delivers it there, only the city
of the resident receiving the couch can receive the municipal B&O tax
money. Prior to the passage of HB 2030, both cities could tax the sale
of the couch – causing a double taxation scenario.
“I’m happy to tell
businesses operating in Bellingham that they will no longer be overtaxed
by the city on their municipal B&O tax in the future,” said Ericksen.
“I’m glad this situation is being corrected and that fairness is
prevailing – our businesses need it.”
As part of HB 2030, the
Department of Revenue studied estimated impacts of the allocation and
apportionment rules on business taxpayers and city governments. Overall,
businesses should save over $23.3 million per year in municipal B&O
taxes when these rules become mandatory in 2008.
While two-thirds of that
amount, around $15.5 million, is from the city of Seattle, 38 other
cities are affected. According to Department of Revenue projections,
businesses that conduct transactions or activities in Bellingham,
combined, should save an estimated $632,000 annually. Other business and
cities’ numbers include: Aberdeen ($457,000); Bellevue ($2,023,000);
Bremerton ($346,000); Everett ($773,000); Olympia ($365,000); Tacoma
($1,505,000); and Tumwater ($305,000).
There are three main ways local governments can tax businesses:
regulatory licenses, revenue generating licenses, and the municipal B&O
tax. Only cities are authorized to levy a municipal B&O tax and the
rates are capped by state law and all classes must be taxed in the same
manner.
Washington also levies a B&O tax on all businesses operating in the
state. It is a tax on gross receipts – gross income, gross sales, or
value of products – meaning no deduction is allowed for costs of doing
business such as raw materials or employee wages.
Ericksen notes this is the only type of business tax in the country that
uses gross receipts as its base, which can be hard on smaller businesses
that have thin profit margins.
“Our B&O tax is onerous and disconcerting to any business already
operating in or looking to relocate to our state,” said Ericksen. “It’s
one of many structures we should take a long, hard look at as we
contemplate ways to make our state more attractive to employers.”
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For more information, contact:
John
Handy, Assistant Director: (360) 786-5758
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