Washington Business Fall 2015 | Legislative Review | Page 36
2015 legislative review
HB 1678/SB 5541
HB 2055
Failed/AWB Supported
Passed/AWB Supported
e-commerce tax fairness
This measure was agency request legislation
from the Department of Revenue (DOR).
It was an agreed-to bill with the business
community to improve tax fairness for businesses engaged in electronic commerce by
eliminating inconsistent tax treatment and
ensuring that prewritten computer software
developers remain eligible for the manufacturing machinery and equipment sales and
use tax exemption. It also provides greater
clarity for out-of-state sellers concerning
their tax obligations by establishing clickthru nexus. Regrettably, in the final budget
deal only the click-through nexus provision
was passed, leaving employers vulnerable
to fluctuating interpretations by the DOR
on what is or is not digital automated services or goods for purposes of determining
an exempt business input. This not only
creates problems regarding interpretation,
but also creates difficulty in reaching agreement with DOR on compromise legislation
in the future when lawmakers only accept
the taxation side of a package and not the
associated reforms.
HB 1769/SB 5665
extending the high-tech
r&d tax incentive
Failed/AWB Supported
Unfortunately, the final budget deal did
not include a continuation of the expired
high-technology research and development (R&D) tax incentive. This puts
Washington at a competitive disadvantage
when trying to retain, attract or grow hightech companies and jobs. First adopted in
1994 and renewed in 2004, Washington is
now one of seven states with no R&D tax
incentive. Annual reports from companies
filed with the Department of Revenue document increased employment with high
wages, health care and retirement benefits.
Supported by AWB, this incentive sought
to help employers achieve higher survival
rates, increase investment in R&D and
development of new products.
34 association of washington business
initiatives fiscal impact
With lawmakers under pressure to fund
the narrowly-approved Initiative 1351 to
reduce class sizes, Rep. Norm Johnson,
R-Yakima, introduced legislation to provide citizens greater information on the
impact of initiatives on the state budgeting process. House Bill 2055, which was
signed into law by the governor, changes
the statement deadlines for the attorney
general and fiscal impact statements so
ballot committees are able to consider the
information as they prepare the pro and
con statements published in the state Voters’ Pamphlet. AWB supported the bill to
ensure voters are better informed about
the cost and impact of ballot measures.
HB 2134
tax preference disclosure
of confidential data
Failed/AWB Opposed
Sponsored by Rep. Reuven Carlyle,
D-Seattle, this bill sought to increase
the recordkeeping and reporting obligations on taxpayers. These requirements
would destroy taxpayer confidentiality
and burden many small businesses with
new reporting requirements. It would
impose confusing and inconsistent
reporting requirements with risk of substantial penalties on data that is already
reported. AWB opposed this legislation
and the bill failed to pass.
HB 2150
b&o tax reform
Failed/AWB Opposed
Introduced by Rep. Drew MacEwen,
R-Union, this bill sought to reform the
business and occupation tax (B&O) system
by reducing the number of classifications
and changing the tax rates. Modeled after
the Texas gross margins tax, House Bill
2150 would have replaced existing classifications and rates with three new rates:
services, 3.75 percent; retail/wholesale/
manufacturing/ banking, 1.6 percent;
and telecom at 1.2 percent. A $500,000
deduction was proposed to offset the rate
increases along with other deductions.
While well-intended, such massive tax
restructuring is complicated and would
need greater review, stakeholder input
and industry economic modeling. AWB
opposed the measure and asked lawmakers to consider less intrusive forms of
collapsing B&O tax classifications without
changing rates, as proposed in SB 5688
during the 2013 and 2014 sessions.
HB 2224
tax increases
Failed/AWB Opposed
Sponsored by Rep. Reuven Carlyle,
D-Seattle, this was the primary tax bill in
the regular session that House Democrats
relied on when balancing their operating
budget. It sought to raise $1.5 billion in
new taxes by repealing or narrowing tax
exemptions, imposing a 5 percent capital
gains income tax, and creating a five-tier
economic nexus standard for online retail
sales. The bill also sought to increase the
tax on service companies with a 0.3 percent business and occupation tax. AWB
opposed this measure and it failed to
pass out of committee, though House
Democrats continued to push for taxes
throughout the entire legislative session
and into the third special session. At that
time an agreement was ultimately reached
on a smaller tax package found in SB 6138.
HB 2266/SB 6088
class-size reductions
under i-1351
Passed/AWB Supported
Voters narrowly passed Initiative 1351 by a
vote of 50.96 percent in 2014, creating an
immediate $2 billion dollar budget hole
for lawmakers to address. This came in
addition to the obligation under McCleary
to further fund K-12 education. The governor did not include funding for this
initiative in his first budget proposal, nor
did lawmakers in the House or Senate.