Report - 2021 03 16 A28696 D231762 Bill Report 1521 S E Sbr Bfst Ta 21

Summary

A Washington Senate Bill Report on ESHB 1521, an act relating to supporting warehousing and manufacturing job centers, prepared for the Senate Committee on Business, Financial Services & Trade as of March 11, 2021. The report states that the bill passed the House on 3/3/21 by a vote of 97-0. Its background section describes the Streamlined Sales and Use Tax Agreement, local mitigation payments, and EHB 1948, which the report states the Governor vetoed on April 3, 2020. The bill summary states that qualified cities that received a quarterly mitigation payment of at least $60,000 on June 30, 2020 would receive quarterly payments, reduced by 20 percent each year beginning July 1, 2022, with payments ending July 1, 2026. The report closes with a staff summary of supporting public testimony and a list of those testifying.

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                             SENATE BILL REPORT
                                  ESHB 1521

                                       As of March 11, 2021

Title: An act relating to supporting warehousing and manufacturing job centers.

Brief Description: Supporting warehousing and manufacturing job centers.

Sponsors: House Committee on Finance (originally sponsored by Representatives Entenman,
    Sullivan, Callan, Jacobsen, Taylor, Stokesbary, Gregerson and Ormsby).

Brief History: Passed House: 3/3/21, 97-0.
     Committee Activity: Business, Financial Services & Trade: 3/11/21.


                                      Brief Summary of Bill
           • Creates the Manufacturing and Warehousing Job Centers Account.
           • Provides for mitigation payments for the support of manufacturing and
             job centers in manufacturing and warehousing qualified local taxing
             districts negatively impacted by the Streamlined Sales and Use Tax
             Agreement.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Clinton McCarthy (786-7319)

     Background: Retail Sales and Use Tax. Retail sales taxes are imposed on retail sales of
     most articles of tangible personal property, digital products, and some services. A retail
     sale is a sale to the final consumer or end user of the property, digital product, or service. If
     retail sales taxes were not collected when the user acquired the property, digital product, or
     service, then use tax applies to the value of the property, digital product, or service when
     used in this state. The state, all counties, and all cities levy retail sales and use taxes. The
     state sales and use tax rate is 6.5 percent. Local sales and use tax rates vary from 0.5
     percent to 3.9 percent, depending on the location.




     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                       ESHB 1521
     Nexus. Nexus is required before a taxing jurisdiction can impose taxes on an entity. In the
     case of retail sales taxes, nexus is necessary in determining whether an out-of-state business
     selling products into a state is liable for collecting retail sales taxes for that state. As the
     result of a United States Supreme Court decision, Washington adopted requirements
     imposing retail sales tax collection requirements, as well as business and occupation tax
     obligations, on out-of-state sellers.

     Streamlined Sales and Use Tax Agreement. In 2007, legislation was enacted fully adopting
     the Streamlined Sales and Use Tax Agreement (SSUTA).

     The SSUTA includes provisions for determining where a sale is deemed to occur for local
     sales and use tax purposes. As part of the legislation, the Streamlined Sales and Use Tax
     Mitigation Account was created to mitigate the effect of the change in sourcing rules to
     negatively impacted local jurisdictions. Each July 1st, the state treasurer must transfer an
     amount determined by the Department of Revenue (DOR) to fully mitigate negatively
     impacted local jurisdictions. DOR determines each local jurisdiction's annual losses.
     Distributions are made quarterly representing one-fourth of a jurisdiction's annual loss, less
     voluntary compliance revenue from the previous quarter.

     In 2017, the Legislature repealed local mitigation payments, effective October 1, 2019.
     Until that time, payments must be adjusted to reflect the impact of marketplace fairness on
     local tax revenues and will be made only to cities, counties, and public facilities districts.
     Selected jurisdictions may have qualified for mitigation payments under the 2019-2021
     omnibus operating budget.

     House Bill 1948. During the 2020 session, the Legislature passed EHB 1948. Under EHB
     1948, qualified local taxing districts negatively impacted by the SSUTA receive annual
     mitigation payments each July 1st. To qualify, a local taxing district must be a city and
     have received a mitigation payment of at least $150,000 in calendar year 2018 from the
     Streamlined Sales and Use Tax Mitigation Account (mitigation account). In addition, the
     taxing district must continue to have local sales tax revenue loss due to the sourcing
     provisions in the SSUTA.

     Beginning July 1, 2020, DOR must calculate each qualified taxing district's annual loss.
     The annual loss is calculated by comparing at least 12 months of tax return data from before
     and after July 1, 2008. Each quarter, distributions are made from the Warehousing and
     Manufacturing Jobs Center Account (account) created in this act. Distributions from the
     account will be an amount equal to one-fourth of the taxing district's annual loss. DOR will
     reduce this amount by the voluntary compliance revenue and marketplace fairness revenue.

     On April 3, 2020, the Governor fully vetoed EHB 1948. In the veto statement, the
     Governor cited dramatically changed circumstances resulting from the COVID-19
     pandemic since the Legislature's approval of the 2020 supplemental operating budget.


Senate Bill Report                              -2-                                       ESHB 1521
     Summary of Bill: Qualified local taxing districts negatively impacted by the SSUTA may
     receive annual mitigation payments each July 1st. To qualify, a local taxing district must be
     a city and have received a quarterly streamlined sales tax mitigation payment of at least
     $60,000 on June 30, 2020.

     Beginning July 1, 2021, DOR must provide each qualified local taxing district a quarterly
     mitigation payment equal to the payment provided to that taxing district on June 30, 2020.
     Beginning July 1, 2022, the amount of the quarterly mitigation payments must be reduced
     by 20 percent from the previous year's payment that same quarter for each qualified local
     taxing district.

     The quarterly distribution must be made from the account. Expenditures from the account
     may be used only for mitigating the negative fiscal impacts to local taxing jurisdictions as
     the result of sourcing changes from the SSUTA.

     Payments end July 1, 2026.

     Appropriation: None.

     Fiscal Note: Available.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony: PRO: The Governor vetoed SHB 1948 after the
     2020 session in error. Diverse communities have been negatively impacted by this shift.
     Wealthy cities saw a big increase to revenue by changing the point of sale. Kent is home to
     the fourth largest warehousing center in the United States. They have lost over $3 million
     per year after the changes were made to the sales tax distributions. These communities
     depend on this revenue to fund parks and roads. This is a fundamental fairness and equity
     issue. Our warehouses provide an enormous benefit to the ports. This investment is good
     for the overall health of the state's economy. There is an unusually large amount of freight
     traffic on the roads near warehouses and prematurely age infrastructure. The proposed
     legislation will be of great assistance. We all rely on the supply chains based on the
     warehouses in Washington State.

     Persons Testifying: PRO: Representative Debra Entenman, Prime Sponsor; Dana Ralph,
     City of Kent; Mary Lou Pauly, City of Issaquah; Carolyn Logue, South Sound Chamber of
     Commerce Legislative Coalition; Allan Ekberg, mayor, City of Tukwila; Nancy Backus,
     City of Auburn; Bill Pugh, mayor, City of Sumner; Briahna Murray, contract lobbyist for
     Cities of Kent and Issaquah.

     Persons Signed In To Testify But Not Testifying: No one.


Senate Bill Report                             -3-                                       ESHB 1521


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