Multiple Agency Fiscal Note Summary and Revenue Note — 5483 SB, Digital processing services
Summary
Multiple Agency Fiscal Note Summary for 5483 SB, titled Digital processing services, followed by a Department of Revenue Fiscal Note (agency 140). Part I of that note lists total estimated cash receipts of (41,410,000) in FY 2024, (51,910,000) in FY 2025 and (93,320,000) for 2023-25, and expenditures of 29,300 in FY 2024, 8,600 in FY 2025 and 37,900 for 2023-25 from GF-STATE. The narrative states that the bill extends the sales and use tax exemptions for sales to a business of digital goods purchased solely for business purposes to include digital automated services purchased by a financial institution solely for business purposes.
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“Multiple Agency Fiscal Note Summary and Revenue Note — 5483 SB, Digital processing services.”
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Multiple Agency Fiscal Note Summary
Bill Number: 5483 SB Title: Digital processing services
Estimated Cash Receipts
Agency Name 2023-25 2025-27 2027-29
GF-State NGF-Outlook Total GF-State NGF-Outlook Total GF-State NGF-Outlook Total
Department of (93,170,000) (93,170,000) (93,320,000) (111,240,000) (111,240,000) (111,420,000) (122,200,000) (122,200,000) (122,400,000)
Revenue
Total $ (93,170,000) (93,170,000) (93,320,000) (111,240,000) (111,240,000) (111,420,000) (122,200,000) (122,200,000) (122,400,000)
Agency Name 2023-25 2025-27 2027-29
GF- State Total GF- State Total GF- State Total
Local Gov. Courts
Loc School dist-SPI
Local Gov. Other (41,550,300) (49,608,900) (54,489,599)
Local Gov. Total (41,550,300) (49,608,900) (54,489,599)
Estimated Operating Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total
Department of .2 37,900 37,900 37,900 .0 0 0 0 .0 0 0 0
Revenue
Total $ 0.2 37,900 37,900 37,900 0.0 0 0 0 0.0 0 0 0
Estimated Capital Budget Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs Bonds Total FTEs Bonds Total FTEs Bonds Total
Department of Revenue .0 0 0 .0 0 0 .0 0 0
Total $ 0.0 0 0 0.0 0 0 0.0 0 0
Estimated Capital Budget Breakout
Prepared by: Cheri Keller, OFM Phone: Date Published:
(360) 584-2207 Final
FNPID 66028
:
FNS029 Multi Agency rollup
Department of Revenue Fiscal Note
Bill Number: 5483 SB Title: Digital processing services Agency: 140-Department of Revenue
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
Account FY 2024 FY 2025 2023-25 2025-27 2027-29
GF-STATE-State (10,330,000) (12,960,000) (23,290,000) (27,810,000) (30,550,000)
01 - Taxes 01 - Retail Sales Tax
GF-STATE-State (31,010,000) (38,870,000) (69,880,000) (83,430,000) (91,650,000)
01 - Taxes 10 - Compensating Tax
Performance Audits of Government (20,000) (20,000) (40,000) (40,000) (50,000)
Account-State
01 - Taxes 01 - Retail Sales Tax
Performance Audits of Government (50,000) (60,000) (110,000) (140,000) (150,000)
Account-State
01 - Taxes 10 - Compensating Tax
Total $ (41,410,000) (51,910,000) (93,320,000) (111,420,000) (122,400,000)
Estimated Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.3 0.1 0.2
Account
GF-STATE-State 001-1 29,300 8,600 37,900
Total $ 29,300 8,600 37,900
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
X
form Parts I-V.
If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
Capital budget impact, complete Part IV.
X Requires new rule making, complete Part V.
Legislative Contact: Clinton McCarthy Phone:
360-786-7319 Date: 01/24/2023
Agency Preparation: Taylor Culp Phone:
360-534-1511 Date: 01/25/2023
Agency Approval: Valerie Torres Phone:
360-534-1521 Date: 01/25/2023
OFM Review: Cheri Keller Phone:
(360) 584-2207 Date: 01/26/2023
Request # 5483-1-1
Form FN (Rev 1/00) 180,283.00 1 Bill # 5483 SB
FNS062 Department of Revenue Fiscal Note
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
CURRENT LAW:
Retail sales tax is due on retail sales of digital goods, digital automated services (DAS), digital codes, and services provided
by the seller exclusively in connection with these products. However, the tax does not apply to the sale to a business of
digital goods, and services rendered in respect to digital goods, if the digital goods and services rendered in respect to digital
goods are purchased solely for business purposes. This exemption also applies to the sale to a business of a digital code if all
the digital goods obtained with the code are used solely for business purposes.
Payment processing services, such as electronic credit card processing activities, and data processing services are excluded
from the definition of "digital automated services" and are not included within the definition of “retail sale” for sales tax
purposes. As a result, payment processing and data processing services are not subject to retail sales tax.
The retail sale of two or more items for one nonitemized price (a “bundled transaction”) is generally subject to retail sales
tax if the retail sale of any of the items included in the bundled transaction would be subject to retail sales tax. Thus, while a
stand-alone sale of data processing or payment processing services is not subject to retail sales tax, a bundled transaction
involving data processing or payment processing services and a product that is subject to retail sales tax, such as prewritten
computer software, would be subject to retail sales tax.
PROPOSAL:
This bill extends the sales and use tax exemptions for sales to a business of digital goods purchased solely for business
purposes to include digital automated services purchased by a financial institution solely for business purposes.
"Financial institution" means a bank, trust company, mutual savings bank, savings and loan association, or credit union
authorized to do business and accept deposits in this state under state or federal law.
The new tax preference performance provisions do not apply to this bill (see section 4 of the bill).
EFFECTIVE DATE:
The bill takes effect 90 days after final adjournment of the session.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate,
the detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived.
Explanation of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
ASSUMPTIONS:
- Some uncertainty exists on the part of DAS vendors and financial institutions as to when a particular transaction involves
digital automated services (DAS). As a result, some vendors may not be collecting retail sales tax from financial institutions
on sales of DAS, and financial institutions may not be paying the use tax on some purchases of DAS.
- Washington-chartered banks pay retail sales tax or use tax on purchases of DAS.
- Out-of-state banks paying use tax to Washington pay either retail sales tax or use tax on purchases of DAS.
- Out-of-state banks not paying use tax to Washington are also not paying retail sales tax on purchases of DAS used in
Washington. This estimate does not include the impact from exempting these taxpayers.
- Twenty-five percent of use tax paid by credit unions is for DAS purchases.
- Multiplying taxable income reported for business and occupation tax purposes under the service and other activities
classification by 7.29% determines the bank's estimated DAS purchases. Audit data informed the ratio of DAS purchases
in relation to a bank’s Washington business activity.
Request # 5483-1-1
Form FN (Rev 1/00) 180,283.00 2 Bill # 5483 SB
FNS062 Department of Revenue Fiscal Note
- This estimate assumes the legislation is effective July 21, 2023, and is implemented on August 1, 2023.
- Local revenue estimates use the statewide average local sales and use tax rate of 2.9231%.
DATA SOURCES:
- Department of Revenue excise tax return and audit data
- Economic and Revenue Forecast Council November 2022 forecast
REVENUE ESTIMATES:
This bill decreases state revenues by an estimated $41.4 million in the 10 months of impacted collections in fiscal year 2024,
and by $51.9 million in fiscal year 2025, the first full year of impacted collections.
This bill also decreases local revenues by an estimated $18.6 million in the 10 months of impacted collections in fiscal year
2024, and by $23.3 in fiscal year 2025, the first full year of impacted collections.
TOTAL REVENUE IMPACT:
State Government (cash basis, $000):
FY 2024 - ($ 41,410)
FY 2025 - ($ 51,910)
FY 2026 - ($ 54,370)
FY 2027 - ($ 57,050)
FY 2028 - ($ 59,870)
FY 2029 - ($ 62,530)
Local Government, if applicable (cash basis, $000):
FY 2024 - ($ 18,630)
FY 2025 - ($ 23,340)
FY 2026 - ($ 24,450)
FY 2027 - ($ 25,660)
FY 2028 - ($ 26,920)
FY 2029 - ($ 28,120)
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
ASSUMPTIONS:
This legislation will affect 315 financial institutions.
FIRST YEAR COSTS:
The department will incur total costs of $29,300 in fiscal year 2024. These costs include:
Labor Costs - Time and effort equate to 0.28 FTE.
- Create a Special Notice to inform affected taxpayers of the reporting change.
- Update or create publications in print and information on the department’s website.
- Respond to tax ruling requests and email inquiries.
- Process tax return work items, assist taxpayers with reporting questions, and respond to inquiries via email, web
message, and paper correspondence.
- Examine accounts and make corrections as necessary.
Request # 5483-1-1
Form FN (Rev 1/00) 180,283.00 3 Bill # 5483 SB
FNS062 Department of Revenue Fiscal Note
SECOND YEAR COSTS:
The department will incur total costs of $8,600 in fiscal year 2025. These costs include:
Labor Costs - Time and effort equate to 0.1 FTE.
- Process tax return work items, assist taxpayers with reporting questions, and respond to inquiries via email, web
message, and paper correspondence.
- Examine accounts and make corrections as necessary.
ONGOING COSTS:
There are no ongoing costs.
Part III: Expenditure Detail
III. A - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.3 0.1 0.2
A-Salaries and Wages 17,900 5,600 23,500
B-Employee Benefits 5,900 1,800 7,700
E-Goods and Other Services 3,700 900 4,600
J-Capital Outlays 1,800 300 2,100
Total $ $29,300 $8,600 $37,900
III. B - Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part I and Part IIIA.
Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
EMS BAND 4 126,619 0.0 0.0
EXCISE TAX EX 2 55,872 0.1 0.1 0.1
MGMT ANALYST4 73,260 0.0 0.0
TAX POLICY SP 2 75,120 0.1 0.1
TAX POLICY SP 3 85,020 0.0 0.0
TAX POLICY SP 4 91,524 0.0 0.0
WMS BAND 3 107,685 0.0 0.0
Total FTEs 0.3 0.1 0.2
III. C - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
Request # 5483-1-1
Form FN (Rev 1/00) 180,283.00 4 Bill # 5483 SB
FNS062 Department of Revenue Fiscal Note
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Should this legislation become law, the department will use the expedited rulemaking process to amend WAC 458-20-146,
titled: “National and state banks, mutual savings banks, savings and loan associations and other financial institutions” and
WAC 458-20-15503, titled: “Digital products.”
Persons affected by this rulemaking would include financial institutions who will benefit from the expanded exemption.
Request # 5483-1-1
Form FN (Rev 1/00) 180,283.00 5 Bill # 5483 SB
FNS062 Department of Revenue Fiscal Note
LOCAL GOVERNMENT FISCAL NOTE
Department of Commerce
Bill Number: 5483 SB Title: Digital processing services
Part I: Jurisdiction-Location, type or status of political subdivision defines range of fiscal impacts.
Legislation Impacts:
X Cities: Significant sales and use revenue loss
X Counties: Significant sales and use revenue loss
X Special Districts: Significant sales and use revenue loss
Specific jurisdictions only:
Variance occurs due to:
Part II: Estimates
No fiscal impacts.
Expenditures represent one-time costs:
Legislation provides local option:
Key variables cannot be estimated with certainty at this time:
Estimated revenue impacts to:
Jurisdiction FY 2024 FY 2025 2023-25 2025-27 2027-29
City (5,493,109) (6,881,866) (12,374,975) (14,775,078) (16,228,702)
County (6,752,459) (8,459,602) (15,212,061) (18,162,411) (19,949,293)
Special District (6,198,132) (7,765,132) (13,963,264) (16,671,411) (18,311,604)
TOTAL $ (18,443,700) (23,106,600) (41,550,300) (49,608,900) (54,489,599)
GRAND TOTAL $ (145,648,799)
Estimated expenditure impacts to:
None
Part III: Preparation and Approval
Fiscal Note Analyst: Angie Hong Phone: 360-725-5041 Date: 01/26/2023
Leg. Committee Contact: Clinton McCarthy Phone: 360-786-7319 Date: 01/24/2023
Agency Approval: Allan Johnson Phone: 360-725-5033 Date: 01/26/2023
OFM Review: Cheri Keller Phone: (360) 584-2207 Date: 01/26/2023
Page 1 of 3 Bill Number: 5483 SB
FNS060 Local Government Fiscal Note
Part IV: Analysis
A. SUMMARY OF BILL
Description of the bill with an emphasis on how it impacts local government.
Section 1 describes legislative intent.
Section 2 and 3 amend sales and use tax exemption law for digital codes to extend the sales and use tax exemptions for
sales to a business of digital goods purchased solely for business purposes to include digital automated services purchased
by a financial institution solely for business purposes.
B. SUMMARY OF EXPENDITURE IMPACTS
Expenditure impacts of the legislation on local governments with the expenditure provisions identified by section number and when
appropriate, the detail of expenditures. Delineated between city, county and special district impacts.
This bill will not impact local government expenditures.
C. SUMMARY OF REVENUE IMPACTS
Revenue impacts of the legislation on local governments, with the revenue provisions identified by section number, and when
appropriate, the detail of revenue sources. Delineated between city, county and special district impacts.
According to the Dept. of Revenue fiscal note, this bill will decrease local government revenues by an estimated $18.6
million in the 10 months of impacted collections in fiscal year 2024, and by $23.3 in fiscal year 2025, the first full year of
impacted collections.
TOTAL LOCAL REVENUE IMPACT (DOR #s)
FY 2024 - ($ 18,630,000)
FY 2025 - ($ 23,340,000)
FY 2026 - ($ 24,450,000)
FY 2027 - ($ 25,660,000)
FY 2028 - ($ 26,920,000)
FY 2029 - ($ 28,120,000)
METHODOLOGY
The distributions for cities, counties, and special districts are based on DOR data for local sales and use tax distributions
from Calendar Year 2021. Mitigation payments and distributions to hospital benefit zones are not factored into this
distribution. The result is a distribution of 36.61 percent to counties, 29.78 percent to cities, and 33.61 percent to special
districts with a one percent DOR administrative fee deducted.
COUNTIES
FY 2024 ($6,752,459)
FY 2025 ($8,459,602)
FY 2026 ($8,861,923)
FY 2027 ($9,300,488)
FY 2028 ($9,757,176)
FY 2029 ($10,192,117)
CITIES
FY 2024 ($5,493,109)
FY 2025 ($6,881,866)
FY 2026 ($7,209,153)
FY 2027 ($7,565,925)
FY 2028 ($7,937,439)
FY 2029 ($8,291,263)
Page 2 of 3 Bill Number: 5483 SB
FNS060 Local Government Fiscal Note
SPECIAL DISTRICTS
FY 2024 ($6,198,132)
FY 2025 ($7,765,132)
FY 2026 ($8,134,424)
FY 2027 ($8,536,987)
FY 2028 ($8,956,184)
FY 2029 ($9,355,420)
SOURCES
Department of Revenue Fiscal Note
Department of Revenue Local Tax Distributions
Page 3 of 3 Bill Number: 5483 SB
FNS060 Local Government Fiscal Note
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