Small business opposing B&O surcharge on another front
State Director Patrick Connor reports from Olympia on the small-business agenda for the legislative week ending April 5
Budget deliberations remained on center stage during Week 12 of the 2019 session of the Washington State Legislature.
Around 200 budget amendments were submitted in the Senate Ways & Means Committee, of which almost 120 were considered Wednesday. The panel met for more than 12 hours, finally adjourning about 2 a.m. The full Senate took up the committee-passed budget Thursday afternoon. More than 50 floor amendments were offered; at least 40 were debated. The final budget bill drew three Republican votes, passing 31-17.
The Senate’s tax bills will be heard in Ways & Means next week.
Meanwhile, the House Finance Committee heard two of that chamber’s tax bills Thursday. NFIB testified opposed to both. Details about the original bills are available here.
- HB 2156 – Capital gains tax and graduated real estate excise tax (REET). A proposed substitute bill was introduced that changes the exemption for the sales of certain business assets for the worse. Basically, the proposed substitute would apply a capital gains tax to land and key intangible assets like customer lists and going concern/goodwill. So, the sale of a small business could trigger a double-whammy of both a higher REET and a capital gains tax for small businesses organized as sole proprietorships, partnerships, LLCs, and s-corps, while full c-corporations would only be subject to the REET.
- HB 2157 – “Closing loopholes” and tax structure study. NFIB objected to two provisions of this bill. One would eliminate the sales and use tax exemption on the purchase of bullion and coins. The other would change the nonresident sales tax exemption to a refund. Some 33 other states, including Oregon and Idaho, do not apply sales taxes to the purchase of bullion and coins. Doing so in Washington would add nearly 10 percent to the cost of these items, making them undesirable as investment options unless purchased from out-of-state sources. There’s no question that would harm the roughly 110 coin and precious metal dealers in our state and curtail coin collector trade shows. The bill would also require visitors from Oregon, Montana, several Canadian provinces, and other US states or territories with no sales tax to pay Washington’s state and local sales taxes. They would then have to wait until the following year to apply for a refund of taxes paid in excess of $25 – but, the refund would only apply to the state’s share of sales tax (6.5 percent), not the local portion (which can be another 3 percent or more in some areas). NFIB supports the provision in this bill that would require a four-year study of alternative tax structures to modify or replace the B&O and other state taxes.
New Payroll Tax
NFIB went on record today opposing HB 1087 in the Senate Ways & Means Committee, establishing a new payroll tax on workers to fund a benefit program that could be used for a variety of home-care, medical assistance, and other support services, primarily for the elderly. We reported earlier in session that we had successfully negotiated several changes in an effort to be neutral. Additional concerns have since been raised about the bill. We heard from some whose employees reside in Oregon or Idaho. It appears you would be required to deduct the proposed payroll tax on those workers, but they would not be eligible to receive the benefits. Others remain frustrated at the likely addition of another payroll tax on top of the Paid Family & Medical Leave tax that just took effect in January. These concerns, along with the House’s B&O tax surcharge, which would apply to many business-to-business services, multiple graduated REET proposals that would disproportionately impact commercial property, and a House capital gains tax bill targeting small businesses while exempting large corporations, are forcing us back into opposing this bill as part of an onslaught of proposed new and increased taxes. Moreover, a new analysis of HB 1087 released yesterday by the Washington Policy Center shows workers will pay $30 billion in payroll taxes to “save” the state about $1.2 billion over 30 years.
B&O Surcharge
Speaking of the B&O surcharge, NFIB today signed in opposed to a bill before the House Finance Committee that would expand the sales and use tax exemption for constructing and equipping data centers. Current law limits this exemption to rural counties. This proposal would permit some of those facilities to be sited in urban areas. It seems disingenuous for the Legislature to heed Microsoft and other tech giants’ call for a B&O surcharge affecting industries beyond their own – including thousands of small businesses – while making them eligible for tens of millions in additional tax breaks specific to the tech industry.
Environment, Health Care
- We also again signed in opposing a Low Carbon Fuel Standard. That bill is currently in the Senate Transportation Committee.
- And, we signed in supporting the All Payer Claims Database bill, which is being heard today by the House Appropriations Committee, as well as HB 1523, the health-insurance standard benefit-design bill now in Senate Ways & Means.
- Tomorrow NFIB will be signing in at the House Appropriations Committee in support of the Senate’s standard benefit-design bill and opposed to both the clean-energy mandate and universal health care workgroup bills.
Previous Reports From the State Capitol
