Take the Proposed B&O Gross Marginal Revenue Tax Test

Date: January 26, 2018

Rep. Kristine Lytton to explain new idea at NFIB Washington's Small Business Day, February 1

State Director Patrick Connor reports from the State Capitol on the small-business agenda for the legislative week ending January 26

NFIB/Washington’s Small Business Day is Thursday, February 1. There is still time to register online, or contact Senior Grassroots Manager Stacy Jenkins at 360-786-8675. NFIB expects confirmation January 29 that Sen. Shelly Short, as well as L&I Director Joel Sacks and/or Assistant Director Liz Smith, will be added to the program. Already confirmed are House Finance Committee Chairwoman Rep. Kristine Lytton, Sen. Curtis King, and Jason McGill, Gov. Jay Inslee’s senior health policy advisor. Sen. Guy Palumbo will give the luncheon keynote address.

Take the Gross Marginal Revenue Tax Test

In advance of her Small Business Day presentation, House Finance Committee Chairwoman Rep. Kristine Lytton introduced House Bill 2940, the Small Business Tax Fairness Act. The bill would calculate B&O tax liability in a new way, based on “gross marginal revenue.”

Here’s how it would work:

  • take your 2017 gross revenue reported on your B&O tax returns
  • apply any existing deductions
  • now, subtract the cost of goods sold
  • AND, subtract the cost of labor (including salary, wages, and benefits).

This is your “gross marginal revenue” (GMR).

  • If that amount is less than $125,000 you would NOT have to file a B&O return, unless you collect and remit other taxes to the state, like sales tax
  • If your GMR is less than $250,000 you would owe ZERO B&O tax
  • If your GMR is between $250,000 and $1 million you would pay B&O on the GMR using the same tax rate(s) as normal
  • If, however, your GMR is more than $1 million, you would pay a slightly higher B&O rate. The tax rate for those with a GMR more than $1 million would be subject to a 6 percent surcharge, so service businesses would pay 1.59 percent, up from 1.5 percent; retail would pay 0.0050, up from 0.00471. Those now paying the tax at 0.00484 would instead pay 0.0051.

Would your firm pay more or less under this proposal?

Rep. Lytton is looking to NFIB members for information and suggestions to improve the bill. A task force would also be appointed to review existing tax preferences and recommend other changes or new approaches to improve B&O tax fairness.

NFIB testified in favor of three other B&O bills before the House Finance Committee this week.

  • House Bill 2305 seeks to move the filing date for annual B&O returns to March 1, allowing more time to receive 1099s from your clients.
  • House Bill 2350 would increase the threshold before business are required to file a B&O tax return.
  • House Bill 2672 would increase the B&O filing threshold to $125,000 for most businesses, and $150,000 for service firms, and increase the small business tax credit $123,000 for most firms, and $148,000 for service businesses.

These bills are unlikely to advance if Rep. Lytton moves HB 2940, because that bill also addresses most of these issues.

Health Care

BIAW, the state homebuilders’ association, shifted from opposed to “other” on the senate version of the reinsurance bill due to amendments protecting its members from being double-charged under the proposed funding structure. NFIB again opposed the bill, this time in Senate Ways & Means, pointing out that the $200 million annual assessment on insurance carriers and third-party administrators to fund the program would effectively be a tax hike, regardless of who ultimately pays it. With BIAW’s change in position, NFIB had expected to be the lone voice of opposition. However, organized labor and third-party administrators joined us in opposition to the bill. Senate Bill 6062 passed on what sounded like a party-line voice vote in Ways & Means. The bill previously passed the Senate Health & Long-Term Care Committee with Democrats in support, and all Republicans opposed.

Also in the Senate, NFIB testified in support of Senate Bill 6026, which would prevent insurance companies or pharmacy benefit managers from enforcing a so-called “gag rule” in contracts with pharmacies. Instead, the bill would allow pharmacists to tell patients both the cash price and the insurance co-pay or co-insurance amount for each prescription filled. NFIB has long supported greater health care cost transparency to allow consumers to make informed purchasing decisions.

Sexual Harassment

Thank you to all who commented last week on HB 2820, Rep. Gina McCabe’s “healthy relationship star” legislation. Because of your input, and testimony from NFIB, AWB, and domestic violence prevention groups flagging concerns about the bill, the bill has been re-written into a task force that will review data and recommend legislation, if needed, to better equip employers choosing to provide information to workers experiencing sexual harassment or domestic violence.

Gig Economy Workers

NFIB worked behind the scenes in testimony this week opposing bills that would ban or unreasonably limit non-compete agreements, and establish “portable benefits” for gig economy workers.

Employee Off-Duty Conduct

NFIB submitted amendments to Sen. Patty Kuderer’s Senate Bill 5667, regarding off-duty conduct by employees and job applicants. In addition to concerns about legal (under state law) marijuana use jeopardizing workplace safety, NFIB also communicated its desire to maintain an employer’s right to terminate or refuse to hire an individual whose legal conduct includes forms of hate speech that would damage that employer’s business, if associated with it.

Previous Reports, News Releases, Editorials

January 24 News Release—Small Business Owners to Gather in Olympia, February 1

January 19 Report—Phantom Legislation, Hirst Fix Highlight Week in Olympia

January 13 Report—Dead Bills Return From the Grave

[Tile photo of Rep. Kristine Lytton courtesy of Washington House Democrats webpage]

Related Content: News | State Capitol Report | Taxes | Washington

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