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Published on Friday, July 7, 2017

Long-standing AWC priority marketplace fairness act passes as part of budget revenue package

EHB 2163 passed on June 30 with several pieces of provisions that cities supported in the previous revenue proposals HB 2186 and SB 5929, including passage of a state version of a long-standing AWC priority, the Marketplace Fairness Act. The bill is expected to raise $445.4 million in 2017-19 and $864.1 million in 2019-21 in revenues for the state general fund.

Here are some of the major provisions of the bill:

Marketplace fairness act

  • Requires internet and out-of-state retailers to collect sales taxes or provide customer names and notice for use taxes, effective January 1, 2018
  • For estimates of impacts by city, see AWC’s Open Data Portal

Other sales tax impacts

  • Repeals sales tax exemption on bottled water
  • Narrows sales tax exemption on self-produced fuel and provides a new state use tax for refinery self-produced fuel

Streamlined sales tax mitigation

  • Phases out streamlined sales tax (SST) mitigation to jurisdictions impacted by the 2007 change to destination-based sourcing due to increased internet sales tax revenues from the marketplace fairness provisions
  • The appropriation for mitigation in the budget includes mitigation for cities, counties, and PFDs, offset by new revenues as provided in EHB 2163
  • The calculation for mitigation is amended to include an offset for new revenues from new retailers under the mainstreet fairness provisions, in the mitigation calculation of net losses which is currently offset by new voluntary compliance revenues under SST
  • Transit authorities are excluded from eligibility for mitigation beginning July 1, 2017 through a change to the definition of local jurisdiction
  • Repeals mitigation for cities and counties on October 1, 2019
  • A related proviso in the budget includes a Department of Revenue study of impacts of new internet sales tax on mitigation jurisdictions by November 1, 2018

HB 2163 did not include another provision that had been included in HB 2186 and that AWC supported for a graduated rate for the state Real Estate Excise Tax (REET). That proposal would have established a graduated rate for the state REET. The graduated rate would have resulted in a lower 0.75 percent rate on residential sales under $250,000, the same 1.28 percent rate on sales $250,000 to $1 million, higher rates of 2 percent for sales $1 million to $5 million, and 2.5 percent for sales over $5 million. AWC also had requested similar authority for cities as a local option.

Categories: Budget & finance