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Published on Friday, March 15, 2013

New telecommunications tax parity bill heard

We’ve previously written about SB 5422 and HB 1971, which address the issues raised in the 2011 Sprint Spectrum v. Washington State Department of Revenue case. HB 1971 was heard in the House Finance Committee this morning, and AWC’s Victoria Lincoln testified in support of the bill.

For cities, the key provisions of the bill include:

  • Removing the sales tax exemption for all residential phone lines.
  • Maintaining the Department of Revenue’s ability to continue levying sales tax on cell phones.
  • Stating that sales tax provisions related to cell phones apply retroactively.
  • Adding a retroactive exemption from sales tax for Voice over Internet Protocol (VoIP) service while stating local VoIP service is subject to sales tax as of August 1, 2013.

The bill also:

  • Requires retailers to collect E911 taxes on prepaid wireless phones.
  • Eliminates dedicated excise taxes for the Washington Telephone Assistance Program and the Telecommunications Relay Service and shifts the funding for these programs to the state general fund.
  • Establishes a temporary state universal communications services program.

This bill has significant financial implications for the state and local governments. For state fiscal years 2013–2015, the measure would generate an estimated $63.7 million for the state general fund and $26 million for local governments, including $10 million for cities. In addition, Verizon recently filed suit against the state, which, similar to the Sprint Spectrum case, alleges some of its services have been inappropriately subject to sales tax. If the Legislature does not pass a bill and a court requires the state to issue sales tax refunds, the impact is estimated at $674.1 million for the state and $249.5 million for local governments.

Categories: Budget & finance
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