Dear Friends and Neighbors,
As you know, our state has a gross receipts tax called the business and occupation (B&O) tax. This tax is measured on the value of products, gross proceeds of sale, or gross income of the business, with rates varying by classification. You can find more details, including information on credits and how this tax is paid, at this state Department of Revenue website.
I have heard for years from small business owners that the B&O tax is unfair, complicated and needs to be changed. As a former small business owner and manager, I can empathize.
B&O tax reform | House Bill 2150
One of my colleagues, Rep. Drew MacEwen of the 35th District, has put forward a bold, bipartisan bill that would update and simplify our state’s B&O tax. He believes the proposal would “make Washington’s B&O tax fairer, flatter and more flexible.”
House Bill 2150 would eliminate the B&O tax burden on thousands of businesses in our state by ending preferences that have been in place since the tax was created. The legislation would provide businesses the ability to deduct $500,000 of their gross receipts if it is greater than the other deductions the plan provides. Businesses would be able to select one of three deductions: cost of goods sold; 30 percent of revenue; or up to $200,000 per-employee compensation. The results of this change would be the elimination of the B&O tax for more than 285,000 businesses in our state.
Rep. MacEwen’s proposal is revenue neutral, meaning the tax collections would not have a meaningful impact on the operating budget. This would be accomplished by consolidating the number of rates from 10 to four: service rate (3.75 percent); retail/wholesale/manufacturing (1.6 percent); and telecommunications (1.2 percent). Aerospace would remain at its current rate.
Whenever a major tax reform proposal is deemed revenue neutral, there are going to be winners and losers. I don’t want to suggest House Bill 2150 would be good for every business. You can learn more at this website.
House Bill 2150 received a public hearing in the House Finance Committee on March 13. You can watch it here. While the measure does not appear to be moving forward this legislative session, it starts an important discussion that will continue this interim and into the next legislative session. I would like you to be a part of this discussion.
- What are your thoughts on House Bill 2150? Please share your opinion in this brief survey.
In your service,