From: Bruce Reid (TAX) [mailto:brucerei@microsoft.com]
Sent: Thursday, April 03, 2008 3:32 PM
To: Bueing, Ron; Collier, Steve; Dacca, Joseph; Dr. Ben Kim; Hamilton, Linda (OFM); Hunter, Ross; Justin, Jim; Kilmer, Derek; Moore, Victor (OFM); Murray, Julie; Orcutt, Ed; Paula Borhauer; Pedersen, Marilyn; Prem, Rich; Robinson, Chuck; Silverman, Greg; Tina Bodine; York, Amber; Zarelli, Joseph; Holmstrom, Cindi (DOR)
Cc: Brewer, Gilbert (DOR); Brubaker, Russ (DOR)
Subject: Committee on the Study of Electronically Delivered Goods - SHB 2585

A potential item for the agenda at the next committee meeting.  Feel free to correct me if I’m off-base in my observations.

It was interesting to note that the Legislature passed, and the Governor just recently signed, SHB 2585.  The effect of the bill is that the advertising revenue of traditional newspaper companies from advertising on their websites will be subject to B&O tax at the printing and publishing rate of .484 percent,  instead of the 1.5 percent rate applicable to the advertising revenue of other news media (traditional and web based), or other web based business models from advertising on their websites.

In the context of sales and use tax, the vision and goals of our Committee is to promote fairness, neutrality and equity regardless of the delivery methods or changes in technology and business models.  It’s not clear to me that the same vision and goals for the B&O tax were considered in the case of  SHB 2585.   

SHB 2585  would appear to be discriminatory as it clearly creates two classifications for taxation of essentially the same services -- providing news and information on an internet site from which the taxpayer earns advertising  revenues.  Moreover, the statute creates a higher tax rate for a certain classification of online businesses, namely those that do not also publish a print newspaper.