The state budget adopted by the Legislature this week and sent to Governor Chris Gregoire for her signature requires painful cuts to balance spending with available revenues for the 2009-11 biennium.

While the Department of Revenue was not immune from these necessities, including the continued imposition of a salary freeze and other reductions, the Governor and Legislature also recognized the key role the Department plays in collecting 96 percent of state General Fund tax revenues.

The budget includes both efficiencies and additional expenditures to streamline our operations and help ensure that all businesses pay their fair share of taxes during the challenging times ahead.

As director, I want to assure you that the Department will continue its commitment to fairness, transparency, and economic vitality. To that end, we are pleased that the budget reflects key legislation that will help us do our jobs more efficiently than ever while maintaining the excellent compliance rate among Washington businesses.

These measures include:

• More business subject to electronic filing and service delivery – SSB 5571 will require more business to file and pay their tax returns electronically and allow electronic delivery of tax assessments.  Currently only the largest businesses are required to file electronically, although many businesses have voluntarily given up paper returns. Businesses make far fewer errors when submitting returns electronically due to automatic error-checking, and electronically filed returns do not have to be manually keyed in by Department staff, further reducing staff overhead. The Department will reduce staffing in its returns processing centers to reflect these efficiencies;
• Replacement of resale certificates with reseller permit – Resale certificates were intended to allow retailers to buy items without paying sales tax if they intended to resell them. However, some businesses purchased items wholesale for their own use with no intention to sell them at retail, or avoided paying sales tax on speculative construction. The new system will require businesses to obtain a reseller permit from the Department before they can purchase items for resale. SB 6173 also included special rules for contractors to ensure sales tax is paid when due;
• Improved and additional tax collection – The budget provides funding to invest in new resources, including additional auditors and data analysis capabilities, to ensure that all businesses are paying their fair share of taxes, including out-of-state companies.
• Taxation of digital goods clarified – ESHB 2075 addresses the sales and use taxation of products furnished electronically by clearly identifying when digital goods are subject to sales or use taxes. This legislation updates our tax laws for the Internet age.
  

I assure you that the Department will work hard in the years ahead to operate as efficiently and effectively as possible, while doing all it can to work cooperatively with businesses during these challenging times.

More information regarding the state budget is available on Governor Gregoire’s web site

Cindi Holmstrom
Director