NOTES ON THE LOCAL TAX DISTRIBUTIONS REVENUE RESEARCH REPORT The distribution amounts reported in this publication are amounts disbursed to local governments, cities and counties, from the Office of the State Treasurer. The sales tax is collected by the Department of Revenue which is responsible for the correct allocation of the funds. The amounts in this publication are based on the local share of retail sales and use taxes collected two months prior to the distribution. Distributions are made monthly; however, no allowances or adjustments are made for late returns. Distributions from late returns are made in the second month after the returns are received just as they are for current returns. The data are used by local governments to track disbursements and plan budgets. Differences Between Local Tax Distributions and the Quarterly Business Review The amounts reported in this publication should not be compared with the Quarterly Business Review (QBR) amounts for taxable retail sales by county and city (tables 3 and 4). The two amounts differ in the following respects. 1. The local distribution amounts are based on local retail sales and use taxes. QBR amounts are based on retail sales only. The use tax is levied on items purchased out of state but used in state and on other items on which sales tax has not been paid. Use tax can fluctuate significantly due to purchases of machinery and equipment. 2. Local sales and use tax distributions are made monthly based on cash collections of two months prior, without regard to when the tax liability occurred. QBR taxable retail sales are reported for the month in which the liability occurs. Adjustments are made for returns up to two months late. 3. State and county shares are deducted from the local distribution and not from the amounts reported as taxable retail sales. Local Sales and Use Tax Distributions A portion of the sales tax collected is a local tax and is returned to the city or county where the sales transaction took place. The city or county is identified by a location code on the tax form. Except for the hotel/motel tax, the state share of the sales tax is 6.5 percent. The calculation for the distributions of the local sales and use tax is as follows. In most cases, a 1 percent fee is deducted from the total reported collections for state administration of the program. (State law allows deduction of up to 2 percent for administration costs.) Of the remaining 99 percent, 15 percent is given to the county. The remaining 85 percent is distributed to the cities as their share of the basic or optional tax. Counties receive the full amount attributable to sales in the unincorporated areas, plus the 15 percent share from the cities. Distributions can fluctuate dramatically due to population changes, as well as annexations and incorporations. Businesses are notified if their location code has changed due to an incorporation or due to annexation into a public transportation benefit area (PTBA). Criminal Justice Tax Distributions The criminal justice tax is an additional local sales/use tax of 0.1 percent for criminal justice programs. The criminal justice distribution is based on population rather than location code. This tax is levied only by the county and is imposed county-wide, but the receipts are shared with the cities. Of the revenues collected for criminal justice, 1.5 percent is taken for administration. Of the amount remaining, 10 percent is distributed to the county and 90 percent is distributed to cities and counties on a per capita basis based on their official April 1 populations. As of January 1, 1996, twenty-one of the thirty- nine counties impose the 0.1 percent criminal justice tax. Juvenile Detention Facility Tax Distributions The juvenile detention facility tax of 0.1 percent was approved by the 1995 Legislature solely for the purpose of providing funds for juvenile detention facilities and jails in counties with populations less than one million. Each county must vote to approve the tax for collection. It is levied only by the county and is imposed county-wide. Of the revenues collected, 1.5 percent is taken for administration and the remainder is distributed wholly to the county. Baseball Stadium Fund Distributions Engrossed House Bill 2115 provides funding measures for a baseball stadium in King County. Three sections of the bill that affect the taxes that certain King County businesses will collect are explained below. These taxes are effective beginning January 1, 1996. 1. Section 101 establishes a new mechanism for sharing of the state retail sales and use tax that is derived from King County. King County is authorized to levy an additional local sales and use tax at a maximum rate of 0.017 percent. The proceeds of the tax are deducted from the 6.5 percent state tax; therefore, the consumer will not experience an additional tax burden. The proceeds will be diverted to the county as the state share for paying the principal and interest on bonds for the stadium. 2. Section 201(1) authorizes an additional local tax of 0.5 percent on food and beverages sold by restaurants, taverns and bars throughout King County. This tax is not deducted from other sales taxes, so it will be an additional tax for the consumer. 3. Section 201(2) authorizes an additional special stadium sales and use tax of 2 percent on car rentals that occur within King County. The tax rate for car rentals in King County will therefore be 17.1 percent which represents the total of the combined state and local retail sales tax (8.2 percent), statewide car rental tax (5.9 percent), optional King County car rental tax (1 percent) and special stadium sales and use tax (2 percent). Transit Tax Distributions Twenty-two cities, counties or PTBAs levy a local sales and use tax for transit programs. The tax ranges in rate from 0.1 to 0.6 percent. After an administration fee of 1.5 percent is taken, the remainder is returned to the transit districts. Hotel/Motel Tax Distributions The "regular" hotel/motel tax distributions, shown on pages 18 through 21, are for a local option tax of 2 percent on sales of hotel/motel rooms. The regular hotel/motel tax is not paid in addition to other state and local sales taxes. Instead, it is credited against the state's 6.5 percent retail sales tax. Cities can levy the regular hotel/motel tax within their corporate limits and counties can levy the tax in unincorporated areas and within cities that do not levy the tax. (There are two exceptions. The first is King County where the only city authorized to impose the tax is Bellevue and county government levies the hotel/motel tax throughout the entire county, including Bellevue. The second exception is in Yakima County where both the City of Yakima and the county levy the hotel/motel tax within the City of Yakima.) Blanks beside a county name indicate the county does not levy the tax. Cities not levying the tax have been excluded from the table. Zeros indicate the city or county levies the tax but did not receive a distribution that month. State law requires that data on individual taxpayers be kept confidential. To comply with this requirement, in the regular and additional hotel/motel tax distribution tables, a "D" indicates that the data cannot be disclosed because the jurisdictions have fewer than three hotels or have fewer than three taxpayers who report on a monthly basis. The amounts distributed for the hotel/motel tax have been aggregated in the category called "Ds" in the summary table at the bottom of page 21; they are not included in the total for the county. Additional Hotel/Motel Taxes The "additional" (also referred to as "special") hotel/motel tax distributions shown on page 22 are for hotel/motel taxes that have been authorized by statute for specific cities and counties for specific purposes. These taxes, which vary in rate from 2 percent to 3 percent, are paid in addition to all other state and local sales taxes.