RETAIL SALES & USE TAX CREDITS AND DEFERRALS

36.100.090 BASEBALL STADIUM DEFERRAL

Description: State and local retail sales and use tax may be deferred on construction of a public baseball stadium. Such a stadium must be owned and operated by a public facilities district, and the facility must have a retractable roof and natural turf. Deferred sales tax on construction must be repaid over a ten year period, starting on the fifth year after completion. Safeco Field was completed during 1999.

Purpose: To encourage construction of a stadium for professional baseball in King County.

Category/Year Enacted: Economic development; 1995.

Primary Beneficiaries: The public facilities district that operates the stadium and the professional baseball team that plays its home games in the stadium.

Conflict With Other Programs: None evident. However, the construction of most other publicly owned facilities are fully subject to retail sales tax.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 4,359 - - - - - -
Local taxes 1,177 - - - - - -

If the deferral were repealed, would the estimated revenue be realized? Unlikely; the deferral was considered as necessary to help finance the stadium.

36.102.070 FOOTBALL STADIUM DEFERRAL

Description: The Public Stadium Authority can defer sales/use taxes on the construction of a stadium facility for professional football and adjacent exhibition center. The taxes can be deferred until five years after the stadium becomes operational. Purpose: The tax deferral constitutes part of the plan to finance the stadium which was approved by the voters in June, 1997.

Category/Year Enacted: Economic development; 1997.

Primary Beneficiaries: The Public Stadium Authority and users and attendees of events at the facility.

Conflict With Other Programs: None evident; however, the exemption applies only to a single facility.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 699 12,577 13,975 699
Local taxes 189 3,396 3,773 189

If the deferral were repealed, would the estimated revenue be realized? Unlikely; the deferral was considered as necessary to help finance the stadium.

47.46.060 2ND NARROWS BRIDGE

Description: Deferral of state and local retail sales tax is provided for construction of a second Tacoma Narrows bridge, and associated road improvements, for a period of five years. This exemption includes a retail sales/use tax exemption on the rental of equipment used during construction. Starting on December 31 of the fifth year following completion of the project, 10 percent of the tax will be repaid annually over a period of ten years.

Purpose: To lower the overall cost of the project to enhance the likelihood of private investors funding the cost of construction and to mitigate the amount of tolls necessary to fund repayment of the private investment.

Category/Year Enacted: Not intended in the tax base; 1998.

Primary Beneficiaries: Commuters that use the highly congested Highway 16 corridor.

Conflict With Other Programs: This legislation is very specific and applies only to a single project.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes - - 1,820 4,576 5,330
Local taxes - - 532 1,528 1,558

If the deferral were repealed, would the estimated revenue be realized? Yes.

82.08.037 BAD DEBTS

Description: A credit (or refund) against current sales tax liability is allowed for sales taxes previously remitted to the state on items sold for which the seller is unable to collect the tax from the customer and which are deductible as worthless for federal income tax purposes.

Purpose: This credit assures that sales tax is only paid on sales on which the seller actually receives full payment for the goods sold. A similar deduction has been a part of the B&O tax statutes since 1935.

Category/Year Enacted: Economic development; 1982.

Primary Beneficiaries: Firms that make sales on credit.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 47,865 48,965 50,092 51,244
Local taxes 12,666 12,957 13,255 13,560

If the credit were repealed, would the estimated revenue be realized? No; retailers could either switch to the cash method of accounting or collect the sales tax at the time of the transaction, even if they defer payment of the balance.

82.12.035 TAXES PAID OUT OF STATE

Description: A credit against use tax liability on items brought into Washington for use here is allowed for sales or use taxes paid to another state or political subdivision thereof. The credit is limited to the amount of Washington use tax otherwise due.

Purpose: The purpose is to avoid double taxation for items acquired in other states and imported for use in Washington. The sales/use tax is intended to tax final consumption of goods, and it would not be appropriate to subject an item to more than one retail sales tax.

Category/Year Enacted: Not intended in the tax base; 1967.

Primary Beneficiaries: Residents who purchase goods outside the state for use at home.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 44,474 45,719 47,740 49,769
Local taxes 11,632 11,957 12,486 13,017

If the credit were repealed, would the estimated revenue be realized? Unlikely.

82.32.065 VEHICLES UNDER WARRANTY

Description: A credit or refund of sales tax is allowed to manufacturers of vehicles, if they refund the sales tax to customers upon the return of new vehicles under the provisions of Chapter 19.118 RCW, the so-called lemon law.

Purpose: To assure that manufacturers are not financially responsible for sales tax, if they refund the tax to customers in conjunction with vehicles that are returned under warranty.

Category/Year Enacted: Individuals; 1987.

Primary Beneficiaries: Purchasers and manufacturers of new motor vehicles that are defective.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 129 133 137 141
Local taxes 34 35 36 37

If the credit were repealed, would the estimated revenue be realized? Yes.

82.34.050(1) POLLUTION CONTROL FACILITIES

82.34.050(2)

Description: Construction of required pollution control facilities associated with approved applications received between July 30, 1967 and November 30, 1981 were exempt from state sales/use taxes. If the tax was previously paid, it may have been taken as a credit. The first subsection of this statute refers to the sales tax exemption (which is no longer applicable), and the second reflects the credit against use tax; the impact indicated below refers to the credit against use tax.

Purpose: The purpose of the program was to encourage pollution control and to compensate Washington companies for the costs of upgrading pollution control facilities since Washington standards were, at the time the program began, more stringent than federal standards.

Category/Year Enacted: Economic development; 1967 (program terminated in 1981; credit of tax paid still allowable against use tax liability).

Primary Beneficiaries: Companies required to install pollution control facilities, primarily firms in the lumber, wood products, paper, aluminum and food products industries. A total of 151 firms applied for the B&O, public utility or use tax credits.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 316 276 235 220
Local taxes - - - - - - - -

If the exemption were repealed, would the estimated revenue be realized?

Unlikely; it would be difficult to rescind credits previously granted.

82.60.040 RURAL COUNTY SALES TAX DEFERRAL

82.60.049

Description: This sales tax deferral program is available for new or remodeled buildings and/or equipment used in manufacturing or research and development activities in rural counties or economically distressed areas. To qualify, the project must be located in a county with a population density of no more than 100 persons per square mile or an economic development target area (community empowerment zone). Legislation in 1999 removed the former criteria which were based on unemployment, income and timber impact areas.

The sales or use tax liability is deferred for three years, followed by a five-year graduated repayment schedule for applications before July 1, 1994. For subsequent applications the repayment requirement is waived, provided the program requirements are met; thus converting the deferral into an outright exemption.

The deferral program for rural and targeted areas is currently scheduled to expire on July 1, 2004 (extended from 1998 in 1994).

Purpose: The purpose of the sales tax deferral program is to encourage manufacturing and R&D activities and job creation in the state, particularly in rural and economically depressed areas.

Category/Year Enacted: Economic development; 1985 (extended to all rural counties in 1999).

Primary Beneficiaries: Manufacturing and research and development firms located in or moving to economic target areas. As of June 30, 1999, approximately 492 projects had been approved under the distressed area program.

Conflict With Other Programs: None evident; however, the new statewide manufacturing machinery exemption (RCW 82.08.02565 and 82.12.02565) covers some of the same equipment and the high technology deferral also can cover some of the same equipment for some firms.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 23,030 23,595 25,258 25,847
Local taxes 5,919 6,064 6,491 6,643

If the deferralswere repealed, would the estimated revenue be realized? Some of the impact represents anticipated applications; only that portion of the impact could be avoided by eliminating the program, not deferrals that have been previously approved.

82.61 NEW MANUFACTURERS' SALES TAX DEFERRAL (Repealed in 1995)

Description: This 1985 tax deferral program provided a deferral of sales/use tax on new structures built and related equipment purchased or used by manufacturing or research and development firms which were new to the state. In 1987 certain aluminum companies that had ceased operation or were in imminent danger of closing were added to the program; deferral was allowed on new equipment or modernization of those facilities. The sales tax liability was deferrable for three years, followed by a five-year graduated repayment schedule. The Legislature repealed this program effective on July 1, 1995, and new applications were not permitted after that date. However, previously granted deferrals are still being taken.

Purpose: The purpose of this program was to encourage manufacturing and R&D activities and job creation in the state. With the 1995 enactment of a comprehensive sales tax exemption for manufacturing machinery (RCW 82.08.02565), it was felt that this deferral was no longer necessary.

Category/Year Enacted: Economic development; 1985 (repealed in 1995).

Primary Beneficiaries: As of June 30, 1996, 98 projects had been approved and completed under the new manufacturers program and 4 applications had been approved for aluminum firms over the 10 year program.

Conflict With Other Programs: None evident.

Tax Savings ($000): No new sales tax deferrals have been granted since this statute was repealed effective July 1, 1995. Currently, there are $27.7 million in unpaid deferrals of state and local sales tax under this program.

82.63 HIGH TECHNOLOGY DEFERRAL

Description: In 1994 a new sales tax deferral program, similar to the distressed area program, was established for research and development expenditures and pilot scale manufacturing facilities in selected high technology activities. The allowable activity areas are biotechnology, electronic device technology, environmental technology, advanced computing and advanced materials. In 1995, the repayment requirement was waived for firms that continue to use the high tech facility for eight years, thus converting the deferral into an exemption.

Purpose: To stimulate the creation of high wage jobs in high technology industries.

Category/Year Enacted: Economic development; 1994.

Primary Beneficiaries: Manufacturers and research firms involved in high technology activities. As of July 1, 1997, 62 firms had been approved under this program.

Conflict With Other Programs: None evident; however, some equipment covered by this program can be covered by the distressed area deferral and the statewide manufacturing machinery exemption.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 38,218 43,589 50,008 57,507
Local taxes 9,822 11,202 12,852 14,779

If the deferral were repealed, would the estimated revenue be realized?

Unlikely; these deferrals have already been granted.

82.66.030 HORSE RACING TRACK DEFERRAL

Description: The amount of retail sales/use tax spent on constructing a thoroughbred horse racing track facility located west of the Cascade Mountains is eligible for deferral. Construction must commence prior to July 1, 1998, and no new deferrals will be allowed after that date. (Note: The facility has been completed, and no new construction is expected at the site.) Repayment, originally spread over five years, was expanded to a ten year period in 1998 and will commence in the year 2006.

Purpose: To provide a financial incentive for construction of a track to replace the Longacres track.

Category/Year Enacted: Economic development; 1995; repayment period extended to ten years in 1998.

Primary Beneficiaries: The Emerald Downs horse race facility, as well as the entire horse racing industry in Washington.

Conflict With Other Programs: This legislation is very specific and is intended to apply to a single facility.

Tax Savings ($000): A total of $5,154,742 in state and local sales/use tax was authorized for deferral in 1996. No additional amounts are anticipated before the expiration date of the exemption.

If the deferral were repealed, would the estimated revenue be realized? Unlikely; deferrals are already being taken.