What happens if the calculated mitigation payments (sourcing losses less voluntary compliance/MPFA dollars) exceed state appropriation? If there is a shortfall and no additional appropriations/sources available, what is the process of allocating the shortfall between the mitigated jurisdictions?
The Department calculates the SST Mitigation payments and provides those amounts to the State Treasurer. The State Treasurer determines the process for shortfalls between the appropriation and the payments.
Does the “Estimated Remotes Sales Tax Revenue” include Voluntary Compliance received under the Streamlined Sales and Use Tax Agreement (SSUTA)?
No. Assuming that “Estimated Remote Sales Tax Revenue” means the marketplace facilitator/remote seller revenue defined in Part IV of EHB 2163, the voluntary compliance revenue received under SSUTA is separate from the marketplace facilitator/remote seller revenue. The Department will ensure the same revenue is not included in both SST Mitigation payment offsets.
What was DOR’s methodology and source(s) of information used in developing estimated remote sales revenues?
The Department used industry data and U.S. Census Bureau data to estimate Washington remote sales revenues. From the state sales tax estimate, we derived the total local sales tax impact by applying an average local tax rate. The Department’s standard average local tax rate value for Legislative Session 2017 was 2.5355 percent.
We estimated the local sales tax impact by local jurisdiction by using a relevant subset of local tax distributions from 2015 and 2016 to estimate future local distributions of new sales tax revenue from this legislation. We made an adjustment for the then future increase of Sound Transit's tax rate from 0.9 percent to 1.4 percent. Finally, we excluded taxable activities that are unrelated to remote sales, such as lodging taxes from the relevant subset of local tax distributions data.
Will the DOR provide via its Secured Messaging System estimated remote sales tax revenues by jurisdiction and at the individual business level? Will marketplace facilitator/remote seller revenue be delineated in the Distribution Detail that is available from the DOR Fortress Online portal?
Yes. The Department will provide each jurisdiction the amount of marketplace facilitator/remote seller revenue – as we do with the voluntary compliance revenue as part of the SST Mitigation payment files.
Yes. Information from remote sellers and marketplace facilitators will be included in the local tax distribution files.
What is DOR’s plan and timetable with respect to business outreach and enforcement efforts?
The Department began strategizing an ongoing communication and enforcement plan shortly after the passage of EHB 2163. Educational letters are being sent to both registered and unregistered taxpayers, and our website (dor.wa.gov) contains a wealth of information on the effects on the new legislation. This information is being updated regularly. The agency also has an ongoing tax discovery program that is designed to educate the public about its tax obligations, and to assist them in becoming compliant with state tax laws.
How does the Department know if a remittance is marketplace facilitator/remote seller revenue? Will marketplace facilitator/remote seller revenue be delineated in the Distribution Detail which is available from the DOR Fortress Online portal?
The Department has developed a method to identify marketplace facilitators/remote sellers in order to calculate mitigation payments. Information from remote sellers and marketplace facilitators will be included in the local tax distribution files (available from the DOR Fortress Online portal); however, the businesses will not be identified as marketplace facilitators/remote sellers.
Why is there a need for a reconciliation at the end of the 18-month period?
The legislation does not explain why a reconciliation is necessary.
Isn’t the reduction of mitigation payments during the 18-month period based on actual marketplace facilitator/remote seller revenue?
Yes. The marketplace facilitator/remote seller revenue will be based on actual taxpayer reporting.
If it is based on an estimate and there is a risk that there will be an amount owed to the state, how much of a risk is it? It would be difficult for a City to absorb a significant reduction in Sales Tax revenues distributions due to this reconciliation unless it is planned.
The amount of risk relates to the amount of consumer use tax reported annually in April for activities occurring in the prior year.
If there is a legal challenge to EHB 2163, what will be the State's response or action? Will they still require sellers to elect to either comply with use tax notice and reporting or collect the sales tax and remit?
The State/Department will defend it:
- If named as a defendant in the litigation, or
- If the plaintiff challenges the constitutionality of the statute.
Unless the court places an injunction on the state implementing EHB2163, the Department will continue to administer and enforce the law enacted in the bill.
Will the state hold the sales tax pending outcome of legal action? If the State remits the taxes to jurisdictions, will it have to be repaid if the courts rule it is unconstitutional?
Generally speaking, sales tax remitted to the Department is deposited into the General Fund. Thus, the Department does not hold onto the tax pending the outcome of litigation. Should the plaintiff(s) prevail, the Court may order the Department to provide refunds. However, it is difficult to speculate as to possible remedies, which will depend on the specific details and scope of the litigation, if and where it were to happen.
Without the specific details and scope of the potential litigation, the Department declines to speculate as to possible remedies.