Legislative Information - Quarter 3, 2023 | Washington Department of Revenue

Third quarter 2023 update

First-year capital gains tax results

The first tax deadline for Washington’s new capital gains tax was April 18, 2023, and collections surpassed expectations, with payments totaling $838,170,963.33. The tax applies to individuals reporting total gains on the sale or exchange of qualifying long-term capital assets in excess of $250,000.

Total collections are expected to fluctuate for the next several months: a significant portion of total receipts so far have come from individuals who received a filing extension and made an estimated payment. It’s likely that these individuals will owe an amount different from their April estimate once they finalize their returns, which are due in October. It’s also possible that the department will identify both positive and negative adjustments to payments that were remitted along with timely returns.

With the Supreme Court’s Quinn decision upholding the tax coming so near the filing deadline and most of the taxpayers reporting to DOR for the first time, the department went to great lengths to provide extensive customer service and guidance. DOR responded to 335 ruling requests and 1,319 calls from taxpayers with questions or requests for assistance. We also published administrative rules, informational websites, and a series of educational videos.

WFTC results to date

2023 has been a year of firsts for DOR. In addition to the capital gains tax, DOR began collecting applications in February for the state’s new Working Families Tax Credit. Individuals may continue to apply for a credit against tax paid in 2022, but for purposes of looking at initial results, the majority of the year’s applications came in by the April 18 federal tax filing deadline.

As of June 15, DOR received 180,133 applications and refunded $93,072,711. Approximately 45% of the estimated WFTC-eligible individuals have applied for the tax credit.

The department is encouraged by these first-year results. Ours is the first earned income tax credit program launched in a non-income tax state, which has presented unique challenges, as we do not possess the same volume of data on residents that states with an income tax have for their residents. Our WFTC team heard from states with an income tax say they consider a 35% or 40% first-year application rate a success. For Washington to have surpassed that as a non-income tax state is a notable achievement.

DOR maintains a dashboard of WFTC performance data on the official WFTC website, which we update twice a month. We also encourage you to remind your constituents to check their eligibility for the tax credit and apply online at workingfamiliescredit.wa.gov.

New unclaimed property program results

Following up on our last quarterly legislative update, DOR’s Unclaimed Property team has now launched a new Money Match program to proactively send unclaimed property back to its rightful owner without requiring the owner to search and apply online. In first quarter of 2023, the department returned $165,060.28 to Washingtonians under the Money Match program.

Earlier this spring, the department mailed an initial batch of 2,000 letters notifying owners that we would be sending them a check. The program intends to ramp up to sending 10,000 letters per quarter. The program is limited to property for which DOR has multiple data points providing a high degree of certainty that we’ve identified the correct owner and have their current address.

Citizens shouldn’t only rely on the Money Match program to recover their unclaimed property. We encourage people to check if they have unclaimed property on our UCP website. Please help us spread the word with your constituents that they can easily and quickly check to see if they have unclaimed cash or other property waiting for them.

The Wayfair way

A five-year study by DOR has concluded that Washington sales and use tax collections from remote sellers and facilitators have benefited over recent years from a combination of the state’s marketplace fairness laws, the U.S. Supreme Court’s 2018 Wayfair decision, and the pandemic.

A refresher of what the Wayfair case entailed:

The U.S. Supreme Court upheld a South Dakota law that imposed a sales tax collection obligation on sellers with more than $100,000 in sales or 200 transactions annually in South Dakota. Prior to that decision, states could only impose a sales tax collection obligation on sellers with a physical presence in the state under federal law. The Wayfair decision represents a change in federal law that permits states to impose greater sales and use tax collection obligations on sellers than was previously allowed.

In 2017 before the Wayfair decision, the legislature passed HB 2163, a marketplace fairness bill. In 2019, the legislature passed additional marketplace fairness legislation, SB 5581.

The chart above shows the state’s projected and estimated actual sales and use tax revenue from sellers and facilitators impacted by Washington’s marketplace fairness laws and the Wayfair decision. The blue line tracks what DOR’s fiscal note projected at the time; the red bars represent actual revenue collection. (Actual collections are estimated, as DOR could not identify an exhaustive list of all relevant taxpayers for purposes of the study.)

Actual collections began to dramatically exceed fiscal note expectations beginning in FY 2020 at the start of the pandemic, when many people turned to shopping online instead of in stores. If the legislature had not acted on marketplace fairness, the state might have missed substantial amounts of this sales and use tax revenue.

Drew Shirk appointed as new DOR director

In June, DOR welcomed Drew Shirk as its new director. Drew succeeded John Ryser, who has served as DOR’s acting director since Vikki Smith’s retirement last year. Drew most recently served as the executive director of legislative affairs for the governor. Prior to his tenure with the governor’s office, Drew served in numerous roles at DOR, starting his public career with DOR's compliance division in 1989 and concluding as the department's senior assistant director for tax policy.

DOR’s 2023 session snapshot

If we may conclude with unapologetic pats on our own back, here are some quick stats from DOR’s support to the legislature during the 2023 session.

Our Legislation & Policy division analyzed 561 bills and 786 amendments, drafted seven bills at the request of lawmakers, and sent 118 letters to sponsors and nonpartisan staff suggesting ways to improve drafting their bills. Our Research & Fiscal Analysis division published 445 fiscal notes and 304 fiscal estimates, with 98% of the fiscal notes submitted to the appropriate committee on time for their hearing.

That is just some of the work we do during session, but hopefully it is a helpful snapshot of our commitment to being a partner and resource to the legislature. RCW 82.01.060 tasks us with providing nonpartisan assistance to the legislature on tax matters, and we take that responsibility seriously. Please let us know if you have suggestions for how we can improve our service in the future. Thank you.