Governor proposes B&O tax streamlining

Governor Gregoire today announced her proposal to streamline administration of state and local B&O taxes. This is one of WPC's long standing recommendations. As we noted in our recent B&O reform proposal:

"Intelligent replacement of the B&O tax will take time. Meanwhile, lawmakers can take a significant step toward reducing the burden the present tax imposes on business owners. Policymakers should streamline the cost complying with the B&O tax by centralizing its administration.

Currently 38 Washington cities impose their own version of a B&O tax,
and unlike local sales and use taxes which are collected by the Department of Revenue, all the administrative functions of municipal B&O taxes are conducted by individual cities. Shifting administration of the tax to the Department of Revenue, as is already done with local sales taxes, would reduce the cost and complexity of municipal B&O taxes and would greatly help businesses. This move would particularly help small business owners, who are disproportionately hit by regulatory compliance costs.

Centralization of B&O municipal tax administration would ensure uniformity of tax compliance for firms that operate in several different jurisdictions. Business owners should not be taxed at a rate that exceeds 100 percent of their gross receipts liability. This problem is addressed by ensuring that municipal taxation of gross receipts occurs only where there is a business-related activity.

A requirement of significant physical presence in the jurisdiction should be
a prerequisite to taxation by that city. In other words, there must be an economic connection between actual business activity and the amount of tax owed. Simply estimating the level of business activity, as some cities do, should not be the basis on which municipal officials impose a local tax on a business."

Here are additional details on the Governor's B&O reform proposal.