1. Home
  2. Forms & Publications
  3. Publications By Subject
  4. Tax Topics
  5. 2017 Tax Legislation

2017 Tax legislation

The following is a brief summary of the tax-related bills passed by the Legislature and signed into law by Gov. Inslee during the 2017 legislative session:
 


Annual Summary of 2017 Tax Legislation (pdf)

 

Bottled water subject to sales tax

Sales of bottled water are subject to sales or use tax effective August 1, 2017. The bill provides the following sales tax exemption or refund:

  • Bottled water purchased under the SNAP (food stamp) program (exemption at store)
  • When a buyer does not have readily available potable water (exemption for water delivery or refund); and
  • When a buyer has a prescription for bottled water (exemption for water delivery or refund).

(EHB 2163, Part I, Chapter 28, Laws of 2017, 3rd Special Session, Part III)

 Special Notice: Bottled water subject to sales tax

 

New nexus standard for Retailing B&O tax

Effective July 1, 2017, this bill requires a business to pay retailing B&O tax if, in the current or immediately preceding calendar year, the business has more than $267,000 of yearly gross receipts sourced or attributed to Washington, or at least 25% of its total yearly gross receipts from this state. As result, a business engaged in a retailing activity has nexus with Washington State either by having a physical presence in this state or by exceeding these receipts threshold.

Also, the timeframe for applying the economic nexus standards for out-of-state businesses with apportionable income has changed beginning July 1, 2017. This means that out-of-state businesses (not organized or commercially domiciled in Washington) will be subject to B&O tax in the current year if they met any of the economic nexus thresholds during the current or prior calendar year: (EHB 2163, Part III, Chapter 28, Laws of 2017, 3rd Special Session, Part III)

Tax Topics Article: New nexus standard for Retailing B&O tax

 

Marketplace Fairness changes

Effective January 1, 2018, this bill requires remote sellers, marketplace facilitators, and referrers meeting specified sales or income thresholds to elect to either:

  • Collect sales or use tax on sales to Washington consumers, or
  • Comply with specified use tax notice and reporting requirements. Failure to comply subjects the entity to specified penalties.

(EHB 2163, Part II, Chapter 28, Laws of 2017, 3rd Special Session, Part II)

Tax Topics Article: Marketplace Fairness

 

Martial arts – retail sales tax changes

Effective October 19, 2017, many martial arts facilities will no longer be responsible for collecting retail sales tax on charges for participating in martial arts classes, training, or events. However, retail sales tax still applies to charges for martial arts classes, training, or events that occur at an athletic or fitness facility. (SSB 5977, Chapter 37, Laws of 2017, Part XII)

Special Notice: Martial arts - Retail sales tax changes

 

Expired tax exemptions

The following tax exemptions have expired (because they were not extended in the 2017 Legislation):

  • The sales and use tax exemptions for certain products (such as wood chips, grape vines and charcoal) for use by restaurants that impart flavor to food during the cooking process have expired effective July 1, 2017. (RCW 82.08.210, RCW 82.12.210)
  • The sales and use tax exemptions for clay targets purchased by nonprofit gun clubs have expired effective July 1, 2017. (RCW 82.08.205, 82.12.205)

 

Eliminating wholesale vehicle dealer license

Effective July 1, 2017, this bill phases out licenses for wholesale vehicle dealers.

  • Effective July 1, 2017, the Department of Licensing may not issue any new wholesale vehicle licenses
  • Effective July 1, 2018, the Department of Licensing may not renew any wholesale vehicle licenses.

(House Bill 1722, Laws of 2017)

 

Clarification of use permits for entity owned vessels

Effective July 23, 2017, this bill clarifies the issuance of use permits for entity owned vessels and adds the following expiration dates:

  • All applications must be received by the Department of Revenue by November 30, 2025.
  • All nonresident vessel permits for entity owned vessels must be obtained by December 31, 2025.

This legislation expires July 1, 2026. (Substitute Senate Bill 5358, Chapter 323, Laws of 2017)

Special Notice: Coming soon

 

Relating to promoting a sustainable, local renewable energy industry through the modification of renewable energy tax incentives

Effective July 1, 2017, this bill ends the current program administered by the Department of Revenue and transfers program management to the Washington State University Extension Energy Program on October 1, 2017. The bill:

  • Establishes a new cost recovery incentive program open to applicants certified under the existing program and new applicants starting July 1, 2017.
  • Ends the sales tax exemption on renewable energy systems capable of generating  500 kw or less on September 30, 2017
  • Modifies the PUT credit (RCW 82.16.130) for incentive payments made under the existing program
  • Removes the confidentiality of application data and information related to PUT credits.

Credits to participating light and power businesses increases to the greater of $250,000 or 1 ½ percent of their taxable sales in calendar year 2014
(Engrossed Substitute Senate Bill 5939)

Special Notice: Coming soon

 

Streamlined sales tax mitigation to local governments

Beginning after June 30, 2017, this bill limits Streamlined Sales Tax (SST) mitigation payments to only cities, counties and public facility districts. Also:

  • Beginning on June 30, 2018, it reduces SST mitigation payments for cities, counties, and public facility districts by any local tax revenue increase as a result of “marketplace facilitator/remote seller” revenue.
  • It ends SST mitigation payments for cities, counties, and public facility districts after payments made on September 30, 2019.

(EHB 2163, Chapter 28, Laws of 2017, 3rd Special Session, Part IV)

 

Enhanced food fish excise tax increase

Effective January 1, 2018, this bill modifies the enhanced food fish excise tax to:

  • Create two categories of enhanced food fish, one for fish harvested from the Puget Sound and one for fish harvested from ocean waters, the Columbia Rives, Willapa Bay, and Grays Harbor.
  • Increase the tax rate for chinook, coho, and chum salmon, and anadromous game fish harvested from ocean waters, the Columbia River, Willapa Bay, and Grays Harbor rate  to 6.25% from 5.25%.

The tax rate for enhanced foo fish harvested from the Puget Sound remains at 5.25%. (Engrossed Substitute House Bill (ESHB) 1597 (Chapter 53, Laws of 2017))

Special Notice: Coming soon

 

Relating to tax credits for clean alternative fuel commercial vehicles

Effective January 1, 2018, this bill expands and extends the tax credits available to persons taxable under chapters 82.04 or 82.16 for the purchase, lease, or conversion of commercial vehicles to operate on alternative fuels.  RCW 82.04.4496 and 82.16.0496 are each amended to:

  • Increase maximum credit per vehicle up to 14,000 pounds Gross Vehicle Weight (GVW) from $5,000 to $25,000
  • Increase maximum credit per vehicle 14,001 to 26,500 pounds GVW from $10,000 to $50,000
  • Increase maximum credit per vehicle above 26,500 pounds GVW from $20,000 to $100,000
  • Allow a vehicle purchase/lease delivery date up to one year after notification of acceptance of the credit
  • Increase the mileage and manufacturing date limits for qualifying used commercial vehicles to vehicles with an odometer reading of less than 450,000 miles and are less than ten years past the original date of manufacture.
  • Allow person applying for credit to submit one application for multiple vehicles

Expands qualifying commercial vehicles to include those used to provide commercial services and those that transport passengers.(Engrossed Substitute House Bill 1809)

Special Notice: Coming soon

 

Washington’s motion picture and film industries B&O tax credits for contributors to Washington Filmworks

The bill extends the credit provided by RCW 82.04.4489 to June 30, 2027. The maximum credit a business may earn in a calendar year is limited to the lesser of:

  • $750,000; or
  • The full amount of the cash contribution made to Washington Filmworks.

(Substitute Senate Bill (SSB) 5977 (Section 3, Chapter 37, Laws of 2017 3rd sp. Sess))

Special Notice: Coming soon

 

Main Street tax credit

This bill increases the Main Street statewide annual credit to $2.5 million and makes certain administrative changes to the program, including:

  • Extends the application deadline from January 1 each year to the second Monday in January of each year.
  • Requires that contributions to the Main Street fund or communities must be made by November 15th. If not, those credits are forfeited and will become available to new applicants.

(Substitute Senate Bill (SSB) 5977 (Part I, Chapter 37, Laws of 2017 3rd sp. Sess))

Special Notice: Main Street Tax Credit Increased

 

Silicon smelters tax relief

This bill establishes a public utility tax (PUT) and business and occupation (B&O) credit for a person that sells manufactured gas, natural gas, or electricity to a silicon smelter.

In addition, the bill also allows for a brokered natural gas use tax exemption for silicon smelters using manufactured or natural gas delivered through a pipeline.

Certain employment requirements must be met for calendar years 2021 and 2022. Businesses claiming either preference that do not meet the employment requirements must repay the amount claimed for the prior two years. (Substitute Senate Bill (SSB) 5977 (Part VII, Chapter 37, Laws of 2017 3rd sp. Sess))

Special Notice: Coming soon

 

Relating to solar silicon manufacturing

This bill extends the preferential B&O tax rate for the manufacture of solar silicon products by manufacturers, manufacturers selling their product at wholesale, and processors for hire to July 1, 2027. (Substitute Senate Bill 5977 Part IV)

Special Notice: Coming soon

 

Relating to semiconductor materials manufacturing

This bill extends the preferential tax rate for semiconductor manufacturers and processors for hire through December 1, 2028. This bill:

  • Proposes to further extend the expiration date if a new manufacturing facility is located in Clark County Washington
  • Requires manufacturers whose employee levels drop below 90 percent of the preceding three years to repay 50 percent of the tax preference
  • Provides an expiration date of January 1, 2024 on the sales/use tax exemption for new construction and gases & chemicals used in the manufacture of semiconductors unless a significant semiconductor manufacturing facility is sited in Washington

(Substitute Senate Bill 5977 Part V)

Special Notice: Coming soon

 

Nonprofit organizations selling wine at auction

Effective July 23, 2017, this bill allows nonprofit organizations to provide wine tasting and sell the wine for off-site consumption at auction. The event must be held at a specific place and time and cannot be open to the public. (HB 1718, Chapter 250, Laws of 2017)

For more information, please see the section on Wine Auctions in our nonprofit Tax Guide.

 

Sales of spirits by distributors to employees

Effective July 23, 2017, this bill allows distributors of spirits in certain situations to sell their spirits directly to their employees. (SSB 5537, Chapter 160, Laws of 2017)

In order to qualify, such sales must meet all of the following requirements:

  • The product must be in such condition that it cannot reasonably be sold in the normal course of business, such as, for example, because of damage to the labels on individual bottles
  • The spirits cannot be sold for less than the licensee’s cost of acquiring the spirits
  • All sales are subject to the Spirits Licensing Fees (RCW 66.24.630(4)) and both the Spirits Liter Tax and the Spirits Sales Tax (RCW 82.08.150)
  • The employee must be 21 years of age or older and must have been employed by the distributor for at least 90 days
  • The employee must be purchasing the spirits for personal consumption and not for resale

For more information, please fact sheet on Selling Spirits in Washington State for Distributors. 

 

Beer, spirits and wine distributors – credit card fees

Effective July 23, 2017, this bill authorizes licensed distributors of beer, spirits and/or wine to pass credit card fees on to a purchaser licensed to sell beer, spirits, and/or wine for consumption on the licensed premises. (ESB 5665, Chapter 190, Laws of 2017)

For more information on the taxation of such fees, please see our online article on surcharges.

 

Concerning tax relief for the construction of adapted housing for disabled veterans

Effective August 1, 2017, this bill allows disabled veterans to apply to the Department for a refund of the state portion of retail sales or use tax paid for materials incorporated in and/or labor and services rendered in respect to adapted housing performed under certain grants awarded by the United States Department of Veterans Affairs. The bill limits the remittance to $2,500 for each project. The annual statewide cap for remittances may not exceed $125,000. (SHB 2138 Chapter 176, Laws of 2017)  For more information please see our Special Notice.

 

B&O exemption on wholesale sales of fertilizer and seed

Effective October 19, 2017, this bill exempts certain sales of fertilizer, crop protection products and seeds between eligible distributors and eligible retailers from business and occupation (B&O) tax when there is a specified percentage of common ownership between the distributor and retailers. (Substitute Senate Bill 5977, Part III, Chapter 37 Laws of 2017, 3rd Special Session)

 

Use tax on self-produced fuel

Effective January 1, 2018, this bill modifies the exemption from use tax for businesses that manufacture or extract fuel and use that fuel in their manufacturing or extracting process.  This affects use tax on refinery fuel. (EHB 2163, Part I, Chapter 28 Laws of 2017, 3rd Special Session).

Biomass fuel remains exempt from use tax. Businesses using refinery fuel that they extract or manufacture in the manufacturing or extracting process must pay use tax based on the following rates:

  • 0.963% – From January 1, 2018 through December 31, 2018.
  • 1.926% – From January 1, 2019 through December 31, 2019.
  • 2.889% – From January 1, 2020 through December 31, 2020.
  • 3.852% – From January 1, 2121 and thereafter.

Note: Section 108, which specifies phased-in rates for the newly imposed use tax, does not specify a tax rate for August 1, 2017, through December 31, 2017. The Legislature has indicated it will address the ambiguity and clarify that use tax does not apply until January 1, 2018.

Special Notice: Coming soon