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2019 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 2019 legislative session.


Summary of 2019 Tax & Licensing Legislation
 

Abandoned vehicles sold at auction

This bill amends the definition of “sale” to exclude an abandoned vehicle sold by a registered tow truck operator (RTTO) at a public auction or to a licensed vehicle wrecker, hulk hauler, or scrap processor. RTTO’s are no longer required to collect and submit sales tax or pay business and occupation tax on the sale of abandoned vehicles at auction. Purchasers of abandoned vehicles will pay use tax to the Department of Licensing when they register the vehicle.

Effective July 28, 2019 (SSB 5668, Chapter 357, Laws of 2019).

Auctions of abandoned vehicles by registered tow truck operations

 

Annual return due date

Starting with the Annual 2019 return, this bill changes the due date for annual excise tax returns from Jan. 31 of each year to April 15.

Effective July 28, 2019 (2SHB 1059, Chapter 63, Laws of 2019).

 

Clean energy

This bill changes how Washington electric utilities may generate electricity, and provides a sales and use tax exemption on purchases of renewable energy systems. Specifically, this bill:

  • amends and extends the retail sales and use tax exemptions (in the form of a refund) on purchases of machinery and equipment and the labor charges to install them used at a facility capable of generating at least one thousand watts AC of electricity from solar, beginning Jan. 1, 2020
  • provides a 100 percent sales and use tax exemption for solar energy systems capable of generating no more than 100 kilowatts (kW) AC of electricity if the seller meets certain registration and compliance requirements
    • exemption applies to equipment installed beginning July 1, 2019
  • provides a 50 to 100 percent sales and use tax exemption for solar energy systems over 100 kW AC and up to 500 kW AC, dependent on the seller meeting certain requirements, beginning Jan. 1, 2020

Effective May 7, 2019 (E2SSB 5116, Chapter 288, Laws of 2019).

Sales and use tax exemption on purchases and installation of solar energy systems

Sales and use tax exemption on purchases of certain solar and other renewable energy systems

 

Commercial office space incentive

This bill allows a city in a county with a population less than 1.5 million to create both of the following:

  • a local sales and use tax remittance program
  • a local property tax reinvestment program to incentivize the development of commercial office space

The remittance program is for 100 percent of the local sales and use tax on:

  • the sale of, or charge made for labor and services on the construction or rehabilitation of commercial office space
  • the sales or use of tangible personal property that is installed as an ingredient or component of a commercial office space

Effective July 28, 2019 (SHB 1746, Chapter 273, Laws of 2019).

 

Energy efficiency incentive

This bill:

  • requires the Department of Commerce to establish a State Energy Performance Standard for certain commercial buildings by Nov. 1, 2020
  • provides an incentive payment for building owners who demonstrate early compliance with the Standard
    • application and approval occur through the Department of Commerce
    • incentive payment equals $0.85 per gross square foot of floor area and will be made by utilities or light and power businesses serving the building and participating in the program
  • creates a public utility tax credit for utilities and light and power businesses participating in the early adoption incentive payment program
    • credit equals the amount of incentive payments made to qualifying building owners plus documented administrative costs not to exceed 8 percent of the incentive payments

Effective July 28, 2019 (HB 1257, Chapter 285, Laws of 2019).

 

Financial institution tax

This bill imposes an additional B&O tax of 1.2 percent beginning Jan. 1, 2020, on specified financial institutions. The additional tax applies to the business’ income subject to the B&O tax under the service and other activities B&O tax classification.

Effective Jan. 1, 2020 (SHB 2167).

 

Graduated real estate excise tax

This bill:

  • creates graduated state real estate excise tax (REET) rates
  • makes changes to transfers of controlling interest

Effective Jan. 1, 2020 (ESSB 5998).

 

Green transportation

This bill:

  • imposes a new annual $75 transportation electrification fee on electric, hybrids, and other alternative fuel vehicles
  • creates a retail sales and use tax exemption on the sale or lease of new alternative fuel passenger vehicles with a selling price plus trade-in amount of $45,000 or less
  • creates a retail sales and use tax exemption on the sale or lease of used alternative fuel passenger vehicles with a selling price plus trade-in amount of $30,000 or less
  • extends and expands the B&O tax and PUT credits for alternative fuel commercial vehicles to include infrastructure to support these vehicles, effective January 1, 2020
  • extends and expands the electric vehicle battery and infrastructure sales and use tax exemptions to include electric batteries or fuel cells for electric buses, sale of zero emission buses, and renewable hydrogen production facilities
  • extends and expands the leasehold excise tax exemption for public land used for electric vehicle charging stations to include hydrogen refueling stations and renewable hydrogen production facilities
  • creates a retail sales and use tax exemption on the sale of vessels using a battery-powered electric marine propulsion system that provides continuous power greater than 15 kW and new vessels equipped with the same size propulsion system

Effective Aug. 1, 2019 unless otherwise noted (E2SHB 2042, Chapter 287, Laws of 2019).

Tax exemptions on electric vehicle infrastructure, electric vehicle batteries and fuel cells, and zero emissions buses

New clean alternative fuel and plug-in hybrid vehicle sales and use tax exemption

New electric vessel and marine propulsion system tax exemption

 

Hazardous substance tax on petroleum products

This bill:

  • subjects petroleum products to a volume-based  hazardous substance tax (HST) at a rate of $1.09 per barrel beginning July 1, 2019
  • subjects petroleum products that are not easily measured on a per-barrel basis to the current value-based  HST rate instead of the new volumetric rate
  • requires the department to publish a list of these products

Effective July 1, 2019 (ESSB 5993).

Hazardous substance tax change for petroleum products

 

Health sciences shared sales tax extended

This bill extends the expiration date of the 0.02 percent state shared sales and use tax for a Health Sciences and Services Authority from Jan. 1, 2023, to Jan. 1, 2038. 

Effective July 28, 2019 (SB 5596).

 

In-state broadcasters

This bill:

  • updates the method for calculating the standard deduction for radio and television broadcasters for revenue received from network, national, and regional advertising
  • requires the Department of Revenue to publish the standard deduction by rule by Sept. 30, 2020, and update it every five years

Effective July 28, 2019 (HB 2035).

Change to the advertising deduction for radio and television broadcasting

 

International investment management companies

This bill modifies the requirements to be a qualifying international investment management service (IIMS) business.  Only those businesses–and their affiliates—that meet the new requirements will be able to report under the B&O tax classification for International Investment Management Services.  Additionally, only those businesses—and their affiliates—that meet the new requirement will be able to take the sales tax exemption for the purchases of standard financial information.

Effective July 1, 2019 (ESB 6016).

Taxation of international investment management companies

 

Medicaid incentive payments – B&O tax exemption

This bill expands the existing deduction in RCW 82.04.43395 for Accountable Communities of Health to allow certain public or state-owned hospitals and hospitals affiliated with a state institution to take a business and occupation tax deduction for incentive payments received from the Medicaid Quality Improvement Program (MQIP) under 42 C.F.R. 438.6(b)(2).

It also creates a new B&O deduction for managed care organizations as defined in RCW 74.60.010 that receive those same incentive funds from MQIP.

Effective July 28, 2019 (SHB 2024, Chapter 350, Laws of 2024).

Medicaid incentive payments business and occupation tax deductions expanded

 

Nonresident refund program

This bill converts the nonresident sales tax exemption to a refund program.

Effective July 1, 2019 (ESSB 5997).

Changes to the sales tax exemption for qualified nonresidents

Businesses can post this message to notify customers of the change.

 

Paint stewardship program

This bill:

  • requires manufacturers of architectural paint to participate in a stewardship program for managing the end-of-life disposal of leftover paint
  • establishes an assessment to be added to the purchase price of architectural paint
  • provides a B&O tax exemption equal to amounts received for this assessment

Effective July 28, 2019 (SHB 1652, Chapter 344, Laws of 2019).

 

Political subdivisions

This bill provides an exemption from sales tax when either of the following occur:

  • there is a merger of two political subdivisions
  • there is a contractual consolidation of two political subdivisions under which the taxpayer that originally paid sales or use tax continues to benefit from the use of the personal property

Effective July 28, 2019 (SB 5337, Chapter 188, Laws of 2019).

 

Preferential timber rate extended

This bill:

  • extends the preferential business and occupation tax rates on certain activities related to the timber industry and the surcharge on certain timber and wood product manufacturers, extractors, and wholesalers to July 1, 2045
  • amends the type of timber and wood products eligible for the preferential manufacturing B&O rate to include mass timber products as defined in RCW 19.27.570(1)  

Effective July 28, 2019 (E3SHB 1324, Chapter 336, Laws of 2019).

Timber activities: - eligibility expanded to mass timber product manufacturers and expiration date extended for preferential rate

 

Renewable natural gas

This bill makes the production and sale of renewable natural gas subject to business and occupation (B&O) tax, instead of public utility tax (PUT). It also expands the definition of “to manufacture” to include the production and processing of renewable natural gas. 

Effective July 28, 2019 (HB 1070, Chapter 202, Laws of 2019).

Taxability of renewable natural gas

 

Scan-down allowances – B&O tax deduction

This bill creates a service and other business and occupation tax deduction for revenue generated from scan-down allowances related to the following:

Effective July 28, 2019 (EHB 1354, Chapter 217, Laws of 2019).

Scan-down allowances - new business and occupation (B&O) tax deduction 

 

Standardized health plan – B&O tax exemption

This bill:

  • requires the Health Benefit Exchange (HBE), along with other stakeholders, to create up to three standardized health plans for each of the existing HBE health plan tiers
    • requires Health Care Authority (HCA) to contract with health carriers to offer those plans
  • creates a B&O tax exemption for health care providers who perform services on patients covered by HBE health plans created by this bill

Effective July 28, 2019 (ESSB 5526).

Health Care Provider B&O tax exemption available in 2021

 

Travel agent and tour operator rate

This bill increases the B&O tax rate for travel agents and tour operators from 0.275 percent to 0.9 percent for those businesses with an annual taxable income greater than $250,000. Businesses with an annual taxable income of $250,000 or less still owe the 0.275 percent B&O tax rate.

Effective July 1, 2019 (ESSB 6004).

Business and occupation (B&O) tax rate increase for certain travel agents and tour operators

 

Vapor products tax

This bill creates a new tax on the first possessor in this state of vapor products. The tax is imposed on the volume of the solution listed by the manufacturer at the following tax rates:

  • nine cents per milliliter of solution in an accessible container (container intended to be opened) containing more than 5 milliliters of liquid
  • twenty-seven cents per milliliter of solution in all other vapor products

Effective Oct. 1, 2019 (HB 1873).

New vapor products tax due on existing inventory

New vapor products tax

 

Wayfair changes

This bill modifies tax obligations as a result of the South Dakota v. Wayfair, Inc. decision. It:    

  • codifies the Wayfair  sales tax collection obligation threshold of over $100,000 in receipts from Washington sales and eliminates the 200 transactions threshold
  • aligns nexus thresholds for B&O tax and sales tax collection starting Jan. 1, 2020
    • $100,000 will be calculated using all gross income
  • repeals the referrer definition and the use tax notice and reporting requirements beginning July 1, 2019
  • limits the existing B&O tax and sales tax exemption for sales of goods in import commerce to the wholesale sale of unroasted coffee beans or sales between a parent company and its wholly owned subsidiary

Beginning July 1, 2019, marketplace facilitators:

  • no longer have a digital products delay
  • must provide their marketplace sellers with access to gross sales information for all Washington sales so their marketplace sellers can timely and accurately file tax returns with the Department

Effective March 14, 2019 (SSB 5581, Chapter 8, Laws of 2019).

 

Workforce education B&O surcharges

This bill creates a three-tiered Workforce Education Investment Surcharge. Each tier assesses a surcharge based on a percentage of the service and other activities B&O tax rate of 1.5 percent as follows:

  • a 20 percent surcharge on select businesses
  • a 33.33 percent surcharge on advanced computing businesses with revenue between $25 billion and $100 billion
  • a 66.66 percent surcharge on advanced computing businesses with revenue more than $100 billion

Effective Jan. 1, 2020 (E2SHB 2158). Effective February 10, 2020, ESSB6492 primarily replaces E2SHB 2158 retroactively.