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2020 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 2020 legislative session.

Also, see the department’s complete Summary of 2020 Tax & Licensing Legislation.
 

Aerospace taxes

This bill makes the following aerospace business and occupation tax preference changes, effective April 1, 2020:

  • Manufacturers and processors for hire of commercial aircraft and components of such aircraft are subject to a business and occupation tax rate of 0.484% on their manufacturing, wholesaling and retailing activities.
  • Manufacturers and processors for hire of certain aerospace tooling are subject to a business and occupation tax rate of 0.484% on their manufacturing and wholesaling activities, and a business and occupation tax rate of 0.471% on their retailing activities.

After March 31, 2021, a preferential rate of 0.357% will be implemented when all of the following conditions are met:

  • The United States and European Union reach an agreement resolving their World Trade Organization disputes regarding large civil airplanes.
  • The agreement expressly allows a preferential business and occupation tax rate of 0.357% or less.
  • The Department of Commerce notifies the Department of Revenue that an agreement has been reached.
  • The Department of Labor & Industries notifies the Department of Revenue that a significant commercial airplane manufacturer has at least a 0.3% “aerospace apprenticeship utilization rate.”

Effective March 25, 2020 (ESB 6690, Chapter 165, Laws of 2020)

 

Derelict vessels

This bill broadens the requirement to provide proof of marine insurance to vessels more than 35 feet in length. Proof of marine insurance is required upon any payment of tax to the department or any transfer of the vessel. Previously, only vessels over 65 feet were required to provide proof of marine insurance.

Effective June 11, 2020 (2SSB 6528, Chapter 324, Laws of 2020)

 

Electric marine battery incentive

This bill:

  • Extends the retail sales and use tax exemptions for new battery-powered electric marine propulsion systems with continuous power greater than 15 kilowatts and vessels equipped with such propulsion systems from July 1, 2025, to July 1, 2030.
  • Expands these retail sales and use tax exemptions to include the purchase and use of:
    • Batteries and battery packs used exclusively to power electric or hybrid marine propulsion systems that operate with a continuous power greater than 15 kilowatts, and labor and services to install, repair, alter, or improve such batteries or battery packs.
    • New shoreside batteries for the purpose of reducing grid demand when charging electric and hybrid vessels, labor and services to install, alter, or improve such shoreside batteries or their infrastructure, and tangible personal property that will become a component of shoreside batteries infrastructure.

Effective July 1, 2020 (SHB 2486, Chapter 341, Laws of 2020)

Batteries for electric vessel and marine propulsion systems tax exemption 

 

Expired exemption for mental health and chemical dependency services

The deduction provided in RCW 82.04.4277 to health or social welfare and behavioral health organizations for mental health and chemical dependency services expired January 1, 2020.

 

Feminine hygiene products

This bill provides a permanent sales and use tax exemption on the purchase or use of feminine hygiene products.

Effective July 1, 2020 (ESSB 5417, Chapter 350, Laws of 2020)

Sales tax exemption for feminine hygiene products

 

Gift cards

This bill adds additional limitations on when gift certificates and gift cards may have an expiration date.

Effective July 1, 2020 (HB 1727, Chapter 376, Laws of 2019)

Changes to gift certificates and gift cards

 

Heavy equipment rental

This bill creates a new heavy equipment rental tax of 1.25% on the rental price, beginning January 1, 2022, which is collected from the consumer.

Effective June 11, 2020 (SSB 5628, Chapter 301, Laws of 2020)

 

Land development or management services

This bill clarifies that “land development and management” services are excluded from being subject to retail sales tax, if such services are provided by a person that is not also responsible for the construction activities.

Effective June 11, 2020 (HB 2229, Chapter 109, Laws of 2020)

Land development and management services

 

Large private airplanes

This bill extends the sales and use tax exemptions on sales to nonresidents of large private airplanes, and for charges for services to repair, clean, alter, or improve, such airplanes, from July 1, 2021, to July 1, 2031.

(SSB 6068, Chapter 304, Laws of 2020)

 

Nonprofit and library fundraising

This bill removes the expiration date on the use tax exemption for items purchased or received as a prize at a qualifying nonprofit organization or library fundraising event. Under current law, to qualify for the exemption, an item must be valued at less than $12,000. Under this bill, the $12,000 value limit is adjusted annually for inflation.

Effective June 11, 2020 (SB 6312, Chapter 159, Laws of 2020)

 

Plastic bags

This bill:

  • Requires retailers, beginning January 1, 2021, to charge 8 cents for any recycled content paper bag or reusable plastic bag provided to consumers through December 31, 2025.
  • Increases the bag charge to 12 cents per plastic bag beginning January 1, 2026.
  • Provides a business and occupation tax deduction for any funds derived from the pass-through bag charge created by this bill. Retail sales tax still applies to the pass-through charge.
  • Prohibits retailers, beginning January 1, 2021, from providing single-use plastic carryout bags, and certain paper carryout bags and reusable carryout bags unless they meet recycled content requirements.

Effective June 11, 2020 (ESSB 5323, Chapter 138, Laws of 2020)

 

Tribal compacts

This bill authorizes the Governor to enter into compacts with Indian tribes concerning qualified transactions between non-tribal members within a compact covered area.

Beginning on the effective date of the compact, the compact must allow the compacting tribe to receive both of the following amounts collected on qualified transactions:

  • 100% of the retailing business and occupation tax.
  • The first $500,000 of the state sales and use tax.

For qualified transactions occurring within a new development, the compacting tribe will also receive one of the following amounts of state sales and use tax:

  • 25% of any amount above the $500,000 cap.
  • 60% of any amount above the $500,000 cap if the tribe has completed a qualified capital investment.

Beginning January 1st of the fourth calendar year following the signing of the compact, the compacting tribe will receive one of the following amounts of state sales and use tax for qualified transactions that do not occur within a new development:

  • 25% of any amount above the $500,000 cap.
  • 50% of any amount above the $500,000 cap if the tribe has completed a qualified capital investment.

Effective June 11, 2020 (SHB 2803, Chapter 132, Laws of 2020)

Retail taxes compact

 

Workforce education investment funding

This bill:

  • Eliminates the Workforce Education Investment Surcharge on “specified persons” imposed under E2SHB 2158 retroactively to January 1, 2020.
  • Creates a higher (1.75%) tax rate for businesses (and affiliated groups) with $1 million or more of taxable income subject to the Service and Other Activities classification.
  • Amends the advanced computing surcharge previously imposed under RCW 82.04.299(2) to equal 1.22% of a select advanced computing business's gross income subject to service and other activities business and occupation tax, beginning April 1, 2020.
  • Eliminates the $4 million minimum advanced computing surcharge and increases the maximum combined advanced computing surcharge for any affiliated group from $7 million to $9 million.

Effective April 1, 2020 (ESSB 6492, Chapter 2, Laws of 2020)

Workforce Education – Service and Other Activities Rate Changes