Local Government Partnership Meeting September 29, 2010
Welcome and Introductions Cindi Holmstrom, DirectorDepartment of Revenue
Announcements & Housekeeping Items Miki Gearhart, Local Government Partnership Facilitator
Non-Resident Exemption and Canadian Provinces Gil Brewer, Assistant Director Interpretations and Technical Advice
Streamlined Sales Tax Mitigation for Local Governments Don Gutmann Research Division
National Streamlined Sales Tax Russ Brubaker Executive Division
National Streamlined Sales Tax: Main Street Fairness Act (the “Act”) • On July 1, 2010, the Act was introduced in the U.S. House of Representatives (H.R. 5660). • The Act would allow Streamlined member states to assert collection authority over remote sellers without a physical in-state presence. • There is currently no companion Senate bill. • Efforts to pass legislation may intensify after the November elections.
National Streamlined Sales Tax: Main Street Fairness Act, continued • Remaining issues: • Vendor compensation. • The small seller exception threshold. • The Communications Task Force negotiations and simplification of other taxes on communication services. • Indirect non-consumer paid taxes: cable franchise fees, right-of-way fees, and public education and government access fees, and municipal business and occupation and utility taxes. • Direct consumer paid taxes: E911, telephone relay service, and telephone assistance taxes. • Implementation.
National Streamlined SalesTax: Streamlined Agreement Amendments and Rules Update • Recently adopted amendments and rules: • The Streamlined Agreement was amended to provide a toggle for “bottled water” under the definition of “food and food ingredients.” • Rules 311.1 & 311.2 were adopted to clarify the sourcing of services on tangible personal property (TTP), e.g., repair of TPP. • Proposed rules of interest: • Draft rules 327.6 & 327.6.1 have been proposed to clarify the Streamlined definition of “candy.” • Draft Rule 327.7 has been proposed to clarify that reductions in the sales price paid by employees for achieving specific performance goals and employee awards convertible to cash are not discounts excluded from the sale price.
National Streamlined Sales Tax: Annual Compliance Review • The 2010 annual compliance review of Streamlined member states began in August. • Of the first 13 member states reviewed, Washington was the only state to have no compliance issues. • The Compliance Review and Interpretation Committee (CRIC) will schedule a meeting to discuss Washington’s compliance in October of 2010. • Absent additional comments from the business community, we expect the CRIC will recommend Washington to be found in compliance with the Agreement.
National Streamlined Sales Tax Questions?
Sales and Use Tax Collections from Candy and Bottled Water Don GutmannResearch Division
Local Sales Tax Distribution Department of Revenue Taxpayer Account Administration James Petit
Distribution Cycle • A two month lag from the end of the reporting period to distribution of funds. • Sales taxes are collected in the reporting period by the seller. • Sales taxes are remitted the following month • Distribution follows the end of the following month after taxes are remitted
Example of Local Taxes Distributed • Basic Local and Optional tax • Transportation Taxes • Lodging Taxes • Public Facilities District Taxes • State Shared – LRF, LIFT, Annexations • Criminal Justice Taxes
Example of a Distribution Cycle for the month of July • Sales tax is collected by taxpayer in July • July returns are remitted during the month of August
Distribution Cycle Example • Accumulation begins, separating the taxes remitted into separate funds • Accumulation includes current returns and past due reported during the cycle
Distribution Example Continued • Accumulation includes adjustment to accounts as result of review of returns and input from local jurisdictions • Funds can only be re-distributed from entity to entity within 6 months (per contract with local governments). • Local Sales Tax examiners review accumulation reports
Distribution Example Continued • Distribution Cut Off September 21st
Distribution Example Continued • Cut Off date is approximately 6 business days prior to the end of the month • Any returns and adjustments after this date are included in the next distribution cycle
Final Steps of Distribution Example • September 22, final review of accumulation • Distribution file is released to Office of State Treasurer
Final Steps of Distribution Example Continued • September 30, Office of State Treasure funds distribution
Questions DOR Contact: Bob Petteys Tax Administration Manager Telephone: (360) 902-7065 E-mail: RobertP@dor.wa.gov
Annexation Impacts and Processes Andy Van Gerpen, September 29, 2010
General Annexation Information (DOR administration) 2. Update on Annexation Services Tax
What annexation information should be included in notification? • Annexation ordinance • Legal description • Map of annexation
What is the timeline for notification? • 75 days in advance of effective date of annexation • In addition to the requirement to notify OFM
Once notified, what will DOR update? • Website GIS information • Address/tax rate search • Map search • Downloadable databases
Where should the annexation information be sent? Department of Revenue Attn: Local Tax Manager PO Box 47476 Olympia, WA 98504
What is the Annexation Services Tax? • A local sales and use tax imposed by cities with qualifying annexations • Used to provide, maintain, and operate municipal services for the annexation area • Credited against the state sales/use tax • Imposed city-wide
What cities may impose the Annexation Services Tax? • Any city located in a county with a population greater than 600,000 • Snohomish • King • Pierce • Must annex a qualified annexation
What annexations will qualify? • Population requirement – Single annexation with population greater than 10,000 • Cost requirement – Projected annual costs to provide municipal services greater than projected annual general revenue • Timing Requirement – Annexation must be commenced before January 1, 2015
What determines the tax rates? • Population of annexation area • Between 10,000 and 20,000 ….. 0.1% • More than 20,000 .................... 0.2%
Are there limitations? • Time period – 10 years (or less, if there is no longer a “gap” for that annexation area) • Effective date • July 1st – must start on July 1 • After annexation is effective • Threshold limitation – difference (“gap”) between costs and revenue
How is the threshold limitation determined? • The city determines the new threshold (“gap”) amount each year • Threshold is based on the difference between the city’s cost to provide, maintain, and operate municipal services for the annexation area and the general revenue that the city would otherwise expect to receive from the annexation during a year • New threshold is provided to the Department of Revenue by March 1stof each year (once the tax is imposed)
Important dates • July 1st -- Annexation tax can only be imposed on July 1st of a year • December 31, 2014 -- To qualify, a city must commence annexation of a qualifying area no later than December 31, 2014 (before January 1, 2015) • Before June 1st(at least 30 days before effective date of tax) – Send DOR a copy of adopted ordinance/resolution imposing the annexation, including first “gap” amount • March 1stof each year – Send DOR new “gap” amount for upcoming state fiscal year
What cities have imposed the tax? • Auburn • Burien • Kent • Lake Stevens • Marysville • Renton
Resources Statute: RCW 82.14.415 DOR’s Local Government Web page: dor.wa.gov/localgovernment
DOR contacts • Tax Account Administration Division • Andy Van Gerpen (360) 902-7172 (Annexation Services Tax Credit) • Bob Petteys (360) 902-7065 • (General Annexation Questions) • James Petit (360) 902-7037 • Legislation and Policy Division • Miki Gearhart (360) 570-6127
City-County Assistance Diana Tibbetts, September 29, 2010
City-County Assistance • Established by the Legislature in 2005. ESSB 6050 was adopted and can now be found in RCW 43.08.290. • Legislation redirected a portion of REET collections to a city-county assistance account to provide financial assistance to cities and counties. • Distributions are made quarterly (April, July, October and January). • Each quarter the account is divided in half. Half is distributed to cities and half to counties. • The very first distribution was on Oct 1, 2005 . Yearly certification or data revisions were done by March 1 each year and the first distribution of the 4-quarter cycle was on April 1.
Changes to City-County Assistance • In 2009, SB 5511 made some changes to the program. The amendments: • Simplified the administration of the program and added a review period to the yearly certification process. • Changed the certification date from March 1 to October 1 beginning in 2009 which moved the first distribution of the 4-quarter cycle to January 1. • Fiscal Year data replaced Calendar Year data to provide the most recent data available for the calculations. • SST Mitigation payments are added to the distribution formulas. • Descriptions of both bills are on DOR local government webpage http://dor.wa.gov/content/doingbusiness/localgovernment.aspx
2011 City-County Assistance Distributions Certification for 2011 distributions is finalized and posted to the local government webpage. Quarterly estimates are based on the September 2010 REET forecast; cities and counties will not receive their certified amounts in 2011. 2009 and 2010 distributions included a $5 million per year budget appropriation. This was a temporary addition to REET collections for city-county assistance. Spreadsheets are updated for each quarterly distribution and the most current REET forecast.