In Our View: Helping Businesses

Governor, Department of Revenuerecommend centralizing B&O tax collections

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Any Washingtonian who ventures beyond state lines and talks about our state’s business climate will usually hear many questions about Microsoft, Costco and other corporate giants for which we’re famous. But here’s a fact that might surprise many people here and elsewhere: About 95 percent of the state’s employers have fewer than 50 workers, according to a recent press release from Gov. Chris Gregoire’s office.

Clearly, it is within this small-business arena where an economic recovery can gain its most widespread traction. It’s nice to have Washington’s giant corporations with their glass towers and sprawling campuses, but the radiator shop and the small architectural firm just around the corner are also important.

Gregoire has several ideas for helping small businesses. Last week, she issued a policy brief that focused primarily on centralizing the collection of business and occupation (B&O) taxes, but also mentioned other steps that would make life a lot easier for radiator repair specialists, architects and other not-so-giant businesses. Let us all hope that the Legislature (which convenes today) will recognize the wisdom in Gregoire’s recommendations and take decisive action.

Consolidating the collection of B&O taxes is not a new proposal. Last year, the Department of Revenue met with small businesses, local governments, tax experts and other stakeholders, and among the ideas was to have B&O taxes administered in the same way as state and local sales taxes. In those cases, the state (through the DOR) collects the taxes and returns revenues to the municipalities. But the B&O tax is different; at least 39 cities (none in Clark County) collect B&O taxes independently, and this creates a significant burden for small businesses.

Instead of focusing exclusively on radiators or architectural blueprints, the poor business owner must focus time and effort on complex tax regulations, filling out multiple forms. The chore quickly grows for companies that do business in multiple locations, because different cities charge different rates for B&O taxes. Additionally, at the state level, there are more than 50 B&O tax classifications, depending on the activities of the small business.

The DOR, and now Gregoire, want to make all of that easier by letting the DOR administer B&O taxes. Certainly, the department is qualified. Unlike the small business, this is precisely why the department exists. Equally certain is the small-business owner’s desire to get all this regulatory work in one pile. Under the governor’s plan, they could use one form and go to one place to report all business taxes. Classifications and exemptions would be reduced. The number of times tax rates can change during the year would be reduced. One-stop sources would offer help for multiple state agency tax filing requirements.

And don’t forget the other stakeholders in this issue: the cities that would be able to turn over these administrative duties to the state. This could boost enforcement efforts, expand compliance and increase revenues.

Both the DOR and the governor believe all of this can be done on a cost-neutral basis. In other words, neither the state nor the businesses would make or lose much money from this change. But simply from the convenience factor, the changes could be monumental for business owners, especially those who are teetering on the tightrope that the profit-and-loss statement has become.