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Sunday, December 3, 2023
Dec. 3, 2023

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New state taxes to take effect soon

They will be phased in, help raise $800M to balance budget


On the Web:To learn more, go to: http://dor.wa.gov

The Legislature acted. Now prepare to pay up.

Tax increases approved last week will phase in over the next two months, provided Gov. Chris Gregoire signs into law legislation that would raise about $800 million to help balance the budget.

May 1 is when smokers will begin paying increased taxes on tobacco products, including an additional $1 for a pack of cigarettes. That will bring the tax to $3.025 per pack, second-highest in the nation behind only Rhode Island.

Also May 1, a temporary hike in the business and occupation tax on most services takes effect. The tax will increase from 1.5 percent of gross income to 1.8 percent for professionals including attorneys, architects, engineers, physicians and private investigators. Hospitals and scientific research and development businesses are exempt from the increase.

The legislation enacting the tax increase does offer a break to small service businesses, doubling their B&O tax credit permanently to $70 per month. According to the Department of Revenue, that will allow service providers to gross up to about $80,000 annually without incurring any additional B&O tax liability. Some businesses may actually end up paying lower taxes, the department said.

About 74,000 service businesses out of 137,000 in the state will be eligible for the doubled tax credit.

On the Web:To learn more, go to: http://dor.wa.gov

The same tax bill also temporarily suspends a sales tax exemption affecting livestock nutrient management; repeals a property management salary exemption; limits the bad debt deduction on retail sales; requires corporate boards of directors to pay a tax on their fees; directs the Revenue Department to crack down on abusive tax avoidance schemes; addresses several court decisions affecting taxation; and sets new minimum standards affecting taxation of out-of-state companies doing business in Washington.

On June 1, consumers will begin paying the state sales tax on candy and bottled water. Both products are presently exempt.

As an offset, candy manufacturers will be eligible for a B&O tax credit of $1,000 for each job they maintain for a calendar year after the tax goes into effect.

Sales of bottled water for medical reasons or where consumers lack a potable drinking water source will remain exempt from the tax.

Also June 1, the state tax on beer will increase by 50 cents per gallon, or about 28 cents on a six-pack. Microbrewery beers are exempt from the increase.

The carbonated beverage tax, one of the most controversial taxes passed in the Legislature’s final days, will increase by 2 cents per 12-ounce can effective July 1.

All the tax changes expire on July 1, 2013, except the ones on candy and tobacco products, which are permanent.

However, the tax on bottled water could be extended indefinitely if voters approve a ballot measure in November that would authorize the sale of about $500 million in bonds, with the money dedicated to retrofitting and renovating aging school buildings and creating jobs.

The temporary sales tax on bottled water purchases would be extended to help finance the projects.

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