Washington – Governor Proposes Temporary Sales Tax Increase and Other Revenue Measures

SALT Report 1236 – Washington Governor Chris Gregoire has submitted a 2012 supplemental budget proposal that calls for more than $2 billion in spending cuts and a number of revenue measures, including a temporary increase in the state sales tax rate from 6.5% to 7%.  The increase would require voter approval and would expire July 1, 2015.

Governor Gregoire asked the Legislature to consider several revenue options that include reducing the time to claim an excise tax refund from five years to four years and increasing the interest rate on unpaid taxes an additional 2%.

The governor also submitted a number of proposals that would require a two-thirds vote of the Legislature and include the following:

  • Impose an additional business and occupation (B&O) tax of 0.6% on oil companies if certain profit thresholds are met
  • Impose an additional B&O tax of 1.5% on financial institutions if certain profit thresholds are met
  • Repeal the sales tax exemption for purchases made by nonresidents
  • Limit the B&O tax deduction for first mortgage interest to community banks
  • Impose an additional sales tax of 5% on passenger vehicles if the price or value exceeds $50,000
  • Impose a new 1.5% gross receipts tax on gambling and lottery winnings
  • Increase the cigarette tax from $3.025 to $3.275 per pack
  • Prohibit companies from creating shell corporations outside the state to reduce their B&O tax liability
  • Limit B&O tax preferences for meat processors, fruit and vegetable processors
  • Allow collection of B&O tax from out-of-state printers that sell into Washington