Washington – Department Proposes to Amend Public Works Contracts Excise Tax Advisory

SALT Report 2979 – The Washington Department of Revenue issued a draft of proposed amendments to Excise Tax Advisory 3024.2013 – Public Works Contracts.  The current ETA explains the scope of retainage fees and provides guidance regarding when retail sales tax and the business and occupation tax is due on the retainage fees.

Generally, in the case of public improvement contracts, the public body must withhold a percentage of the contract price and place it in trust.  This ensures that if any subcontractor, supplier, or government agency is owed money from the project they may file a Notice of Lien against the contract retainage.  However, once the contract is completed and the Department has certified that no taxes or penalties are due, the funds will be released.

The Department proposes to update this ETA to reflect recent statutory changes regarding an exclusion from the contract retainage requirement pursuant to Substitute House Bill 1420, Laws of 2013.   Specifically, the legislation provides that in certain circumstances improvement contracts can rely on the contract bond for the protection and payment of claims and certain taxes and penalties.

The Department intends to file for ETA adoption on September 26, 2013.

For Further Information

Washington Department of Revenue – ETA 3024.2013