Dec 2009: Gary Smith - 2009 Review and 2010 Projections for Washington State

Speaker Highlights

December 16, 2009

2009 Review & 2010 Projections for Washington State

Go to www.ibaw.net/aswa-seattle to review presentation

Presented by:

Gary Smith

Independent Business Association

2009 IN REVIEW

No New Taxes!

WA State was projected to have a $9-billion revenue shortage out of a $36-billion 2-year budget
Tax increases considered:

State income tax - 1% on those earning $500,000+
State sales tax - .3% temporarily
Sales taxes on services
Street utility tax
Net state spending down about $1.2 billion as compared to 2007-2009 ($32.550 billion to $31.390 billion)

SB 5434 – Accountants Accounting firm with an office in this state offering to perform attest or compilation services may not use the title CPA without a license. This does not impact the services permitted by unlicensed persons.

Challenges for state unemployment laws
Washington State out of conformity with federal unemployment law. Could result in a $400+ million tax increase on Washington employers
Taxes too high – putting too much money into state’s unemployment trust fund. Over $2 billion in early 2009.
Recent court decision allowing more people who voluntarily quit to collect unemployment benefits

Paid Family Leave Law

Enacted in 2007

Allows up to 5 weeks of paid leave for the birth or adoption of a child – up to $250 per week
Scheduled to take effect October 1, 2009
Problem - it has never been funded & SB 6158 will be put off until October 1, 2012

Industrial Insurance

HB 1402 Limiting Contact with Medical Providers Limited

Employers are greatly restricted in communicating with an injured worker’s physician once the employer files an appeal in a claim.
Dept of L&I similar to employer
Claimant communications with IME physicians also limited
Effective 7/26/09

Health Insurance

HB 2052 Delaying the Implementation of the Health Insurance Partnership to 1/1/2011
A number of new benefit mandates proposed only one passed

Requires at least $350,000 lifetime benefit for transplant

Legislature cut $234 million from funding of state’s Basic Health Plan

New State Tax E-File Requirement

Requires that most business taxpayers to report and pay their taxes using the Internet and no longer use paper tax returns or mail checks.
Applies to all monthly taxpayers
Took effect for July 2009 tax return due on August 25, 2009
10% tax penalty for filing paper return
Affects over 30,000 business taxpayers

E-File And Accountants

The third-party accountant sets up their Logon ID and password in My Account at www.dor.wa.gov They provide their Logon ID and email address to the business owner.
The business owner adds the third-party accountant to the account by logging into My Account. The business owner clicks on “Manage business account” and then, “Add/edit user permissions”. The business owner enters the accountant’s Logon ID and e-mail address and then, chooses “Preparer”.
The third-party accountant logs into My Account, selects the account and prepares the E-file tax return for the business owner. On the Summary & Payment page, the third-party accountant, checks for errors and then, clicks on “Lock”. This will prevent any changes being made to the total due.
The third-party accountant then notifies the business owner that their Washington State E-file Tax Return has been completed and is ready to be filed and paid.
The business owner logs into My Account, reviews the tax return, selects one of the payment options and submits their E-file return.
NOTE: When the “Lock” button is selected, the activity is recorded in a log on this account. Only the person who locked the return or an Administrator on the account can unlock the return. Any action to unlock the return will also be shown in the log. This way, anyone who makes changes to an E-file Tax Return prepared by a third-party accountant can be identified.

NEW Resale Permit

New numbering system
Valid for: 2 years for non-construction businesses & 1 year for construction businesses
This permit can be used to purchase items for one of the following reasons:

For resale without intervening use.
For use as an ingredient or component of a new article of tangible personal property produced for sale.
As a chemical to be used in processing a new article of tangible personal property produced for sale.
For use as feed, seed, seedlings, fertilizer, or spray materials by a farmer.
Items for personal use.
Items used in your business that are not resold, such as office supplies and equipment.
Promotional items or gifts.
The rental of tools and equipment.
Retailers, Wholesalers, Manufacturers (estimated 226,000)
Contractors (estimated 41,000) – criteria for Resale Permit issuance after receiving completed application

This permit cannot be used to purchase:

Replaces Resale Certificate
Effective January 1, 2010 - improved tax compliance (less cheating) projected to generate $100+ million in state revenues 2010-2011.
Criteria used for Auto Issue Resale Permit

New Digital Goods Tax Law

Beginning July 26, 2009, sales or use tax will be due on digital products ranging from streaming video to online newsletters. Clarifies how taxes apply to products that exist only as computer bits and bytes. Specifically, it:

For more information, contact the WA Department of Revenue
www.dor.wa.gov or 1-800-647-7706

LOOKING AHEAD TO 2010

State Budget - 2010

State budget facing another $2.6 billion revenue shortage as of November 19, 2009
Most expect the budget problem to reach $3 billion when the state’s Economic Forecast is issued in mid-February
State Constitution requires a balanced budget
Governor has proposed a balanced budget
Will propose a Tax Increase Budget soon
Lots of pressure for new tax revenues

New State Taxes?

General Fund Taxes 2009-11
Tax Amount Percent of GF (in millions)

Retail sales $16,673.8 55.4%

Business & occupation $6,108.1 20.3%

Property (state school levy) $3,102.9 10.3%

Real estate excise $1,329.8 4.4%

Public Utility $836.4 2.8%

Insurance premiums $586.7 2.0%

Liquor, Beer, wine & Profits $431.0 1.4%

Licenses & fees $190.8 0.6%

Cigarette and tobacco products $119.3 0.4%

Brokered natural gas $100.0 0.3%

Leasehold excise tax $47.0 0.2%

Public utility district $40.6 0.1%

Boat excise $36.6 0.1%

Earnings on Investments $31.5 0.1%

Timber excise $10.7 0.0%

Other taxes too small to matter

2010 Is Much Different Than 2009

2009 - I-960 was in effect

Requires 2/3s vote of the Legislature
Vote of the people

I-960 can be changed by a simple majority vote of the Legislature after January 1, 2010

Most Likely New Tax Options

Increase state sales tax from 6.5% to 7.5% - raises about $1.2 billion/yr.
Extend sales tax to many services – accounting and tax preparation likely to be included – raises about $1.1 billion/yr.
Increase B&O tax by 30% - raises about $1 billion/yr.