State Capitol in Olympia.

State Capitol in Olympia.

State House approves bill to restore streamlined sales tax funds

Measure would mean about $4 million per year to city of Kent

The city of Kent moved one step closer to getting streamlined sales tax mitigation funds restored when the state House passed a bill 97-0.

House Bill 1521, sponsored by State Rep. Debra Entenman, D-Kent, and approved on March 3, is virtually identical to HB 1948, which passed the Legislature last year to approve the funds.

At the beginning of the COVID-19 pandemic last March, Gov. Jay Inslee vetoed most legislation that added new spending in anticipation of decreased tax revenue. Both bills create a Warehousing and Manufacturing Job Centers Account to provide mitigation funds for communities who received substantial mitigation funds from the recently closed streamlined sales tax mitigation account. HB 1948 passed the House with an 84-12 vote last year.

“Cities with large warehousing and manufacturing centers like Kent and Auburn help drive our state’s economy,” Entenman said in a House Democrats news release. “Changes in tax structure have left these communities to foot the bill for services and road maintenance that benefits all of Washington. I am thankful that we were able to once again pass this bill that will provide our communities the revenue they need to keep our state’s economy moving.”

In 2007, Kent and Auburn lost sales tax revenue because of a change in tax structure by multiple states to simplify the collection of sales taxes from online purchases. To mitigate that lost revenue the Legislature created the streamlined sales tax account.

The Legislature ended the streamlined sales tax account in 2017, speculating that changes resulting from the Marketplace Fairness Act would compensate for the lost revenue. Unfortunately, in cities with large warehousing and manufacturing centers, this was not the case. In 2018, the City of Kent still received over $4.5 million.

“This bill will directly benefit Kent and Auburn taxpayers by allowing these cities to maintain their current budgets without tax increases,” Entenman said.

The bill now heads to the Senate for consideration. Its predecessor passed the Senate 42-7 last year. The measure is scheduled for a public hearing March 11 in the Senate Committee on Business, Financial Services & Trade.

Kent city leaders issued the following response to the bill’s passage:

“We want to thank our legislators in the state House for recognizing the importance of supporting the streamlined sales tax mitigation program,” according to the statement. “We’re looking forward to support in the Senate!”

The Kent Valley is the fourth largest manufacturing and distribution center in the country, and destination-based sales tax sourcing hurts Kent residents, according to the city.

The Kent City Council set as a priority this session to ask the Legislature to restore funding to the streamlined sales tax mitigation program. Inslee vetoed the measure last March to help save funds due to the impact of COVID-19 on tax revenue.

The Legislature had approved earlier in 2020 an additional six years of funding, which would have meant as much as $4 million per year to Kent, which lost revenue when legislation changed the state to a destination-based sales tax, taking away lots of tax revenue Kent had received from the many warehouses in the city.

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