Reduced B&O Rate for Printing and Publishing Newspapers
Legislative Auditor’s Conclusion:
The preference provides tax relief to newspaper printers and
publishers and saves these businesses money. However, the newspaper industry continues
to lose revenue and jobs as it seeks to stabilize financially.
July 2021
Executive Summary
Preference reduces the B&O tax rate for printing and publishing
newspapers
The preference provides a reduced business and occupation (B&O) tax rate
to businesses that print or publish newspapers. The reduced rate applies to
advertising and subscription revenue generated by print and digital newspapersDigital
newspapers are the digital versions of a printed newspaper. Digital
newspapers must have the same name and content as their printed version,
and can be published online or as a copy on a mobile device, such as a
cell phone or e-reader.. The preference is available to any
business producing materials that meet the statutory definition of newspaper.
It is not available for online newspapers that do not have a print version.
The preference is scheduled to expire on July 1, 2024.
Preference provides tax relief and a uniform tax rate, but the newspaper industry
continues to struggle
After modifying the statutory definition of newspaper in 2008, the Legislature
enacted this preference in 2009 to provide financial relief to the newspaper
industry. The industry has lost revenue since the late 2000s due to changes in
advertising practices, technology changes, and evolving consumer preferences. The
preference was designed to provide temporary assistance while newspapers stabilize
financially.
The preference was extended in 2015. At that time, the Legislature added a
performance statement and directed JLARC staff to evaluate year-to-year changes in
the industry's gross revenue.
Objectives (stated)
Results
To provide temporary tax relief to the newspaper industry as it adjusts to
significant revenue and technological changes.
Unclear. While the preference meets the objective of providing tax
relief to newspaper printers and publishers, it is unclear how long this
relief is desired. The preference has been in place for 12 years and the
newspaper industry continues to lose revenue and employment.
To provide a permanent uniform tax rate for the industry.
Met. The preference meets the objective of providing a uniform tax
rate for revenue generated by newspaper's qualifying print and digital
activities.
Recommendations
Legislative Auditor's Recommendation: Review
The Legislature should review this preference to determine if the relief to
newspaper printers and publishers is sufficient and if additional assistance
is needed to help these businesses stabilize financially. If the Legislature is
interested in helping the newspaper industry more broadly, it should consider
additional approaches.
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
July 2021
REVIEW Details
1. Preference provides tax relief to newspapers
The preference provides financial relief to the newspaper
industry by lowering the B&O tax rate for newspaper printers and publishers
The 2009 Legislature created the preference to reduce the B&O rate for businesses
that print or publish newspapers. Revenues generated from digital newspapersDigital newspapers are the digital
versions of a printed newspapers. Digital newspapers must have the same name and
content as their printed versions, and can be published online or as a copy on a
mobile device, such as a cell phone or e-reader. are also taxed at
the preferential rate due to a 2008 change in the definition of newspaper (RCW 82.04.214).
Preference intended to provide financial relief to the newspaper industry
The 2009 Legislature enacted the preference to reduce the B&O tax rate from
0.484% to 0.2904% for businesses that print or publish newspapers. The preference was
designed to provide temporary financial relief to newspaper businesses in response to
significant lost revenue and the loss of some Washington newspapers. Testimony
suggested that the newspapers would stabilize financially by 2015.
In 2012, the Legislature temporarily increased the preference rate to 0.365% as part
of efforts to raise revenue as the state recovered from the Great Recession. When the
increase expired, the rate was lowered to 0.35% on July 1, 2013.
Exhibit 1.1: Legislature has adjusted the preferential B&O tax rate for the
newspaper industry multiple times
Source: JLARC staff analysis of RCW 82.04.260.
The preference was last modified in 2015, when the Legislature extended the
expiration date and added a performance statement with two policy objectives:
To extend tax relief to the newspaper industry as it adjusts to significant
revenue shifts and technological changes.
To provide a permanent uniform tax rate to minimize the burden of reporting
B&O taxes for different types of revenue.
The Legislature also directed JLARC staff to evaluate year-to-year changes in gross
revenue for newspaper businesses claiming the preference. If the change is positive
during the three most recent years, the Legislature intends for the preference to
expire, reinstating the 0.484% rate. This situation has not occurred and the
preference has been in place for 12 years.
Beneficiaries currently pay a reduced B&O rate of 0.35% and the preference is
scheduled to expire July 1, 2024.
The 2008 Legislature changed the statutory definition of newspaper
Prior to the preference's creation, the 2008 Legislature modified the statutory
definition of newspaper to include supplements and digital versions of print
newspapers. According to statute82.04.214
RCW:
Newspapers are publications issued at least twice per month and printed on
newsprint and folded without binding. This includes supplements and digital versions
of a printed newspaper with the same name and content.
Supplements are publications that are part of a printed newspaper and
distributed as an insert or attachment to the newspaper. A supplement may be
distributed separately if the distribution is within the newspaper's circulation
area.
Before the change in definition, digital advertising revenue was taxed at a 1.5%
rate. Industry representatives testified in 2009 that newspapers often combine print
and digital advertising sales. This complicated tax reporting because it was difficult
to differentiate revenue from print and digital ads and apply different tax rates.
Under the current definition of newspapers, digital and print advertising revenue for
newspaper printers and publishers is taxed at the same rate.
Statutory definition makes preference available to some non-newspaper activities
Statute defines a newspaper by its physical form and how often it is published rather
than its content, consistent with a 1989 U.S. Supreme Court decision (Texas Monthly
v. Bullock). This may result in some unintended beneficiaries. For example,
book and periodical publishers, some supermarkets, advertising agencies, and
commercial printers may qualify for the preference if their printed materials meet the
statutory definition of newspaper.
Newspaper industry in financial decline since the late 2000s
Newspapers rely on advertising and subscription revenue. However, the industry has
lost revenue since the late 2000s. According to Pew Research Center data, advertising
revenue peaked at $49.4 billion in 2005 and declined by an average of $2.7 billion
annually through 2018. Circulation revenueCirculation revenue is money paid by newspaper readers, either
through subscriptions or newsstand purchases. has been more
consistent, increasing by about $144 million annually since 2011. This growth is
consistent with subscription price increases in the years after advertising revenue
fell. Price increases may have led some news consumers to cancel or change their
subscription type, but the ratio of print and digital subscription revenue is
unknown.
Exhibit 1.2: Advertising and circulation revenue for the newspaper industry,
1996-2018
Source: JLARC staff analysis of advertising revenue and circulation revenue from the
Pew Research Center's "Newspapers Fact Sheet." Published July 2019.
According to industry sources and media observers, the newspaper industry's financial
decline is due to many factors, including changes in advertising practices, technology
changes, and evolving consumer preferences.
Advertising practices: The expansion of digital news content contributed to
a greater supply of ad inventory and declining prices. Many advertisers use targeted
ads, a practice that gives advantage to companies with access to data about
individual web browsing habits.
Technology: Digital media such as online news websites and free news
sources compete with print newspapers.
Consumer preferences: Readers increasingly prefer digital newspapers over
print. Digital subscriptions generally bring in less revenue than print
subscriptions.
Washington's newspaper industry reflects these national trends.
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
July 2021
REVIEW Details
2. Preference's value is decreasing
The preference's value is decreasing as newspaper printers and
publishers lose revenue and employment
Between fiscal year 2016 and fiscal year 2020, 164 beneficiaries claimed the
preferential B&O rate for printing or publishing newspapers. The number of
businesses claiming the preference each year decreased during this period. JLARC staff
used the primary NAICS codeNorth
American Industry Classification System uses a six digit numerical system to
classify businesses by type of primary economic activity. to
identify which beneficiaries are newspaper printers and publishers. Of the 164
beneficiaries, 109 (66%) are newspapers. Other beneficiaries include book and
periodical publishers, some chain supermarkets, advertising agencies, and commercial
printers, which qualify under the law.
Beneficiary savings declining by an average of 6% per year
Department of Revenue tax return detail indicates that beneficiaries saved $481,000
in fiscal year 2020. JLARC staff estimate beneficiaries will save $823,000 in the
2021-23 biennium.
Exhibit 2.1: Beneficiary revenue and estimated savings are declining
Biennium
Fiscal Year
Taxable Revenue
Estimated Beneficiary Savings
% Change from Previous Year
2015-17
7/1/15-6/30/17
2016
$462,851,000
$620,000
-6.5%
2017
$456,589,000
$612,000
-1.4%
2017-19
7/1/17 - 6/30/19
2018
$444,448,000
$596,000
-2.7%
2019
$427,605,000
$573,000
-3.8%
2019-21
7/1/19-6/30/21
2020
$358,924,000
$481,000
-16.1%
2021
$337,127,000
$452,000
-6.1%
2021-23
7/1/21-6/30/23
2022
$316,654,000
$424,000
-6.1%
2023
$297,424,000
$399,000
-6.1%
2021-23 Biennium
$614,077,000
$823,000
Source: JLARC staff analysis of Department of Revenue tax return detail, fiscal
years 2016-2020. FY 2021-2023 estimated based on the average annual percentage change
in beneficiary savings from 2015-2020. Amounts rounded to nearest $1,000.
Beneficiaries saved a total of $2.9 million between fiscal year 2016 through fiscal
year 2020. Newspaper printers and publishers account for approximately $2.4 million
(84%) of all savings. The annual savings for newspaper beneficiaries decreased by 6.1%
per year, on average.
Revenues and employment in Washington's newspaper industry declined since 2015
When the 2015 Legislature amended the preference, it stated its intent to provide tax
relief until the industry stabilizes financially. The Legislature included
year-to-year change in newspaper revenue as a performance metric. If revenue growth is
positive for the three most recent years, the preference will expire.
Tax return data indicates that gross revenues reported for newspaper printers and
publishers (66% of the beneficiaries) fell from $476 million in fiscal 2015 to $340
million in fiscal 2020 (29% decrease). On average, total revenue decreased by
approximately $27 million every year. This decline in gross revenues for Washington
newspapers is consistent with the national drop in newspaper advertising revenue (see
Exhibit 1.1). While most newspaper revenue comes from advertising and
subscriptions, revenue also comes from other printing and distribution services.
Because revenue breakdown by source is unavailable, it is unknown how specific revenue
streams changed over time.
Employment at Washington newspapers claiming the preference also declined between
calendar years 2015 and 2019, the most recent year available. According to Employment
Security Department (ESD) records, beneficiaries reported approximately 2,950
employees in 2015 and 1,824 employees in 2019.
Employment at all Washington newspapers dropped 33% from 2015 to 2019, and 38% among
newspapers claiming the preference. Some newspapers do not claim the preference. These
newspapers may not qualify for the preference, may not know about the preference, or
may not have tax liability.
Employment has decreased at a faster rate in Washington compared to the rest of the
country. According to the Pew Research Center, national employment in the newspaper
industry decreased by 21% between 2015 and 2019. It is unclear why Washington's
newspaper employment decreased more sharply than newspaper employment nationally.
COVID-19 pandemic may have further affected Washington's
newspaper industry
The ongoing COVID-19 pandemic may have contributed to additional financial
instability for Washington's newspapers.
According to data compiled by the Columbia Journalism Review, at least 43
newspapers in Washington laid off employees in 2020, and 23 newspapers suspended
printing operations or reduced the number of days they offer a print newspaper.
Industry representatives stated that the pandemic caused additional layoffs,
furloughs, and other cost-cutting measures.
Since November 2019, digital subscriptions increased nationally by 51% and print
subscriptions decreased by 13%. Digital subscriptions are cheaper than print
subscriptions. Multiple new subscribers may be required to offset the loss of each
print subscriber.
The full impact of the pandemic on Washington's newspaper industry is unclear.
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
July 2021
Review Details
3. Newspapers exploring other funding models
Newspaper printers and publishers are exploring alternate funding
models, but it is unclear if the industry will stabilize financially
While still relying on advertising and subscribers, the Salt Lake
Tribune also accepts tax-deductible donations and established an
endowment to ensure ongoing funding. Despite these changes, the newspaper
reduced its print offerings by switching from a daily to a weekly newspaper in
2020.
JLARC staff reviewed literature on business models and revenue streams in the
newspaper industry and interviewed representatives from local newspapers to learn how
the newspaper industry is addressing ongoing financial and technological challenges.
Newspapers are pursuing alternate funding
Newspapers have traditionally operated as for-profit entities funded by advertising
and subscription revenue. Prior to the Great Recession in 2008, about 80% of
newspapers' total revenue came from advertising. Since 2010, advertising revenue has
dropped by more than two-thirds.
Across the U.S., newspapers are exploring alternate funding to stabilize their
revenue streams. For example, the Salt Lake Tribune converted to non-profit
status in 2019.
According to industry representatives, no for-profit newspapers in Washington have
converted to non-profits as of early 2021. Local newspapers are using a variety of
strategies to compensate for declining revenue, including reducing the number of print
days, increasing subscription fees, seeking alternate funding sources, and reducing
staff and hours.
Some Washington newspapers serving larger and more urban populations are partnering
with non-profit organizations and seeking to create endowed
reporting positionsEndowed reporting positions are paid
for with revenue from an endowment fund established to support news reporting
permanently.. Smaller newspapers have pursued community engagement
approaches.
Exhibit 3.1: Washington newspapers are partnering with other entities to secure
funding
The Seattle Times partnered with local entities to help fund its
news-gathering operations. The newspaper partnered with the Seattle Foundation
to channel local philanthropy to fund journalism, raising over $5 million
between 2013 and 2018. In 2019, these entities created the Investigative
Journalism Fund to build on the success of other philanthropically funded
issue-specific efforts.
The
Spokesman-Review (Spokane) and The Daily Herald (Everett), are
securing funding for endowed reporting positions. According to industry
representatives, some positions may be issue-specific and others will emphasize
investigative reporting.
The four newspapers in Washington owned by McClatchy added
reporting positions focusing on indigenous and military communities. The effort
is a partnership with Report for AmericaReport for America is a national service program that
places journalists into local newsrooms across the country to report on
under-covered issues. (RFA) to hire journalists whose salaries
are split between the RFA and the newspaper. The RFA also helps newsrooms
develop philanthropy efforts. In April 2021, the newspapers launched a funding
drive to raise tax-deductible donations to help pay the salaries.
Source: JLARC staff analysis.
Newspapers serving smaller markets have experimented with a community engagement
model, where the newspaper sponsors an event such as a forum or food show and earns
revenue from ticket sales or local business sponsorships. Industry representatives
told JLARC staff that prior to the COVID-19 pandemic, these efforts appeared to be
working for newspapers serving smaller isolated markets.
It is too early to tell whether alternate funding efforts will succeed
It is too early to draw conclusions about whether these efforts to develop alternate
funding models will persist and succeed, and be adopted more broadly.
Partnerships with local non-profits and creating endowed reporting positions may
not be effective in smaller markets because foundation funding and philanthropic
resources are concentrated in urban areas.
Sponsored events may be more challenging in urban areas where there is more
competition for consumers' disposable income.
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
July 2021
Review Details
4. Other jurisdictions exploring policy options
Policy efforts in other jurisdictions may serve as a model for
Washington
A tax preference for businesses printing or publishing a physical newspaper may be of
diminishing utility as the industry continues to transition to digital media. While
Washington's print newspaper industry continued to lose revenue and jobs between 2015
and 2019, employment in the internet publishing and broadcasting
and web search portals sectorAs defined by the U.S. Census
Bureau, NAICS sector 519130 includes news publishers that do not
produce printed products. increased from 11,300 to 25,200 (123%
increase). While this job growth is not exclusive to new providers, it suggests a
growing digital footprint in the news industry as print options shrink. If the
Legislature is interested in assisting the local newspaper industry, efforts in other
states or in Congress may serve as a model.
Other states are exploring ways to support news media beyond tax policy. These
approaches do not limit support to businesses engaged in printing or publishing
newspapers.
Examples in other states include:
New Jersey's Civic Information Consortium, which grants state funds to efforts
such as training journalists and advancing civic technology projects. Its mission is
to strengthen local media and civic participation.
The Colorado Media Project, a private grant-funded organization of civic leaders,
academics, philanthropists, journalists, and business leaders that focuses on
increasing newsroom capacity, supporting collaboration across the state, and
enhancing community engagement.
Various efforts to help newspapers have been introduced in Congress in recent years:
The "Saving Local News Act" introduced in 2019 would have provided newspapers with
the same tax status as non-profits. The Act did not pass.
The "Future of Local News Commission Act" introduced in 2020 would have created a
panel to identify mechanisms for public funding.
The "Journalism Competition and Preservation Act" would provide a temporary safe
harbor from federal antitrust laws and allow news outlets to collectively negotiate
with online platforms for use of their work. This bill was first introduced in 2019
and reintroduced in March 2021. Countries such as France, Spain, and Australia have
also sought to compel online platforms to negotiate licensing agreements with news
organizations.
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
July 2021
Review Details
5. Applicable statutes
RCW 82.04.260, RCW 82.04.214
Reduced B&O rate for newspaper printers and publishers
RCW 82.04.260
Tax on manufacturers and processors of various foods and by-products
(1) Upon every person engaging within this state in the business of
manufacturing:
(a) Wheat into flour, barley into pearl barley, soybeans into soybean oil, canola
into canola oil, canola meal, or canola by-products, or sunflower seeds into sunflower
oil; as to such persons the amount of tax with respect to such business is equal to
the value of the flour, pearl barley, oil, canola meal, or canola by-product
manufactured, multiplied by the rate of 0.138 percent;
(b) Beginning July 1, 2025, seafood products that remain in a raw, raw frozen, or raw
salted state at the completion of the manufacturing by that person; or selling
manufactured seafood products that remain in a raw, raw frozen, or raw salted state at
the completion of the manufacturing, to purchasers who transport in the ordinary
course of business the goods out of this state; as to such persons the amount of tax
with respect to such business is equal to the value of the products manufactured or
the gross proceeds derived from such sales, multiplied by the rate of 0.138 percent.
Sellers must keep and preserve records for the period required by RCW 82.32.070
establishing that the goods were transported by the purchaser in the ordinary course
of business out of this state;
(c)(i) Except as provided otherwise in (c)(iii) of this subsection, from July 1,
2025, until January 1, 2036, dairy products; or selling dairy products that the person
has manufactured to purchasers who either transport in the ordinary course of business
the goods out of state or purchasers who use such dairy products as an ingredient or
component in the manufacturing of a dairy product; as to such persons the tax imposed
is equal to the value of the products manufactured or the gross proceeds derived from
such sales multiplied by the rate of 0.138 percent. Sellers must keep and preserve
records for the period required by RCW 82.32.070 establishing that the goods were
transported by the purchaser in the ordinary course of business out of this state or
sold to a manufacturer for use as an ingredient or component in the manufacturing of a
dairy product.
(ii) For the purposes of this subsection (1)(c), "dairy products" means:
(A) Products, not including any marijuana-infused product, that as of September 20,
2001, are identified in 21 C.F.R., chapter 1, parts 131, 133, and 135, including
by-products from the manufacturing of the dairy products, such as whey and casein;
and
(B) Products comprised of not less than seventy percent dairy products that qualify
under (c)(ii)(A) of this subsection, measured by weight or volume.
(iii) The preferential tax rate provided to taxpayers under this subsection (1)(c)
does not apply to sales of dairy products on or after July 1, 2023, where a dairy
product is used by the purchaser as an ingredient or component in the manufacturing in
Washington of a dairy product;
(d)(i) Beginning July 1, 2025, fruits or vegetables by canning, preserving, freezing,
processing, or dehydrating fresh fruits or vegetables, or selling at wholesale fruits
or vegetables manufactured by the seller by canning, preserving, freezing, processing,
or dehydrating fresh fruits or vegetables and sold to purchasers who transport in the
ordinary course of business the goods out of this state; as to such persons the amount
of tax with respect to such business is equal to the value of the products
manufactured or the gross proceeds derived from such sales multiplied by the rate of
0.138 percent. Sellers must keep and preserve records for the period required by RCW
82.32.070 establishing that the goods were transported by the purchaser in the
ordinary course of business out of this state.
(ii) For purposes of this subsection (1)(d), "fruits" and "vegetables" do not include
marijuana, useable marijuana, or marijuana-infused products; and
(e) Wood biomass fuel; as to such persons the amount of tax with respect to the
business is equal to the value of wood biomass fuel manufactured, multiplied by the
rate of 0.138 percent. For the purposes of this section, "wood biomass fuel" means a
liquid or gaseous fuel that is produced from lignocellulosic feedstocks, including
wood, forest, or field residue and dedicated energy crops, and that does not include
wood treated with chemical preservations such as creosote, pentachlorophenol, or
copper-chrome-arsenic.
(2) Upon every person engaging within this state in the business of splitting or
processing dried peas; as to such persons the amount of tax with respect to such
business is equal to the value of the peas split or processed, multiplied by the rate
of 0.138 percent.
(3) Upon every nonprofit corporation and nonprofit association engaging within this
state in research and development, as to such corporations and associations, the
amount of tax with respect to such activities is equal to the gross income derived
from such activities multiplied by the rate of 0.484 percent.
(4) Upon every person engaging within this state in the business of slaughtering,
breaking and/or processing perishable meat products and/or selling the same at
wholesale only and not at retail; as to such persons the tax imposed is equal to the
gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
(5)(a) Upon every person engaging within this state in the business of acting as a
travel agent or tour operator and whose annual taxable amount for the prior calendar
year was two hundred fifty thousand dollars or less; as to such persons the amount of
the tax with respect to such activities is equal to the gross income derived from such
activities multiplied by the rate of 0.275 percent.
(b) Upon every person engaging within this state in the business of acting as a
travel agent or tour operator and whose annual taxable amount for the calendar year
was more than two hundred fifty thousand dollars; as to such persons the amount of the
tax with respect to such activities is equal to the gross income derived from such
activities multiplied by the rate of 0.275 percent through June 30, 2019, and 0.9
percent beginning July 1, 2019.
(6) Upon every person engaging within this state in business as an international
steamship agent, international customs house broker, international freight forwarder,
vessel and/or cargo charter broker in foreign commerce, and/or international air cargo
agent; as to such persons the amount of the tax with respect to only international
activities is equal to the gross income derived from such activities multiplied by the
rate of 0.275 percent.
(7) Upon every person engaging within this state in the business of stevedoring and
associated activities pertinent to the movement of goods and commodities in waterborne
interstate or foreign commerce; as to such persons the amount of tax with respect to
such business is equal to the gross proceeds derived from such activities multiplied
by the rate of 0.275 percent. Persons subject to taxation under this subsection are
exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of their
business subject to taxation under this subsection. Stevedoring and associated
activities pertinent to the conduct of goods and commodities in waterborne interstate
or foreign commerce are defined as all activities of a labor, service or
transportation nature whereby cargo may be loaded or unloaded to or from vessels or
barges, passing over, onto or under a wharf, pier, or similar structure; cargo may be
moved to a warehouse or similar holding or storage yard or area to await further
movement in import or export or may move to a consolidation freight station and be
stuffed, unstuffed, containerized, separated or otherwise segregated or aggregated for
delivery or loaded on any mode of transportation for delivery to its consignee.
Specific activities included in this definition are: Wharfage, handling, loading,
unloading, moving of cargo to a convenient place of delivery to the consignee or a
convenient place for further movement to export mode; documentation services in
connection with the receipt, delivery, checking, care, custody and control of cargo
required in the transfer of cargo; imported automobile handling prior to delivery to
consignee; terminal stevedoring and incidental vessel services, including but not
limited to plugging and unplugging refrigerator service to containers, trailers, and
other refrigerated cargo receptacles, and securing ship hatch covers.
(8)(a) Upon every person engaging within this state in the business of disposing of
low-level waste, as defined in *RCW 43.145.010; as to such persons the amount of the
tax with respect to such business is equal to the gross income of the business,
excluding any fees imposed under **chapter 43.200 RCW, multiplied by the rate of 3.3
percent.
(b) If the gross income of the taxpayer is attributable to activities both within and
without this state, the gross income attributable to this state must be determined in
accordance with the methods of apportionment required under RCW 82.04.460.
(9) Upon every person engaging within this state as an insurance producer or title
insurance agent licensed under chapter 48.17 RCW or a surplus line broker licensed
under chapter 48.15 RCW; as to such persons, the amount of the tax with respect to
such licensed activities is equal to the gross income of such business multiplied by
the rate of 0.484 percent.
(10) Upon every person engaging within this state in business as a hospital, as
defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by the
state or any of its political subdivisions, as to such persons, the amount of tax with
respect to such activities is equal to the gross income of the business multiplied by
the rate of 0.75 percent through June 30, 1995, and 1.5 percent thereafter.
(11)(a) Beginning October 1, 2005, upon every person engaging within this state in
the business of manufacturing commercial airplanes, or components of such airplanes,
or making sales, at retail or wholesale, of commercial airplanes or components of such
airplanes, manufactured by the seller, as to such persons the amount of tax with
respect to such business is, in the case of manufacturers, equal to the value of the
product manufactured and the gross proceeds of sales of the product manufactured, or
in the case of processors for hire, equal to the gross income of the business,
multiplied by the rate of:
(i) 0.4235 percent from October 1, 2005, through June 30, 2007;
(ii) 0.2904 percent beginning July 1, 2007, through March 31, 2020; and
(iii) Beginning April 1, 2020, 0.484 percent, subject to any reduction required under
(e) of this subsection (11). The tax rate in this subsection (11)(a)(iii) applies to
all business activities described in this subsection (11)(a).
(b) Beginning July 1, 2008, upon every person who is not eligible to report under the
provisions of (a) of this subsection (11) and is engaging within this state in the
business of manufacturing tooling specifically designed for use in manufacturing
commercial airplanes or components of such airplanes, or making sales, at retail or
wholesale, of such tooling manufactured by the seller, as to such persons the amount
of tax with respect to such business is, in the case of manufacturers, equal to the
value of the product manufactured and the gross proceeds of sales of the product
manufactured, or in the case of processors for hire, be equal to the gross income of
the business, multiplied by the rate of:
(i) 0.2904 percent through March 31, 2020; and
(ii) Beginning April 1, 2020, the following rates, which are subject to any reduction
required under (e) of this subsection (11):
(A) The rate under RCW 82.04.250(1) on the business of making retail sales of tooling
specifically designed for use in manufacturing commercial airplanes or components of
such airplanes; and
(B) 0.484 percent on all other business activities described in this subsection
(11)(b).
(c) For the purposes of this subsection (11), "commercial airplane" and "component"
have the same meanings as provided in RCW 82.32.550.
(d)(i) In addition to all other requirements under this title, a person reporting
under the tax rate provided in this subsection (11) must file a complete annual tax
performance report with the department under RCW 82.32.534. However, this requirement
does not apply to persons reporting under the tax rate in (a)(iii) of this subsection
(11), so long as that rate remains 0.484 percent, or under any of the tax rates in
(b)(ii)(A) and (B) of this subsection (11), so long as those tax rates remain the rate
imposed pursuant to RCW 82.04.250(1) and 0.484 percent, respectively.
(ii) Nothing in (d)(i) of this subsection (11) may be construed as affecting the
obligation of a person reporting under a tax rate provided in this subsection (11) to
file a complete annual tax performance report with the department under RCW 82.32.534:
(A) Pursuant to another provision of this title as a result of claiming a tax credit
or exemption; or (B) pursuant to (d)(i) of this subsection (11) as a result of
claiming the tax rates in (a)(ii) or (b)(i) of this subsection (11) for periods ending
before April 1, 2020.
(e)(i) After March 31, 2021, the tax rates under (a)(iii) and (b)(ii) of this
subsection (11) must be reduced to 0.357 percent provided the conditions in RCW
82.04.2602 are met. The effective date of the rates authorized under this subsection
(11)(e) must occur on the first day of the next calendar quarter that is at least
sixty days after the department receives the last of the two written notices pursuant
to RCW 82.04.2602 (3) and (4).
(ii) Both a significant commercial airplane manufacturer separately and the rest of
the aerospace industry as a whole, receiving the rate of 0.357 percent under this
subsection (11)(e) are subject to the aerospace apprenticeship utilization rates
required under RCW 49.04.220 by April 1, 2026, or five years after the effective date
of the 0.357 percent rate authorized under this subsection (11)(e), whichever is
later, as determined by the department of labor and industries.
(iii) The provisions of RCW 82.32.805 and 82.32.808 do not apply to this subsection
(11)(e).
(f)(i) Except as provided in (f)(ii) of this subsection (11), this subsection (11)
does not apply on and after July 1, 2040.
(ii) With respect to the manufacturing of commercial airplanes or making sales, at
retail or wholesale, of commercial airplanes, this subsection (11) does not apply on
and after July 1st of the year in which the department makes a determination that any
final assembly or wing assembly of any version or variant of a commercial airplane
that is the basis of a siting of a significant commercial airplane manufacturing
program in the state under RCW 82.32.850 has been sited outside the state of
Washington. This subsection (11)(f)(ii) only applies to the manufacturing or sale of
commercial airplanes that are the basis of a siting of a significant commercial
airplane manufacturing program in the state under RCW 82.32.850. This subsection
(11)(f)(ii) continues to apply during the time that a person is subject to the tax
rate in (a)(iii) of this subsection (11).
(g) For the purposes of this subsection, "a significant commercial airplane
manufacturer" means a manufacturer of commercial airplanes with at least fifty
thousand full-time employees in Washington as of January 1, 2021.
(12)(a) Until July 1, 2045, upon every person engaging within this state in the
business of extracting timber or extracting for hire timber; as to such persons the
amount of tax with respect to the business is, in the case of extractors, equal to the
value of products, including by-products, extracted, or in the case of extractors for
hire, equal to the gross income of the business, multiplied by the rate of 0.4235
percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1,
2007, through June 30, 2045.
(b) Until July 1, 2045, upon every person engaging within this state in the business
of manufacturing or processing for hire: (i) Timber into timber products or wood
products; (ii) timber products into other timber products or wood products; or (iii)
products defined in RCW 19.27.570(1): as to such persons the amount of the tax with
respect to the business is, in the case of manufacturers, equal to the value of
products, including by-products, manufactured, or in the case of processors for hire,
equal to the gross income of the business, multiplied by the rate of 0.4235 percent
from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1, 2007,
through June 30, 2045.
(c) Until July 1, 2045, upon every person engaging within this state in the business
of selling at wholesale: (i) Timber extracted by that person; (ii) timber products
manufactured by that person from timber or other timber products; (iii) wood products
manufactured by that person from timber or timber products; or (iv) products defined
in RCW 19.27.570(1) manufactured by that person; as to such persons the amount of the
tax with respect to the business is equal to the gross proceeds of sales of the
timber, timber products, wood products, or products defined in RCW 19.27.570(1)
multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and
0.2904 percent from July 1, 2007, through June 30, 2045.
(d) Until July 1, 2045, upon every person engaging within this state in the business
of selling standing timber; as to such persons the amount of the tax with respect to
the business is equal to the gross income of the business multiplied by the rate of
0.2904 percent. For purposes of this subsection (12)(d), "selling standing timber"
means the sale of timber apart from the land, where the buyer is required to sever the
timber within thirty months from the date of the original contract, regardless of the
method of payment for the timber and whether title to the timber transfers before,
upon, or after severance.
(e) For purposes of this subsection, the following definitions apply:
(i) "Biocomposite surface products" means surface material products containing, by
weight or volume, more than fifty percent recycled paper and that also use
nonpetroleum-based phenolic resin as a bonding agent.
(ii) "Paper and paper products" means products made of interwoven cellulosic fibers
held together largely by hydrogen bonding. "Paper and paper products" includes
newsprint; office, printing, fine, and pressure-sensitive papers; paper napkins,
towels, and toilet tissue; kraft bag, construction, and other kraft industrial papers;
paperboard, liquid packaging containers, containerboard, corrugated, and solid-fiber
containers including linerboard and corrugated medium; and related types of cellulosic
products containing primarily, by weight or volume, cellulosic materials. "Paper and
paper products" does not include books, newspapers, magazines, periodicals, and other
printed publications, advertising materials, calendars, and similar types of printed
materials.
(iii) "Recycled paper" means paper and paper products having fifty percent or more of
their fiber content that comes from postconsumer waste. For purposes of this
subsection (12)(e)(iii), "postconsumer waste" means a finished material that would
normally be disposed of as solid waste, having completed its life cycle as a consumer
item.
(iv) "Timber" means forest trees, standing or down, on privately or publicly owned
land. "Timber" does not include Christmas trees that are cultivated by agricultural
methods or short-rotation hardwoods as defined in RCW 84.33.035.
(v) "Timber products" means:
(A) Logs, wood chips, sawdust, wood waste, and similar products obtained wholly from
the processing of timber, short-rotation hardwoods as defined in RCW 84.33.035, or
both;
(B) Pulp, including market pulp and pulp derived from recovered paper or paper
products; and
(C) Recycled paper, but only when used in the manufacture of biocomposite surface
products.
(vi) "Wood products" means paper and paper products; dimensional lumber; engineered
wood products such as particleboard, oriented strand board, medium density fiberboard,
and plywood; wood doors; wood windows; and biocomposite surface products.
(f) Except for small harvesters as defined in RCW 84.33.035, a person reporting under
the tax rate provided in this subsection (12) must file a complete annual tax
performance report with the department under RCW 82.32.534.
(g) Nothing in this subsection (12) may be construed to affect the taxation of any
activity defined as a retail sale in RCW 82.04.050(2) (b) or (c), defined as a
wholesale sale in RCW 82.04.060(2), or taxed under RCW 82.04.280(1)(g).
(13) Upon every person engaging within this state in inspecting, testing, labeling,
and storing canned salmon owned by another person, as to such persons, the amount of
tax with respect to such activities is equal to the gross income derived from such
activities multiplied by the rate of 0.484 percent.
(14)(a) Upon every person engaging within this state in the business of printing a
newspaper, publishing a newspaper, or both, the amount of tax on such business is
equal to the gross income of the business multiplied by the rate of 0.35 percent until
July 1, 2024, and 0.484 percent thereafter.
(b) A person reporting under the tax rate provided in this subsection (14) must file
a complete annual tax performance report with the department under RCW 82.32.834.
Definitions
RCW 82.04.214
(1) "Newspaper" means:
(a) A publication issued regularly at stated intervals at least twice a month and
printed on newsprint in tabloid or broadsheet format folded loosely together without
stapling, glue, or any other binding of any kind, including any supplement of a
printed newspaper; and
(b) An electronic version of a printed newspaper that:
(i) Shares content with the printed newspaper; and
(ii) Is prominently identified by the same name as the printed newspaper or otherwise
conspicuously indicates that it is a complement to the printed newspaper.
(2) For purposes of this section, "supplement" means a printed publication, including
a magazine or advertising section, that is:
(a) Labeled and identified as part of the printed newspaper; and
(b) Circulated or distributed:
(i) As an insert or attachment to the printed newspaper; or
(ii) Separate and apart from the printed newspaper so long as the distribution is
within the general circulation area of the newspaper.
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
July 2021
Recommendations & Responses
Legislative Auditor's Recommendation
The Legislative Auditor recommends reviewing this
preference
The Legislature should review this preference to determine if it provides
sufficient relief to newspaper printers and publishers and whether additional
assistance is needed as these businesses attempt to stabilize financially. The
preference has been in place for 12 years and the newspaper industry continues to lose
revenue and jobs. If the Legislature is interested in helping the news industry more
broadly, it should consider additional approaches.
Legislation Required: Yes
Fiscal Impact: Unknown
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
The Joint Legislative Audit and Review Committee (JLARC) works to make state
government operations more efficient and effective. JLARC is comprised of an equal
number of Representatives and Senators, Democrats and Republicans.
JLARC's nonpartisan staff analysts, under the direction of the Legislative Auditor,
conduct performance audits, program evaluations, sunset reviews, and other analyses
assigned by the Legislature and JLARC.
The statutory authority for JLARC, established in Chapter 44.28 RCW,
requires the Legislative Auditor to ensure that JLARC studies are conducted in
accordance with Generally Accepted Government Auditing Standards, as applicable to the
scope of the audit. This study was conducted in accordance with those applicable
standards. Those standards require analysts to plan and perform audits to obtain
sufficient, appropriate evidence to provide a reasonable basis for findings and
conclusions based on the audit objectives. The evidence obtained for this JLARC report
provides a reasonable basis for the findings and conclusions, and any exceptions to
the application of audit standards have been explicitly disclosed in the body of this
report.
Timeframe for the study
A preliminary audit report will be presented at the July 2021 JLARC meeting and at
the August 2021 meeting of the Commission. A final report will be presented to JLARC
in December 2021.
Committee Action to Distribute Report
On December 1, 2021 this report was approved for distribution by the Joint
Legislative Audit and Review Committee.
Action to distribute this report does not imply the Committee agrees or disagrees
with the Legislative Auditor recommendations.
Preliminary Report: Reduced B&O Rate for Printing and Publishing Newspapers
July 2021
More about this review
Study questions
Click image to view PDF of proposed study questions.
2021 Tax Preference Performance Reviews
Joint Legislative Audit & Review Committee
More about 2021 reviews
Study process
What is a tax preference?
Tax preferences are defined in statute (RCW 43.136.021) as
exemptions, exclusions, or deductions from the base of a state tax; a credit against a
state tax; a deferral of a state tax; or a preferential state tax rate. Washington has
approximately 600 tax preferences.
Why a review of tax preferences?
Legislature creates a process to review tax preferences
In 2006, the Legislature stated that periodic reviews of tax preferences are needed
to determine if their continued existence or modification serves the public interest.
The Legislature enacted Engrossed House Bill 1069 to provide for an orderly process
for the review of tax preferences (RCW 43.136).
Statute assigns specific roles to two different entities:
The Citizen Commission for Performance Measurement of Tax Preferences (The
Commission) creates a schedule for reviews, holds public hearings, and comments on
the reviews.
Staff to the Joint Legislative Audit and Review Committee (JLARC) conduct the
reviews.
Citizen Commission sets the schedule
The Legislature directed the Commission to develop a schedule to accomplish an
orderly review of most tax preferences over ten years. The Commission is directed to
omit certain tax preferences from the schedule, such as those required by
constitutional law. The Commission may also exclude preferences from review that the
Commission determines are a critical part of the tax structure.
The Commission conducts its reviews based on analysis prepared by JLARC staff. In
addition, the Commission may elect to rely on information supplied by the Department
of Revenue.
In 2021, JLARC staff reviewed seven preferences. The Commission's website includes
analysis of preferences completed in previous years: See http://www.citizentaxpref.wa.gov.
JLARC staff's approach to the tax preference reviews
Statute guides the main topics typically covered in the reviews.
Public policy objectives:
What are the public policy objectives that provide a justification for the tax
preference? Is there any documentation on the purpose or intent of the tax
preference? (RCW 43.136.055(b))
What evidence exists to show that the tax preference has contributed to the
achievement of any of these public policy objectives? (RCW 43.136.055(c))
To what extent will continuation of the tax preference contribute to these public
policy objectives? (RCW 43.136.055(d))
If the public policy objectives are not being fulfilled, what is the feasibility
of modifying the tax preference for adjustment of the tax benefits? (RCW
43.136.055(g))
Beneficiaries:
Who are the entities whose state tax liabilities are directly affected by the tax
preference? (RCW 43.136.055(a))
To what extent is the tax preference providing unintended benefits to entities
other than those the Legislature intended? (RCW 43.136.055(e))
Revenue and economic impacts:
What are the past and future tax revenue and economic impacts of the tax
preference to the taxpayer and to the government if it is continued? (This includes
an analysis of the general effects of the tax preference on the overall state
economy, including the effects on consumption and expenditures of persons and
businesses within the state.) (RCW 43.136.055(h))
If the tax preference were to be terminated, what would be the negative effects on
the taxpayers who currently benefit from the tax preference and the extent to which
the resulting higher taxes would have an effect on employment and the economy? (RCW
43.136.055(f))
If the tax preference were to be terminated, what would be the effect on the
distribution of liability for payment of state taxes? (RCW 43.136.055(i))
For those preferences enacted for economic development purposes, what are the
economic impacts of the tax preference compared to the economic impacts of
government activities funded by the tax? (RCW 43.136.055(j))
Other states:
Do other states have a similar tax preference and what potential public policy
benefits might be gained by incorporating a corresponding provision in Washington?
(RCW 43.136.055(k)
JLARC staff's analysis of tax preferences
JLARC staff carefully analyzes a variety of evidence when conducting these
reviews:
Legal and public policy history of the tax preferences.
Beneficiaries of the tax preferences.
Government and other relevant data pertaining to the utilization of these tax
preferences.
Economic and revenue impact of the tax preferences.
Other states' laws to identify similar tax preferences.
Key: understanding the purpose of the preference
The Legislature now requires that any legislation creating a new preference, or
expanding or extending an existing preference, must include a tax preference
performance statement. The performance statement must contain a statement of
legislative purpose as well as metrics to evaluate the effectiveness of the preference
(RCW 82.32.808).
Some of the preferences included in this report were passed before the 2013
legislation that requires performance statements. When a preference's purpose or
objective is identified in statute, staff are able to affirmatively state the public
policy objective. Sometimes the objective may be found in intent statements or in
other parts of statute if there is no tax preference performance statement.
When the Legislature did not state the public policy objective of a preference, JLARC
staff may be able to infer what the implied public policy objective might be. To
arrive at this inferred policy objective, staff review the following:
Legislative history, including
Final bill reports for any statements on the intent or public policy
objectives.
Bills prior to the final version and legislative action on bills related to
the same topic.
Bill reports and testimony from various versions of the bill.
Records of floor debate.
Relevant court cases that provide information on the objective.
Department of Revenue information on the history of tax preferences, including
rules, determinations, appeals, audits, and taxpayer communication.
Press reports during the time of the passage of the bill which may indicate the
intention of the preference.
Other historic documents, such as stakeholder statements, that may address the
issue addressed by the tax preference.
JLARC staff also interview the agencies that administer the tax preferences or are
knowledgeable of the industries affected by the tax. Agencies may provide data on the
value and usage of the tax preference and the beneficiaries. If the beneficiaries of
the tax preference are required to report to other state or federal agencies, JLARC
staff will also obtain data from those agencies.
If there is sufficient information in this evidence to infer a policy objective,
JLARC staff state that in the reviews. In these instances, the purpose may be a more
generalized statement than when there is explicit statutory language.
