SB 6173 changes the current resale certificate program to a sellers permit beginning January 1, 2010. Employers must apply to the Department of Revenue and then receive a reply within 60 days to be eligible for use of the permit. This requirement forces employers to pay the sales tax up-front and then to seek a rebate or refund when filing their taxes. SB 6173 imposes an increase to penalties for misuse from 50% to 100% of tax liability owed.

This recommendation allegedly comes from the Underground Economy Task Force after stakeholders met to review a number of issues surrounding unregistered contractors. Unfortunately, the task force never had any discussion on this issue. The real issue is that the bill allegedly raises over $100 million in the next biennium.

 

AWB asks for a "NO" vote on SB 6173, legislation that establishes a brand new sellers permit program while simultaneously increasing penalties 100 percent. AWB opposes this bill for the following reasons:

1. The Underground Economy Task Force and key Department of Revenue stakeholders have not had any meaningful discussions on the idea of a sellers’ permit.

2. This measure will increase up-front costs for business approximately 10 percent. The bill creates cash flow and accounting problems due to the timing of payments, use of stock products, out-of-state work and tax filing deadlines.

3. The imposition of a sellers permit will require expensive and customized accounting systems. Major accounting firms report such a program could take a year and a half to prepare properly.

4. A sellers’ permit program interferes with current business relationships and on-going contracts while increasing paperwork burdens and employee training costs.

5. According to the DOR fiscal note, this bill will require 17.3 new FTEs and "anticipates that these changes will cause additional errors on the combined excise tax return". These FTE's would be better spent enforcing the existing program rather than creating an entirely new structure that will deliberately cause confusion and misunderstandings resulting in substantially increased penalties. For example, DOR could create a verification process for use of the existing certificate and make it more difficult to access from the internet.

Lawmakers should amend the bill to enhance compliance with the existing resale certificate instead of establishing new programs. If the bill only increased penalties and enhanced DOR enforcement of the existing resale certificate, business could remove its opposition. Unless these changes occur, please vote “NO”. Thank you.

For more information, please contact AWB’s Amber Carter at 360-870-2915 or by e-mail at amberc@awb.org.