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Local Government Partnership Meeting October 13, 2009

Local Government Partnership Meeting October 13, 2009. Welcome and Introductions. Cindi Holmstrom, Director Department of Revenue. Announcements & Housekeeping Items. Miki Gearhart, Local Government Partnership Facilitator. Litigation Panel.

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Local Government Partnership Meeting October 13, 2009

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  1. Local Government Partnership Meeting October 13, 2009

  2. Welcome and Introductions Cindi Holmstrom, DirectorDepartment of Revenue

  3. Announcements & Housekeeping Items Miki Gearhart, Local Government Partnership Facilitator

  4. Litigation Panel HomeStreet Bank; Dot Foods; GP Gypsum; Tracfone; Lamtec; Getty Images; American Honda Import; Others Cam Comfort, Senior Assistant Attorney GeneralPeter Gonick, Assistant Attorney GeneralKent Meyer, Assistant City Attorney, Seattle

  5. BREAK

  6. Local Revitalization Financing (LRF) Janetta Taylor

  7. Demonstration Applications

  8. First Come Basis Applications

  9. First Come Basis Applications

  10. Next Steps • Annual Reports • Due March 31st of each year • Tracking new construction and improvements • Working with county assessors

  11. Feedback &Questions

  12. Property Tax • What is the impact of a negative IPD on taxing districts? • What’s happening to assessed values? David Saavedra Kathy Beith October 13, 2009

  13. Property Tax Limit Factor and Negative “Inflation” • Inflation equals the percentage change in the Implicit Price Deflator (IPD) and for taxes to be collected in 2010 is -.848%. • The limit factor for districts with a population less than 10,000 is 101%. • The limit factor for districts with a population of 10,000 or more is 100% + inflation. For taxes due in 2010, this equals 99.152%. • Local taxing districts with a population of 10,000 or more can increase the limit factor to a maximum of 101% with a finding of substantial need to do so.

  14. Requirements for increasing property tax levies • Taxing districts with a population of less than 10,000 must pass a resolution or ordinance stating the amount of increase in terms of dollars and percentage increase. • Taxing districts with a population of 10,000 or more must pass a resolution or ordinance stating the amount of increase in terms of dollars and percentage increase. This should be the total increase, other than increases for new construction and other authorized amounts. • Taxing districts with a population of 10,000 or more may authorize a limit factor in excess of 99.152% but no more than 101% with a finding of substantial need.

  15. Substantial Need • A resolution or ordinance must indicate the substantial need and set the limit factor. • The resolution or ordinance must be signed by two-thirds of the governing board in districts with legislative authorities comprised of 4 members or less, and by a majority + one in districts with governing boards of more than 4 members. • The limit factor authorized by the resolution or ordinance may be used only for one year.

  16. Substantial Need Language included in a substantial need resolution or ordinance may look something like this: WHEREAS, the Board of Commissioners of ______ Taxing District has determined that, due to ___________________________________ (substantial need), the Board of Commissioners finds that there is a substantial need to increase the budget by 1 percent and to set the levy limit at 101 percent.

  17. Sub heading title, descriptive Main title

  18. Sub heading title, descriptive Main title

  19. Sub heading title, descriptive Counties on Annual Versus Cyclical Revaluation Cycles Main title

  20. Sub heading title, descriptive Main title

  21. BREAK

  22. Reseller Permit Rob Rice, October 13, 2009

  23. Senate Bill 6173 • Eliminates use of resale certificates • Effective January 1, 2010, businesses may no longer accept, honor or use resale certificates • Must use a permit issued by DOR • Permits are free • Issued only to businesses that make wholesale purchases 2

  24. Reasons for the change • Misuse of self-issued resale certificates costs the state over $100 million dollars in lost revenue each year • Anyone can download a resale certificate, fill it out, and make purchases without paying sales tax • Some don’t know the law and use it to buy everything for their business • Bill provides better control and recovers revenue 3

  25. Implementation Approach • Inclusive process with stakeholders • Meetings in June, July & August • Business & trade associations • Contractors & construction organizations • Farmers & agricultural associations • Early rollout; auto-issued to many • Tested application process, permit, and letters with 20 state businesses

  26. The basics • Qualifying businesses that resell goods and services • Process changes from “an honor system with audits” to a managed system • Permits can be verified online (Jan. 2010) • Department will continue to examine wholesale activities during audits

  27. Eligibility Retailers, Wholesalers & Manufacturers • Actively reporting income • No documented misuse of resale certificates 7

  28. Eligibility Contractors • Special requirements for construction industry • Permits not auto-issued • Reporting retail or wholesale • 25% or more of material and contract labor costs related to retail or wholesale construction activities • No documented misuse of resale certificates 8

  29. Processingapplications • May apply by paper or online • Goal is to issue in 10 business days • Implementation Auto-issued permits: 155,399 Notices mailed: 326,000 Application approval rate as of 10/5/09: 95%

  30. The permit

  31. How long are permits valid? 4 years Businesses registered on or before 1/1/09 2 yearsBusiness registered after 1/1/09 • Permits renewed every four years 1 yearQualifying contractors • Contractors reapply every year

  32. Deductions& refunds Businesses that don’t qualify for a permit but sometimes buy goods to resell should pay sales tax. They can recover tax paid by: • Taking a “Taxable Amount for Tax Paid at Source” deduction on returns • Requesting a refund from the Department 13

  33. Outreach Web – http://dor.wa.gov/resellerpermit Online video tutorial News outlets statewide PublicationsBrochurePostersSignsInformation cards

  34. Otheroutreach E-mail & PhoneTrade associations Commodities commissions Nonprofit groups Association newsNewsletters Web pages E-mail list-servs Business publicationsPuget Sound Business JournalKitsap Business JournalBusiness Examiner (Tacoma)

  35. Multilingual outreach • Overview Sheet – translated into most common languages Spanish, Tagalog, Vietnamese, Korean, Chinese, Russian • Telephone assistance in any language– Language Line • Hispanic – Radio, newspapers, local Chambers • Russian – Radio, newspapers • Korean – Grocery Assn, radio • Local Chambers & EDCs

  36. SST Mitigation Update Matthew J. Bryan, October 13, 2009

  37. background What is Mitigation? • Washington switched to destination-based sales tax on July 1, 2008. • Businesses report sales tax to the location where a good is delivered, instead of to the location from whence it shipped. • Some jurisdictions with many warehouses and few residences were adversely impacted. • The Mitigation program compensates them with State funds.

  38. background What is Mitigation? • The Department of Revenue calculates the revenue lost by each taxing jurisdiction • Based on tax reporting information • A mathematical model is used • Some amount of imperfection in the results

  39. difficulty estimating Why are losses hard to calculate? • No data on deliveries per se • This is a mathematical estimate (hypothetical tax return)

  40. difficulty estimating Why are losses hard to calculate? • Difficult to separate deliveries from other sorts of activities. • Could there be no deliveries in this case? Perhaps a new storefront? (hypothetical origin-based tax return) (hypothetical destination-based tax return)

  41. how you can help Tell us what you know • Local jurisdictions know their businesses better than we do. • Better tracking of opening and closing establishments • Better idea of their activities and whether they are making deliveries. • The Department of Revenue sends Mitigation data to you each quarter. • Reviewing it is your opportunity to share your knowledge with us.

  42. how you can help The Mitigation Data • The Department sends data to local jurisdictions each quarter. • It details the deliveries we have estimated for each business. • We also send a list of which businesses have been excluded because of jurisdictions asking questions. • In the future, we may show businesses excluded for other reasons.

  43. how you can help Level of sales in your jurisdiction Estimated deliveries The Mitigation Data

  44. pointing you in the right direction What are the most useful things for you to find? • A business you suspect is not making deliveries. • A business you suspect has always reported destination-based sales tax (or should have been). • A business that had a location open or close in your jurisdiction during the relevant periods of time. • July 1, 2007 – June 30, 2009 for most businesses • January 1, 2007 – December 31, 2009 for businesses that report annually. • A business not included in the analysis which makes retail deliveries.

  45. getting back to us How can you send us your results? • E-mail is not secure • Send your results through the Secure Messaging Center. • Open the Mitigation secure message from us and press “Reply.” • Attach your response and send.

  46. annualization What is “annualization”? • Starting December 31, 2009 payments will no longer be computed by comparing two quarters. • They will be calculated by comparing two years worth of data and dividing by four. • Fiscal Year 2008 and 2009 • This estimate will be used for all future payments. • Voluntary (out-of-state) sellers will continue to lower the payment amounts.

  47. annualization How is annualization different? First four payments Annualized payments Payment Frequency Quarterly Quarterly Analysis Based On Quarter-to-quarter comparisons Fiscal Year 2008 compared to Fiscal Year 2009 divided by 4. Adjustment Frequency Quarterly Annually

  48. getting back to us Have further Mitigation questions? Matthew J. Bryan Research Division Washington State Department of Revenue Phone: (360) 570-6074 E-Mail: MatthewBr@dor.wa.gov

  49. Reseller Permit Questions?

  50. Closing Comments

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