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Draft:Washington State Department of Revenue

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Introduction

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The Washington Department of Revenue (DOR, or sometimes called Revenue) is the primary tax agency of Washington state.  Revenue oversees about 60 different categories of taxes that fund education, social services, health care, corrections, public safety, natural resource conservation, and other services for Washington residents.

The Department of Revenue’s main office is located in Tumwater, with public field offices in the Washington cities of Bellingham, Bothell, Kent, Port Angeles, Richland, Seattle, Spokane, Tacoma, Wenatchee, Vancouver, and Yakima. It employs over 1,400 employees, including tax agents, analysts, appraisers, attorneys, auditors, examiners, foresters, information technology specialists, and support staff.[1]

Functions and responsibilities

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The Department of Revenue manages Washington State’s business and occupation, public utility, and sales and use taxes, as well as the capital gains, timber, cigarette and tobacco, property, leasehold, estate, and other tax programs. DOR's responsibilities also include:

  • Providing assistance, information, and education to roughly 625,683 businesses
  • Processing $38 billion in annual revenue, covering all local sales and use taxes and over 90% of state General Fund tax revenue
  • Handling over 416,000 business license applications and renewals each year
  • Working with all 39 WA counties to oversee property tax administration
  • Developing and implementing tax legislation
  • Conducting tax and fiscal research
  • Identifying unregistered businesses.[1]

Special Programs

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Working Families Tax Credit Program

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The Working Families Tax Credit program provides a tax reimbursement to low-to-moderate income individuals who meet certain eligibility requirements.[2] Revenue reported receiving 182,300 applications and refunding $94.7 million for FY 2023, the first year of the program.[3]

Unclaimed Property Program

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In FY 2023, DOR reported approving 306,374 claims and returning $138.9 million in unclaimed property to owners. The Money Match program, launched in spring 2023, automatically returns unclaimed property to its rightful owners after verifying ownership, eliminating the need for owners to file claims or submit documentation. DOR also reported that 9,014 checks totaling $1.2 million were returned to owners through Money Match in FY 2023.[3]

Tribal Partnerships Program

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As a part of Revenue’s Executive division, the Tribal Partnerships Program manages Revenue’s government-to-government relations with the 29 federally recognized Tribal Nations in Washington. DOR currently has compacts with 11 tribes:

The Tribal Partnerships Program also provides legal and policy support on tribal issues, handles present and future compacting, provides taxpayer education to those doing business in Indian Country, and educates agency staff on tribal cultural norms. It also represents DOR in the Tribal Tax Advisory Group (TTAG), an advisory group comprised of Tribal representatives, Tribal Partnerships Program representatives, and Revenue’s Executive Team members.[3]

Organization and Structure

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The current director of the Department of Revenue is Drew Shirk, appointed by Governor Jay Inslee in 2023.[5]

DOR has 15 different divisions with the following responsibilities:

1. Administrative Review & Hearings

Handles taxpayer requests for reviews of tax assessments and refunds and gives guidance on Washington tax laws.

2. Audit

Encourages voluntary compliance, conducts audits, and collaborates with taxpayers to ensure accurate reporting.

3. Business & Financial Services

Provides administrative and financial support to the agency.

4. Compliance

Collects tax revenue through discovery, education, field oversight, investigations, assessments, and enforcement actions.

5. Customer Experience & Communications

Handles internal and external communications and customer experience.

6. Executive

Manages the implementation of the Governor’s Executive Orders and Directives, legislative actions, government-to-government relations, and statewide enterprise initiatives.

7. Human Resources

Offers support and services to management, employees, and job seekers.

8. Information Services

Handles IT infrastructure, service support, and IT security.

9. Interpretations & Technical Advice

Develops guidance for the fair and consistent application of state tax law, and offers policy analysis and technical advice.

10. Legislation & Policy

Assists the Governor, Legislature, and agency director in evaluating state and local tax programs and policies.

11. Property Tax

Oversees the administration of state and local property taxes and offers guidance to county assessors and appraising inter-county operating property.

12. Research & Fiscal Analysis

Compiles tax data, produces fiscal notes and estimates, and analyzes the tax and economic impacts of proposed legislation in support of the Governor and Legislature.

13. Taxpayer Account Administration

Manages tax and incentive programs, including the collection, accounting, and distribution of excise taxes and fees, and administers the Uniform Unclaimed Property program.

14. Taxpayer Services

Manages statewide Business Licensing Services, the inbound call center, the taxpayer service program, and taxpayer rights advocates.

15. Working Families Tax Credit

Administers a credit program serving low- to moderate-income individuals and families who meet specific eligibility criteria.[3]

History

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The Department of Revenue was established on July 1, 1967, following the state legislature’s decision in 1965 to abolish the existing three-member Washington Tax Commission, which had been operating since 1905. This change was part of an effort to modernize and streamline the tax collection system.[6]

In 1981, voters approved an initiative repealing inheritance and gift taxes, replacing it with an estate tax equal to the amount of federal tax credit.[7]

In 1987, the U.S. Supreme Court ruled that Business & Occupation (B&O) taxes on certain interstate transactions were unconstitutional. Following the decision, Washington state repealed the multiple activities exemption and introduced credits for B&O taxes paid outside Washington, allowing businesses to offset taxes on in-state manufacturing against those for in-state sales.[8]

During the 1982 legislative session, a major restructuring of local government finance took place. To obtain additional sales tax authority, cities had to place a cap on utility tax rates, and cities and counties had to accept limitations on system development charges. Sales tax equalization was also introduced, redistributing a portion of revenue to small tax-base jurisdictions.[9]

In 1997, the legislature clarified the B&O tax law on certain internet services, including email, information retrieval, and hosting of information online.[10]

In 1998, voters approved Initiative 695, which repealed the motor vehicle excise tax and mandated a flat $30 tab fee.[11]

In 2001, the legislature began phasing out the federal estate tax by 2010 and reduced the state tax credit by 25 percent each year, eliminating the state credit by the end of 2004.[12]

In 2007, Washington adopted the Streamlined Sales Tax Agreement (SSTA), effective July 1, 2008, to simplify tax collection and improve compliance, particularly for remote and interstate sales.[13] The state also authorized a new local sales tax to support the Health Services Authority, which aimed to fund local healthcare initiatives.[14]

In 2009, DOR began requiring electronic filing and payment of excise taxes for all taxpayers who file monthly.[15] Also, reseller permits replaced resale certificate for wholesale purchasers.[16]

During a three-month period in 2011, DOR conducted its first amnesty program, allowing taxpayers to pay any outstanding taxes without associated penalties and interest. The program ultimately generated an estimated $345.8 million in revenue and waived $91 million in penalties and interest.[17]

In 2011, the Master License Service (MLS), the one-stop business license center that had helped business owners register with various state agencies since its creation in 1977, was transferred from Department of Licensing to DOR and rebranded as Business Licensing Service (BLS).[18]

In April 2015, DOR signed a contract with Fast Enterprises to begin the Tax and Licensing Systems Replacement (TLSR) project to modernize the agency’s tax and business licensing systems.[19]

In 2018, Revenue launched the My DOR portal,[20]where taxpayers could register, file, and pay electronically.[21] The Automated Tax and Licensing Administration System (ATLAS) and ATLAS Management Program (AMP) also began.[22]

Washington’s Marketplace Fairness Law went into effect on Jan. 1, 2018, requiring out-of-state businesses without a physical presence to make a choice to either collect sales tax or follow use tax notification and reporting requirements.[23]

In response to the COVID-19 global pandemic, in March of 2020, Revenue closed its doors to the public and transitioned 1,200 employees to telework.[24] Services continued online and by phone. DOR reopened its public offices in February of 2022.[25] DOR continues to offer telework options for its employees.[26]

The Tribal Partnerships Program was commissioned in 2020.[27]

In 2021, the Working Families Tax Credit was funded by legislation. The program started in 2023.[28]

The 2021 legislative session also saw the passing of SB 5096, which established a 7% capital gains tax on individual profits exceeding $250,000.[3] A Douglas County Superior Court judge ruled the tax unconstitutional in 2022,[29] but in 2023, the state Supreme Court overruled this ruling upon appeal.[30]   Initiative No. 2109 (I-2109), a ballot initiative to repeal SB 5096, will appear on the ballot on November 5, 2024.

References

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  1. ^ a b "What we do". dor.wa.gov. Washington State Department of Revenue. Retrieved 2024-11-05.
  2. ^ Deng, Grace (2024-07-23). "Thousands of low-income WA families qualify for a tax credit they aren't claiming". Washington State Standard. Retrieved 2024-10-29.
  3. ^ a b c d e "Annual Report:July 2022 - June 2023" (PDF). dor.wa.gov. Washington State Department of Revenue. Retrieved October 29, 2024.
  4. ^ "Retail taxes compacts". www.dor.wa.gov. Washington State Department of Revenue. Retrieved 2024-10-29.
  5. ^ "Department of Revenue". Daily Journal of Commerce. April 20, 2023. Retrieved October 29, 2024.
  6. ^ Chesley, Frank (September 4, 2004). "Washington State Taxation". www.historylink.org.
  7. ^ "Washington Estate Tax Invalidated by Supreme Court Decision" (PDF). Senate Ways & Means Committee. February 3, 2005. Retrieved October 29, 2024.
  8. ^ "U.S. Supreme Court Denies Review in State B&O Tax Case". www.atg.wa.gov. Washington State Office of the Attorney General. October 17, 1999. Retrieved 2024-10-29.
  9. ^ "A History of Washington's Local Governments: Washington State Local Governance Study Commission Report (Update). Appendix D of the County Financial Health and Governance Alternatives 2007 Legislative Study" (PDF). Municipal Research and Services Center of Washington. October 2007.
  10. ^ "Senate Bill Report: ESSB 5763: An act relating to prohibiting the taxation of internet service providers as network telephone services providers". app.leg.wa.gov. Washington State Legislature. Retrieved October 29, 2024.
  11. ^ "Recent Initiatives" (PDF). Washington State Joint Legislative Audit and Review Committee. Retrieved October 29, 2024.
  12. ^ Watkins, Marilyn P (September 2006). "Discussion Brief: Washington's Estate Tax" (PDF). Opportunity Institute. Retrieved October 29, 2024.
  13. ^ "Remote Seller Information". Streamlined Sales Tax Governing Board. Retrieved 2024-10-29.
  14. ^ "RCW 82.14.480: Sales and use tax for health sciences and services authorities. (Expires January 1, 2038.)". app.leg.wa.gov. Retrieved 2024-10-29.
  15. ^ "WAC 458-20-228: Returns, payments, penalties, extensions, interest, stays of collection". apps.leg.wa.gov. Washington State Legislature. Retrieved 2024-10-29.
  16. ^ "WAC 458-20-102A: Resale certificates". app.leg.wa.gov. Washington State Legislature. Retrieved 2024-10-29.
  17. ^ "Amnesty Report: February 1-April 30, 2011" (PDF). Washington State Department of Revenue. February 2022. Retrieved 2024-10-29.
  18. ^ "Business Licensing Service hits milestone with 200th local licensing partner". dor.wa.gov. Washington State Department of Revenue. Retrieved 2024-11-05.
  19. ^ Taylor, Janetta (June 3, 2015). "Local Government Partnership" (PDF). dor.wa.gov. Washington State Department of Revenue.
  20. ^ "My DOR: Sign In". secure.dor.wa.gov. Retrieved 2024-11-05.
  21. ^ "Revenue to launch new online tax portal | Washington Department of Revenue". dor.wa.gov. Retrieved 2024-11-05.
  22. ^ "Annual Report: July 2018 - June 2019" (PDF). Washington State Department of Revenue. July 2019. Retrieved October 29, 2024.
  23. ^ "Washington's New Marketplace Fairness Legislation Is Effective as of January 1, 2018". www.mossadams.com. 2018-01-25. Retrieved 2024-11-05.
  24. ^ "Department of Revenue temporarily closes public offices to limit the spread of novel coronavirus". dor.wa.gov. Washington Department of Revenue. 2020. Retrieved 2024-11-05.
  25. ^ "Department of Revenue offices temporarily closed to the public". dor.wa.gov. Washington Department of Revenue. Retrieved 2024-11-05.
  26. ^ "Strategic Business Plan July 2022-June 2027" (PDF). August 2022.
  27. ^ Duvall, David; Knudsen, Daniel; O'Connell, Keri (February 2022). "Tribal Partnerships Program" (PDF).
  28. ^ Brunner, Jim (2021-04-18). "Starting in 2023, an estimated 420,000 Washingtonians will get tax rebates of $300 to $1,200". The Seattle Times. Retrieved 2024-11-05.
  29. ^ O'Sullivan, Joseph (2022-03-01). "In a blow to progressives, Douglas County court strikes down WA's new capital-gains tax". The Seattle Times. Retrieved 2024-11-05.
  30. ^ O'Sullivan, Joseph (2023-03-24). "WA Supreme Court upholds capital gains tax". The Seattle Times. Retrieved 2024-11-05.
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