Senators say agency’s apology, delay of tax ‘guidance’ is appropriate response after causing confusion

Legislators to fix problem that produced chaotic double-taxation situation

In response to concerns raised by a bipartisan group of lawmakers, the Washington Department of Revenue (DOR) has suspended the implementation of new administrative guidance concerning the sales tax on concrete pumping. The delay will allow lawmakers to weigh in during their 2020 session, which runs from mid-January through mid-March.

“It was a huge problem for the concrete pumpers, and that impacted everyone else,” said Sen. Mike Padden, R-Spokane Valley. “For example, it would have added 50,000 dollars to the cost of the Amazon project in Spokane for the cost of the concrete alone.”

Other lawmakers joined Padden in praising the decision.

“I am pleased that DOR has decided to suspend implementation of its concrete pumping guidance until April. Washingtonians depend on an open transparent process that engages those affected by decisions agencies make,” said Sen. Shelly Short, R-Addy. “It was very clear that DOR did not seek external input, resulting in unfair treatment and burdensome costs on the construction industry. It is my hope that the Legislature can work with DOR and stakeholders during the 2020 legislative session to find a permanent solution in place of the guidance.”

The controversial interim guidance, issued in October by DOR without legislative or stakeholder input, resulted in concrete pumpers essentially being double-taxed – meaning they were subject to both the B&O tax on retail and the retail sales tax. The guidance (on Rule 211) required those hiring concrete pumpers to pay sales tax on the contract, and again on the concrete when it is sold as part of a finished construction.

Short, Padden and Sen. Mark Schoesler, R-Ritzville, along with Representatives Tom Dent, R-Moses Lake, Brian Blake, D-Aberdeen and Mike Chapman, D-Port Angeles, worked with the building industry to voice opposition to both the guidance change and the process used to make the change.

In a letter to DOR Director Vikki Smith, the lawmakers wrote, “With the stroke of a pen, DOR has managed to create chaos, disadvantage hard-working, small businesses who provide needed services in the construction industry and sanction double-taxation. …It is incredibly troublesome that DOR chose to change long-standing policy in such a secretive, non-inclusive manner.”

On Friday, Smith responded to the lawmakers, announcing the delay in implementation. She wrote, “We want to be transparent on our reading of the law and delaying the interim guidance’s effective date accomplishes this objective while affording the Legislature time to make changes and for stakeholders to provide additional feedback.”

While Padden was glad to see DOR walk its initial decision back, he said the process highlights an ongoing problem with government bureaucrats.

“It’s troubling that government agencies seem tone deaf to who they are serving,” said Padden. “They don’t serve themselves; they are supposed to serve the people. If you are going to serve the people, you must follow a proper process, and not just pull policy changes out of thin air.”

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