The Legislature has passed three of the major operating budget tax bills (ESSB 5794, ESSB 5814, and ESSB 5813). The three others (SHB 2081, SHB 2077, and SHB 2049) are scheduled for executive session in the Senate Ways & Means Committee this afternoon.

ESSB 5794

As adopted, ESSB 5794 would apply or increase business and occupation (B&O) taxes on:

• Rental or lease of individual storage space at self-storage facilities,
• Credit unions that merge with or acquire a bank regulated by the Department of Financial Institutions,
• Title insurance agents,
• Retailing and wholesaling of precious metal bullion and monetized bullion, and
• Interest on investments or loans secured by mortgages or deeds of trust.

It would also remove B&O and public utility tax credits for light and power and gas distribution businesses, new employment for international service activities, and public safety standards and testing.

This bill has changed significantly since the fiscal note was published, so it is not clear what the revenue impact of ESSB 5794 is.

ESSB 5814

As adopted, ESSB 5814 would apply the sales tax and the retailing B&O tax rate to certain services:

• Information technology training services, technical support, and other services;
• Custom website development services;
• Investigation, security services, security monitoring services, and armored car services;
• Temporary staffing services (except for staffing for hospitals);
• Advertising services (excluding web hosting, newspapers, printing or publishing, radio and television);
• Live presentations (whether in-person or online); and
• Digital automated services that primarily involve the application of human effort.

Most of these changes would not apply to sales between members of an affiliated group.

It would also expand the definition of “tobacco products” so that the tobacco products tax would apply to products that contain nicotine, whether derived from tobacco or created synthetically.

Notably, the bill no longer includes a requirement that certain businesses make a one-time prepayment of sales taxes to the state. (See my previous post for more on the earlier version of the bill, which included this budget gimmick.)

The fiscal note has not been updated since the bill was introduced. Given the many changes to the bill since then, the revenue impact of the version that passed the Legislature is unclear.

ESSB 5813

As adopted, ESSB 5813 would increase the capital gains tax rate to 9.9% on gains over $1 million. It would also increase the estate tax rates, with the marginal rate for the top bracket increasing from 20% to 35%. The estate tax exclusion amount would increase from $2.193 million to $3 million and be adjusted for inflation going forward. I wrote about the bill in detail here. The only differences in the adopted version are that the estate tax changes would apply to deaths occurring on or after July 1, 2025 (instead of Jan. 1, 2025) and the deduction for farms would be expanded to nonfamilial heirs who materially participated in the operation of the farm.

The most recent fiscal note estimates that the bill would increase revenues to funds subject to the outlook (NGFO) by $341.5 million in 2025–27 and $313.9 million in 2027–29. (The two differences noted above are not reflected in the fiscal note, but I don’t think they will materially change the revenue estimates.)