Reforming B&O for manufacturing businesses

State lawmakers are pushing for legislation to lower the amount of Business and Occupation (B&O) taxes that rural manufacturers pay. During recent public testimony, proponents of HB 2947 said the bill would help attract more companies to relocate to Washington, however some stakeholders indicated a need for the measure to be expanded to benefit all manufacturing businesses.

In response, the prime sponsor took the aim of the bill and redrafted it into HB 2992, which extends the benefit by including timber and wood product manufacturers, extractors and wholesalers. Some lawmakers, however, found fault in that legislation’s definition of “rural” and voted against its passage during a Feb. 19 executive session.

During a Feb. 16 House Finance Committee public hearing, prime sponsor State Rep. Mike Chapman (D-24) told committee members that the concept of the legislation was borne out of discussions during the Association of Washington Business (AWB) rural manufacturing summit.

“We started talking about how we can help lower the unemployment gap. We know that it’s about a two-percent average of unemployment in the Seattle area versus the rest of Washington. …there was a lot of great arguments made for assisting rural manufacturers.”

Under both bills, the manufacturing, wholesale and retailing B&O tax rates for manufacturers in rural areas would be decreased incrementally. HB 2992 would allow applicable manufacturers to pay a .2904 B&O tax rate starting in 2024, down from 0.484. The bill also specifies that applicable rural areas must meet certain population densities.

The measure passed out of committee by a 9-2 vote on Feb. 19 and is not currently scheduled for an additional hearing.



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