Bill would create an environment for small businesses to thrive

December 12, 2006

OLYMPIA… Sen. Mike Carrell (R-Lakewood) has introduced legislation for the 2007 session that would double the state’s current business and occupation (B&O) tax credit, and give small businesses more of a fighting chance to be successful.  Currently, small businesses begin paying their B&O tax once they clear annual gross receipt of:

• $28,000 (service businesses);

• $86,777 (manufacturing businesses); and

• $89,172 (retailing businesses).

Carrell’s legislation (SB 5004) would increase those thresholds to $56,000, $173,554 and $178,334, giving more time for startup businesses to grow and establish themselves before they begin participating in the B&O tax structure.

“This legislation is a big win for small businesses, and I’m confident it will help create more jobs and further grow Washington’s economy,” Carrell said.  “Additionally, this bill offers more broad-based tax relief for Washington citizens as opposed to singling out a particular industry or employer.

“The first several years of a startup business usually bring negative revenue, even though a business might be growing, as evidenced by the hiring of new employees and other investments.  Raising the B&O tax credit threshold would allow businesses to generate more revenue without having to pay that tax until they reach a point where they are more productive and showing a profit,” Carrell said.

The bill would also:

• tie the credit to the rate of inflation (consumer price index, or CPI) and grow the credit by such in future years; and

• double the gross receipts threshold under which businesses do not need to register with the Department of Revenue from $12,000 to $24,000 a year.

The B&O tax has long been a bane of the business community and has been considered by some to be a "job killer" for small and startup businesses.  The current credit was passed in 1994.  Since then, the state has made no adjustments for inflation or upward increases.  As a result, much of the benefit has eroded due to inflation.  Carrell’s bill would exempt an additional 39,000 businesses from the B&O tax, and 107,000 more businesses would see some type of tax relief.

“Washington currently ranks third highest in the nation for business failure rates, and we’re the only state in the country with a B&O tax,” Carrell said.  “Recognizing that the B&O tends to hit small and startup businesses the hardest, this additional broad-based tax relief will help address this problem.

“We have to compete with Oregon and Idaho, who have no B&O tax, and this bill will make our state more competitive.  This legislation makes a difference in the real world by encouraging people who start small businesses to stay in business in Washington,” Carrell said.

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Sen. Mike Carrell represents the 28^th Legislative District, which includes Lakewood, Steilacoom, University Place, DuPont, Fircrest, and parts of Tacoma, Fort Lewis, and McChord Air Force Base.

For more information contact Erich