The state House passed a bill to equalize taxes levied on various telecommunications services Thursday, winning strong support from both sides of the aisle for what is in effect a $109.9 million increase in taxes on home and cell telephone services. The vote in the Democrat-controlled chamber was a lopsided 74-to-18 with more than 20 Republicans voting for it and just 17 opposed. Among Democrats, only Rep. Monica Stonier of Vancouver voted against it – something the first-year lawmaker has done on several tax measures this year.
The bill helps close a huge tax loophole that resulted from a 2011 court decision that said Sprint’s sales of wireless services to non-business customers were exempt from state and local sales and use taxes. In effect the bill repeals that tax exemption, which had been meant for home-phone services such as land lines.
House Bill 1971 could add a tax of potentially $1.20 to $2 to the average monthly home phone bill, according to the bill sponsor, Democratic Rep. Reuven Carlyle of Seattle. But Carlyle said the bill represents a major reform of the telecom tax code that had become a “complete mess” after the federal breakup of AT&T in 1983.
“Telecommunications reform is a highlight of this session,” Carlyle told House members in a floor speech.
He also said it ends the risk that the state could lose hundreds of millions of dollars in future tax receipts through additional lawsuits by phone-service providers asserting their services also were exempt from the taxes. Some have suggested before that up to $800 million in lost revenue was at stake.
Republican Rep. Ed Orcutt of Kalama said there were aspects of the legislation he disliked but he saw it as vital to keeping small independent phone companies operating in rural areas. He said some of the taxes will replace federal funds once earmarked to help provide service in rural areas.
The bill now goes to the Senate where a Republican led coalition holds a one-vote majority and appears wedded to a no-new-taxes agenda.
Asked at a press conference, Senate Majority Leader Rodney Tom refused to say how his caucus viewed the tax bill. He said the Republican Senate and Democratic House were still negotiating on a budget and related bills.
In the House, the bill was the product of negotiations over more than two years with all elements of the telecom industry involved, Carlyle said. All players except the satellite-dish sector agreed to equalize the taxes, and because of opposition from Senate lawmakers, Carlyle said he had to drop satellite service from the legislation – at a cost of $50 million in tax receipts.
During hearings earlier this year the bill drew mixed testimony – with opposition from retailers and support from most areas of the telecommunications industry.
The bill extends enhanced 9-1-1 taxes to wireless services and creates a state universal-access fund to replace federal funding that is expiring to help ensure phone service in hard-to-serve areas. Under the bill, the sales tax applies equally to wireless, voice-over-internet-protocol, and land-line services.