SB 5806
In CommitteeSenate
Revenue voluntary disclosure
Creating a voluntary disclosure program within the department of revenue.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill establishes a one-time, time-limited voluntary disclosure program to encourage unregistered businesses to come into compliance with state tax laws by waiving penalties and interest on past unpaid taxes. It is modeled after a successful 2011 amnesty program and aims to increase state revenue and long-term tax compliance.
- Creates a voluntary disclosure program at the Department of Revenue that allows unregistered businesses to come forward and register without facing penalties or interest on past unpaid taxes.
- Applies only to businesses that were required to register under state law but did not, and who apply before the Department contacts them about tax compliance.
- Requires applicants to certify under penalty of perjury that they have not committed fraud or evasion and have fully disclosed their taxable activity.
- Penalty and interest relief is available only for taxes owed while unregistered, and only if the application is submitted between July 1, 2025, and September 30, 2025.
- Excludes relief for taxes collected from customers but not paid to the state (e.g., unremitted sales tax), and does not allow refunds for taxes already paid before July 1, 2025.
Who is affected
- Unregistered businesses and independent contractors — Businesses or individuals who have been operating without a required state tax registration and owe back taxes, but have not committed fraud or evasion; they can apply during a limited window to avoid penalties and interest.
- State of Washington (Department of Revenue and general fund) — The state government gains additional revenue from previously uncollected taxes, while also reducing long-term enforcement costs by bringing more taxpayers into compliance.
- Washington consumers — Consumers may see slightly more consistent tax collection at the point of sale if previously unregistered sellers now register and collect sales tax properly.
- Tax preparers and advisors — Tax professionals and accountants may see increased demand for guidance on eligibility and application processes for the program.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The program is projected to generate $345.8 million over two years by collecting previously unremitted taxes—revenue that can fund public services (e.g., education, transportation, healthcare) that benefit everyday Washingtonians, especially low- and middle-income households.
FinancialPeopleRef: Sec. 2(7); Fiscal ImpactSole proprietors, gig workers, and micro-businesses that inadvertently failed to register (e.g., due to confusion over requirements) can now come into compliance without facing punitive penalties—reducing financial risk and administrative burden for everyday workers.
Business & EmploymentLean peopleRef: Sec. 2(2)(b); Sec. 2(7)Increased tax compliance among previously unregistered businesses may reduce future enforcement costs for the Department of Revenue and local governments, freeing resources for other public services—though the magnitude depends on administrative efficiency.
Local GovernmentLean peopleRef: Sec. 2(7); Fiscal ImpactBringing unregistered businesses into the formal tax system may level the playing field for compliant small businesses, especially in sectors like retail, construction, and services where informal operations are common.
Business & EmploymentLean peopleRef: Sec. 2(7); OverviewThe program may improve long-term tax compliance culture by normalizing registration and reducing the perception that noncompliance is a low-risk strategy—though this effect is indirect and uncertain.
Public SafetyRef: Overview; Fiscal Impact
Potential Concerns (4)
The program may inadvertently reward noncompliance by offering penalty/interest waivers to businesses that have willfully avoided registration—especially those who delayed registration to avoid detection—potentially undermining tax enforcement credibility and encouraging strategic noncompliance in future years.
Public SafetyLean industryRef: Sec. 2(1), (5); Sec. 2(3)(a)By waiving penalties for previously unregistered businesses, the program creates a competitive advantage for noncompliant operators over law-abiding businesses that registered on time and paid penalties—distorting market fairness and potentially disincentivizing future compliance.
Business & EmploymentIndustryRef: Sec. 2(1), (5); Sec. 2(3)(a)The exclusion of unremitted sales tax collected from customers but not paid to the state means consumers may still bear the burden of uncollected taxes if businesses collected but did not remit—undermining consumer protection and potentially leaving customers liable for unremitted taxes in audits.
Public SafetyLean industryRef: Sec. 2(5); Sec. 2(6)The requirement to certify under penalty of perjury that no fraud or evasion occurred—without an independent verification mechanism—places significant legal risk on applicants who may lack expertise to distinguish negligence from willful evasion, potentially chilling legitimate disclosure.
Rights & LibertiesLean industryRef: Sec. 2(2)(c), (d), (e); Sec. 2(4)
Who Is Most Affected
Sole proprietors, independent contractors, and micro-businesses that unintentionally failed to register (e.g., due to confusion over thresholds or deadlines) benefit most: they avoid steep penalties and interest, and gain legal legitimacy. However, those who deliberately avoided registration gain a windfall relative to compliant peers.
The state gains $345.8M over two years, improving fiscal capacity for public services. However, the one-time nature of the program limits long-term revenue stability, and the fairness of waiving penalties for past noncompliance may erode trust in tax administration.
Consumers benefit modestly if previously unregistered sellers now collect and remit sales tax properly—reducing tax evasion on goods/services they buy. But if sellers absorb the tax or raise prices, consumers may bear part of the compliance cost.
Tax preparers and accountants may see a short-term surge in demand for advisory services, but the program’s time-limited nature and narrow eligibility may limit long-term revenue for these professionals.
Compliant small businesses face a competitive disadvantage if unregistered rivals avoid penalties—though the program may reduce this imbalance over time by bringing noncompliant operators into the formal economy.