ESSB 6113
SignedSenate
Tax administration
Concerning taxes administered by the department of revenue.
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 makes technical corrections and clarifies ambiguities in Washington’s tax laws without changing overall tax revenue. It adds a $5-per-tire fee, expands the definition of retail sales to include more services (e.g., advertising and fitness facilities), creates a new 7.5% surcharge on large advanced computing businesses, increases a tax on large financial institutions, and adds new transportation-related taxes. It also updates definitions and rules for digital goods, business use exemptions, and tax sourcing.
- Imposes a $5-per-tire fee on retail sales of new replacement vehicle tires, collected by sellers and remitted to the Department of Revenue, with audit and reporting requirements.
- Expands the definition of 'retail sale' to include new categories of services (e.g., live presentations, athletic/fitness facilities, and advertising services), clarifies digital goods and automated services definitions, and adds exemptions for business use and affiliated groups.
- Creates a 7.5% workforce education investment surcharge (phased in from 1.22% in 2020–2025) on select advanced computing businesses with over $25 billion in worldwide gross revenue, capped at $75 million annually per affiliated group.
- Increases the additional tax on specified financial institutions from 1.2% to 1.5% beginning October 1, 2025.
- Adds new transportation-related taxes: 0.5% on motor vehicle sales, 0.5% on recreational vessel purchases or leases, and up to 11.9% on car rentals (phasing to 9.9% in 2027), plus a tax on peer-to-peer car sharing under certain conditions.
- Amends sourcing rules for sales and use taxes, including for digital goods, advertising services, and direct mail, and clarifies apportionment for businesses with in-state and out-of-state use.
Who is affected
- Tire retailers — Businesses that sell new replacement vehicle tires at retail must collect a $5 fee per tire from buyers and report tire sales and fees on their business excise tax returns; the Department of Revenue will audit tire sales and fee collections as part of its regular audit cycle.
- Large advanced computing businesses — Large technology and computing companies (e.g., cloud providers, marketplace facilitators, online search engines, and social media platforms) with over $25 billion in worldwide gross revenue may be subject to a new 7.5% workforce education investment surcharge beginning January 1, 2026, capped at $75 million annually per affiliated group.
- Specified financial institutions — Large financial institutions with at least $1 billion in annual net income (as reported on consolidated financial statements) will pay an additional tax of 1.5% beginning October 1, 2025, on gross income from certain business activities.
- Businesses using digital products and services — Businesses that purchase digital goods, digital codes, or digital automated services for business use may claim exemptions from sales and use tax if they provide an exemption certificate and meet criteria for business-only use or concurrent in-state and out-of-state use.
- Automotive and recreational vehicle sellers and lessors — Retailers of motor vehicles, recreational vessels, and cars rented or shared peer-to-peer must collect new additional taxes: 0.5% on motor vehicles, 0.5% on recreational vessels, and up to 11.9% on car rentals (phased down to 9.9% in 2027), plus a new tax on peer-to-peer car sharing under certain conditions.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The 7.5% workforce education investment surcharge on large tech firms—capped at $75M annually per affiliated group—directly funds expanded enrollment in computer science and engineering programs at state universities, targeting a public good (workforce development) and reducing barriers for students who might otherwise be priced out.
EducationPeopleRef: Sec. 5 (RCW 82.04.299)Transportation-related taxes (motor vehicle, recreational vessel, car rental) are dedicated to the multimodal transportation account, supporting infrastructure improvements—including transit, bike lanes, and road maintenance—that benefit everyday commuters, especially in underserved communities.
TransportationPeopleRef: Sec. 9 (RCW 82.08.020)The 0.5% tax on recreational vessel purchases/leases and the 0.5% motor vehicle tax generate revenue that indirectly supports housing affordability by funding transportation infrastructure that reduces commute times and expands access to jobs in high-cost regions.
HousingPeopleRef: Sec. 9 (RCW 82.08.020)Expanding the retail sale definition to include advertising, fitness, and live presentation services closes loopholes that allowed large digital platforms and national chains to avoid taxation while local service providers paid—improving tax fairness and leveling the playing field for small businesses.
Business & EmploymentPeopleRef: Sec. 2 (RCW 82.04.050)Clarifying sourcing rules for advertising services and digital goods helps ensure local jurisdictions receive fair tax revenue for services (e.g., policing, emergency response) that support the communities where users are located—especially important for rural and unincorporated areas.
Public SafetyPeopleRef: Sec. 2 (RCW 82.04.050)
Potential Concerns (5)
Imposes a $5-per-tire fee on retailers, requiring them to collect, report, and be subject to audits for tire sales and fees—adding administrative burden and compliance costs for small tire retailers and auto shops.
Business & EmploymentRef: Sec. 1 (RCW 70A.205.405)Expanding the definition of 'retail sale' to include services like fitness facilities, advertising, and live presentations may increase tax liability for small service providers (e.g., local gyms, independent marketing consultants) who may not have previously understood themselves to be subject to sales tax.
Business & EmploymentRef: Sec. 2 (RCW 82.04.050)The 7.5% workforce education investment surcharge on large advanced computing businesses with over $25B in global revenue is narrowly targeted, but the definition of 'advanced computing' and 'marketplace facilitator' could inadvertently capture mid-sized tech firms or SaaS providers that serve enterprise clients—even if they fall just below the $25B threshold—due to affiliate grouping rules.
Business & EmploymentRef: Sec. 5 (RCW 82.04.299)Raising the financial institutions tax from 1.2% to 1.5% on gross income for institutions with ≥$1B annual net income may reduce profitability for regional banks and credit unions, potentially leading to tighter credit conditions or reduced branch access in rural communities.
Business & EmploymentRef: Sec. 6 (RCW 82.04.29004)The 0.5% motor vehicle sales tax and up to 11.9% car rental tax (phasing to 9.9% in 2027) increase the cost of vehicle ownership and use—especially affecting low- and middle-income households who rely on personal vehicles for work, healthcare, and childcare in areas with limited transit.
TransportationRef: Sec. 9 (RCW 82.08.020)
Who Is Most Affected
Large tech firms (e.g., cloud providers, social media platforms, marketplace facilitators) with ≥$25B in global revenue will face a new 7.5% surcharge, potentially reducing profitability or prompting price increases for business customers.
Regional banks and credit unions with ≥$1B in annual net income will pay a higher tax (1.5% vs. 1.2%), possibly reducing lending capacity or increasing fees for consumers and small businesses.
Tire retailers must collect and report a $5 fee per tire, adding administrative costs and compliance risk; however, the fee is passed through to consumers, so net impact depends on pricing strategy and volume.
Low- and middle-income households—especially those in car-dependent areas—will pay more for vehicle purchases, rentals, and recreational vessels, straining household budgets without offsetting benefits.
Students and families benefit from expanded access to computer science and engineering programs funded by the surcharge, potentially improving long-term economic mobility and workforce competitiveness.