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Committee hears bill to clarify sales-tax treatment of abandoned-vehicle auction proceeds
Summary
Senate Bill 5072 would change how proceeds from auctioned abandoned vehicles are taxed, shifting the tax treatment so tow operators are not left with unintended sales tax liabilities; witnesses described a fiscal note estimating a revenue decrease over the four-year outlook.
A bill to clarify how sales and B&O taxes apply when tow operators sell abandoned vehicles at auction drew industry support and a neutral Department of Revenue response at a committee hearing.
Jeff Mitchell, committee staff, explained that current law treats towing and storage services as retail sales subject to retailing B&O and sales tax; when an abandoned vehicle sells at auction for less than towing and storage charges, the towing operator currently retains proceeds net of sales tax remitted to the state. SB 5072 would instead treat gross proceeds from sale of an abandoned vehicle as a sale of a vehicle, which in many cases shifts how and when sales tax is collected and remitted.
Mitchell used a numerical example: if towing and storage charges total $500 and a vehicle sells for $300, under the bill the tow operator would keep the full $300 and sales tax would be collected on the $300 sale when the buyer completes the auction purchase. The fiscal note assumes most buyers will be scrap processors, wholesalers or wreckers who buy at wholesale and thereby do not pay retail sales tax, producing an estimated net decrease in state revenue of about $3,400,000 over a four-year outlook and a four-year expenditure impact of about $117,000, according to Mitchell.
Industry witnesses urged passage. Chris Zachary, owner of Burns Towing and president of the Towing Recovery Association of Washington, described prior audits and a $60,000 assessment his business faced and said the bill "will provide clarity and certainty to the towers of Washington on how they are to continue to pay their sales tax to the state of Washington when completing their auction sales pursuant to RCW 46 55." Paul Brussey, a long-time tow operator, echoed the need for a level playing field and consistent administration. Peter Lukovich, lobbyist for the Towing and Recovery Association, summarized the industry's view: "First, the bill simplifies and clarifies a process. Number two, it provides tax fairness for the towers of the state of Washington. And number three, agreed to by all of the stakeholders involved in the process."
Steve Ewing of the Department of Revenue said the agency is neutral on SB 5072 but believes the bill is administrable and corrects how registered tow truck operators are taxed on abandoned vehicles. Proponents asked the committee to recommend the bill for executive session.
The transcript records no committee vote during the hearing.
