Proposed wireless device tax does not compute, critics tell House Finance Committee

(The Center Square) – Members of the House Finance Committee got an earful Wednesday morning from Washingtonians opposed to proposed legislation that would add to the cost of purchasing certain wireless devices.

House Bill 1793 would add $2 at the point of sale to wireless devices that cost more than $250. Money from the tax would go toward efforts to close the “digital divide” between the haves and the have-nots in terms of internet access and download speed.|

The legislation defines smart devices as those “capable of wireless access to the internet. This includes, but is not limited to, smart phones, laptop computers, tablets, wearable devices, smart speakers, gaming consoles, smart gyms, and smart televisions.”

According to the bill’s fiscal note, it’s estimated the tax would bring in $25.4 million during the current 2023-25 biennium, $36.7 million in the 2025-27 biennium, and $37.6 million in the 2027-29 biennium.

Those in the industry said the tax could hurt business.

Mark Johnson, representing the Washington Retail Association, noted that the Department of Revenue estimates approximately 19,000 businesses in the state sell wireless devices.

“That’s quite a few businesses that will be impacted by having to collect and remit this tax on a regular basis, and for the Department of Revenue to audit and follow the tax remittance of this,” he told the committee. “For those reasons, we would respectfully ask that we take a different direction if this is the intent to fund this type of educational opportunities for our students in the future.”

Emily Shay of the Association of Washington Business said the legislation would overly complicate matters.

“One of the concerns regarding the additional fee is that the sellers need to determine what sales are subject to the tax,” she said. “It is unknown how the seller will need to separately identify a smart device from a non-smart device with the given definition in Section 2 of the bill.”

Shay continued, “Furthermore, with the bill sales tax compliance software also needs to be updated to create a line for the new tax. This places unnecessary administrative burdens and complexity onto taxpayers, sales tax compliance software companies, and business entities.”

Mark Harmsworth, director of the Center for Small Business at the free market Washington Policy Center, agreed.

“This is going to significantly hurt our small businesses,” he said. “The compliance costs are huge.”

Harmsworth, a former legislator who served in the House of Representatives, returned to a point made by Shay earlier at the public hearing about what is considered a wireless device.

He rattled off a list of wireless devices that could be taxed under HB 1793, including but not limited to certain automobiles, ham radios, security cameras, alarm systems, police body cameras, household appliances, agriculture tractor controllers, hot tubs, dog collars, and septic tank water alarms.

“Many of the devices we have, including medical devices, talk to the internet, either through an intermediary network or they directly connect to the internet, so these devices technically would fall under this as sold at retail,” Harmsworth said.

Kelly Fukai, vice president of government and community affairs for the Washington Technology Industry Association, said the new tax will increase the cost of access to digital devices, the opposite of the legislation’s intent.

Another former legislator, Jeff Gombosky, representing the Cellular Telephone Industries Association, noted the state’s already high taxes on wireless devices.

“We would also just note that Washington state right now is the second-highest taxed state in the country for wireless service,” Gombosky, who during his tenure in the House served as chair of the very committee he was testifying before, said. “Right now, 32% of the total wireless bill is attributable to taxes and fees.”

Others spoke out forcefully against the imposition of yet another tax on the people of Washington.

“I have to ask each and every one of you, when is enough with all these taxes and fees?” asked Jeff Pack of the Washington Citizens Against Unfair Taxes. “Do you sit in your ivory tower and just think of new ways to bilk us out of more money for whatever your latest agenda is? You’ve gone after income, property, more excise taxes, higher fees, all for whatever your latest agenda is.”

Anti-tax activist Tim Eyman provided some figures he said supports Pack’s assessment of tax-happy lawmakers.

From 2012 through 2022, the state Legislature has raised taxes 41 different times, according to Eyman, which will cumulatively cost taxpayers $62.3 billion.

That’s on top of one of the highest sales taxes in the nation, high property taxes, and increasing car tab renewal fees, he added, urging lawmakers to cut spending to fund its priorities instead of proposing new taxes and fees.

“We’re taxed enough already,” Eyman told the commission.

It wasn’t all outright opposition to the proposed new tax at the public hearing.

“We have signed in ‘other’ on this bill because it anticipates funding that is not included in the governor’s proposed budget, but we want to testify in support of the idea of a permanent revenue stream for digital equity in Washington state,” said Emily Grossman, newly appointed managing director of the Digital Inclusion Unit of the state Department of Commerce.

Eu-Wanda Eagans, senior vice president of Goodwill of the of the Olympic and Rainier Region, also signed is as “other” on the bill while offering support for the goal of the legislation.

“Access to connectivity, digital technology and most importantly digital literacy training is needed more than ever to help people find employment and navigate life,” she said.