Jefferson PUD Tax Overview
Gross Receipts Excise Tax
The State of Washington has a gross receipts tax structure, so nearly all of the District’s activities are subject to a state excise tax in one form or another. State excise taxes to which the District is subject include: B&O tax, public utility tax and privilege tax. The only time that a receipt or collection of the District is not subject to tax is when a specific exclusion is provided. Some exclusions that apply to the District are: Damage claims, wholesale sales of energy, interdepartmental sales, insurance proceeds and Federal or state grant proceeds.
As a consumer, the District is also subject to state and local sales and use tax on all of its purchases of goods and some purchases of services. In addition to state excise taxes, the District is also subject to payroll taxes, fuel taxes, and city occupation taxes.
The District acts as an agent to the Department of Revenue in collecting and remitting retail sales tax and leasehold excise taxes.
Taxation as a PUD
For the purpose of taxation, in many instances the PUD is treated the same as a private company. There are however, a couple of instance where special treatment is provided due to the District’s status as a political subdivision of the State of Washington. The differences are outlined below:
As a PUD, the District is not subject to: Federal Income Tax; Real or Personal Property Taxes and Communications Excise Tax.
As a PUD, the District is subject to the Privilege Tax. Private entities are not. The Privilege Tax is intended to be in lieu of property taxes.
The District is subject to the following taxes at the same rate and application as a non-public entity: Public Utility Tax, Sales/Use Tax, City Occupation Taxes, B&O Tax, Payroll Taxes, Fuel Taxes
Taxes that Benefit the Local Community:
Privilege Tax – A portion of the tax paid is returned to local counties and cities, in accordance with statutory disbursement guidelines.
Sales and Use Tax – For transactions with local tax locations within Jefferson County, the local portion (.025) is disbursed to the county or city in which the transaction occurred. Large construction projects such as Coyle transmission line and the Sparling Well Treatment plant can result in significant sales and use tax revenues for our local community.
City Occupation Taxes. Entire amount paid benefits the City of Port Townsend
Business & Occupation Tax – A gross receipts tax measured on the gross receipts of a business. Rates vary depending on what classification the business activity falls into. The District is commonly subject to B&O tax under the following classifications: Wholesaling (does not include wholesale energy – Telecommunication revenues)
Service & Other Electric, water & wastewater service charges, line extension, transformer and meter fees, wastewater treatment revenues, miscellaneous other billings. Rate 1.5%
Operations subject to the Public Utility Tax are exempt from the B&O tax.
100% of B&O tax collections are deposited to the state’s general fund.
State Public Utility Tax – Levied upon the operations of certain public service businesses. The District’s retail electric sales, water distribution and wastewater distribution and wastewater collection revenue are all subject to the Public Utility Tax (PUT). Revenues from wheeling, scheduling, pole contacts, other ancillary services, many customer modification jobs, some cash revenues and miscellaneous other billings fall under the PUD classification as well, as they are considered incidental to the utility activity.
Public Utility Tax rates are as follows:
Light and Power businesses (electric): 3.8734%
Water Distribution Businesses: 5.029%
Sewer Collections Businesses: 3.852%
Privilege Tax – A tax imposed specifically on PUDs that is intended to be in lieu of real property taxes. The District is subject to Privilege Tax on both the generation of electricity and the retail sale of electricity. Privilege tax is imposed at the following rates:
Retail sales of electricity: 2.14%
Generated energy: 5.35% of the first 4 mills per kilowatt-hour of wholesale value.
City Occupation Tax – The Occupation tax is a municipal business tax that is authorized by the state statute and imposed through city ordinance upon the privilege of engaging in certain occupations within the city limits. The District is subject to electric service occupation taxes in the city of Port Townsend.
Electric sales 6%
All taxes collected are retained by the city for use by the general fund.