When Kent resident Pam Morgan took a close look at her garbage bill, she discovered a charge connected to a city of Kent tax that didn\u2019t seem to add up.<\/p>\n<\/p>\n
Morgan learned that the city charges Republic Services an 18.4 percent utility tax, which the company in turn charges to the customer. That made sense to her, she understands how that works. But she noticed the final customer fee ends up amounting to 22.4 percent, not 18. 4.<\/p>\n<\/p>\n
Why the higher amount?<\/p>\n<\/p>\n
Barbara Lopez, city deputy finance director, explains.<\/p>\n<\/p>\n
\u201cBy passing the tax onto its customers, it has generated additional gross receipts that are then subject to the tax,\u201d Lopez said in an email. \u201cThis creates the perceived difference between the stated rate of the municipal utility tax and the effective rate to the customer.\u201d<\/p>\n<\/p>\n
State law allows cities to collect the tax based on the additional revenue.<\/p>\n<\/p>\n
Jim Hutchinson, an area municipal services manager for Republic Services, said court rulings have backed up the way cities collect utility taxes.<\/p>\n<\/p>\n
\u201cA city can do a tax on a tax,\u201d he said in a phone interview.<\/p>\n<\/p>\n
Morgan appreciates she now knows how the tax works. But she still doesn\u2019t like it.<\/p>\n<\/p>\n
\u201cIn the end, it still seems wrong to me,\u201d Morgan said. \u201cI am familiar with factoring out taxes collected so as to be charged and pay tax on the base income, so for us all to be charged tax on the tax we already paid\u2026 it does not sit right.\u201d<\/p>\n<\/p>\n
Kent, similar to other Washington cities, taxes cable, telephone, cellphone and electric companies at the 6 percent allowed under state law. That rate can only go higher if voters approve an increase.<\/p>\n<\/p>\n
But the state sets no limit on the rates cities tax for garbage, water and sewer.<\/p>\n<\/p>\n
The Kent City Council approved a garbage tax hike to 18.4 percent from 7.8 percent in 2014. That brings in about $3 million per year for street maintenance in neighborhoods. The council approved three years ago a 6 percent tax on cable television bills to raise about $1.3 million per year for information technology staff and equipment.<\/p>\n<\/p>\n
Cities have turned to the new taxes and higher taxes to help bring in more revenue after voters in 2001 approved a 1 percent cap on property tax increases each year by jurisdictions. In the 1990s, cities and counties could raise the property tax rate as much as 6 percent per year.<\/p>\n<\/p>\n
Morgan contacted the city and Republic Services to ask about the garbage tax and the 4 percent difference.<\/p>\n<\/p>\n
\u201cThey basically are saying that the company charges and collects the tax, but that instead of that being considered a pass through, they then are required to show it as revenue and are then taxed by the city on the entire revenue amount,\u201d Morgan said.<\/p>\n<\/p>\n
Other residents also have contacted city staff about the garbage tax.<\/p>\n<\/p>\n
\u201cWe have received a number of questions\/concerns regarding calculation of the solid waste utility tax,\u201d Lopez said. \u201cTo my knowledge, we rarely receive similar questions\/concerns for other utilities.\u201d<\/p>\n<\/p>\n
It can be difficult for customers to look at a bill and figure out the fees and taxes. Lopez said the city recommends that businesses list the tax amount on customer billings as \u201cEffect of city tax.\u201d Some companies simply list a charge.<\/p>\n<\/p>\n