I-1107 Would Restore Wasteful Business Tax Preferences

Initiative 1107 would repeal several common taxes on nonessential items like candy and soda. The measure would also reopen two wasteful business and occupation (B&O) tax loopholes that were closed during the 2010 legislative session.

To help generate additional resources, this year lawmakers narrowed two tax preferences that were expanded by a recent State Supreme Court ruling. In 2005, the Court expanded a preferential B&O tax rate of 0.138 percent, which was originally intended only for processors and wholesalers of perishable meat products (meatpackers).  The Court’s decision allowed companies whose products contain only minimal amounts of meat — i.e. canned chili — to claim this preference. The ruling also expanded a B&O exemption, which originally was intended only for companies that preserve fresh fruits and vegetables, to encompass products with similarly small amounts of preserved fruits or vegetables.1

This year, policymakers clarified and narrowed these preferences to conform to their original intent.  Initiative 1107 would re-expand these preferences at a cost to the state of nearly $9 million in the coming biennium.

For more information on I-1107 read the Budget & Policy Center’s latest policy brief, “2010 Initiatives Could Impact Public Services.”

1. The exemption for canning and preserving fruits and vegetables is scheduled to expire in 2012. Companies that claimed the exemption will then be eligible to receive a preferential, 0.138 percent B&O tax rate.