The Department of Revenue was established on July 1, 1967, following the state legislature's decision in 1965 to abolish the existing three-member Washington Tax Commission, which had been operating since 1905. This change was part of an effort to modernize and streamline the tax collection system. In 1981, voters approved an initiative repealing inheritance and gift taxes, replacing it with an estate tax equal to the amount of federal tax credit. During the 1982 legislative session, a major restructuring of local government finance took place. To obtain additional sales tax authority, cities had to place a cap on utility tax rates, and cities and counties had to accept limitations on system development charges. Sales tax equalization was also introduced, redistributing a portion of revenue to small tax-base jurisdictions. In 1987, the U.S. Supreme Court ruled that Business & Occupation (B&O) taxes on certain interstate transactions were unconstitutional. Following the decision, Washington state repealed the multiple activities exemption and introduced credits for B&O taxes paid outside Washington, allowing businesses to offset taxes on in-state manufacturing against those for in-state sales. In 1997, the legislature clarified the B&O tax law on certain internet services, including email, information retrieval, and hosting of information online. In 1998, voters approved
Initiative 695, which repealed the motor vehicle excise tax and mandated a flat $30 tab fee. It was overturned by the
Washington Supreme Court a year later. In 2001, the legislature began phasing out the federal estate tax by 2010 and reduced the state tax credit by 25 percent each year, eliminating the state credit by the end of 2004. In 2007, Washington adopted the Streamlined Sales Tax Agreement (SSTA), effective July 1, 2008, to simplify tax collection and improve compliance, particularly for remote and interstate sales. The state also authorized a new local sales tax to support the Health Services Authority, which aimed to fund local healthcare initiatives. In 2009, DOR began requiring electronic filing and payment of excise taxes for all taxpayers who file monthly. Also, reseller permits replaced resale certificate for wholesale purchasers. During a three-month period in 2011, DOR conducted its first amnesty program, allowing taxpayers to pay any outstanding taxes without associated penalties and interest. The program ultimately generated an estimated $345.8 million in revenue and waived $91 million in penalties and interest. In 2011, the Master License Service (MLS), the one-stop business license center that had helped business owners register with various state agencies since its creation in 1977, was transferred from Department of Licensing to DOR and rebranded as Business Licensing Service (BLS). In April 2015, DOR signed a contract with Fast Enterprises to begin the Tax and Licensing Systems Replacement (TLSR) project to modernize the agency's tax and business licensing systems. In 2018, Revenue launched the My DOR portal, where taxpayers could register, file, and pay electronically. The Automated Tax and Licensing Administration System (ATLAS) and ATLAS Management Program (AMP) also began. Washington's Marketplace Fairness Law went into effect on January 1, 2018, requiring out-of-state businesses without a physical presence to make a choice to either collect sales tax or follow use tax notification and reporting requirements. In response to the
COVID-19 pandemic, the DOR closed its offices to the public in March 2020 and transitioned 1,200 employees to remote working. Services continued online and by phone until the DOR reopened its public offices in February 2022. The Tribal Partnerships Program was commissioned in 2020. In 2021, the Working Families Tax Credit was funded by legislation. The program started in 2023. The 2021 legislative session also saw the passing of
SB 5096, which established a 7% capital gains tax on individual profits exceeding $250,000. but in 2023, the state Supreme Court overruled this ruling upon appeal.
Initiative No. 2109 (I-2109), a ballot initiative to repeal SB 5096, will appear on the ballot on November 5, 2024. ==References==