Utility Taxes on Your Bill
Washington State imposes two taxes on public utility district customers. For customers who live within the Shelton city limits, there’s an additional tax charged by the city.
Why Do We Have These Taxes? What Are the Rates?
Washington State Public Utility Tax
Operators of certain public service businesses (such as electrical utilities) are subject to the Washington State Public Utility Tax. Other public service businesses subject to this tax include businesses that engage in transportation, communications, natural gas, and water. The tax is in lieu of the business and occupation (B&O) tax. The majority of the funds are distributed into the state general fund. A portion, however, provides financial assistance to local governments for maintenance of public works facilities. This tax is applied to PUD 3’s retail electric sales and services. See RCW 82.16 requirements. You can view Department of Revenue's explanation of the tax.
Washington State Public Utility District (PUD) Privilege Tax
In addition to the Public Utility Tax, the PUD 3 pays the Washington State Public Utility District (PUD) Privilege Tax. The tax is based on the amount received from the sale of electricity and is intended to be in lieu of property tax, since public utility districts are governmental entities and do not pay property taxes. The tax is collected from every utility district for the act or "privilege" of engaging within the state in the business of operating works, plants or facilities for the generation, distribution and sale of electric energy. The state keeps a percentage for the state general fund and for public schools, and the rest is distributed proportionately to counties the Public Utility District serves. This allows schools and other taxing districts to receive revenues from the PUD. See RCW 54.28 requirements.
City of Shelton Electric Public Utility District Tax
The city of Shelton charges an Electric Public Utility District Tax for PUD 3 to operate works, plants, or facilities for the generation, distribution, and sale of electric energy within the city limits. Essentially, it pays for the right to do business in city right of way.
How Are Taxes Calculated for Mason County? The City of Shelton?
Since these taxes are based on the amount received from the sale of electricity, they are reported to the Department of Revenue and the city of Shelton as part of the PUD's taxable gross revenue. Many utilities include these types of taxes in their electric rates. Mason PUD 3 used to have these taxes buried in the rate as well, but for transparency purposes, the PUD has broken out the tax rates to show customers precisely what portion of their bills go to taxes the utility must pay.
The argument we often hear from customers is “you can’t tax a tax!” We totally agree, however the Department of Revenue doesn't classify these as a tax to the consumer, instead it classifies it as a portion of the kWh rate and/or taxable gross revenue (income) of the District – and then the PUD pays these taxes on that taxable gross or revenue.
RCW 54.28.011 defines "Gross Revenue" as the amount received from the sale of electric energy, which also includes any regularly recurring charge, billed to consumers as a condition of receiving electric energy. The taxes explained above are classified as regularly occurring charges and therefore are included in the meaning of gross revenue.
State tax calculation for PUD 3 customers outside the city limits of Shelton:
- Total PUD Charges x .038734 = State Public Utility Tax
- (Total PUD Charges + State Public Utility Tax) x .0214 = State PUD Privilege Tax
State and local tax calculation for PUD 3 customers within the city limits of Shelton:
- Total PUD Charges x .038734 = State Public Utility Tax
- (Total PUD Charges + State Public Utility Tax) x .0214 = State PUD Privilege Tax
- (Total PUD Charges + State Public Utility Tax + State PUD Privilege Tax) x .06 = Shelton Electric Public Utility District Tax