A security company has dropped its lawsuit over Washington’s new sales tax on services weeks after filing it.
It’s unclear why.
The development came after Security Services Northwest brought a suit against the state at the end of September. The voluntary dismissal, signed by a Thurston County Superior Court judge Nov. 4, was without prejudice, meaning the company could refile its lawsuit.
The Sequim-based firm and its lawyer didn’t respond to requests for comment. The state’s Department of Revenue and attorney general’s office weren’t sure why the company backed down.
Security Services Northwest’s lawsuit centered on Senate Bill 5814, a contentious measure Democratic lawmakers passed this year to bring in $1.1 billion in the two-year budget that began July 1, and over $2.6 billion over four years. The law was part of a suite of new and increased taxes and fees Democrats pushed through to fill a multibillion-dollar budget shortfall.
It took effect Oct. 1.
The law expanded taxes on a number of services, including security services. Others covered by the tax law include live presentations, information technology and temporary staffing. Over 90,000 companies are expected to pay under the law.
The levy on investigation, security and armored car services makes up $127 million of the anticipated four-year collections, according to the Department of Revenue.
In its complaint, Security Services Northwest argued the state didn’t give the company enough time to “adapt to and implement internal controls and procedures to ensure that proper sales tax is charged.”
The Department of Revenue issued guidance on companies’ obligations, including on Sept. 12 for security services. Included in the tax are private investigators, bounty hunters, security guards, fingerprinting, background checks, missing person tracking and lie detectors and polygraphs.
Security Services Northwest provides security officers, remote video monitoring and security alarm installation. It’s been in business since 1977.
The agency previously said it notified all businesses set to pay the new tax via letter or email between Aug. 13 and Aug. 22. Notices of the changes were also issued in late July. The department also hosted listening sessions with companies.
Security Services Northwest also took issue with the tax itself, calling it a “direct tax on public safety” in a press release. And it argued the state was taxing security services unfairly compared to other professional services.
The law, which legislators relied upon to help fund a $77.8-billion two-year operating budget, faces other legal threats.
Cable giant Comcast sued separately over a provision targeting digital advertising services. The company says the statute violates federal law because it doesn’t apply the tax to all advertising services equally.
The state has asked a Thurston County judge to dismiss the lawsuit, but this case is still pending.
The advertising services tax is projected to bring in $475 million over the next two budget cycles.
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