New City Water Utility Tax Hits Bills

Posted Thursday, March 12, 2020

Effective January 2015, Skagit PUD water customers who reside within the city limits of Mount Vernon or Sedro-Woolley will begin seeing a new tax line item on their water bills.

The City Councils of Mount Vernon and Sedro-Woolley recently passed ordinances to assess a water utility tax on businesses supplying domestic water to their cities, not including revenue derived from the delivery of water for fire protection.

The water utility tax will be levied at six percent (6%).

It is has long been the position of public utility districts that serving public water to cities is a basic governmental function and therefore not taxable. However, in the case of Wenatchee v. Chelan County PUD No. 1, the Washington Court of Appeals determined that cities are not prohibited from imposing utility taxes on domestic water provided by the districts. 

Using an industry accepted approach for cost allocation, Skagit PUD calculated what percentage of revenue was attributable to providing fire protection to homes and businesses and not subject to the utility tax.

“Twenty percent of our revenue is associated with the infrastructure costs to be able to provide fire suppression,” General Manager Bob Powell said. “The other 80 percent is associated with distribution.”

A credit for fire protection will appear on customer statements.

If you have specific questions about the city water utility tax, customers should contact their city’s administration office.