(The Center Square) – State lawmakers are scrambling for cash to fill the state’s budget shortfall, and one solution could involve redefining storage units as retail sales to impose additional taxes on renters and owners.
The Evergreen State isn’t in a deficit yet since the $10 billion to $16 billion shortfall is due to upcoming spending over the next four years. However, the Office of Program Research, made up of nonpartisan staff for the Washington State House of Representatives, has estimated a budget shortfall of $6.7 billion for the 2027-2029 biennium.
Balancing the budget is a priority for many this session, but unless lawmakers plan to cut spending, they’ll have to raise or create new taxes.
State lawmakers proposed numerous bills to fill the void, including House Bill 1907, which would levy a sales tax and a business and occupation, or B&O, tax on rental storage units. The facilities are exempt from both, but the Legislature wants to reclassify them as taxable to generate more revenue.
“There are 46 million square feet of storage space in Washington state,” Rep. Strom Peterson, D-Edmonds, told the House Finance Committee Tuesday. “Closing this tax loophole and bringing in some of those funds to help with our housing crisis is something that makes sense.”
If approved, HB 1907 could generate $16.2 million in 2026 and more than $489 million through 2035. Committee staff said that money would support affordable housing and “the establishment and preservation of cooperatively owned manufactured home communities.”
The Association of Washington Cities, or AWC, and a few housing providers testified in support of HB 1907. The AWC represents nearly all of Washington’s 281 towns and cities, including their interests, which include increasing tax revenues and local housing supplies.
In contrast, several people testified in opposition to HB 1907 on behalf of the Washington State Self Storage Association and individual facilities. If approved, the bill would require the facilities to pay the B&O tax, which cuts into their profits, and renters to pay the extra sales tax.
Those in opposition argued that self-storage units provide a valuable service to low-income residents who lack the space at home or one altogether. Additional taxes would make renting even more expensive for some renters while digging into small “mom-and-pop” shops around the state.
“House Bill 1907 seeks to redefine self-storage rentals as a retail transaction,” Patrick Gilroy, legislative chair of the Washington State Self Storage Association, testified. “This is not just an unfair financial burden; it’s an unconstitutional attempt to tax rental real estate.”
Rep. Cyndy Jacobsen, R-Puyallup, also raised the constitutional question since HB 1907 would change how the state taxes rental storage spaces. The committee staff didn’t provide an answer during the hearing, but Peterson argued that “this is not a property tax.”
Supporters of HB 1907 said the money would help the state and municipalities support housing efforts as the need outpaces existing revenues. They argued that redefining rentals as retail transactions would align the service with other industries and states.
“The preferential tax treatment of this industry creates an incentive for the creation and maintenance of inefficient uses of urban land,” Carl Schroeder testified on behalf of the AWC. “Treat these businesses like any other business in the state that’s operating and making transactions.”
