Z‑0368.4   _____________________________________________

 

SENATE BILL 5725

 

           _____________________________________________

 

State of Washington      57th Legislature     2001 Regular Session

 

By Senators Spanel and McDonald; by request of Department of Revenue

 

Read first time 02/01/2001.  Referred to Committee on Ways & Means.

_1      AN ACT Relating to granting the department of revenue the

_2  authority to issue direct pay permits; amending RCW 82.12.010,

_3  82.08.050, and 82.12.040; adding a new section to chapter 82.32

_4  RCW; creating new sections; and providing an effective date.

     

_5  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

     

_6      NEW SECTION.  Sec. 1.  The legislature finds that programs to

_7  allow buyers to remit sales and use tax, rather than traditional

_8  collection and remittance by the seller of sales and use tax, can

_9  assist in tax compliance, ease administrative burdens, and reduce

10  impacts on buyers and sellers.  It is the intent of the legislature

11  to grant the department of revenue the authority to permit certain

12  buyers direct payment authority of tax in those instances where it

13  can be shown, to the satisfaction of the department, that direct

14  payment does not burden sellers and does not complicate

15  administration for the department.  Buyers authorized for direct

16  payment will remit tax directly to the department, and will pay

17  use tax on tangible personal property and sales tax on retail

18  labor and/or services.

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_1      This act does not affect the requirements to use a resale

_2  certificate nor does it affect the business and occupation tax

_3  treatment of the seller.

     

_4      NEW SECTION.  Sec. 2.  A new section is added to chapter 82.32

_5  RCW to read as follows:

_6      (1) The director may grant a direct pay permit to a taxpayer

_7  who demonstrates, to the satisfaction of the director, that the

_8  taxpayer meets the requirements of this section.  The direct pay

_9  permit allows the taxpayer to accrue and remit directly to the

10  department use tax on the acquisition of tangible personal

11  property or sales tax on the sale of or charges made for labor

12  and/or services, in accordance with all of the applicable

13  provisions of this title.  Any taxpayer that uses a direct pay

14  permit shall remit state and local sales or use tax directly to

15  the department.  The agreement by the purchaser to remit tax

16  directly to the department, rather than pay sales or use tax to

17  the seller, relieves the seller of the obligation to collect sales

18  or use tax and requires the buyer to pay use tax on the tangible

19  personal property and sales tax on the sale of or charges made for

20  labor and/or services.

21      (2)(a) A taxpayer may apply for a permit under this section if

22  the taxpayer (i) is subject to mandatory use of electronic funds

23  transfer under RCW 82.32.080; or (ii) makes purchases subject to

24  the taxes imposed under chapter 82.08 or 82.12 RCW in excess of

25  ten million dollars per calendar year.

26      (b) Application for a permit must be made in writing to the

27  director in a form and manner prescribed by the department.  A

28  taxpayer who transacts business in two or more locations may

29  submit one application to cover the multiple locations.

30      (c) The director shall review a direct pay permit application

31  in a timely manner and shall notify the applicant, in writing, of

32  the approval or denial of the application. The department shall

33  approve or deny an application based on the applicant=s ability to

34  comply with local government use tax coding capabilities and

35  responsibilities; requirements for vendor notification;

36  recordkeeping obligations; electronic data capabilities; and tax

37  reporting procedures.  Additionally, an application may be denied if

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_1  the director determines that denial would be in the best interest

_2  of collecting taxes due under this title.  The department shall

_3  provide a direct pay permit to an approved applicant with the

_4  notice of approval.  The direct pay permit shall clearly state that

_5  the holder is solely responsible for the accrual and payment of

_6  the tax imposed under chapters 82.08 and 82.12 RCW and that the

_7  seller is relieved of liability to collect tax imposed under

_8  chapters 82.08 and 82.12 RCW on all sales to the direct pay permit

_9  holder.  The taxpayer may petition the director for reconsideration

10  of a denial.

11      (d) A taxpayer who uses a direct pay permit must continue to

12  maintain records that are necessary to a determination of the tax

13  liability in accordance with this title.  A direct pay permit is not

14  transferable and the use of a direct pay permit may not be

15  assigned to a third party.

16      (3) Taxes for which the direct pay permit is used are due and

17  payable on the tax return for the reporting period in which the

18  taxpayer (a) receives the tangible personal property purchased or

19  in which the labor and/or services are performed or (b) receives

20  an invoice for such property or such labor and/or services,

21  whichever period is earlier.

22      (4) The holder of a direct pay permit shall furnish a copy of

23  the direct pay permit to each vendor with whom the taxpayer has

24  opted to use a direct pay permit.  Sellers who make sales upon which

25  the sales or use tax is not collected by reason of the provisions

26  of this section, in addition to existing requirements under this

27  title, shall maintain a copy of the direct pay permit and any such

28  records or information as the department may specify.

29      (5) A direct pay permit is subject to revocation by the

30  director at any time the department determines that the taxpayer

31  has violated any provision of this section or that revocation

32  would be in the best interests of collecting the taxes due under

33  this title.  The notice of revocation must be in writing and is

34  effective either as of the end of the taxpayer's next normal

35  reporting period or a date deemed appropriate by the director and

36  identified in the revocation notice.  The taxpayer may petition the

37  director for reconsideration of a revocation and reinstatement of

38  the permit.

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_1      (6) Any taxpayer who chooses to no longer use a direct pay

_2  permit or whose permit is revoked by the department, shall return

_3  the permit to the department and immediately make a good faith

_4  effort to notify all vendors to whom the permit was given,

_5  advising them that the permit is no longer valid.

_6      (7) Except as provided in this subsection, the direct pay

_7  permit may be used for any purchase of tangible personal property

_8  and any retail sale under RCW 82.04.050.  The direct pay permit may

_9  not be used for:

10      (a) Purchases of meals or beverages;

11      (b) Purchases of motor vehicles, trailers, boats, airplanes,

12  and other property subject to requirements for title transactions

13  by the department of licensing;

14      (c) Purchases for which a resale certificate may be used;

15      (d) Purchases that meet the definitions of RCW 82.04.050 (2)

16  (e) and (f), (3) (a) through (d), (f), and (g), and (5); or

17      (e) Other activities subject to tax under chapter 82.08 or

18  82.12 RCW that the department by rule designates, consistent with

19  the purposes of this section, as activities for which a direct pay

20  permit is not appropriate and may not be used.

     

21     Sec. 3.  RCW 82.12.010 and 1994 c 93 s 1 are each amended to read

22  as follows:

23      For the purposes of this chapter:

24      (1)(a) "Value of the article used" shall mean the

25  consideration, whether money, credit, rights, or other property

26  except trade-in property of like kind, expressed in terms of

27  money, paid or given or contracted to be paid or given by the

28  purchaser to the seller for the article of tangible personal

29  property, the use of which is taxable under this chapter.  The term

30  includes, in addition to the consideration paid or given or

31  contracted to be paid or given, the amount of any tariff or duty

32  paid with respect to the importation of the article used.  In case

33  the article used is acquired by lease or by gift or is extracted,

34  produced, or manufactured by the person using the same or is sold

35  under conditions wherein the purchase price does not represent the

36  true value thereof, the value of the article used shall be

37  determined as nearly as possible according to the retail selling

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_1  price at place of use of similar products of like quality and

_2  character under such rules as the department of revenue may

_3  prescribe.

_4      (b) In case the articles used are acquired by bailment, the

_5  value of the use of the articles so used shall be in an amount

_6  representing a reasonable rental for the use of the articles so

_7  bailed, determined as nearly as possible according to the value of

_8  such use at the places of use of similar products of like quality

_9  and character under such rules as the department of revenue may

10  prescribe.  In case any such articles of tangible personal property

11  are used in respect to the construction, repairing, decorating, or

12  improving of, and which become or are to become an ingredient or

13  component of, new or existing buildings or other structures under,

14  upon, or above real property of or for the United States, any

15  instrumentality thereof, or a county or city housing authority

16  created pursuant to chapter 35.82 RCW, including the installing or

17  attaching of any such articles therein or thereto, whether or not

18  such personal property becomes a part of the realty by virtue of

19  installation, then the value of the use of such articles so used

20  shall be determined according to the retail selling price of such

21  articles, or in the absence of such a selling price, as nearly as

22  possible according to the retail selling price at place of use of

23  similar products of like quality and character or, in the absence

24  of either of these selling price measures, such value may be

25  determined upon a cost basis, in any event under such rules as the

26  department of revenue may prescribe.

27      (c) In the case of articles owned by a user engaged in business

28  outside the state which are brought into the state for no more

29  than one hundred eighty days in any period of three hundred sixty-

30  five consecutive days and which are temporarily used for business

31  purposes by the person in this state, the value of the article

32  used shall be an amount representing a reasonable rental for the

33  use of the articles, unless the person has paid tax under this

34  chapter or chapter 82.08 RCW upon the full value of the article

35  used, as defined in (a) of this subsection.

36      (d) In the case of articles manufactured or produced by the

37  user and used in the manufacture or production of products sold or

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_1  to be sold to the department of defense of the United States, the

_2  value of the articles used shall be determined according to the

_3  value of the ingredients of such articles.

_4      (e) In the case of an article manufactured or produced for

_5  purposes of serving as a prototype for the development of a new or

_6  improved product, the value of the article used shall be

_7  determined by:  (i) The retail selling price of such new or

_8  improved product when first offered for sale; or (ii) the value of

_9  materials incorporated into the prototype in cases in which the

10  new or improved product is not offered for sale.

11      (f) In the case of an article purchased with a direct pay

12  permit under section 2 of this act, the value of the article used

13  shall be determined by the retail selling price, as defined in RCW

14  82.08.010, of such article if but for the use of the direct pay

15  permit the transaction would have been subject to sales tax;

16      (2) "Use," "used," "using," or "put to use" shall have their

17  ordinary meaning, and shall mean the first act within this state

18  by which the taxpayer takes or assumes dominion or control over

19  the article of tangible personal property (as a consumer), and

20  include installation, storage, withdrawal from storage, or any

21  other act preparatory to subsequent actual use or consumption

22  within this state;

23      (3) "Taxpayer" and "purchaser" include all persons included

24  within the meaning of the word "buyer" and the word "consumer" as

25  defined in chapters 82.04 and 82.08 RCW;

26      (4) "Retailer" means every seller as defined in RCW 82.08.010

27  and every person engaged in the business of selling tangible

28  personal property at retail and every person required to collect

29  from purchasers the tax imposed under this chapter;

30      (5) The meaning ascribed to words and phrases in chapters 82.04

31  and 82.08 RCW, insofar as applicable, shall have full force and

32  effect with respect to taxes imposed under the provisions of this

33  chapter.  "Consumer," in addition to the meaning ascribed to it in

34  chapters 82.04 and 82.08 RCW insofar as applicable, shall also

35  mean any person who distributes or displays, or causes to be

36  distributed or displayed, any article of tangible personal

37  property, except newspapers, the primary purpose of which is to

38  promote the sale of products or services.

 

SB 5725                        p. 6

     

_1     Sec. 4.  RCW 82.08.050 and 1993 sp.s. c 25 s 704 are each amended

_2  to read as follows:

_3      The tax hereby imposed shall be paid by the buyer to the

_4  seller, and each seller shall collect from the buyer the full

_5  amount of the tax payable in respect to each taxable sale in

_6  accordance with the schedule of collections adopted by the

_7  department pursuant to the provisions of RCW 82.08.060.  The tax

_8  required by this chapter, to be collected by the seller, shall be

_9  deemed to be held in trust by the seller until paid to the

10  department, and any seller who appropriates or converts the tax

11  collected to his or her own use or to any use other than the

12  payment of the tax to the extent that the money required to be

13  collected is not available for payment on the due date as

14  prescribed in this chapter shall be guilty of a gross misdemeanor.

15      In case any seller fails to collect the tax herein imposed or

16  having collected the tax, fails to pay it to the department in the

17  manner prescribed by this chapter, whether such failure is the

18  result of his or her own acts or the result of acts or conditions

19  beyond his or her control, he or she shall, nevertheless, be

20  personally liable to the state for the amount of the tax, unless

21  the seller has taken from the buyer in good faith a properly

22  executed resale certificate under RCW 82.04.470 or a copy of a

23  direct pay permit issued under section 2 of this act.

24      The amount of tax, until paid by the buyer to the seller or to

25  the department, shall constitute a debt from the buyer to the

26  seller and any seller who fails or refuses to collect the tax as

27  required with intent to violate the provisions of this chapter or

28  to gain some advantage or benefit, either direct or indirect, and

29  any buyer who refuses to pay any tax due under this chapter shall

30  be guilty of a misdemeanor.  The tax required by this chapter to be

31  collected by the seller shall be stated separately from the

32  selling price in any sales invoice or other instrument of sale. On

33  all retail sales through vending machines, the tax need not be

34  stated separately from the selling price or collected separately

35  from the buyer.  For purposes of determining the tax due from the

36  buyer to the seller and from the seller to the department it shall

37  be conclusively presumed that the selling price quoted in any

                               p. 7                       SB 5725

_1  price list, sales document, contract or other agreement between

_2  the parties does not include the tax imposed by this chapter, but

_3  if the seller advertises the price as including the tax or that

_4  the seller is paying the tax, the advertised price shall not be

_5  considered the selling price.

_6      Where a buyer has failed to pay to the seller the tax imposed

_7  by this chapter and the seller has not paid the amount of the tax

_8  to the department, the department may, in its discretion, proceed

_9  directly against the buyer for collection of the tax, in which

10  case a penalty of ten percent may be added to the amount of the

11  tax for failure of the buyer to pay the same to the seller,

12  regardless of when the tax may be collected by the department; and

13  all of the provisions of chapter 82.32 RCW, including those

14  relative to interest and penalties, shall apply in addition; and,

15  for the sole purpose of applying the various provisions of chapter

16  82.32 RCW, the twenty-fifth day of the month following the tax

17  period in which the purchase was made shall be considered as the

18  due date of the tax.

     

19     Sec. 5.  RCW 82.12.040 and 1986 c 48 s 1 are each amended to read

20  as follows:

21      (1) Every person who maintains in this state a place of

22  business or a stock of goods, or engages in business activities

23  within this state, shall obtain from the department a certificate

24  of registration, and shall, at the time of making sales, or making

25  transfers of either possession or title or both, of tangible

26  personal property for use in this state, collect from the

27  purchasers or transferees the tax imposed under this chapter.  For

28  the purposes of this chapter, the phrase "maintains in this state

29  a place of business" shall include the solicitation of sales

30  and/or taking of orders by sales agents or traveling

31  representatives.  For the purposes of this chapter, "engages in

32  business activity within this state" includes every activity which

33  is sufficient under the Constitution of the United States for this

34  state to require collection of tax under this chapter.  The

35  department shall in rules specify activities which constitute

36  engaging in business activity within this state, and shall keep

SB 5725                        p. 8

_1  the rules current with future court interpretations of the

_2  Constitution of the United States.

_3      (2) Every person who engages in this state in the business of

_4  acting as an independent selling agent for persons who do not hold

_5  a valid certificate of registration, and who receives compensation

_6  by reason of sales of tangible personal property of his principals

_7  made for use in this state, shall, at the time such sales are

_8  made, collect from the purchasers the tax imposed under this

_9  chapter, and for that purpose shall be deemed a retailer as

10  defined in this chapter.

11      (3) The tax required to be collected by this chapter shall be

12  deemed to be held in trust by the retailer until paid to the

13  department and any retailer who appropriates or converts the tax

14  collected to his own use or to any use other than the payment of

15  the tax provided herein to the extent that the money required to

16  be collected is not available for payment on the due date as

17  prescribed shall be guilty of a misdemeanor.  In case any seller

18  fails to collect the tax herein imposed or having collected the

19  tax, fails to pay the same to the department in the manner

20  prescribed, whether such failure is the result of his own acts or

21  the result of acts or conditions beyond his control, he shall

22  nevertheless, be personally liable to the state for the amount of

23  such tax, unless the seller has taken from the buyer in good faith

24  a copy of a direct pay permit issued under section 2 of this act.

25      (4) Any retailer who refunds, remits, or rebates to a

26  purchaser, or transferee, either directly or indirectly, and by

27  whatever means, all or any part of the tax levied by this chapter

28  shall be guilty of a misdemeanor.

     

29      NEW SECTION.  Sec. 6.  The code reviser shall place cross-

30  reference sections to section 2 of this act in chapters 82.08,

31  82.12, and 82.14 RCW.

     

32      NEW SECTION.  Sec. 7.  This act takes effect August 1, 2001.

 

‑‑‑ END ‑‑‑

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