AN ACT Relating to revenue and excise taxation; amending RCW 82.04.440; 82.04.4328, 82.04.260, 82.04.270, 82.04.330, and 82.04.100; adding new sections to chapter 82.04 RCW; creating new sections; providing an effective date; and declaring an emergency.

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

Sec. 1. Section 82.04.440, chapter 15, Laws of 1961 as last amended by section 5, chapter 172, Laws of 1981 and RCW 82.04.440 are each amended to read as follows:

(1) Except as provided in subsections (2) and (3) of this section, every person engaged in activities which are within the purview of the provisions of two or more of sections RCW 82.04.230 to 82.04.290, inclusive, shall be taxable under each paragraph applicable to the activities engaged in((~~: PROVIDED, That~~)).

(2)(a) Persons taxable under RCW 82.04.250 or 82.04.270 shall not be taxable under RCW 82.04.230, 82.04.240 or subsection (2), (3), (4), (5), or (7) of RCW 82.04.260 with respect to extracting or manufacturing of the products so sold((~~, and that~~)).

(b) If (a) of this subsection is held by a state or federal court, in a final judgment unappealed from, to result in discrimination against interstate or foreign commerce, this entire subsection shall be null and void.

(3) Persons taxable under RCW 82.04.240 or ((~~RCW~~)) 82.04.260 subsection (4) shall not be taxable under RCW 82.04.230 with respect to extracting the ingredients of the products so manufactured.

(4) Every person taxable under RCW 82.04.230, 82.04.240, or subsection (2), (3), (4), (5) or (7) of RCW 82.04.260 with respect to extracting or manufacturing products in this state shall be allowed a credit against those taxes for any gross receipts taxes paid to another state with respect to the sales of the products so extracted or manufactured in this state. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the extraction or manufacturing of those products. This subsection shall apply to tax reporting periods after July 1, 1985.

(a) For the purpose of this subsection, the term "gross receipts tax" means a tax:

(i) Which is imposed on or measured by the gross volume of business, in terms of gross receipts or in other terms, and in the determination of which the deductions allowed would not constitute the tax an income or value added tax; and

(ii) Which is also not, pursuant to law or custom, separately stated from the sales price.

(b) For the purpose of this subsection, the term "state" means state of the United States, any political subdivision thereof, or the District of Columbia, and any foreign country or political subdivision thereof.

NEW SECTION. Sec. 2. A new section is added to chapter 82.04 RCW to read as follows:

In computing tax there may be deducted from the measure of tax those amounts received by artistic or cultural organizations which represent income derived from business activities conducted by the organization.

Sec. 3. Section 6, chapter 140, Laws of 1981 and RCW 82.04.4328 are each amended to read as follows:

(1) For the purposes of RCW 82.04.4322, 82.04.4324, 82.04.4326, section 2 of this 1985 act, 82.08.031, and 82.12.031, the term "artistic or cultural organization" means an organization which is organized and operated exclusively for the purpose of providing artistic or cultural exhibitions, presentations, or performances or cultural or art education programs, as defined in subsection (2) of this section, for viewing or attendance by the general public. The organization must be a not-for-profit corporation under chapter 24.03 RCW and managed by a governing board of not less than eight individuals none of whom is a paid employee of the organization or by a corporation sole under chapter 24.12 RCW. In addition, to qualify for deduction or exemption from taxation under RCW 82.04.4322, 82.04.4324, 82.04.4326, section 2 of this 1985 act, 82.08.031, and 82.12.031, the corporation shall satisfy the following conditions:

(a) No part of its income may be paid directly or indirectly to its members, stockholders, officers, directors, or trustees except in the form of services rendered by the corporation in accordance with its purposes and bylaws;

(b) Salary or compensation paid to its officers and executives must be only for actual services rendered, and at levels comparable to the salary or compensation of like positions within the state;

(c) Assets of the corporation must be irrevocably dedicated to the activities for which the exemption is granted and, on the liquidation, dissolution, or abandonment by the corporation, may not inure directly or indirectly to the benefit of any member or individual except a nonprofit organization, association, or corporation which also would be entitled to the exemption;

(d) The corporation must be duly licensed or certified when licensing or certification is required by law or regulation;

(e) The amounts received that qualify for exemption must be used for the activities for which the exemption is granted;

(f) Services must be available regardless of race, color, national origin, or ancestry; and

(g) The director of revenue shall have access to its books in order to determine whether the corporation is exempt from taxes.

(2) The term "artistic or cultural exhibitions, presentations, or performances or cultural or art education programs" includes and is limited to:

(a) An exhibition or presentation of works of art or objects of cultural or historical significance, such as those commonly displayed in art or history museums;

(b) A musical or dramatic performance or series of performances; or

(c) An educational seminar or program, or series of such programs, offered by the organization to the general public on an artistic, cultural, or historical subject.

Sec. 4. Section 5, chapter 3, Laws of 1983 2nd ex. sess. and RCW 82.04.260 are each amended to read as follows:

(1) Upon every person engaging within this state in the business of buying wheat, oats, dry peas, dry beans, lentils, triticale, corn, rye and barley, but not including any manufactured or processed products thereof, and selling the same at wholesale; the tax imposed shall be equal to the gross proceeds derived from such sales multiplied by the rate of one one-hundredth of one percent.

(2) Upon every person engaging within this state in the business of manufacturing wheat into flour, soybeans into soybean oil, or sunflower seeds into sunflower oil; as to such persons the amount of tax with respect to such business shall be equal to the value of the flour or oil manufactured, multiplied by the rate of one-eighth of one percent.

(3) Upon every person engaging within this state in the business of splitting or processing dried peas; as to such persons the amount of tax with respect to such business shall be equal to the value of the peas split or processed, multiplied by the rate of one-quarter of one percent.

(4) Upon every person engaging within this state in the business of manufacturing seafood products which remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured, multiplied by the rate of one-eighth of one percent.

(5) Upon every person engaging within this state in the business of manufacturing by canning, preserving, freezing or dehydrating fresh fruits and vegetables; as to such persons the amount of tax with respect to such business shall be equal to the value of the products canned, preserved, frozen or dehydrated multiplied by the rate of three-tenths of one percent.

(6) Upon every nonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the amount of tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of forty-four one-hundredths of one percent.

(7) Upon every person engaging within this state in the business of slaughtering, breaking and/or processing perishable meat products and/or selling the same at wholesale only and not at retail; as to such persons the tax imposed shall be equal to the gross proceeds derived from such sales multiplied by the rate of ((~~thirty-three~~)) twenty-five one-hundredths of one percent through June 30, 1986, and one-eighth of one percent thereafter.

(8) Upon every person engaging within this state in the business of making sales, at retail or wholesale, of nuclear fuel assemblies manufactured by that person, as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the assemblies multiplied by the rate of twenty-five one-hundredths of one percent.

(9) Upon every person engaging within this state in the business of manufacturing nuclear fuel assemblies, as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured multiplied by the rate of twenty-five one-hundredths of one percent.

(10) Upon every person engaging within this state in the business of acting as a travel agent; as to such persons the amount of the tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of twenty-five one-hundredths of one percent.

(11) Upon every person engaging within this state in business as an international steamship agent, international customs house broker, international freight forwarder, vessel and/or cargo charter broker in foreign commerce, and/or international air cargo agent; as to such persons the amount of the tax with respect to only international activities shall be equal to the gross income derived from such activities multiplied by the rate of thirty-three one-hundredths of one percent.

(12) Upon every person engaging within this state in the business of stevedoring and associated activities pertinent to the movement of goods and commodities in waterborne interstate or foreign commerce; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds derived from such activities multiplied by the rate of thirty-three one hundredths of one percent. Persons subject to taxation under this subsection shall be exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of their business subject to taxation under this subsection. Stevedoring and associated activities pertinent to the conduct of goods and commodities in waterborne interstate or foreign commerce are defined as all activities of a labor, service or transportation nature whereby cargo may be loaded or unloaded to or from vessels or barges, passing over, onto or under a wharf, pier, or similar structure; cargo may be moved to a warehouse or similar holding or storage yard or area to await further movement in import or export or may move to a consolidation freight station and be stuffed, unstuffed, containerized, separated or otherwise segregated or aggregated for delivery or loaded on any mode of transportation for delivery to its consignee. Specific activities included in this definition are: wharfage, handling, loading, unloading, moving of cargo to a convenient place of delivery to the consignee or a convenient place for further movement to export mode; documentation services in connection with the receipt, delivery, checking, care, custody and control of cargo required in the transfer of cargo; imported automobile handling prior to delivery to consignee; terminal stevedoring and incidental vessel services, including but not limited to plugging and unplugging refrigerator service to containers, trailers, and other refrigerated cargo receptacles, and securing ship hatch covers.

(13) Upon every person engaging within this state in the business of disposing of low-level waste, as defined in RCW 43.145.010; as to such persons the amount of the tax with respect to such business shall be equal to the gross income of the business, excluding any fees imposed under chapter 43.21F RCW, multiplied by the rate of thirty percent.

If the gross income of the taxpayer is attributable to activities both within and without this state, the gross income attributable to this state shall be determined in accordance with the methods of apportionment required under RCW 82.04.460.

(14) Upon every person engaging within this state as an insurance agent, insurance broker, or insurance solicitor licensed under chapter 48.17 RCW; as to such persons, the amount of the tax with respect to such licensed activities shall be equal to the gross income of such business multiplied by the rate of one percent.

Sec. 5. Section 82.04.270, chapter 15, Laws of 1961 as last amended by section 4, chapter 172, Laws of 1981 and RCW 82.04.270 are each amended to read as follows:

(1) Upon every person except persons taxable under subsections (1) or (8) of RCW 82.04.260 engaging within this state in the business of making sales at wholesale; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of such business multiplied by the rate of forty-four one-hundredths of one percent.

(2) The tax imposed by this section is levied and shall be collected from every person engaged in the business of distributing in this state articles of tangible personal property, owned by them from their own warehouse or other central location in this state to two or more of their own retail stores or outlets, where no change of title or ownership occurs, the intent hereof being to impose a tax equal to the wholesaler's tax upon persons performing functions essentially comparable to those of a wholesaler, but not actually making sales: PROVIDED, That the tax designated in this section may not be assessed twice to the same person for the same article. The amount of the tax as to such persons shall be computed by multiplying forty-four one-hundredths of one percent of the value of the article so distributed as of the time of such distribution: PROVIDED, That persons engaged in the activities described in this subsection shall not be liable for the tax imposed if by proper invoice it can be shown that they have purchased such property from a wholesaler who has paid a business and occupation tax to the state upon the same articles. This proviso shall not apply to purchases from manufacturers as defined in RCW 82.04.110. This proviso shall not apply to businesses which distribute articles to retail outlets with twenty-five percent or more of total sales which are exempt from sales tax pursuant to RCW 82.08.0293. The department of revenue shall prescribe uniform and equitable rules for the purpose of ascertaining such value, which value shall correspond as nearly as possible to the gross proceeds from sales at wholesale in this state of similar articles of like quality and character, and in similar quantities by other taxpayers: PROVIDED FURTHER, That delivery trucks or vans will not under the purposes of this section be considered to be retail stores or outlets.

Sec. 6. Section 82.04.330, chapter 15, Laws of 1961 as amended by section 7, chapter 173, Laws of 1965 ex. sess. and RCW 82.04.330 are each amended to read as follows:

This chapter shall not apply to any person in respect to the business of growing or producing for sale upon ((~~his~~)) the person's own lands or upon land in which ((he)) the person has a present right of possession, any agricultural or horticultural produce or crop, including the raising for sale of any animal, bird, fish, or insect, or the milk, eggs, wool, fur, meat, honey, or other substance obtained therefrom, or in respect to the sale of such products at wholesale by such grower, producer, or raiser thereof. This exemption shall not apply to any person selling such products at retail or using such products as ingredients in a manufacturing process; nor to the sale of any animal or substance obtained therefrom by a person in connection with ((~~his~~)) the person's business of operating a stockyard or a slaughter or packing house; nor to any person in respect to the business of taking, cultivating, or raising Christmas trees or timber; nor to any association of persons whatever, whether mutual, cooperative or otherwise, engaging in any business activity with respect to which tax liability is imposed under the provisions of this chapter.

Sec. 7. Section 82.04.100, chapter 15, Laws of 1961 as amended by section 2, chapter 173, Laws of 1965 ex. sess. and RCW 82.04.100 are each amended to read as follows:

"Extractor" means every person who from ((~~his~~)) the person's own land or from the land of another under a right or license granted by lease or contract, either directly or by contracting with others for the necessary labor or mechanical services, for sale or for commercial or industrial use mines, quarries, takes or produces coal, oil, natural gas, ore, stone, sand, gravel, clay, mineral or other natural resource product, or fells, cuts or takes timber, Christmas trees or other natural products, or takes((~~, cultivates, or raises~~)) fish, or takes, cultivates, or raises shellfish, or other sea or inland water foods or products. ((It)) "Extractor" does not include persons performing under contract the necessary labor or mechanical services for others or persons cultivating or raising fish entirely within confined rearing areas on the person's own land or on land in which the person has a present right of possession.

NEW SECTION. Sec. 8. Nothing in sections 6 and 7 of this act shall be construed to imply that a person, sale, or use made exempt from tax under sections 6 and 7 of this act was taxable under Title 82 RCW prior to the enactment of sections 6 and 7 of this act.

NEW SECTION. Sec. 9. LEGISLATIVE INTENT FOR SECTION 11 OF THIS ACT. It is the intent of the state of Washington in section 11 of this act to provide assistance to those economically distressed areas that do not have substantial means to attract and encourage new business into their communities and also to provide substantial financial incentives for business that will create new jobs within those distressed areas.

NEW SECTION. Sec. 10. A new section is added to chapter 82.04 RCW to read as follows:

(1) "New businesses" means businesses as defined under RCW 82.04.140 which were first legally required to register with the department of revenue on or after the effective date of this act and which have not been licensed to operate within the state of Washington within the last five years.

(2) "Eligible businesses" means businesses engaging in manufacturing, research and development, and warehousing.

(3) "Distressed areas" means:

(a) Any county which exceeds the state-wide annual unemployment average and any city with a population of forty thousand or less within such a county; and

(b) Any city with a population of forty thousand or less that can demonstrate that it is distressed by reason of recent business closures, or notice thereof, severe layoffs for periods in excess of six months, and any other criteria established by the department of commerce and economic development to identify an area as disadvantaged.

NEW SECTION. Sec. 11. A new section is added to chapter 82.04 RCW to read as follows:

Persons engaging in new eligible businesses in distressed areas shall be exempt during the first five years of business operation from the payment of fifty percent of the tax otherwise imposed under this chapter by reason of such activities.

NEW SECTION. Sec. 12. A new section is added to chapter 82.04 RCW to read as follows:

(1) The amount of tax imposed under this chapter on persons engaging in a new business which operates at a loss in any year of the first three years after registration under RCW 82.32.030 shall be deferred and paid as follows:

!tp1,1,1 !ixYEAR!sc ,1AFTER!tt!sc ,1REGISTRATION!tj1!tcPERCENTAGE!sc ,1OF!sc ,1DE!ttFERRED !sc ,1TAX!sc ,1PAID

!tl4!tr10%

!tl5!tr15%

!tl6!tr20%

!tl7!tr25%

!tl8!tr30%

The deferred tax paid in the fourth through eighth year is in addition to the taxes otherwise imposed under this chapter for those years. If a person receiving a tax deferral under this section ceases to engage in the business, all taxes deferred under this section shall be immediately due and payable.

(2) To qualify for tax deferral under subsection (1) of this section, a person engaging in a new business shall apply to the department of revenue for deferral before the end of the period for which taxes are payable. No tax may be deferred under this section until the person has been approved as eligible for deferral by the department. No taxpayer may receive a deferral under this section on a taxable amount exceeding five million dollars during any three-year period. The department shall determine whether or not a taxpayer is operating at a loss according to federal income tax rules.

(3) For the purposes of this section:

(a) "Year" means twelve calendar months.

(b) "New business" means a sole proprietorship, partnership, or corporation which first registered with the department of revenue, or with a comparable agency in another state, within the three-year period prior to application for a tax deferral, but "new business" excludes branches and expansions of established businesses.

(4) The department shall adopt rules to implement this section, including rules on the procedure to be followed and information required to be submitted to obtain a deferral under this section.

NEW SECTION. Sec. 13. A new section is added to chapter 82.04 RCW to read as follows:

(1) For purposes of this chapter, "wholesale sale," "sale at wholesale," "retail sale," and "sale at retail" do not include the sale of precious metal bullion or monetized bullion.

(2) In computing tax under this chapter on the business of making sales of precious metal bullion or monetized bullion, the tax shall be imposed on the amounts received as commissions upon transactions for the accounts of customers over and above the amount paid to other dealers associated in such transactions, but no deduction or offset is allowed on account of salaries or commissions paid to salesmen or other employees.

(3) For purposes of this section, "precious metal bullion" means any elementary precious metal which has been put through a process of smelting or refining, including, but not limited to, gold, silver, platinum, rhodium, and palladium, and which is in such state or condition that its value depends upon its contents and not upon its form. For purposes of this section, "monetized bullion" means coins or other forms of money manufactured from gold, silver, or other metals and heretofore, now, or hereafter used as a medium of exchange under the laws of this state, the United States, or any foreign nation, but does not include coins or money sold to be manufactured into jewelry or works of art.

NEW SECTION. Sec. 14. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect July 1, 1985.