AN ACT Relating to revenue and taxation; amending RCW 82.03.130, 82.03.140, 82.03.180, 82.08.020, 82.04.230, 82.04.240, 82.04.250, 82.04.255, 82.04.270, 82.04.280, 82.04.290, and 84.52.043; reenacting and amending RCW 82.04.260; adding a new title to the Revised Code of Washington, to be numbered Title 82A RCW; creating a new section; prescribing penalties; and providing an effective date.

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

NEW SECTION. Sec. 1. DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout this title:

(1) "Adjusted gross income" means adjusted gross income as determined under the Internal Revenue Code.

(2) "Corporation" means a person taxable as a corporation under the Internal Revenue Code.

(3) "Department" means the state department of revenue.

(4) "Federal base income" means:

(a) For individuals, adjusted gross income;

(b) For regulated investment companies, investment company income as defined in section 852 of the Internal Revenue Code;

(c) For real estate investment trusts, real estate investment trust income as defined in section 857 of the Internal Revenue Code;

(d) For a small business corporation electing not to be subject to federal tax under section 1372 of the Internal Revenue Code, only that income subject to federal tax under section 1378 of the Internal Revenue Code; and

(e) For all other taxpayers, federal taxable income as determined under the Internal Revenue Code.

(5) "Individual" means a natural person.

(6) "Internal Revenue Code" means the United States Internal Revenue Code of 1954 and amendments thereto, as existing on December 31, 1987.

(7) "Person" includes individuals, corporations, partnerships, firms, companies, fiduciaries, and any other group or combination acting as a unit.

(8) "Resident" includes:

(a) An individual who is domiciled in this state unless the individual maintains no permanent place of abode in this state and does maintain a permanent place of abode elsewhere and spends in the aggregate not more than thirty days of the taxable year in this state; or who is not domiciled in this state but maintains a permanent place of abode in this state and spends in the aggregate more than one hundred eighty-three days of the taxable year in this state;

(b) The estate of a decedent who at the time of death was domiciled in this state;

(d) An irrevocable trust, the grantor of which was domiciled in this state at the time the trust became irrevocable. For purposes of this subsection (8)(d), a trust is irrevocable to the extent that the grantor is not treated as the owner thereof under sections 671 through 679 of the Internal Revenue Code.

(9) "Taxable income" means federal base income as modified under section 4 of this act.

(10) "Taxable year" means the taxpayer's taxable year as defined under the Internal Revenue Code.

(11) "Taxpayer" means a person receiving income subject to tax under this title.

NEW SECTION. Sec. 2. INTENT. It is the intent of the legislature in adopting this act to provide the necessary revenues for the support of vital state services on a more stable and equitable basis. This act, if approved by the people through passage of the proposed amendment to Article VII of the state Constitution (SJR ...), will establish an integrated plan for reform of our state tax structure by eliminating any need for sales taxes on food products, by reducing the state's reliance on sales tax revenues and on revenues from business taxes measured by gross receipts, and by replacing the revenue from these tax reductions through a net income tax, thereby establishing a tax system which more fairly measures each taxpayer's ability to support the basic services provided to the people of our state.

NEW SECTION. Sec. 3. TAX IMPOSED. (1) A tax is imposed at the rate of seven percent on all taxable income received by corporations.

(2) A tax is imposed at the rate of seven percent on all taxable income received by individuals, estates, and trusts.

NEW SECTION. Sec. 4. TAXABLE INCOME MODIFICATIONS. In computing taxable income, the following modifications shall be made to the taxpayer's federal base income unless the modification has the effect of duplicating an item of income or deduction:

(1) Add income which has been excluded under section 103 of the Internal Revenue Code in computing federal base income, except interest on obligations of the state of Washington or political subdivisions of the state of Washington. However, the amount added under this subsection shall be reduced by related expenses not deducted in computing federal base income because of section 265 of the Internal Revenue Code.

(2) Add taxes on or measured by income which have been deducted under section 164 of the Internal Revenue Code in computing federal base income.

(3) Add amounts which have been deducted in computing federal base income to the extent the amounts relate to income exempt from tax under this title.

(4) Add amounts which have been deducted in computing federal base income to the extent the amounts have been carried over from taxable years ending before the effective date of this title.

(5) Deduct, to the extent included in federal base income, income derived from obligations of the United States which this state is prohibited by federal law from subjecting to a net income tax. However, the amount deducted under this subsection shall be reduced by any expense, including amortizable bond premium, incurred in the production of such income to the extent the expense has been deducted in calculating federal base income.

(6) Deduct income apportioned or allocated to another state under section 13 of this act.

(7) Deduct income exempt from tax under this title.

(8) Deduct, to the extent included in federal base income, income attributable to activities subjected to tax under chapter 82.04 RCW, if the activities occurred before the effective date of this section.

(9) Add or deduct amounts resulting from the computation required under section 15 of this act.

NEW SECTION. Sec. 5. EXEMPTIONS‑-PERSONAL. The following are exempt from the tax imposed under this title:

(1) Eight thousand dollars for each individual taxpayer.

(2) Eight thousand dollars for each individual taxpayer's spouse if the taxpayer is entitled to an exemption for the spouse under section 151(b) of the Internal Revenue Code.

(3) Sixteen thousand dollars for each taxpayer who is a head of household as determined under section 2(b) of the Internal Revenue Code.

NEW SECTION. Sec. 6. EXEMPTIONS‑-GENERAL. The following are exempt from the tax imposed under this title:

(1) Income exempt from federal income tax under subchapter F of chapter 1 of the Internal Revenue Code, other than unrelated business taxable income as defined in section 512 of the Internal Revenue Code.

(2) Income attributable to activities subject to tax under chapter 82.16 RCW.

(3) Income received as premiums by insurers holding valid certificates of authority issued by the insurance commissioner of this state if the premiums are subject to tax under RCW 48.14.020. Income received by agents of insurers and brokers for insurers is not exempt under this section.

NEW SECTION. Sec. 7. ADJUSTMENT OF EXEMPTIONS FOR NONRESIDENTS. Each exemption allowed under section 5 of this act for individual taxpayers who are not residents for the entire taxable year shall be reduced by multiplying the amount of the exemption by a fraction. The numerator of the fraction is the taxpayer's taxable income. The denominator of the fraction is the taxpayer's adjusted gross income. The fraction shall never be greater than one.

NEW SECTION. Sec. 8. CREDIT FOR BUSINESS AND OCCUPATION TAXES. (1) A credit is allowed for taxes paid during the taxable year under chapter 82.04 RCW. The credit is allowable only against tax imposed under this title upon the income attributable to the activity subjected to tax under chapter 82.04 RCW. The amount of the credit allowed under this section shall not exceed the amount of tax due under this title.

(2) Credit is not allowed under this section for business and occupation taxes accruing before the effective date of this section.

NEW SECTION. Sec. 9. CREDIT FOR INCOME TAXES DUE ANOTHER JURISDICTION. (1) A resident individual, estate, or trust is allowed a credit against the tax imposed under this title for the amount of any income tax imposed by another state, foreign country, or political subdivision thereof on income taxed under this title, subject to the following conditions:

(a) The credit is allowed only for taxes imposed by the other jurisdiction on net income from sources within that jurisdiction.

(b) The amount of the credit shall not exceed the smaller of:

(i) The amount of tax paid to the other jurisdiction on net income from sources within the other jurisdiction; or

(ii) The amount of tax due under this title multiplied by a fraction. The numerator of the fraction is the portion of the taxpayer's adjusted gross income subject to tax in the other jurisdiction. The denominator of the fraction is the taxpayer's taxable income. The fraction shall never be greater than one.

(2) If, in lieu of a credit similar to the credit allowed under subsection (1) of this section, the laws of the taxpayer's state of residence contain a provision exempting a resident of this state from liability for the payment of income taxes on income earned for personal services performed in that state, then the director is authorized to enter into a reciprocal agreement with that state providing a similar tax exemption for its residents on income earned for personal services performed in this state.

NEW SECTION. Sec. 10. DUAL RESIDENCE. If an individual is regarded as a resident both of this state and another jurisdiction for personal income tax purposes, the department shall reduce the tax on that portion of the taxpayer's income which is subjected to tax in both jurisdictions solely by virtue of dual residence, if the other taxing jurisdiction allows a similar reduction. The reduction shall equal the lower of the two taxes applicable to the income taxed twice multiplied by a fraction. The numerator of the fraction is the tax imposed by this state on the income taxed twice. The denominator of the fraction is the tax imposed by both jurisdictions on the income taxed twice. The fraction shall never be greater than one.

NEW SECTION. Sec. 11. PARTNERSHIPS AND SMALL BUSINESS CORPORATIONS. (1) Partnerships are not subject to tax under this title. Partners are subject to tax in their separate or individual capacities.

(2) Small business corporations are not subject to tax under this title, except for income subject to federal tax under section 1378 of the Internal Revenue Code. Shareholders of small business corporations are subject to tax in their separate or individual capacities.

(3) The taxable incomes of partners shall be computed by including a share of the modifications under section 4 of this act and the credit allowed under section 8 of this act, if the modification or credit relates to the income of the partnership. Each partner's share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the partner's distributive share of partnership income. The denominator of the fraction is the total partnership income. The fraction shall never be greater than one.

(4) The taxable incomes of shareholders shall be computed by including a share of the modifications under section 4 of this act and the credit allowed under section 8 of this act, if the modification or credit relates to the income of the small business corporation. Each shareholder's share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the shareholder's pro rata share of small business corporation income. The denominator of the fraction is the total small business corporation income. The fraction shall never be greater than one.

(5) As used in this section:

(a) "Shareholder" means a shareholder of a small business corporation.

(b) "Small business corporation" means a corporation electing not to be subject to federal income tax under section 1372 of the Internal Revenue Code.

(c) "Small business corporation income" includes both distributed and undistributed federal taxable income of the small business corporation.

(d) "Pro rata share" means pro rata share as determined under subchapter S of chapter 1 of the Internal Revenue Code.

NEW SECTION. Sec. 12. ESTATES, TRUSTS, AND BENEFICIARIES. (1) The taxable incomes of estates, trusts, and beneficiaries thereof shall be computed by including a share of the modifications under section 4 of this act and the credit allowed under section 8 of this act, if the modification or credit relates to the income of the estate or trust. Each taxpayer's share of a modification or credit is the amount of modification or credit multiplied by a fraction. The numerator of the fraction is the taxpayer's share of the distributable net income of the estate or trust. The denominator of the fraction is the total distributable net income of the estate or trust. The fraction shall never be greater than one.

(2) As used in this section, "distributable net income" means distributable net income as defined in the Internal Revenue Code. If the estate or trust has no federal distributable net income, the term means the income of the estate or trust which is distributed or is required to be distributed during the taxable year under local law or the terms of the estate or trust instrument.

(3) Any portion of a modification which is not included in calculating the taxable incomes of the beneficiaries shall be included in calculating the taxable income of the trust or estate.

NEW SECTION. Sec. 13. APPORTIONMENT AND ALLOCATION OF INCOME. (1) For resident individuals and corporations other than financial organizations or public utilities, all income shall be apportioned and allocated to this state except income which is apportioned or allocated to another state under RCW 82.56.010.

(2) For nonresident individuals, all income shall be apportioned and allocated to this state if it is not apportioned or allocated to another state under RCW 82.56.010 and is received:

(a) For the rendition of personal services in this state;

(b) As a result of the ownership or disposition of any interest in real or tangible personal property in this state; or

(3) For financial organizations and public utilities, the department shall promulgate rules under which the extent of the taxpayer's income attributable to this state may be fairly determined, and apportioned and allocated to this state. As used in this subsection, "financial organization" and "public utility" have the meanings given in section 1 of Article IV of RCW 82.56.010.

NEW SECTION. Sec. 14. TAX RETURNS FOR FRACTIONAL YEAR. (1) If the first taxable year of any taxpayer with respect to which a tax is imposed by this title ends before December 31st of the calendar year in which this section becomes effective (referred to in this section as a fractional taxable year), the taxable income for the fractional taxable year shall be the taxpayer's taxable income for the entire taxable year, adjusted by one of the following methods, at the taxpayer's election:

(a) The taxable income shall be multiplied by a fraction. The numerator of the fraction is the number of days in the fractional taxable year. The denominator of the fraction is the number of days in the entire taxable year.

(b) The taxable income shall be adjusted, in accordance with rules of the department, so as to include only such income and be reduced only by such deductions as can be clearly determined from the permanent records of the taxpayer to be attributable to the fractional taxable year.

(2) If an individual taxpayer's taxable income is adjusted under subsection (1) of this section, each exemption allowed under section 5 of this act for the taxpayer shall be reduced by multiplying the amount of the exemption by a fraction. The numerator of the fraction is the taxpayer's taxable income as adjusted under subsection (1) of this section. The denominator of the fraction is the taxpayer's taxable income before adjustment under subsection (1) of this section. The fraction shall never be greater than one.

NEW SECTION. Sec. 15. SALE OR EXCHANGE OF CAPITAL ASSET HELD PRIOR TO EFFECTIVE DATE OF SECTION. Taxable income shall be computed without including any gain or deducting any loss on the sale or exchange of a capital asset if such gain or loss is attributable to holding the capital asset prior to the effective date of this section. The portion of gain or loss attributable to the taxpayer's holding period prior to the effective date of this section shall be the ratio that the holding period of the taxpayer expressed in months prior to the effective date of this section bears to the total holding period of the taxpayer expressed in months.

NEW SECTION. Sec. 16. EMPLOYER WITHHOLDING‑-REQUIREMENTS. (1) Every employer making a payment of wages or salaries earned in this state, regardless of the place where the payment is made, shall deduct and withhold a tax as prescribed in tables adopted by the department by rule. The tables shall reasonably reflect the annual tax liability of the employee under this title. Every employer making such a deduction and withholding shall furnish to the employee a record of the amount of tax deducted and withheld from the employee on forms provided by the department.

(2) If the employee is a resident of this state and earns income from personal services entirely performed in another state which imposes an income tax on the income, and the employer withholds income taxes under the laws of the state in which the income is earned, the employer is not required to withhold any tax imposed by this title on the income if the laws of the state in which the income is earned allow a similar exemption for its residents who earn income in this state.

NEW SECTION. Sec. 17. LIABILITY OF EMPLOYER FOR TAX WITHHELD. Any person required to deduct and withhold the tax imposed by this title is liable for the payment of the amount deducted and withheld to the department, and is not liable to any other person for the amount of tax deducted and withheld under this title. The amount of tax so deducted and withheld shall be held to be a special fund in trust for this state.

NEW SECTION. Sec. 18. WITHHOLDING BY GOVERNMENTAL ENTITY. If the employer is the United States or this state or any political subdivision thereof, or an agency or instrumentality of any one or more of the foregoing, then the return of the amount deducted and withheld upon any wages or salaries may be made by any officer of the employer having control of the payment of the wages and salaries or appropriately designated for that purpose.

NEW SECTION. Sec. 19. CREDIT FOR TAX WITHHELD‑-HOW CLAIMED. The amount deducted and withheld as tax under sections 16 through 18 of this act during any taxable year shall be allowed as a credit against the tax imposed for the taxable year by this title. If the tax liability of any individual shown by the return is less than the total amount of the credit which the individual is entitled to claim under this section, the individual is entitled to a refund in the amount of the excess of the credit over the tax otherwise due. If any individual entitled to claim a credit under this section is not otherwise required by this title to file a return, a refund may be obtained in the amount of the credit by filing a return, with applicable sections completed, to claim the refund. No credit or refund is allowed under this section unless the credit or refund is claimed on a return filed for the taxable year for which the amount was deducted and withheld.

NEW SECTION. Sec. 20. METHOD OF ACCOUNTING. (1) A taxpayer's method of accounting for purposes of the tax imposed under this title shall be the same as the taxpayer's method of accounting for federal income tax purposes. If no method of accounting has been regularly used by a taxpayer for federal income tax purposes, tax due under this title shall be computed by a method of accounting which in the opinion of the department fairly reflects income.

(2) If a person's method of accounting is changed for federal income tax purposes, it shall be similarly changed for purposes of this title.

NEW SECTION. Sec. 21. JOINT RETURN. (1) If neither spouse is required to file a federal income tax return for the taxable year, a joint return may be filed under this title under the same conditions under which a joint return may be filed for purposes of the federal income tax.

(2) If the federal income tax liabilities of both spouses are determined on a joint federal return for the taxable year, they shall file a joint return under this title unless one spouse is a resident and the other is a nonresident.

(3) If the federal income tax liability of either spouse is determined on a separate federal return for the taxable year, they shall file separate returns under this title.

(4) If one spouse is a resident and the other is a nonresident, they shall file separate returns under this title, unless they elect to determine their tax liabilities under this title on a joint return as if they were both residents and:

(a) Their federal tax liability for the taxable year was determined on a joint federal return; or

(b) Neither spouse has filed a federal income tax return for the taxable year and they would be permitted to file a joint federal return for the taxable year.

(5) In any case in which a joint return is filed under this section, the liability of the husband and wife is joint and several, unless the spouse is relieved of liability under section 6013 of the Internal Revenue Code.

NEW SECTION. Sec. 22. RECORDS‑-RETURNS. (1) Every taxpayer and every person required to collect the tax imposed under this title shall keep records, render statements, make returns, file reports, and perform other acts, as the department requires by rule. Each return shall be made under penalty of perjury and on forms prescribed by the department. The department may require other statements and reports be made under penalty of perjury and on forms prescribed by the department. The department may require any taxpayer and any person required to collect the tax imposed under this title to furnish to the department a correct copy of any return or document which the taxpayer has filed with the internal revenue service or received from the internal revenue service.

(2) All books and records and other papers and documents required to be kept under this title are subject to inspection by the department at all times during business hours of the day.

NEW SECTION. Sec. 23. COMBINED REPORTING‑-ADMINISTRATIVE ADJUSTMENTS. (1) If a corporation required to report under this title owns or controls, either directly or indirectly, another corporation or corporations except foreign corporations, or if a corporation required to report under this title is owned or controlled, either directly or indirectly, by another corporation except a foreign corporation, the department may require a combined or consolidated report showing the combined taxable income and apportionment factors of the controlled group, excluding foreign corporations, and any other information it deems necessary to ascertain the taxable income of the corporations. The department may, in such manner as it may determine, assess the tax against the corporations which are required to report under this title and whose taxable income is involved in the report upon the basis of the combined entire taxable income; or it may adjust the tax in such other manner as it determines to be equitable if it determines the adjustment is necessary to prevent evasion of taxes or to reflect the income earned by the corporations from business done in this state. Direct or indirect ownership or control of more than fifty percent of the voting stock of a corporation constitutes ownership or control for purposes of this section.

(2) If two or more organizations, trades, or businesses (whether or not incorporated, whether or not organized in or having income from sources allocable to this state, and whether or not affiliated) are owned or controlled directly or indirectly by the same interests, the department may distribute, apportion, or allocate income, deductions, credits, exemptions, or allowances between or among the organizations, trades, or businesses if it determines that the distribution, apportionment, or allocation is necessary to prevent evasion of the tax imposed by this title.

NEW SECTION. Sec. 24. SERVICE OF PROCESS. (1) Any person who incurs tax liability under this title and who removes from this state or conceals his or her whereabouts shall be considered to appoint the secretary of state of this state as the person's agent for service of process or notice in any judicial or administrative proceeding under this title. This process or notice shall be served by the department on the secretary of state by leaving at the office of the secretary of state, at least fifteen days before the return day of the process or notice, a certified copy thereof and by sending to the person, by registered or certified mail, a certified copy with an endorsement thereon of the service upon the secretary of state, addressed to the person at the person's last known address.

(2) Service of process or notice in the manner and under the circumstances provided in this section is of the same force and validity as if served upon the person personally within this state. Proof of this service may be made in any judicial or administrative proceeding by the affidavit of the authorized agent of the department who made the service, with a copy of the process or notice that was so served attached to the affidavit.

NEW SECTION. Sec. 25. PROVISIONS OF INTERNAL REVENUE CODE CONTROL. (1) To the extent possible without being inconsistent with this title, all of the provisions of the Internal Revenue Code relating to the following subjects apply to the taxes imposed under this title:

(a) Time and manner of payment of tax imposed under this title, including tax withheld under sections 16 through 18 of this act.

(b) Periods of limitation upon assessment and collection of taxes. However, if a taxpayer fails to report a change or correction increasing his or her federal taxable income, or fails to report a change or correction which is treated as if it were a deficiency for federal income tax purposes, an assessment may be made at any time within one year of the date on which the department first learns of the change or correction.

(d) Liability of transferees.

(e) Closing agreements and compromises.

(f) Deficiency procedures, except that the state board of tax appeals shall review deficiencies under chapter 82.03 RCW.

(g) Penalties and additions for failure to timely file returns or pay taxes.

(h) Timing, amount, and manner of payment of estimated tax payments.

(i) Time and manner of making returns, verification of returns, and the time when a return is deemed filed.

(j) Powers of the secretary of the treasury, exercised under this title by the department, to prepare and execute returns, to prescribe forms, to enforce collection of the tax through liens and seizure of property, and to impose penalties.

(2) The department by rule may provide modifications and exceptions to the provisions listed in subsection (1) of this section if reasonably necessary to facilitate the prompt, efficient, and equitable collection of tax under this title.

NEW SECTION. Sec. 26. RULES. The department may adopt rules under chapter 34.04 RCW for the administration and enforcement of this title. The rules, to the extent possible without being inconsistent with this title, shall follow the Internal Revenue Code, and the regulations and rulings of the United States treasury department with respect to the federal income tax. The department may adopt as a part of these rules any portions of the Internal Revenue Code and treasury department regulations and rulings, in whole or in part.

NEW SECTION. Sec. 27. REFUNDS OF OVERPAYMENTS‑-OTHER ADMINISTRATIVE PROVISIONS. (1) The department shall refund all taxes and penalties improperly paid or collected.

(2) RCW 82.32.110, 82.32.120, 82.32.130, 82.32.320, 82.32.330, 82.32.340, and 82.32.380 apply to the administration of the taxes imposed under this title.

NEW SECTION. Sec. 28. CRIMES. (1) Any person who knowingly attempts to evade or defeat the tax imposed under this title or payment thereof is guilty of a class C felony as provided in chapter 9A.20 RCW.

(2) Any person required to collect tax imposed under this title who knowingly fails to collect, truthfully account for, or pay over the tax is guilty of a class C felony as provided in chapter 9A.20 RCW.

(3) Any person who knowingly fails to pay tax, pay estimated tax, make returns, keep records, or supply information, as required under this title, is guilty of a gross misdemeanor as provided in chapter 9A.20 RCW.

Sec. 29. APPEALS TO BOARD‑-JURISDICTION AS TO TYPES OF APPEALS. Section 42, chapter 26, Laws of 1967 ex. sess. as last amended by section 6, chapter 46, Laws of 1982 1st ex. sess. and RCW 82.03.130 are each amended to read as follows:

The board shall have jurisdiction to decide the following types of appeals:

(1) Appeals taken pursuant to RCW 82.03.190.

(2) Appeals from a county board of equalization pursuant to RCW 84.08.130.

(3) Appeals by an assessor or landowner from an order of the director of revenue made pursuant to RCW 84.08.010 and 84.08.060, the right to such an appeal being hereby established.

(4) Appeals by an assessor or owner of an intercounty public utility or private car company from determinations by the director of revenue of equalized assessed valuation of property and the apportionment thereof to a county made pursuant to chapter 84.12 RCW and 84.16 RCW, the right to such appeal being hereby established.

(5) Appeals by an assessor, landowner, or owner of an intercounty public utility or private car company from a determination of any county indicated ratio for such county compiled by the department of revenue pursuant to RCW 84.48.075: PROVIDED, That

(a) Said appeal be filed after review of the ratio under RCW 84.48.075(3) and not later than fifteen days after the date of certification as required by RCW 84.48.075; and

(b) The hearing before the board shall be expeditiously held in accordance with rules prescribed by the board and shall take precedence over all matters of the same character.

(6) Appeals relating to the sale of shorelands under RCW 79.01.474.

(7) Appeals relating to timber tax stumpage values under RCW 84.33.071.

(8) Appeals relating to the valuation of farm and agricultural land under RCW 84.34.065.

(9) Appeals relating to property tax exemptions under RCW 84.36.850.

(10) Appeals relating to income tax deficiencies under Title 82A RCW.

Sec. 30. APPEALS TO BOARD‑-ELECTION OF FORMAL OR INFORMAL HEARING. Section 43, chapter 26, Laws of 1967 ex. sess. as amended by section 8, chapter 46, Laws of 1982 1st ex. sess. and RCW 82.03.140 are each amended to read as follows:

In all appeals over which the board has jurisdiction under RCW 82.03.130, a party taking an appeal may elect either a formal or an informal hearing, such election to be made according to rules of practice and procedure to be promulgated by the board: PROVIDED, HOWEVER, That nothing herein shall be construed to modify the provisions of RCW 82.03.190: AND PROVIDED FURTHER, That upon an appeal under RCW 82.03.130(5) or (10), the director of revenue may, within ten days from the date of its receipt of the notice of appeal, file with the clerk of the board notice of its ((~~intention that the hearing be held pursuant to chapter 34.04 RCW~~)) election of a formal hearing. In the event that appeals are taken from the same decision, order, or determination, as the case may be, by different parties and only one of such parties elects a formal hearing, a formal hearing shall be granted.

Sec. 31. JUDICIAL REVIEW OF BOARD'S DECISIONS. Section 47, chapter 26, Laws of 1967 ex. sess. as amended by section 9, chapter 46, Laws of 1982 1st ex. sess. and RCW 82.03.180 are each amended to read as follows:

(1) For appeals other than those under RCW 82.03.130(10), judicial review of a decision of the board of tax appeals shall be de novo in accordance with the provisions of RCW 82.32.180 or 84.68.020 as applicable except when the decision has been rendered pursuant to a formal hearing elected under RCW 82.03.140 or 82.03.190, in which event judicial review may be obtained only pursuant to RCW 34.04.130 and 34.04.140: PROVIDED, HOWEVER, That nothing herein shall be construed to modify the rights of a taxpayer conferred by RCW 82.32.180 and 84.68.020 to sue for tax refunds: AND PROVIDED FURTHER, That no review from a decision made pursuant to RCW 82.03.130(1) may be obtained by a taxpayer unless within the petition period provided by RCW 34.04.130 the taxpayer shall have first paid in full the contested tax, together with all penalties and interest thereon, if any. The director of revenue shall have the same right of review from a decision made pursuant to RCW 82.03.130(1) as does a taxpayer; and the director of revenue and all parties to an appeal under RCW 82.03.130(5) shall have the right of review from a decision made pursuant to RCW 82.03.130(5).

(2) Within thirty days after the final decision of the board in a case under RCW 82.03.130(10) in which a formal hearing is elected, the taxpayer or the department may appeal to the court of appeals. The appeal shall be perfected by filing with the clerk of the court of appeals a petition for review and by serving a copy thereof by mail or personally on the opposing party. The petitioner shall pay the costs of preparing the record of the hearing, and thereafter the board shall file with the clerk of the court the original or a certified copy of the entire record of the proceeding under review. RCW 34.04.130(6) applies to this review, and a bond shall be required for the review if requested by the department. The appropriate division of the court of appeals in which the petition for review is to be filed shall be, at the option of the petitioner, either division II or that division containing the district in which is located the petitioner's residence or principal place of business. The method of judicial review of the board of tax appeals decision provided in this subsection is exclusive. Nothing in this subsection prevents an appeal from the court of appeals to the state supreme court in the same manner as in other civil cases. There shall be no judicial review of a final decision of the board under RCW 82.03.130(10) in which a formal hearing has not been elected.

NEW SECTION. Sec. 32. JUDICIAL REVIEW OF CLAIM FOR REFUND. Any person having filed a claim for refund or credit on any tax, penalty, or other sum collected under this title may, within the applicable period of limitation provided in section 25(1)(b) of this act, sue for a refund or credit on the tax, penalty, or other sum in the superior court of Thurston county. All procedures and rights of appeal governing other civil actions apply to these proceedings.

This section does not apply to any tax payment which has been the subject of an appeal to the state board of tax appeals with respect to which a formal hearing has been held.

Sec. 33. Section 1, chapter 32, Laws of 1985 and RCW 82.08.020 are each amended to read as follows:

(1) There is levied and there shall be collected a tax on each retail sale in this state equal to ((~~six~~)) three and ((~~five-tenths~~)) one-fourth percent of the selling price.

(2) The tax imposed under this chapter shall apply to successive retail sales of the same property.

(3) The rate provided in this section applies to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

Sec. 34. Section 82.04.230, chapter 15, Laws of 1961 as last amended by section 2, chapter 281, Laws of 1971 ex. sess. and RCW 82.04.230 are each amended to read as follows:

Upon every person engaging within this state in business as an extractor; as to such persons the amount of the tax with respect to such business shall be equal to the value of the products, including byproducts, extracted for sale or for commercial or industrial use, multiplied by the rate of ((~~forty-four~~)) twenty-two one-hundredths of one percent;

The measure of the tax is the value of the products, including byproducts, so extracted, regardless of the place of sale or the fact that deliveries may be made to points outside the state.

Sec. 35. Section 82.04.240, chapter 15, Laws of 1961 as last amended by section 1, chapter 172, Laws of 1981 and RCW 82.04.240 are each amended to read as follows:

Upon every person except persons taxable under subsections (2), (3), (4), (5), (7), (8), or (9) of RCW 82.04.260 engaging within this state in business as a manufacturer; as to such persons the amount of the tax with respect to such business shall be equal to the value of the products, including byproducts, manufactured, multiplied by the rate of ((~~forty-four~~)) twenty-two one-hundredths of one percent.

The measure of the tax is the value of the products, including byproducts, so manufactured regardless of the place of sale or the fact that deliveries may be made to points outside the state.

Sec. 36. Section 82.04.250, chapter 15, Laws of 1961 as last amended by section 2, chapter 172, Laws of 1981 and RCW 82.04.250 are each amended to read as follows:

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

Sec. 37. Section 3, chapter 65, Laws of 1970 ex. sess. as last amended by section 2, chapter 32, Laws of 1985 and RCW 82.04.255 are each amended to read as follows:

Upon every person engaging within the state as a real estate broker; as to such persons, the amount of the tax with respect to such business shall be equal to the gross income of the business, multiplied by the rate of ((~~1.50~~)) .75 percent.

The measure of the tax on real estate commissions earned by the real estate broker shall be the gross commission earned by the particular real estate brokerage office including that portion of the commission paid to salesmen or associate brokers in the same office on a particular transaction: PROVIDED, HOWEVER, That where a real estate commission is divided between an originating brokerage office and a cooperating brokerage office on a particular transaction, each brokerage office shall pay the tax only upon their respective shares of said commission: AND PROVIDED FURTHER, That where the brokerage office has paid the tax as provided herein, salesmen or associate brokers within the same brokerage office shall not be required to pay a similar tax upon the same transaction.

Sec. 38. Section 5, chapter 3, Laws of 1983 2nd ex. sess. as amended by section 2, chapter 135, Laws of 1985 and by section 1, chapter 471, Laws of 1985 and RCW 82.04.260 are each reenacted and 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~~)) five one-thousandths 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~~)) one-sixteenth 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~~)) one-eighth 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~~)) one-sixteenth 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~~)) fifteen one-hundredths 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~~)) twenty-two 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 ((~~twenty-five one-hundredths of one percent through June 30, 1986, and one-eighth~~)) one-sixteenth 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~~)) thirteen 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~~)) thirteen 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~~)) thirteen 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~~)) seventeen 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~~)) seventeen 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 43.200 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-half of one percent.

Sec. 39. 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~~)) twenty-two 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~~)) twenty-two 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. 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. 40. Section 2, chapter 8, Laws of 1970 ex. sess. as last amended by section 2, chapter 226, Laws of 1986 and RCW 82.04.280 are each amended to read as follows:

Upon every person engaging within this state in the business of: (1) Printing, and of publishing newspapers, periodicals or magazines; (2) building, repairing or improving any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used, primarily for foot or vehicular traffic including mass transportation vehicles of any kind and including any readjustment, reconstruction or relocation of the facilities of any public, private or cooperatively owned utility or railroad in the course of such building, repairing or improving, the cost of which readjustment, reconstruction, or relocation, is the responsibility of the public authority whose street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle is being built, repaired or improved; (3) extracting for hire or processing for hire; (4) operating a cold storage warehouse or storage warehouse, but not including the rental of cold storage lockers; (5) representing and performing services for fire or casualty insurance companies as an independent resident managing general agent licensed under the provisions of RCW 48.05.310; (6) radio and television broadcasting, excluding network, national and regional advertising computed as a standard deduction based on the national average thereof as annually reported by the Federal Communications Commission, or in lieu thereof by itemization by the individual broadcasting station, and excluding that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the 100 micro-volt signal strength and delivery by wire, if any; (7) engaging in activities which bring a person within the definition of consumer contained in RCW 82.04.190(6), as now or hereafter amended; as to such persons, the amount of tax on such business shall be equal to the gross income of the business multiplied by the rate of ((~~forty-four~~)) twenty-two one hundredths of one percent.

As used in this section, "cold storage warehouse" means a storage warehouse used to store fresh and/or frozen perishable fruits or vegetables, meat, seafood, dairy products, or fowl, or any combination thereof, at a desired temperature to maintain the quality of the product for orderly marketing.

As used in this section, "storage warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation, except field warehouses, fruit warehouses, fruit packing plants, warehouses licensed under chapter 22.09 RCW, public garages storing automobiles, railroad freight sheds, docks and wharves, and "self-storage" or "mini storage" facilities whereby customers have direct access to individual storage areas by separate entrance.

Sec. 41. Section 82.04.290, chapter 15, Laws of 1961 as last amended by section 3, chapter 32, Laws of 1985 and RCW 82.04.290 are each amended to read as follows:

Upon every person engaging within this state in any business activity other than or in addition to those enumerated in RCW 82.04.230, 82.04.240, 82.04.250, 82.04.255, 82.04.260, 82.04.270, and 82.04.280; as to such persons the amount of tax on account of such activities shall be equal to the gross income of the business multiplied by the rate of ((~~1.50~~)) .75 percent. This section includes, among others, and without limiting the scope hereof (whether or not title to materials used in the performance of such business passes to another by accession, confusion or other than by outright sale), persons engaged in the business of rendering any type of service which does not constitute a "sale at retail" or a "sale at wholesale." The value of advertising, demonstration, and promotional supplies and materials furnished to an agent by his principal or supplier to be used for informational, educational and promotional purposes shall not be considered a part of the agent's remuneration or commission and shall not be subject to taxation under this section.

Sec. 42. Section 134, chapter 195, Laws of 1973 1st ex. sess. and RCW 84.52.043 are each amended to read as follows:

Within and subject to the limitations imposed by RCW 84.52.050 as amended, the regular ad valorem tax levies upon real and personal property by the taxing districts hereafter named shall be as follows: The levy by the state shall not exceed ((~~three~~)) two dollars and ((~~sixty~~)) forty cents per thousand dollars of assessed value adjusted to the state equalized value in accordance with the indicated ratio fixed by the state department of revenue to be used exclusively for the support of the common schools; the levy by any county shall not exceed one dollar and eighty cents per thousand dollars of assessed value; the levy for any road district shall not exceed two dollars and twenty-five cents per thousand dollars of assessed value; and the levy by or for any city or town shall not exceed three dollars and thirty-seven and one-half cents per thousand dollars of assessed value: PROVIDED FURTHER, That counties of the fifth class and under are hereby authorized to levy from one dollar and eighty cents to two dollars and forty-seven and one-half cents per thousand dollars of assessed value for general county purposes and from one dollar and fifty-seven and one-half cents to two dollars and twenty-five cents per thousand dollars of assessed value for county road purposes if the total levy for both purposes does not exceed four dollars and five cents per thousand dollars of assessed value: PROVIDED FURTHER, That counties of the fourth and the ninth class are hereby authorized to levy two dollars and two and one-half cents per thousand dollars of assessed value until such time as the junior taxing agencies are utilizing all the dollar rates available to them: AND PROVIDED FURTHER, That the total property tax levy authorized by law without a vote of the people shall not exceed ((~~nine~~)) seven dollars and ((~~fifteen~~)) forty-five cents per thousand dollars of assessed value. Levies at the rates provided by existing law by or for any port or public utility district shall not be included in the limitation set forth by this proviso.

Nothing herein shall prevent levies at the rates provided by existing law by or for any port or power district.

It is the intent of the legislature that the provisions of this section shall supersede all conflicting provisions of law including section 24, chapter 299, Laws of 1971 ex. sess. and section 8, chapter 124, Laws of 1972 ex. sess.

NEW SECTION. Sec. 43. Section 42 of this act applies to taxes levied in 1988 for collection in 1989, and thereafter.

NEW SECTION. Sec. 44. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 45. Sections 1 through 28 and 32 of this act shall be codified as a new title in the Revised Code of Washington, to be numbered Title 82A.

Section captions constitute no part of the law.

NEW SECTION. Sec. 46. This act shall take effect on January 1, 1988, if the proposed amendment to Article VII of the state Constitution authorizing an income tax (SJR ...) is validly submitted and is approved and ratified by the voters at a general election held in November, 1987. If the proposed amendment is not so approved and ratified, this act shall be null and void in its entirety.