AN
ACT Relating to the meaning of the phrase "services rendered in respect to
constructing" for purposes of the business and occupation and sales and
use taxes; adding a new section to chapter 82.04 RCW; and creating a new
section.
BE IT ENACTED BY THE LEGISLATURE
OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. (1)
The legislature finds that the taxation of "services rendered in respect
to constructing buildings or other structures" has generally included the
entire transaction for construction, including certain services provided
directly to the consumer or owner rather than the person engaged in the
performance of the constructing activity. Changes in business practices and
recent administrative and court decisions have confused the issue. It is the
intent of the legislature to clarify which services, if standing alone and not
part of the construction agreement, are taxed as retail or wholesale sales, and
which services will continue to be taxed as a service.
(2)
It is further the intent of the legislature to confirm that the entire price
for the construction of a building or other structure for a consumer or owner
continues to be a retail sale, even though some of the individual services
reflected in the price, if provided alone, would be taxed as services and not
as separate retail or wholesale sales.
(3)
Therefore, the intent of this act is to maintain the application of the law and
not to extend retail treatment to activities not previously treated as retail
activities. Services that are otherwise subject to tax as a service under RCW
82.04.290(2), including but not limited to engineering, architectural,
surveying, flagging, accounting, legal, consulting, or administrative services,
remain subject to tax as a service under RCW 82.04.290(2), if the person
responsible for the performance of those services is not also responsible for
the performance of the constructing, building, repairing, improving, or
decorating activities. Additionally, unless otherwise provided by law, a
person entering into an agreement to be responsible for the performance of
services otherwise subject to tax as a service under RCW 82.04.290(2), and
subsequently entering into a separate agreement to be responsible for the
performance of constructing, building, repairing, improving, or decorating
activities, is subject to tax as a service under RCW 82.04.290(2) with respect
to the first agreement, and is subject to tax under the appropriate section of
chapter 82.04 RCW with respect to the second agreement, if at the time of the
first agreement there was no contemplation by the parties, as evidenced by the
facts, that the agreements would be awarded to the same person.
NEW
SECTION. Sec. 2. A
new section is added to chapter 82.04 RCW to read as follows:
(1)
As used in RCW 82.04.050, the term "services rendered in respect to"
means those services that are directly related to the constructing, building,
repairing, improving, and decorating of buildings or other structures and that
are performed by a person who is responsible for the performance of the
constructing, building, repairing, improving, or decorating activity. The term
does not include services such as engineering, architectural, surveying,
flagging, accounting, legal, consulting, or administrative services provided to
the consumer of, or person responsible for performing, the constructing,
building, repairing, improving, or decorating services. (2) A contract or
agreement under which a person is responsible for both services that would
otherwise be subject to tax as a service under RCW 82.04.290(2) and also
constructing, building, repairing, improving, or decorating activities that
would otherwise be subject to tax under another section of this chapter is
subject to the tax that applies to the predominant activity under the contract
or agreement.
(3)
Unless otherwise provided by law, a contract or agreement under which a person
is responsible for activities that are subject to tax as a service under RCW
82.04.290(2), and a subsequent contract or agreement under which the same
person is responsible for constructing, building, repairing, improving, or
decorating activities subject to tax under another section of this chapter,
shall not be combined and taxed as a single activity if at the time of the
first contract or agreement it was not contemplated by the parties, as
evidenced by the facts, that the same person would be awarded both contracts.
(4) As used in this section "responsible for the
performance" means that the person is obligated to perform the activities,
either personally or through a third party. A person who reviews work for a
consumer, retailer, or wholesaler but does not supervise or direct the work is
not responsible for the performance of the work. A person who is financially
obligated for the work, such as a bank, but who does not have control over the
work itself is not responsible for the performance of the work.
