DEPARTMENT OF REVENUE

[Filed April 16, 2020, 3:15 p.m.]

Preproposal statement of inquiry was filed as WSR 20-05-063.

Title of Rule and Other Identifying Information: WAC 458-20-103 Time and place of sale, the department proposes to revise the rule and retitle it: Gift certificates—Sale deemed to occur and retail sales tax collected at time of redemption.

Hearing Location(s): On May 26, 2020, at 10:00 a.m., at 6400 Linderson Way S.W., Conference Room 114A, Tumwater, WA 98501.

Date of Intended Adoption: June 2, 2020.

Submit Written Comments to: Tim Danforth (until April 30, 2020), P.O. Box 47453, Olympia, WA 98504-7453, email TimD@dor.wa.gov, fax 360-534-1606; after April 30, 2020, send written comments to Atif Aziz at AtifA@dor.wa.gov.

Assistance for Persons with Disabilities: Contact Julie King or Renee Cosare, phone 360-704-5733 or 360-704-5734, TTY 800-833-6384.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department plans to amend WAC 458-20-103 to remove provisions inconsistent with statutory authority and/or redundant with other rules, and to clarify existing law regarding the taxation of gift certificates. The proposed amended rule focuses on the timing and the measure of the retail sales tax on the redemption of gift certificates. Additional references to RCW 82.32.023 (defining product) and 82.08.020 (defining selling price) are added for clarification. The rule is retitled to reflect its content.

Reasons Supporting Proposal: The department of revenue (DOR) would like to revise WAC 458-20-103 because it is no longer consistent with statutory authority and has been made redundant or replaced by other rules. See RCW 82.32.730, 82.04.040, 82.04.067, 82.08.0531; WAC 458-20-108, 458-20-145, 458-20-211, 458-20-193, 458-20-221, 458-20-19401.

Statutory Authority for Adoption: RCW 82.32.300, 82.01.060(2).

Statute Being Implemented: RCW 82.04.040, 82.04.050.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: DOR, governmental.

Name of Agency Personnel Responsible for Drafting: Tim Danforth, 6400 Linderson Way S.W., Tumwater, WA, 360-534-1538; Implementation and Enforcement: John Ryser, 6400 Linderson Way S.W., Tumwater, WA, 360-534-1605.

A school district fiscal impact statement is not required under RCW 28A.305.135.

A cost-benefit analysis is not required under RCW 34.05.328. This rule is not a significant legislative rule as defined by RCW 34.05.328.

The proposed rule does not impose more-than-minor costs on businesses. Following is a summary of the agency's analysis showing how costs were calculated. The proposed rule language for WAC 458-20-103 provides information to businesses regarding the timing and the measure of the retail sales tax on the redemption of gift certificates. The proposed rule does not impose more than minor costs on businesses, as it does not propose any new tax rate, tax measure, reporting or recordkeeping requirements not already established by statute.

AMENDATORY SECTION(Amending WSR 82-12-021, filed 5/25/82)

WAC 458-20-103((Time and place of sale.))Gift certificates—Sale deemed to occur and retail sales tax collected at time of redemption.

((Under the Revenue Act of 1935, as amended, the word "sale" means any transfer of the ownership of, title to, or possession of, property for a valuable consideration, and includes the sale or charge made for performing certain services.

For the purpose of determining tax liability of persons selling tangible personal property, a sale takes place in this state when the goods sold are delivered to the buyer in this state, irrespective of whether title to the goods passes to the buyer at a point within or without this state.

With respect to the charge made for performing services which constitute sales as defined in RCW 82.04.040 and 82.04.050, a sale takes place in this state when the services are performed herein. With respect to the charge made for renting or leasing tangible personal property, a sale takes place in this state when the property is used in this state by the lessee.

Where gift certificates are sold which will be redeemed in merchandise, or in services which are defined by the Revenue Act as retail sales, the sale is deemed to occur and the retail sales tax shall be collected at the time the certificate is actually redeemed for the merchandise or services. The measure of the tax is the total selling price of the merchandise or services at the time of the redemption, including the redemption value of the certificate, or any part thereof, which is applied toward the selling price. (See WAC 458-20-235 for effect of rate changes on prior contracts and sales agreements. See also WAC 458-20-131 which deals with merchandising games, and which covers the situation where certificates or trade checks are issued which may be redeemed for services which are not retail sales, such as barber services, admissions, etc.)

Revised March 2, 1982.))(1) Tax timing. A purchase of a product, as defined in RCW 82.32.023, or services made through the redemption of a gift certificate or gift card is deemed to occur for retail sales tax purposes at the time the certificate or card is actually redeemed for the product or services. Retail sales tax must be collected at the time of redemption.

(2) Tax measure. The measure of the tax is the total selling price of the product or services at the time of the redemption, including the redemption value of the certificate, or any part thereof, which is applied toward the selling price. See RCW 82.08.010 for the definition of selling price.