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AN ACT Relating to increasing interstate trade through tax incentives for warehouse and grain elevator operations; amending RCW 81.104.170; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.44 RCW; adding a new section to chapter 46.87 RCW; adding a new section to chapter 82.04 RCW; adding a new section to chapter 82.14 RCW; creating new sections; providing an effective date; and declaring an emergency.

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

NEW SECTION. Sec. 1. The legislature finds that the state's overall economic health and prosperity is bolstered through tax incentives targeted to specific industries. The warehouse and distribution industry is critical to other businesses. The transportation sector, the retail sector, the ports, and the wholesalers all rely on the warehouse and distribution industry. It is the intent of the legislature to stimulate interstate trade by providing tax incentives to those persons in the warehouse and distribution industry engaged in highly competitive trade.

NEW SECTION. Sec. 2. A new section is added to chapter 82.08 RCW to read as follows:

(1) Wholesalers or third-party warehousers who own or operate warehouses or grain elevators and retailers who own or operate distribution centers, and who have paid the tax levied by RCW 82.08.020 on:

(a) Material-handling and racking equipment, and labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the equipment;

(b) Construction of a warehouse or grain elevator, including materials, and including service and labor costs; or

(c) Trucks for use at a warehouse or grain elevator that has received the construction exemption if the trucks are used for distribution or transport of finished goods to and from the warehouse or grain elevator and if the trucks are purchased or leased within eighteen months after construction is completed,

are eligible for an exemption in the form of a remittance. The amount of the remittance is computed under subsection (3) of this section and is based on the state share of sales tax.

(2) For purposes of this section and sections 3, 4, 5, and 6 of this act:

(a) "Agricultural products" has the meaning given in RCW 82.04.213;

(b) "Construction" means the actual construction of a warehouse or grain elevator that did not exist before the construction began. "Construction" includes expansion if the expansion adds at least one hundred thousand square feet of additional space to an existing warehouse or additional storage capacity of at least seven hundred fifty thousand bushels to an existing grain elevator. "Construction" does not include renovation, remodeling, or repair;

(d) "Distribution center" means a warehouse that is used exclusively by a retailer solely for the storage and distribution of finished products to retail outlets of the retailer. "Distribution center" does not include a warehouse at which retail activity occurs;

(e) "Finished goods" means tangible personal property intended for sale by a retailer or wholesaler. "Finished goods" does not include agricultural products stored by wholesalers, third-party warehouses, or retailers if the storage takes place on the land of the person who produced the agricultural product. "Finished goods" does not include logs, minerals, petroleum, gas, or other extracted products stored as raw materials or in bulk;

(f) "Grain elevator" means a structure used for storage and handling of grain in bulk;

(g) "Material-handling equipment and racking equipment" means equipment in a warehouse or grain elevator that is primarily used to handle, store, organize, convey, package, or repackage finished goods. The term includes tangible personal property with a useful life of one year or more that becomes an ingredient or component of the equipment, including repair and replacement parts. The term does not include equipment in offices, lunchrooms, restrooms, and other like space, within a warehouse or grain elevator, or equipment used for nonwarehousing purposes. "Material-handling equipment" includes but is not limited to: Conveyers, carousels, lifts, positioners, pick-up-and-place units, cranes, hoists, mechanical arms, and robots; mechanized systems, including containers that are an integral part of the system, whose purpose is to lift or move tangible personal property; and automated handling, storage, and retrieval systems, including computers that control them, whose purpose is to lift or move tangible personal property; and forklifts and other off-the-road vehicles that are used to lift or move tangible personal property and that cannot be operated legally on roads and streets. "Racking equipment" includes, but is not limited to, conveying systems, chutes, shelves, racks, bins, drawers, pallets, and other containers and storage devices that form a necessary part of the storage system;

(h) "Person" has the meaning given in RCW 82.04.030;

(i) "Retailer" means a person who makes "sales at retail" as defined in chapter 82.04 RCW of tangible personal property;

(j) "Square footage" means the product of the two horizontal dimensions of each floor of a specific warehouse. The entire footprint of the warehouse shall be measured in calculating the square footage, including space that juts out from the building profile such as loading docks. "Square footage" does not mean the aggregate of the square footage of more than one warehouse at a location or the aggregate of the square footage of warehouses at more than one location;

(k) "Third-party warehouser" means a person taxable under RCW 82.04.280(4);

(l) "Truck" means a motor vehicle, as defined in chapter 46.04 RCW, used for the transport of goods, and includes a tractor or trailer;

(m) "Warehouse" means an enclosed building or structure in which finished goods are stored. A warehouse building or structure may have more than one storage room and more than one floor. Office space, lunchrooms, restrooms, and other space within the warehouse and necessary for the operation of the warehouse are considered part of the warehouse as are loading docks and other such space attached to the building and used for handling of finished goods. Landscaping and parking lots are not considered part of the warehouse. A storage yard is not a warehouse, nor is a building in which manufacturing takes place; and

(n) "Wholesaler" means a person who makes "sales at wholesale" as defined in chapter 82.04 RCW of tangible personal property, but "wholesaler" does not include a person who makes sales exempt under 82.04.330.

(3)(a) A person claiming an exemption from state tax in the form of a remittance under this section shall pay the tax imposed by RCW 82.08.020 to the seller who shall remit the tax to the department. The buyer may then apply to the department for remittance of all or part of the tax paid under RCW 82.08.020. For warehouses with square footage of one hundred thousand or more but less than one hundred fifty thousand, and for grain elevators with bushel capacity of seven hundred fifty thousand or more but less than one million, the remittance is equal to fifty percent of the amount of tax paid. For warehouses with square footage of one hundred fifty thousand or more but less than two hundred thousand, and for grain elevators with bushel capacity of one million or more but less than one million five hundred thousand, the remittance is equal to seventy-five percent of the amount of tax paid. For warehouses with square footage of two hundred thousand or more, and for grain elevators with bushel capacity of one million five hundred thousand or more, the remittance is equal to one hundred percent of the amount of tax paid.

(b) The department shall determine eligibility under this section based on information provided by the buyer and through audit and other administrative records. The buyer shall submit to the department, in adequate detail to enable the department to determine whether the equipment, truck, or construction meets the criteria under this section: Invoices; proof of tax paid; documents describing the material-handling equipment and racking equipment; location and size of warehouses and grain elevators; and construction invoices and documents.

(c) The department shall on a quarterly basis remit exempted amounts to those persons determined to be eligible under this section.

(4) Warehouses, grain elevators, and material-handling equipment and racking equipment for which an exemption, credit, or deferral has been or is being received under chapter 82.60, 82.61, 82.62, or 82.63 RCW or RCW 82.08.02565 or 82.12.02565 are not eligible for any remittance under this section. Warehouses and grain elevators upon which construction was initiated before the effective date of this act are not eligible for a remittance under this section.

(5) The lessor or owner of a warehouse or grain elevator is not eligible for a remittance under this section unless the underlying ownership of the warehouse or grain elevator, the material-handling equipment and racking equipment, or trucks vests exclusively in the same person, or unless the lessor by written contract agrees to pass the economic benefit of the remittance to the lessee in the form of reduced rent payments.

NEW SECTION. Sec. 3. A new section is added to chapter 82.12 RCW to read as follows:

(1) Wholesalers or third-party warehousers who own or operate warehouses or grain elevators, and retailers who own or operate distribution centers, and who have paid the tax levied under RCW 82.12.020 on:

(a) Material-handling equipment and racking equipment;

(b) Materials incorporated in the construction of a warehouse or grain elevator; or

(c) Trucks for use at a warehouse or grain elevator that has received the construction exemption if the trucks are used for distribution or transport of finished goods to and from the warehouse or grain elevator and if the trucks are acquired or leased within eighteen months after construction is completed,

are eligible for an exemption on tax paid in the form of a remittance or credit against tax owed. The amount of the remittance or credit is computed under subsection (2) of this section and is based on the state share of use tax.

(2)(a) A person claiming an exemption from state tax in the form of a remittance under this section shall pay the tax imposed by RCW 82.12.020 to the department. The person may then apply to the department for remittance of all or part of the tax paid under RCW 82.12.020. For warehouses with square footage of one hundred thousand or more but less than one hundred fifty thousand, and for grain elevators with bushel capacity of seven hundred fifty thousand or more but less than one million, the remittance is equal to fifty percent of the amount of tax paid. For warehouses with square footage of one hundred fifty thousand or more but less than two hundred thousand, and for grain elevators with bushel capacity of one million or more but less than one million five hundred thousand, the remittance is equal to seventy-five percent of the amount of tax paid. For warehouses with square footage of two hundred thousand or more, and for grain elevators with bushel capacity of one million five hundred thousand or more, the remittance is equal to one hundred percent of the amount of tax paid.

(b) The department shall determine eligibility under this section based on information provided by the buyer and through audit and other administrative records. The buyer shall submit to the department, in adequate detail to enable the department to determine whether the equipment, truck, or construction meets the criteria under this section: Invoices; proof of tax paid; documents describing the material-handling equipment and racking equipment; location and size of warehouses, if applicable; and construction invoices and documents.

(c) The department shall on a quarterly basis remit or credit exempted amounts to those persons determined to be eligible under this section.

(3) Warehouse, grain elevators, and material-handling equipment and racking equipment for which an exemption, credit, or deferral has been or is being received under chapter 82.60, 82.61, 82.62, or 82.63 RCW or RCW 82.08.02565 or 82.12.02565 are not eligible for any remittance under this section. Materials incorporated in warehouses and grain elevators upon which construction was initiated prior to the effective date of this act are not eligible for a remittance under this section.

(4) The lessor or owner of the warehouse or grain elevator is not eligible for a remittance or credit under this section unless the underlying ownership of the warehouse or grain elevator, material‑handling equipment and racking equipment, or trucks vests exclusively in the same person, or unless the lessor by written contract agrees to pass the economic benefit of the exemption to the lessee in the form of reduced rent payments.

(5) The definitions in section 2 of this act apply to this section.

NEW SECTION. Sec. 4. A new section is added to chapter 82.44 RCW to read as follows:

(1) Wholesalers, third-party warehousers, and retailers, who qualify for exemption under section 2 or 3 of this act for trucks used at a warehouse, and who paid the tax owed under RCW 82.44.020 on trucks exempted under section 2 or 3 of this act, are eligible for an exemption in the form of a remittance as computed under subsection (2) of this section. Trucks used at a grain elevator are not eligible for a remittance under this section.

(2) Persons eligible for remittance under this section shall pay the tax to the department of licensing. The taxpayer may then apply to the department of revenue for a remittance of fifty-seven percent of the tax paid on eligible trucks multiplied by the applicable proration factor, multiplied by the multiple-warehouse ratio if applicable. Proration factors are: For warehouses with square footage of one hundred thousand or more but less than one hundred fifty thousand the factor is fifty percent; for warehouses with square footage of one hundred fifty thousand or more but less than two hundred thousand the factor is seventy-five percent; and for facilities with square footage of two hundred thousand or more the factor is one hundred percent. If a qualifying truck is used at more than one warehouse and some of these warehouses do not qualify for the construction exemption, the remittance shall reflect this nonqualifying use through calculation of the multiple-warehouse ratio. The multiple-warehouse ratio is the square footage of qualifying warehouses served by the truck divided by the square footage of nonqualifying warehouses served by the truck.

(3) The taxpayer shall submit to the department of revenue, in adequate detail to enable the department to determine if a truck meets the criteria under this section: Invoices; proof of tax paid; and documents describing location and size of warehouses, if applicable. The department of revenue shall on an annual basis remit exempted amounts to those persons determined to be eligible under this section.

(4) Trucks for which an exemption, credit, or deferral has been or is being received under chapter 82.60, 82.61, 82.62, or 82.63 RCW or RCW 82.08.02565 or 82.12.02565 are not eligible for any remittance under this section. Acquisition or use of trucks that occurred before the effective date of this act is not eligible for remittance under this section. If a truck is sold or other such an action by which it is not used at the warehouse to which it was originally assigned, the exemption under this section is not available.

(5) The lessor or owner of the warehouse is not eligible for a remittance unless the underlying ownership of the warehouse, equipment, and trucks vests exclusively in the same person, or unless the lessor by written contract agrees to pass the economic benefit of the remittance to the lessee in the form of reduced rent payments.

(6) The definitions in section 2 of this act apply to this section.

NEW SECTION. Sec. 5. A new section is added to chapter 46.87 RCW to read as follows:

(1) Wholesalers, third-party warehousers, and retailers, who qualify for the exemption under section 2 or 3 of this act for trucks used at a warehouse, and who paid the tax owed under RCW 82.44.020 on the trucks exempted under section 2 or 3 of this act, are eligible for an exemption in the form of a remittance as computed under subsection (2) of this section. Trucks used at a grain elevator are not eligible for a remittance under this section.

(4) Trucks for which an exemption, credit, or deferral has been or is being received under chapter 82.60, 82.61, 82.62, or 82.63 RCW or RCW 82.08.02565 or 82.12.02565 are not eligible for any remittance under this section. Acquisition or use of trucks that occurred before the effective date of this act is not eligible for remittance under this section. If a truck is sold or other such an action in which it is not used at the warehouse to which it was originally assigned, the exemption under this section is not available.

(6) Chapter 82.32 RCW applies to this section.

(7) The definitions in section 2 of this act apply to this section.

NEW SECTION. Sec. 6. A new section is added to chapter 82.04 RCW to read as follows:

(1) A credit against the tax imposed under this chapter is allowed for wholesalers or third-party warehousers who own or operate warehouses or grain elevators and retailers who own or operate distribution centers, and who are eligible for an exemption in the form of a remittance under section 2 or 3 of this act.

(2) The credit is equal to the amount of sales and use tax paid under chapter 82.14 RCW and RCW 81.104.170 on retail sales that qualify for an exemption in the form of a remittance under section 2 of this act and on the value of articles that qualify for an exemption in the form of a remittance under section 3 of this act.

(3) Persons claiming a credit under this section shall apply for the credit in a form and manner prescribed by the department. The department shall determine eligibility for the credit based on information provided by the buyer and through audit and other administrative records. The credit shall be taken against taxes due for the calendar year in which the credit is approved by the department. Any portion of the credit in excess of the tax due under this chapter may be carried forward in successive years until the credit is exhausted.

(4) The definitions in section 2 of this act apply to this section.

NEW SECTION. Sec. 7. A new section is added to chapter 82.14 RCW to read as follows:

The exemptions in sections 2 and 3 of this act are for the state portion of the sales and use tax and do not extend to the tax imposed in this chapter.

Sec. 8. RCW 81.104.170 and 1992 c 101 s 28 are each amended to read as follows:

Cities that operate transit systems, county transportation authorities, metropolitan municipal corporations, public transportation benefit areas, and regional transit authorities may submit an authorizing proposition to the voters and if approved by a majority of persons voting, fix and impose a sales and use tax in accordance with the terms of this chapter, solely for the purpose of providing high capacity transportation service.

The tax authorized pursuant to this section shall be in addition to the tax authorized by RCW 82.14.030 and shall be collected from those persons who are taxable by the state pursuant to chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the taxing district. The maximum rate of such tax shall be approved by the voters and shall not exceed one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax). The maximum rate of such tax that may be imposed shall not exceed nine‑tenths of one percent in any county that imposes a tax under RCW 82.14.340, or within a regional transit authority if any county within the authority imposes a tax under RCW 82.14.340. The exemptions in sections 2 and 3 of this act are for the state portion of the sales and use tax and do not extend to the tax authorized in this section.

NEW SECTION. Sec. 9. The legislative fiscal committees shall report to the legislature by December 1, 1999, on the economic impacts of this act. This report shall analyze employment and other relevant economic data pertaining to the tax exemptions authorized under this act and shall measure the effect on the creation or retention of family‑wage jobs and diversification of the state's economy. Analytic techniques may include, but not be limited to, comparisons of Washington to other states that did not enact business tax changes, comparisons across Washington counties based on usage of the tax exemptions, and comparisons across similar firms based on their use of the tax exemptions. In performing the analysis, the legislative fiscal committees shall consult with business and labor interests. The department of revenue, the employment security department, and other agencies shall provide to the legislative fiscal committees such data as the legislative fiscal committees may request in performing the analysis required under this section.

NEW SECTION. Sec. 10. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 1997.