AN
ACT Relating to prohibiting the taxation of internet service providers as
network telephone services providers; amending RCW 82.04.055 and 82.04.065;
adding a new section to chapter 35.21 RCW; adding a new section to chapter
82.04 RCW; creating a new section; and declaring an emergency.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. The
legislature finds that the newly emerging business of providing internet
service is providing widespread benefits to all levels of society. The
legislature further finds that this business is important to our state's
continued growth in the high-technology sector of the economy and that, as this
industry emerges, it should not be burdened by new taxes that might not be
appropriate for the type of service being provided. The legislature further
finds that there is no clear statutory guidance as to how internet services
should be classified for tax purposes and intends to ratify the state's current
treatment of such services.
NEW
SECTION. Sec. 2. A
new section is added to chapter 35.21 RCW to read as follows:
Until
July 1, 1999, a city or town may not impose any new taxes or fees specific to
internet service providers. A city or town may tax internet service providers
under generally applicable business taxes or fees, at a rate not to exceed the
rate applied to a general service classification. For the purposes of this
section, "internet service" has the same meaning as in section 4 of
this act.
Sec.
3. RCW
82.04.055 and 1993 sp.s. c 25 s 201 are each amended to read as follows:
(1)
"Selected business services" means:
(a)
Stenographic, secretarial, and clerical services.
(b)
Computer services, including but not limited to computer programming, custom
software modification, custom software installation, custom software
maintenance, custom software repair, training in the use of custom software,
computer systems design, and custom software update services.
(c)
Data processing services, including but not limited to word processing, data
entry, data retrieval, data search, information compilation, payroll
processing, business accounts processing, data production, and other computerized
data and information storage or manipulation. Data processing services also
includes the use of a computer or computer time for data processing whether the
processing is performed by the provider of the computer or by the purchaser or
other beneficiary of the service.
(d)
Information services, including but not limited to electronic data retrieval or
research that entails furnishing financial or legal information, data or
research, internet service as defined in section 4 of this act, general
or specialized news, or current information unless such news or current
information is furnished to a newspaper publisher or to a radio or television
station licensed by the federal communications commission.
(e)
Legal, arbitration, and mediation services, including but not limited to
paralegal services, legal research services, and court reporting services.
(f)
Accounting, auditing, actuarial, bookkeeping, tax preparation, and similar
services.
(g)
Design services whether or not performed by persons licensed or certified,
including but not limited to the following:
(i)
Engineering services, including civil, electrical, mechanical, petroleum,
marine, nuclear, and design engineering, machine designing, machine tool
designing, and sewage disposal system designing;
(ii)
Architectural services, including but not limited to: Structural or landscape
design or architecture, interior design, building design, building program
management, and space planning.
(h)
Business consulting services. Business consulting services are those primarily
providing operating counsel, advice, or assistance to the management or owner
of any business, private, nonprofit, or public organization, including but not
limited to those in the following areas: Administrative management consulting,
general management consulting, human resource consulting or training,
management engineering consulting, management information systems consulting,
manufacturing management consulting, marketing consulting, operations research
consulting, personnel management consulting, physical distribution consulting,
site location consulting, economic consulting, motel, hotel, and resort
consulting, restaurant consulting, government affairs consulting, and lobbying.
(i)
Business management services, including but not limited to administrative
management, business management, and office management, but not including
property management or property leasing, motel, hotel, and resort management,
or automobile parking management.
(j)
Protective services, including but not limited to detective agency services and
private investigating services, armored car services, guard or protective
services, lie detection or polygraph services, and security system, burglar, or
fire alarm monitoring and maintenance services.
(k)
Public relations or advertising services, including but not limited to layout,
art direction, graphic design, copy writing, mechanical preparation, opinion
research, marketing research, marketing, or production supervision, but
excluding services provided as part of broadcast or print advertising.
(l)
Aerial and land surveying, geological consulting, and real estate appraising.
(2)
Subsection (1) of this section notwithstanding, the term "selected
business services" does not include:
(a)
The provision of either permanent or temporary employees.
(b)
Services provided by a public benefit nonprofit organization, as defined in RCW
82.04.366, to the state of Washington, its political subdivisions, municipal
corporations, or quasi-municipal corporations.
(c)
Services related to the identification, investigation, or cleanup arising out
of the release or threatened release of hazardous substances when the services
are remedial or response actions performed under federal or state law, or when
the services are performed to determine if a release of hazardous substances
has occurred or is likely to occur.
(d)
Services provided to or performed for, on behalf of, or for the benefit of a
collective investment fund such as: (i) A mutual fund or other regulated
investment company as defined in section 851(a) of the Internal Revenue Code of
1986, as amended; (ii) an "investment company" as that term is used
in section 3(a) of the Investment Company Act of 1940 as well as an entity that
would be an investment company under section 3(a) of the Investment Company Act
of 1940 except for the section 3(c)(1) or (11) exemptions, or except that it is
a foreign investment company organized under laws of a foreign country; (iii)
an "employee benefit plan," which includes any plan, trust,
commingled employee benefit trusts, or custodial arrangement that is subject to
the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sec.
1001 et seq., or that is described in sections 125, 401, 403, 408, 457, and
501(c)(9) and (17) through (23) of the Internal Revenue Code of 1986, as
amended, or similar plan maintained by state or local governments, or plans,
trusts, or custodial arrangements established to self-insure benefits required
by federal, state, or local law; (iv) a fund maintained by a tax exempt
organization as defined in section 501(c)(3) or 509(a) of the Internal Revenue
Code of 1986, as amended, for operating, quasi-endowment, or endowment
purposes; or (v) funds that are established for the benefit of such tax exempt
organization such as charitable remainder trusts, charitable lead trusts,
charitable annuity trusts, or other similar trusts.
(e)
Research or experimental services eligible for expense treatment under section
174 of the Internal Revenue Code of 1986, as amended.
(f)
Financial services provided by a financial institution. The term
"financial institution" means a corporation, partnership, or other
business organization chartered under Title 30, 31, 32, or 33 RCW, or under the
National Bank Act, as amended, the Homeowners Loan Act, as amended, or the
Federal Credit Union Act, as amended, or a holding company of any such business
organization that is subject to the Bank Holding Company Act, as amended, or
the Homeowners Loan Act, as amended, or a subsidiary or affiliate wholly owned
or controlled by one or more financial institutions, as well as a lender
approved by the United States secretary of housing and urban development for
participation in any mortgage insurance program under the National Housing Act,
as amended. The term "financial services" means those activities
authorized by the laws cited in this subsection (2)(f) and includes services
such as mortgage servicing, contract collection servicing, finance leasing, and
services provided in a fiduciary capacity to a trust or estate.
NEW
SECTION. Sec. 4. A
new section is added to chapter 82.04 RCW to read as follows:
(1)
The provision of internet services is a selected business service activity and
subject to tax under RCW 82.04.290(1), but if RCW 82.04.055 is repealed then
the provision of internet services is taxable under the general service
business and occupation tax classification of RCW 82.04.290.
(2)
"Internet" means the international computer network of both federal
and nonfederal interoperable packet switched data networks, including the
graphical subnetwork called the world wide web.
(3)
"Internet service" means a service that includes computer processing
applications, provides the user with additional or restructured information, or
permits the user to interact with stored information through the internet or a
proprietary subscriber network. "Internet service" includes
provision of internet electronic mail, access to the internet for information
retrieval, and hosting of information for retrieval over the internet or the
graphical subnetwork called the world wide web.
Sec.
5. RCW
82.04.065 and 1983 2nd ex.s. c 3 s 24 are each amended to read as follows:
(1)
"Competitive telephone service" means the providing by any person of
telecommunications equipment or apparatus, or service related to that equipment
or apparatus such as repair or maintenance service, if the equipment or
apparatus is of a type which can be provided by persons that are not subject to
regulation as telephone companies under Title 80 RCW and for which a separate
charge is made.
(2)
"Network telephone service" means the providing by any person of
access to a local telephone network, local telephone network switching service,
toll service, or coin telephone services, or the providing of telephonic,
video, data, or similar communication or transmission for hire, via a local
telephone network, toll line or channel, cable, microwave, or similar
communication or transmission system. "Network telephone service"
includes interstate service, including toll service, originating from or
received on telecommunications equipment or apparatus in this state if the
charge for the service is billed to a person in this state. "Network
telephone service" includes the provision of transmission to and from the
site of an internet provider via a local telephone network, toll line or
channel, cable, microwave, or similar communication or transmission system.
"Network telephone service" does not include the providing of
competitive telephone service, the providing of cable television service, ((nor))
the providing of broadcast services by radio or television stations, nor the
provision of internet service as defined in section 4 of this act, including
the reception of dial-in connection, provided at the site of the internet
service provider.
(3)
"Telephone service" means competitive telephone service or network
telephone service, or both, as defined in subsections (1) and (2) of this
section.
(4)
"Telephone business" means the business of providing network
telephone service, as defined in subsection (2) of this section. It includes
cooperative or farmer line telephone companies or associations operating an
exchange.
NEW
SECTION. Sec. 6. 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. 7. 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 immediately.
