Z‑0529.1 _____________________________________________
HOUSE BILL 1706
_____________________________________________
State of Washington 57th Legislature 2001 Regular Session
By Representatives Morris and Cairnes; by request of Department of Revenue
Read first time 02/01/2001. Referred to Committee on Finance.
_1 AN ACT Relating to granting the department of revenue the
_2 authority to issue direct pay permits; amending RCW 82.12.010,
_3 82.08.050, and 82.12.040; adding a new section to chapter 82.32
_4 RCW; creating new sections; and providing an effective date.
_5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
_6 NEW SECTION. Sec. 1. The legislature finds that programs to
_7 allow buyers to remit sales and use tax, rather than traditional
_8 collection and remittance by the seller of sales and use tax, can
_9 assist in tax compliance, ease administrative burdens, and reduce
10 impacts on buyers and sellers. It is the intent of the legislature
11 to grant the department of revenue the authority to permit certain
12 buyers direct payment authority of tax in those instances where it
13 can be shown, to the satisfaction of the department, that direct
14 payment does not burden sellers and does not complicate
15 administration for the department. Buyers authorized for direct
16 payment will remit tax directly to the department, and will pay
17 use tax on tangible personal property and sales tax on retail
18 labor and/or services.
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_1 This act does not affect the requirements to use a resale
_2 certificate nor does it affect the business and occupation tax
_3 treatment of the seller.
_4 NEW SECTION. Sec. 2. A new section is added to chapter 82.32
_5 RCW to read as follows:
_6 (1) The director may grant a direct pay permit to a taxpayer
_7 who demonstrates, to the satisfaction of the director, that the
_8 taxpayer meets the requirements of this section. The direct pay
_9 permit allows the taxpayer to accrue and remit directly to the
10 department use tax on the acquisition of tangible personal
11 property or sales tax on the sale of or charges made for labor
12 and/or services, in accordance with all of the applicable
13 provisions of this title. Any taxpayer that uses a direct pay
14 permit shall remit state and local sales or use tax directly to
15 the department. The agreement by the purchaser to remit tax
16 directly to the department, rather than pay sales or use tax to
17 the seller, relieves the seller of the obligation to collect sales
18 or use tax and requires the buyer to pay use tax on the tangible
19 personal property and sales tax on the sale of or charges made for
20 labor and/or services.
21 (2)(a) A taxpayer may apply for a permit under this section if
22 the taxpayer (i) is subject to mandatory use of electronic funds
23 transfer under RCW 82.32.080; or (ii) makes purchases subject to
24 the taxes imposed under chapter 82.08 or 82.12 RCW in excess of
25 ten million dollars per calendar year.
26 (b) Application for a permit must be made in writing to the
27 director in a form and manner prescribed by the department. A
28 taxpayer who transacts business in two or more locations may
29 submit one application to cover the multiple locations.
30 (c) The director shall review a direct pay permit application
31 in a timely manner and shall notify the applicant, in writing, of
32 the approval or denial of the application. The department shall
33 approve or deny an application based on the applicant=s ability to
34 comply with local government use tax coding capabilities and
35 responsibilities; requirements for vendor notification;
36 recordkeeping obligations; electronic data capabilities; and tax
37 reporting procedures. Additionally, an application may be denied if
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_1 the director determines that denial would be in the best interest
_2 of collecting taxes due under this title. The department shall
_3 provide a direct pay permit to an approved applicant with the
_4 notice of approval. The direct pay permit shall clearly state that
_5 the holder is solely responsible for the accrual and payment of
_6 the tax imposed under chapters 82.08 and 82.12 RCW and that the
_7 seller is relieved of liability to collect tax imposed under
_8 chapters 82.08 and 82.12 RCW on all sales to the direct pay permit
_9 holder. The taxpayer may petition the director for reconsideration
10 of a denial.
11 (d) A taxpayer who uses a direct pay permit must continue to
12 maintain records that are necessary to a determination of the tax
13 liability in accordance with this title. A direct pay permit is not
14 transferable and the use of a direct pay permit may not be
15 assigned to a third party.
16 (3) Taxes for which the direct pay permit is used are due and
17 payable on the tax return for the reporting period in which the
18 taxpayer (a) receives the tangible personal property purchased or
19 in which the labor and/or services are performed or (b) receives
20 an invoice for such property or such labor and/or services,
21 whichever period is earlier.
22 (4) The holder of a direct pay permit shall furnish a copy of
23 the direct pay permit to each vendor with whom the taxpayer has
24 opted to use a direct pay permit. Sellers who make sales upon which
25 the sales or use tax is not collected by reason of the provisions
26 of this section, in addition to existing requirements under this
27 title, shall maintain a copy of the direct pay permit and any such
28 records or information as the department may specify.
29 (5) A direct pay permit is subject to revocation by the
30 director at any time the department determines that the taxpayer
31 has violated any provision of this section or that revocation
32 would be in the best interests of collecting the taxes due under
33 this title. The notice of revocation must be in writing and is
34 effective either as of the end of the taxpayer's next normal
35 reporting period or a date deemed appropriate by the director and
36 identified in the revocation notice. The taxpayer may petition the
37 director for reconsideration of a revocation and reinstatement of
38 the permit.
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_1 (6) Any taxpayer who chooses to no longer use a direct pay
_2 permit or whose permit is revoked by the department, shall return
_3 the permit to the department and immediately make a good faith
_4 effort to notify all vendors to whom the permit was given,
_5 advising them that the permit is no longer valid.
_6 (7) Except as provided in this subsection, the direct pay
_7 permit may be used for any purchase of tangible personal property
_8 and any retail sale under RCW 82.04.050. The direct pay permit may
_9 not be used for:
10 (a) Purchases of meals or beverages;
11 (b) Purchases of motor vehicles, trailers, boats, airplanes,
12 and other property subject to requirements for title transactions
13 by the department of licensing;
14 (c) Purchases for which a resale certificate may be used;
15 (d) Purchases that meet the definitions of RCW 82.04.050 (2)
16 (e) and (f), (3) (a) through (d), (f), and (g), and (5); or
17 (e) Other activities subject to tax under chapter 82.08 or
18 82.12 RCW that the department by rule designates, consistent with
19 the purposes of this section, as activities for which a direct pay
20 permit is not appropriate and may not be used.
21 Sec. 3. RCW 82.12.010 and 1994 c 93 s 1 are each amended to read
22 as follows:
23 For the purposes of this chapter:
24 (1)(a) "Value of the article used" shall mean the
25 consideration, whether money, credit, rights, or other property
26 except trade-in property of like kind, expressed in terms of
27 money, paid or given or contracted to be paid or given by the
28 purchaser to the seller for the article of tangible personal
29 property, the use of which is taxable under this chapter. The term
30 includes, in addition to the consideration paid or given or
31 contracted to be paid or given, the amount of any tariff or duty
32 paid with respect to the importation of the article used. In case
33 the article used is acquired by lease or by gift or is extracted,
34 produced, or manufactured by the person using the same or is sold
35 under conditions wherein the purchase price does not represent the
36 true value thereof, the value of the article used shall be
37 determined as nearly as possible according to the retail selling
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_1 price at place of use of similar products of like quality and
_2 character under such rules as the department of revenue may
_3 prescribe.
_4 (b) In case the articles used are acquired by bailment, the
_5 value of the use of the articles so used shall be in an amount
_6 representing a reasonable rental for the use of the articles so
_7 bailed, determined as nearly as possible according to the value of
_8 such use at the places of use of similar products of like quality
_9 and character under such rules as the department of revenue may
10 prescribe. In case any such articles of tangible personal property
11 are used in respect to the construction, repairing, decorating, or
12 improving of, and which become or are to become an ingredient or
13 component of, new or existing buildings or other structures under,
14 upon, or above real property of or for the United States, any
15 instrumentality thereof, or a county or city housing authority
16 created pursuant to chapter 35.82 RCW, including the installing or
17 attaching of any such articles therein or thereto, whether or not
18 such personal property becomes a part of the realty by virtue of
19 installation, then the value of the use of such articles so used
20 shall be determined according to the retail selling price of such
21 articles, or in the absence of such a selling price, as nearly as
22 possible according to the retail selling price at place of use of
23 similar products of like quality and character or, in the absence
24 of either of these selling price measures, such value may be
25 determined upon a cost basis, in any event under such rules as the
26 department of revenue may prescribe.
27 (c) In the case of articles owned by a user engaged in business
28 outside the state which are brought into the state for no more
29 than one hundred eighty days in any period of three hundred sixty-
30 five consecutive days and which are temporarily used for business
31 purposes by the person in this state, the value of the article
32 used shall be an amount representing a reasonable rental for the
33 use of the articles, unless the person has paid tax under this
34 chapter or chapter 82.08 RCW upon the full value of the article
35 used, as defined in (a) of this subsection.
36 (d) In the case of articles manufactured or produced by the
37 user and used in the manufacture or production of products sold or
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_1 to be sold to the department of defense of the United States, the
_2 value of the articles used shall be determined according to the
_3 value of the ingredients of such articles.
_4 (e) In the case of an article manufactured or produced for
_5 purposes of serving as a prototype for the development of a new or
_6 improved product, the value of the article used shall be
_7 determined by: (i) The retail selling price of such new or
_8 improved product when first offered for sale; or (ii) the value of
_9 materials incorporated into the prototype in cases in which the
10 new or improved product is not offered for sale.
11 (f) In the case of an article purchased with a direct pay
12 permit under section 2 of this act, the value of the article used
13 shall be determined by the retail selling price, as defined in RCW
14 82.08.010, of such article if but for the use of the direct pay
15 permit the transaction would have been subject to sales tax;
16 (2) "Use," "used," "using," or "put to use" shall have their
17 ordinary meaning, and shall mean the first act within this state
18 by which the taxpayer takes or assumes dominion or control over
19 the article of tangible personal property (as a consumer), and
20 include installation, storage, withdrawal from storage, or any
21 other act preparatory to subsequent actual use or consumption
22 within this state;
23 (3) "Taxpayer" and "purchaser" include all persons included
24 within the meaning of the word "buyer" and the word "consumer" as
25 defined in chapters 82.04 and 82.08 RCW;
26 (4) "Retailer" means every seller as defined in RCW 82.08.010
27 and every person engaged in the business of selling tangible
28 personal property at retail and every person required to collect
29 from purchasers the tax imposed under this chapter;
30 (5) The meaning ascribed to words and phrases in chapters 82.04
31 and 82.08 RCW, insofar as applicable, shall have full force and
32 effect with respect to taxes imposed under the provisions of this
33 chapter. "Consumer," in addition to the meaning ascribed to it in
34 chapters 82.04 and 82.08 RCW insofar as applicable, shall also
35 mean any person who distributes or displays, or causes to be
36 distributed or displayed, any article of tangible personal
37 property, except newspapers, the primary purpose of which is to
38 promote the sale of products or services.
HB 1706 p. 6
_1
_2 Sec. 4. RCW 82.08.050 and 1993 sp.s. c 25 s 704 are each amended
_3 to read as follows:
_4 The tax hereby imposed shall be paid by the buyer to the
_5 seller, and each seller shall collect from the buyer the full
_6 amount of the tax payable in respect to each taxable sale in
_7 accordance with the schedule of collections adopted by the
_8 department pursuant to the provisions of RCW 82.08.060. The tax
_9 required by this chapter, to be collected by the seller, shall be
10 deemed to be held in trust by the seller until paid to the
11 department, and any seller who appropriates or converts the tax
12 collected to his or her own use or to any use other than the
13 payment of the tax to the extent that the money required to be
14 collected is not available for payment on the due date as
15 prescribed in this chapter shall be guilty of a gross misdemeanor.
16 In case any seller fails to collect the tax herein imposed or
17 having collected the tax, fails to pay it to the department in the
18 manner prescribed by this chapter, whether such failure is the
19 result of his or her own acts or the result of acts or conditions
20 beyond his or her control, he or she shall, nevertheless, be
21 personally liable to the state for the amount of the tax, unless
22 the seller has taken from the buyer in good faith a properly
23 executed resale certificate under RCW 82.04.470 or a copy of a
24 direct pay permit issued under section 2 of this act.
25 The amount of tax, until paid by the buyer to the seller or to
26 the department, shall constitute a debt from the buyer to the
27 seller and any seller who fails or refuses to collect the tax as
28 required with intent to violate the provisions of this chapter or
29 to gain some advantage or benefit, either direct or indirect, and
30 any buyer who refuses to pay any tax due under this chapter shall
31 be guilty of a misdemeanor. The tax required by this chapter to be
32 collected by the seller shall be stated separately from the
33 selling price in any sales invoice or other instrument of sale. On
34 all retail sales through vending machines, the tax need not be
35 stated separately from the selling price or collected separately
36 from the buyer. For purposes of determining the tax due from the
37 buyer to the seller and from the seller to the department it shall
38 be conclusively presumed that the selling price quoted in any
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_1 price list, sales document, contract or other agreement between
_2 the parties does not include the tax imposed by this chapter, but
_3 if the seller advertises the price as including the tax or that
_4 the seller is paying the tax, the advertised price shall not be
_5 considered the selling price.
_6 Where a buyer has failed to pay to the seller the tax imposed
_7 by this chapter and the seller has not paid the amount of the tax
_8 to the department, the department may, in its discretion, proceed
_9 directly against the buyer for collection of the tax, in which
10 case a penalty of ten percent may be added to the amount of the
11 tax for failure of the buyer to pay the same to the seller,
12 regardless of when the tax may be collected by the department; and
13 all of the provisions of chapter 82.32 RCW, including those
14 relative to interest and penalties, shall apply in addition; and,
15 for the sole purpose of applying the various provisions of chapter
16 82.32 RCW, the twenty-fifth day of the month following the tax
17 period in which the purchase was made shall be considered as the
18 due date of the tax.
19 Sec. 5. RCW 82.12.040 and 1986 c 48 s 1 are each amended to read
20 as follows:
21 (1) Every person who maintains in this state a place of
22 business or a stock of goods, or engages in business activities
23 within this state, shall obtain from the department a certificate
24 of registration, and shall, at the time of making sales, or making
25 transfers of either possession or title or both, of tangible
26 personal property for use in this state, collect from the
27 purchasers or transferees the tax imposed under this chapter. For
28 the purposes of this chapter, the phrase "maintains in this state
29 a place of business" shall include the solicitation of sales
30 and/or taking of orders by sales agents or traveling
31 representatives. For the purposes of this chapter, "engages in
32 business activity within this state" includes every activity which
33 is sufficient under the Constitution of the United States for this
34 state to require collection of tax under this chapter. The
35 department shall in rules specify activities which constitute
36 engaging in business activity within this state, and shall keep
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_1 the rules current with future court interpretations of the
_2 Constitution of the United States.
_3 (2) Every person who engages in this state in the business of
_4 acting as an independent selling agent for persons who do not hold
_5 a valid certificate of registration, and who receives compensation
_6 by reason of sales of tangible personal property of his principals
_7 made for use in this state, shall, at the time such sales are
_8 made, collect from the purchasers the tax imposed under this
_9 chapter, and for that purpose shall be deemed a retailer as
10 defined in this chapter.
11 (3) The tax required to be collected by this chapter shall be
12 deemed to be held in trust by the retailer until paid to the
13 department and any retailer who appropriates or converts the tax
14 collected to his own use or to any use other than the payment of
15 the tax provided herein to the extent that the money required to
16 be collected is not available for payment on the due date as
17 prescribed shall be guilty of a misdemeanor. In case any seller
18 fails to collect the tax herein imposed or having collected the
19 tax, fails to pay the same to the department in the manner
20 prescribed, whether such failure is the result of his own acts or
21 the result of acts or conditions beyond his control, he shall
22 nevertheless, be personally liable to the state for the amount of
23 such tax, unless the seller has taken from the buyer in good faith
24 a copy of a direct pay permit issued under section 2 of this act.
25 (4) Any retailer who refunds, remits, or rebates to a
26 purchaser, or transferee, either directly or indirectly, and by
27 whatever means, all or any part of the tax levied by this chapter
28 shall be guilty of a misdemeanor.
29 NEW SECTION. Sec. 6. The code reviser shall place cross-
30 reference sections to section 2 of this act in chapters 82.08,
31 82.12, and 82.14 RCW.
32 NEW SECTION. Sec. 7. This act takes effect August 1, 2001.
‑‑‑ END ‑‑‑
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