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HOUSE BILL 1706
_____________________________________________
Passed Legislature ‑
2001 Regular Session
State of Washington 57th
Legislature 2001 Regular Session
By
Read
first time 02/01/2001. Referred to Committee on Finance. Authorizing the department of revenue to issue direct pay
permits.
_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 HB 1706.PL
_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
HB 1706.PL p.
2
_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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3 HB 1706.PL
_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
HB 1706.PL p.
4
_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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5 HB 1706.PL
_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.PL 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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7 HB 1706.PL
_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
HB 1706.PL p.
8
_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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9 HB 1706.PL
