1357-S AMS FRAS SUTE 001

SHB 1357 - S AMD 827

By Senator Fraser

NOT ADOPTED

On page 6, line 21, after "RCW 82.04.2635(2)." insert the following:

"NEW SECTION. Sec. 2. A new section is added to chapter 82.04 RCW to read as follows:

(1) Persons providing both physical fitness services and amusement and recreation services shall elect either to report their entire gross income subject to tax under this chapter from initiation fees and dues and other charges for general use or access of facilities as subject to the tax imposed by RCW 82.04.250(1) or to allocate such income as subject to the taxes imposed by RCW 82.04.290(2) and 82.04.250(1) as provided in subsection (2) of this section.

(2) (a) To determine the amount of gross income subject to the tax imposed by RCW 82.04.290(2) and 82.04.250(1), persons must allocate their gross income subject to tax under this chapter from initiation fees and dues and other charges for general use or access of facilities using a ratio. The numerator of this ratio shall be the square footage of facilities devoted exclusively to providing members or customers with physical fitness services multiplied by a factor determined by the department. This factor is to recognize the difference in income generated per square foot of areas devoted exclusively to providing members or customers with physical fitness services and income generated per square foot of other areas included in the ratio based on industry averages. The department shall determine the factor based on the most recent available data and shall inform taxpayers of its determination. This factor shall be updated on July first of each even-numbered year beginning on July 1, 2006. The denominator of this ratio shall be the numerator plus the difference between the total square footage of facilities and the square footage of facilities devoted exclusively to providing members or customers with physical fitness services.

For purposes of this ratio, the following areas are to be excluded from the numerator and denominator if used exclusively for the purposes that such areas are customarily used for:

(i) Lockers, showers, and hallways;

(ii) Child care center;

(iii) Sales of tangible personal property such as sales in a pro shop;

(iv) Lounge, snack bar, or other food and beverage area;

(v) Areas that may only be accessed or utilized by members or customers for a charge separate and distinct from initiation fees, dues, or a charge for general use or access of the facilities, such as may be the case for areas dedicated to physical therapy, tanning, massage, or day spa services.

(vi) Meeting rooms;

(vii) Parking facilities and picnic areas; and

(viii) Administrative offices, laundry facilities, customer service desks, and other areas utilized only by employees.

(b) The amount of gross income subject to the tax imposed by RCW 82.04.290(2) is the product of the ratio described in (a) of this subsection (2) and the amount of gross income subject to tax under this chapter from initiation fees and dues and other charges for general use or access of facilities. The balance of the gross income subject to tax under this chapter from initiation fees and dues and other charges for general use or access of facilities shall be subject to the tax imposed by RCW 82.04.250(1).

(c) Once a person has made an election, the person must report tax liability consistent with that election for at least twelve consecutive months. A person may change an election prospectively only, effective on the first day of a calendar quarter.

(3) If the persons described in subsection (1) of this section receive income from sources other than those described in subsection (1) of this section or provide services other than those named in subsection (1) of this section, that income and those services are subject to tax as otherwise provided in this chapter.

(4) This section does not apply to any person that provides members or customers with access to outdoor golf range or golf course facilities.

NEW SECTION. Sec. 3. A new section is added to chapter 82.08 RCW to read as follows:

Notwithstanding anything in this chapter to the contrary, in the case of a person providing both physical fitness services and amusement and recreation services who is required to make an election under section 2 of this act, the selling price for purposes of RCW 82.08.020 shall be the amount subject to tax imposed by RCW 82.04.250(1)."

Renumber the sections consecutively and correct any internal references accordingly.

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EFFECT: Provides an allocation method for businesses that provide both physical fitness services and amusement and recreation services to clarify what portions of profits should be classified as retail services and what should be classified as general services.