BILL REQ. #:  H-0754.1 

Read first time 01/23/2003.   Referred to Committee on Finance.

     AN ACT Relating to prohibiting municipal taxation of intellectual property creating activities; adding a new section to chapter 35.21 RCW; providing an effective date; and declaring an emergency.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 35.21 RCW to read as follows:
     (1) A city, code city, or town shall not impose a tax measured by "gross proceeds of sales," "gross income of the business," or "value proceeding or accruing," as those terms are used in chapter 82.04 RCW, upon any intellectual property creating activity as a taxable incident, unless the city, code city, or town imposed such a tax on January 1, 2003. Effective January 1, 2005, all cities, code cities, and towns are prohibited from imposing a tax measured by "gross proceeds of sales," "gross income of the business," or "value proceeding or accruing," as those terms are used in chapter 82.04 RCW, upon any intellectual property creating activity as a taxable incident. Nothing in this section precludes a city, town, or code city from imposing a tax upon the sale of products that includes the benefits from intellectual property creating activities.
     (2) "Intellectual property creating activity" means research, development, authorship, creation, or general or specific inventive activity, without regard to whether intellectual property creating activity actually results in the creation of patents, trademarks, trade secrets, subject matter subject to copyright, or other intellectual property.
     (3) Fee-for-service and contract manufacturing activities shall not be considered primarily directed at the creation of intellectual property creating activity rights, whether or not such rights are incidentally created in the course of conducting such activities.

NEW SECTION.  Sec. 2   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, 2003.