BILL REQ. #:  H-4954.1 

READ FIRST TIME 02/6/04.   

     AN ACT Relating to conforming Washington's tax structure to portions of the streamlined sales and use tax agreement not implemented by chapter 168, Laws of 2003; amending RCW 82.32.020 and 82.32.030; amending 2003 c 168 s 902 (uncodified); reenacting and amending RCW 82.14.020; adding new sections to chapter 82.32 RCW; adding new sections to chapter 82.14 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; creating a new section; providing a continency; providing effective dates; providing contingent effective dates; and providing expiration dates.

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

Sec. 101   RCW 82.32.020 and 2003 1st sp.s. c 13 s 16 are each amended to read as follows:
     For the purposes of this chapter:
     (1) The meaning attributed in chapters 82.01 through 82.27 RCW to the words and phrases "tax year," "taxable year," "person," "company," "gross proceeds of sales," "gross income of the business," "business," "engaging in business," "successor," "gross operating revenue," "gross income," "taxpayer," "retail sale," and "value of products" shall apply equally to the provisions of this chapter.
     (2) Unless the context requires otherwise, "agreement" means the streamlined sales and use tax agreement.
     (3) "Certified automated system" means software certified under the agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction.
     (4) "Certified service provider" means an agent certified under the agreement to perform all of the seller's sales and use tax functions, other than the seller's obligation to remit tax on its own purchases.
     (5)(a) "Member state" means a state that:
     (i) Has petitioned for membership in the agreement and submitted a certificate of compliance; and
     (ii) Prior to the effective date of the agreement, has been found to be in substantial compliance with the requirements of the agreement by an affirmative vote of three-fourths of the other petitioning states; or
     (iii) After the effective date of the agreement, has been found to be in compliance with the agreement by a three-fourths vote of the entire governing board of the agreement.
     (b) Membership under (a)(ii) of this subsection is effective on the first day of a calendar quarter at least sixty days after at least ten states comprising at least twenty percent of the total population, as determined by the 2000 federal census, of all states imposing a state sales tax have petitioned for membership and have been found in compliance with the agreement.
     (c) Membership under (a)(iii) of this subsection is effective on the state's proposed date of entry.
     (6) "Model 1 seller" means a seller that has selected a certified service provider as its agent to perform all the seller's sales and use tax functions, other than the seller's obligation to remit tax on its own purchases.
     (7) "Model 2 seller" means a seller that has selected a certified automated system to perform part of its sales and use tax functions, but retains responsibility for remitting the tax.
     (8) "Model 3 seller" means a seller that has sales in at least five member states, has total annual sales revenue of at least five hundred million dollars, has a proprietary system that calculates the amount of tax due each jurisdiction, and has entered into a performance agreement with the member states that establishes a tax performance standard for the seller. As used in this subsection, a seller includes an affiliated group of sellers using the same proprietary system.
     (9) "Source" means the location in which the sale or use, of tangible personal property or a service, subject to tax under chapter 82.08, 82.12, 82.14, or 82.14B RCW, is deemed to occur.

NEW SECTION.  Sec. 201   A new section is added to chapter 82.32 RCW to read as follows:
     (1) A seller, by written agreement, may appoint a person to represent the seller as its agent. The seller's agent has authority to register the seller with the state. An agent may also be a certified service provider, with authority to perform all the seller's sales and use tax functions, except that the seller remains responsible for remitting the tax on its own purchases.
     (2) The seller or its agent must provide the state with a copy of the written agreement upon request.

Sec. 202   RCW 82.32.030 and 1996 c 111 s 2 are each amended to read as follows:
     (1) Except as provided in subsections (2) and (3) of this section, if any person engages in any business or performs any act upon which a tax is imposed by the preceding chapters, he or she shall, under such rules as the department of revenue shall prescribe, apply for and obtain from the department a registration certificate. Such registration certificate shall be personal and nontransferable and shall be valid as long as the taxpayer continues in business and pays the tax accrued to the state. In case business is transacted at two or more separate places by one taxpayer, a separate registration certificate for each place at which business is transacted with the public shall be required. Each certificate shall be numbered and shall show the name, residence, and place and character of business of the taxpayer and such other information as the department of revenue deems necessary and shall be posted in a conspicuous place at the place of business for which it is issued. Where a place of business of the taxpayer is changed, the taxpayer must return to the department the existing certificate, and a new certificate will be issued for the new place of business. No person required to be registered under this section shall engage in any business taxable hereunder without first being so registered. The department, by rule, may provide for the issuance of certificates of registration to temporary places of business.
     (2) Unless the person is a dealer as defined in RCW 9.41.010, registration under this section is not required if the following conditions are met:
     (a) A person's value of products, gross proceeds of sales, or gross income of the business, from all business activities taxable under chapter 82.04 RCW, is less than twelve thousand dollars per year;
     (b) The person's gross income of the business from all activities taxable under chapter 82.16 RCW is less than twelve thousand dollars per year;
     (c) The person is not required to collect or pay to the department of revenue any other tax or fee which the department is authorized to collect; and
     (d) The person is not otherwise required to obtain a license subject to the master application procedure provided in chapter 19.02 RCW.
     (3) Persons who agree to collect and remit sales and use tax to the department under the agreement and are not required to register under subsection (1) of this section may:
     (a) Register through an on-line system authorized under the agreement, if the person agrees to provide additional information to the department to complete the registration process; or
     (b) Register under subsection (1) of this section.

NEW SECTION.  Sec. 301   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The department shall adopt by rule monetary allowances for certified service providers, model 2 sellers, model 3 sellers, and other sellers that are not model 1 or model 2 sellers. The department may be guided by the provisions for monetary allowances adopted by the governing board of the agreement to determine the amount of the allowances and the conditions under which they are allowed. The monetary allowance must be reasonable and provide adequate incentive for certified service providers and sellers to collect and remit under the agreement.
     (2) For certified service providers, the monetary allowance may include a base rate that applies to taxable transactions processed by the certified service provider. Additionally, for a period not to exceed twenty-four months following a seller's registration under RCW 82.32.030(3), the monetary allowance may include a percentage of tax revenue generated by the seller.
     (3) For model 2 sellers, the monetary allowance may include a base rate or percentage of revenue generated by a seller registering under RCW 82.32.030(3), but shall not exceed a period of twenty-four months.
     (4) For model 3 sellers and all other sellers that are not model 1 sellers or model 2 sellers, the monetary allowance may include a percentage of tax revenue generated by a seller registering under RCW 82.32.030(3), but shall not exceed a period of twenty-four months.

NEW SECTION.  Sec. 302   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The department may adopt by rule vendor compensation for sellers collecting and remitting sales and use taxes. The vendor compensation may include a base rate or a percentage of tax revenue collected by the seller, and may vary by type of seller. The department may be guided by the findings of the cost of collection study performed under the agreement, by cost of collection studies performed by the department, and by vendor compensation provided by other states, to determine reasonable vendor compensation for sellers for the costs to collect and remit sales and use taxes.
     (2) A seller shall not be entitled to vendor compensation while the seller or its certified service provider, as defined in RCW 82.32.020, receives a monetary allowance under section 301 of this act.

NEW SECTION.  Sec. 401   A new section is added to chapter 82.32 RCW to read as follows:
     (1) No assessment for taxes imposed under chapters 82.08 and 82.12 RCW, or related penalties or interest, may be made by the department against a seller who:
     (a) Within twelve months of the effective date of this state becoming a member state of the agreement, registers to collect and remit to the department the applicable taxes imposed under chapters 82.08 and 82.12 RCW on sales made to buyers in this state in accordance with the terms of the agreement, if the seller was not so registered in this state in the twelve-month period preceding the effective date of this state becoming a member state of the agreement; and
     (b) Continues to be registered and continues to collect and remit to the department the applicable taxes imposed under chapters 82.08 and 82.12 RCW for a period of at least thirty-six months, absent the seller's fraud or intentional misrepresentation of a material fact.
     (2) The provisions of subsection (1) of this section preclude an assessment for taxes imposed under chapters 82.08 and 82.12 RCW for sales made to buyers during the period the seller was not registered in this state.
     (3) The provisions of this section do not apply to any seller with respect to:
     (a) Any matter or matters for which the seller, before registering to collect and remit the applicable taxes imposed under chapters 82.08 and 82.12 RCW, received notice from the department of the commencement of an audit and which audit is not yet finally resolved including any related administrative and judicial processes;
     (b) Taxes imposed under chapters 82.08 and 82.12 RCW and collected or remitted to the department by the seller; or
     (c) That seller's liability for taxes imposed under chapters 82.08 and 82.12 RCW in that seller's capacity as a buyer.
     (4) The periods of limitation for making an assessment or correction of an assessment prescribed in RCW 82.32.050(3) and 82.32.100(3) do not run during the thirty-six month period in subsection (1)(b) of this section.

NEW SECTION.  Sec. 501   A new section is added to chapter 82.32 RCW to read as follows:
     (1) Except as provided in subsections (5), (6), (7), and (8) of this section, for purposes of collecting or paying sales or use taxes to the appropriate jurisdictions, all sales at retail shall be sourced in accordance with this subsection and subsections (2) through (4) of this section.
     (a) When tangible personal property or a service defined as a retail sale under RCW 82.04.050 is received by the purchaser at a business location of the seller, the sale is sourced to that business location.
     (b) When the tangible personal property or a service defined as a retail sale under RCW 82.04.050 is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser or the purchaser's donee, designated as such by the purchaser, occurs, including the location indicated by instructions for delivery to the purchaser or donee, known to the seller.
     (c) When (a) and (b) of this subsection do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller's business when use of this address does not constitute bad faith.
     (d) When (a), (b), and (c) of this subsection do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available, when use of this address does not constitute bad faith.
     (e) When (a), (b), (c), or (d) of this subsection do not apply, including the circumstance where the seller is without sufficient information to apply those provisions, then the location shall be determined by the address from which tangible personal property was shipped, from which the digital good or the computer software delivered electronically was first available for transmission by the seller, or from which the service defined as a retail sale under RCW 82.04.050 was provided, disregarding for these purposes any location that merely provided the digital transfer of the product sold.
     (2) The lease or rental of tangible personal property, other than property identified in subsection (3) or (4) of this section, shall be sourced as follows:
     (a) For a lease or rental that requires recurring periodic payments, the first periodic payment is sourced the same as a retail sale in accordance with subsection (1) of this section. Periodic payments made subsequent to the first payment are sourced to the primary property location for each period covered by the payment. The primary property location shall be as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. The property location shall not be altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and service calls.
     (b) For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with subsection (1) of this section.
     (c) This subsection does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.
     (3) The lease or rental of motor vehicles, trailers, semitrailers, or aircraft that do not qualify as transportation equipment shall be sourced as follows:
     (a) For a lease or rental that requires recurring periodic payments, each periodic payment is sourced to the primary property location. The primary property location shall be as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. This location shall not be altered by intermittent use at different locations.
     (b) For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with subsection (1) of this section.
     (c) This subsection does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.
     (4) The retail sale, including lease or rental, of transportation equipment shall be sourced the same as a retail sale in accordance with subsection (1) of this section.
     (5) A purchaser that is a business and is not a holder of a direct pay permit that knows at the time of purchase of a digital good, computer software delivered electronically, or a service that the digital good, computer software delivered electronically, or service will be concurrently available for use in more than one jurisdiction shall deliver to the seller in conjunction with its purchase a multiple points of use exemption form disclosing this fact.
     (a) Upon receipt of the multiple point of use exemption form, the seller is relieved of all obligation to collect, pay, or remit the applicable tax and the purchaser is obligated to collect, pay, or remit the applicable tax.
     (b) A purchaser delivering the multiple point of use exemption form, or a direct pay permit in lieu of a multiple point of use exemption form, may use any reasonable, but consistent and uniform, method of apportionment that is supported by the purchaser's business records as they exist at the time of the consummation of the sale.
     (c) The multiple point of use exemption form shall remain in effect for all future sales by the seller to the purchaser until it is revoked in writing.
     (6)(a) A purchaser of direct mail that is not a holder of a direct pay permit shall provide to the seller in conjunction with the purchase either a direct mail form or information that shows the jurisdictions to which the direct mail is delivered to recipients.
     (i) Upon receipt of the direct mail form, the seller is relieved of all obligations to collect, pay, or remit the applicable tax and the purchaser is obligated to pay or remit the applicable tax on a direct pay basis. A direct mail form shall remain in effect for all future sales of direct mail by the seller to the purchaser until it is revoked in writing.
     (ii) Upon receipt of information from the purchaser showing the jurisdictions to which the direct mail is delivered to recipients, the seller shall collect the tax according to the delivery information provided by the purchaser. In the absence of bad faith, the seller is relieved of any further obligation to collect tax on any transaction where the seller has collected tax pursuant to the delivery information provided by the purchaser.
     (b) If the purchaser of direct mail does not have a direct pay permit and does not provide the seller with either a direct mail form or delivery information as required by (a) of this subsection, the seller shall collect the tax according to subsection (1)(e) of this section. This subsection does not limit a purchaser's obligation for sales or use tax to any state to which the direct mail is delivered.
     (c) If a purchaser of direct mail provides the seller with documentation of direct pay authority, the purchaser is not required to provide a direct mail form or delivery information to the seller.
     (7) The following are sourced to the location at or from which delivery is made to the consumer:
     (a) A retail sale consisting of watercraft;
     (b) A retail sale consisting of a modular home, manufactured home, or mobile home;
     (c) A retail sale, excluding the lease and rental, consisting of a motor vehicle, trailer, semitrailer, or aircraft, that do not qualify as transportation equipment; and
     (d) Until January 1, 2006, a retail sale of tangible personal property made by a person engaged in the business of selling flowers. The rules for the sourcing retail sales and use taxes of flowers delivered with telegraphic instructions in WAC 458-20-158, as effective on July 1, 1970, shall remain in effect until January 1, 2006.
     (8) A retail sale consisting of the providing of telecommunications services shall be sourced in accordance with RCW 82.32.520.
     (9) The definitions in this subsection apply throughout this section.
     (a) "Delivered electronically" means delivered to the purchaser by means other than tangible storage media.
     (b) "Direct mail" means printed material delivered or distributed by United States mail or other delivery service to a mass audience or to addressees on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipients. "Direct mail" includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. "Direct mail" does not include multiple items of printed material delivered to a single address.
     (c) "Receive" and "receipt" means taking possession of tangible personal property, making first use of services, or taking possession or making first use of digital goods, whichever comes first. "Receive" and "receipt" do not include possession by a shipping company on behalf of the purchaser.
     (d) "Transportation equipment" means any of the following:
     (i) Locomotives and railcars that are used for the carriage of persons or property in interstate commerce;
     (ii) Trucks and truck-tractors with a gross vehicle weight rating of 10,001 pounds or greater, trailers, semitrailers, or passenger buses that are:
     (A) Registered through the international registration plan; and
     (B) Operated under authority of a carrier authorized and certificated by the United States department of transportation or another federal authority to engage in the carriage of persons or property in interstate commerce;
     (iii) Aircraft that are operated by air carriers authorized and certificated by the United States department of transportation or another federal or foreign authority to engage in the carriage of persons or property in interstate or foreign commerce;
     (iv) Containers designed for use on and component parts attached or secured on the items described in (d)(i) through (iii) of this subsection.
     (10) In those instances where there is no obligation on the part of a seller to collect or remit use tax, the use of tangible personal property or of a service, subject to use tax, is sourced to the place of first use. The definition of use in RCW 82.12.010 applies to this subsection.

Sec. 502   RCW 82.14.020 and 2003 c 168 s 503 and 2003 c 168 s 502 are each reenacted and amended to read as follows:
     For purposes of this chapter:
     (1) ((A retail sale consisting solely of the sale of tangible personal property shall be deemed to have occurred at the retail outlet at or from which delivery is made to the consumer;
     (2) A retail sale consisting essentially of the performance of personal, business, or professional services shall be deemed to have occurred at the place at which such services were primarily performed, except that for the performance of a tow truck service, as defined in RCW 46.55.010, the retail sale shall be deemed to have occurred at the place of business of the operator of the tow truck service;
     (3) A retail sale consisting of the rental of tangible personal property shall be deemed to have occurred (a) in the case of a rental involving periodic rental payments, at the place of primary use by the lessee during the period covered by each payment, or (b) in all other cases, at the place of first use by the lessee;
     (4) A retail sale within the scope of RCW 82.04.050(2), and a retail sale of taxable personal property to be installed by the seller shall be deemed to have occurred at the place where the labor and services involved were primarily performed;
     (5)(a) A retail sale consisting of the providing to a consumer of telephone service, as defined in RCW 82.04.065, other than a sale of tangible personal property under subsection (1) of this section or a rental of tangible personal property under subsection (3) of this section or a sale of mobile telecommunications services, shall be deemed to have occurred at the situs of the telephone or other instrument through which the telephone service is rendered;
     (b) A retail sale consisting of the providing of telecommunications services shall be sourced in accordance with RCW 82.32.520;
     (6) A retail sale of linen and uniform supply services is deemed to occur as provided in RCW 82.08.0202;
     (7))) "City" means a city or town;
     (((8))) (2) The meaning ascribed to words and phrases in chapters 82.04, 82.08 and 82.12 RCW, as now or hereafter amended, insofar as applicable, shall have full force and effect with respect to taxes imposed under authority of this chapter;
     (((9))) (3) "Taxable event" shall mean any retail sale, or any use, upon which a state tax is imposed pursuant to chapter 82.08 or 82.12 RCW, as they now exist or may hereafter be amended: PROVIDED, HOWEVER, That the term shall not include a retail sale taxable pursuant to RCW 82.08.150, as now or hereafter amended;
     (((10))) (4) "Treasurer or other legal depository" shall mean the treasurer or legal depository of a county or city.

NEW SECTION.  Sec. 503   A new section is added to chapter 82.14 RCW to read as follows:
     Sales and use taxes imposed under this chapter shall be sourced in accordance with section 501 of this act.

NEW SECTION.  Sec. 601   A new section is added to chapter 82.14 RCW to read as follows:
     The legislature finds and declares that:
     (1) Washington state's participation as a member state in the streamlined sales and use tax agreement benefits the state, all its local taxing jurisdictions, and its retailing industry by increasing state and local revenues, improving the state's business climate, and simplifying the state's tax structure.
     (2) Participation in the streamlined sales and use tax agreement requires the adoption of the agreement's sourcing provisions, which changes the location in which a retail sale of tangible personal property occurs from the point of origin to the point of delivery.
     (3) The streamlined sales and use tax agreement's sourcing provisions will cause sales and use tax revenues to shift among local taxing jurisdictions, and it is in the best interest of the state and all its subdivisions to mitigate the adverse effects of adopting the agreement's sourcing provisions by providing state revenues to those taxing jurisdictions that lose revenues.
     (4) Revenue shifts among local taxing jurisdictions cannot be precisely determined without significantly increasing the administrative burden on the retail industry, which is contrary to the intent of the streamlined sales and use tax agreement. Therefore, the legislature recognizes that local taxing jurisdictions will be adequately, but not completely, mitigated for revenue losses that result from this act.
     (5) This section expires June 30, 2015.

NEW SECTION.  Sec. 602   A new section is added to chapter 82.14 RCW to read as follows:
     (1) The streamlined sales and use tax agreement mitigation account is created in the state treasury, and shall be used for mitigating financial impacts related to the enactment of section 501 of this act. Except as provided in subsection (3) of this section, into this account shall be placed:
     (a) An amount of state sales and use taxes, as provided in section 606 of this act, representing a portion of the amount that is expected to be received by the department from sellers who, under the agreement, register to collect and remit to the department state sales and use taxes and who are otherwise not required to register under RCW 82.32.030(1);
     (b) A portion of the amounts deducted under the authority of RCW 82.14.050 by the department under contract with counties and cities and with transportation authorities under RCW 82.14.045 for the administration and collection of sales and use taxes authorized by this chapter and imposed by such local taxing authorities. The portion is equal to the product of (i) the total amounts deducted and (ii) the factor specified in section 606(1)(b) of this act; and
     (c) All amounts authorized under section 604 of this act to be deducted by the department.
     (2)(a) Funds in the streamlined sales and use tax agreement mitigation account shall be distributed by the state treasurer to cities, counties, and transportation authorities, as directed by the department and in accordance with sections 603 and 605 of this act.
     (b) Any funds that remain in the account as of June 30 of each year shall be distributed ratably to the state general fund and to the local jurisdictions for which the department made a deduction under section 604 of this act, based on the proportion of funds received to the account from each jurisdiction under this section.
     (3) By December 1, 2010, the department shall submit a report to the governor and the legislature on the fiscal and economic effects of the sourcing changes under section 501 of this act. The department shall consider any changes to the tax base pursuant to the implementation of legislation to require remote sellers to collect and remit sales taxes pursuant to federal authorization under section 1101(1) (a) or (b) of this act, and the need for continuing state mitigation assistance.
     (4) For purposes of this section and sections 603 through 606 of this act, the following definitions apply:
     (a) "State sales and use taxes" means the taxes imposed under chapters 82.08 and 82.12 RCW.
     (b) "Agreement" means the same as in RCW 82.58.010.
     (c) "Transportation authority" means an authority that imposes a tax under RCW 82.14.045.
     (4) This section expires June 30, 2015.

NEW SECTION.  Sec. 603   A new section is added to chapter 82.14 RCW to read as follows:
     (1) At such times as distributions are made under RCW 82.14.060, the state treasurer, as directed by the department, shall make distributions to eligible counties, cities, and transportation authorities from the streamlined sales and use tax agreement mitigation account. Except as provided in (e) of this subsection, the distributions shall be made as provided in (a) through (d) of this subsection.
     (a) In the period July 2005 through June 2006, an amount equal to:
     (i) Eighty-five percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is four percent or more of total calendar year 2002 unrestricted current expense revenue as determined by the department;
     (ii) Seventy percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is at least one-half of one percent, but less than four percent of total calendar year 2002 unrestricted current expense revenue as determined by the department; and
     (iii) Fifty percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is less than one-half of one percent of total calendar year 2002 unrestricted current expense revenue, but greater than one hundred thousand dollars as determined by the department.
     (b) In the period July 2006 through June 2007, an amount equal to:
     (i) Sixty-five percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is four percent or more of total calendar year 2002 unrestricted current expense revenue as determined by the department;
     (ii) Fifty percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is at least one-half of one percent, but less than four percent of total calendar year 2002 unrestricted current expense revenue as determined by the department; and
     (iii) Twenty-five percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is less than one-half of one percent of total calendar year 2002 unrestricted current expense revenue, but greater than one hundred thousand dollars as determined by the department.
     (c) In the period July 2007 through June 2008, an amount equal to:
     (i) Forty-five percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is four percent or more of total calendar year 2002 unrestricted current expense revenue as determined by the department; and
     (ii) Twenty-five percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is at least one-half of one percent, but less than four percent of total calendar year 2002 unrestricted current expense revenue as determined by the department.
     (d) In the period July 2008 through June 2009, an amount equal to twenty-five percent of estimated sales tax loss for each county, city, and transportation authority whose estimated sales tax loss is four percent or more of total calendar year 2002 unrestricted current expense revenue as determined by the department.
     (e)(i) In each fiscal year through fiscal year 2012, an amount equal to no less than sixty percent of the estimated long-term sales tax loss, and in each fiscal year from fiscal year 2013 through fiscal year 2015, an amount equal to no less than thirty percent of the estimated long-term sales tax loss, for each county, city, and transportation authority whose estimated long-term sales tax loss is: (A) At least two-hundred and fifty thousand dollars in magnitude and equal to one and six-tenths percent or more of total calendar year 2002 unrestricted current expense revenue as determined by the department; or (B) equal to three percent or more of total calendar year 2002 unrestricted current expense revenue as determined by the department. The amounts shall be provided as in (e)(ii) through (iv) of this subsection.
     (ii) If the amount to be distributed for the fiscal year in (a), (b), (c), or (d) of this subsection (1) exceeds an amount equal to sixty percent of the estimated long-term sales tax loss, no amounts shall be distributed under this subsection (1)(e) for the fiscal year.
     (iii) If the amount to be distributed for the fiscal year in (a), (b), (c), or (d) of this subsection (1) is equal to or less than an amount equal to sixty percent of the estimated long-term sales tax loss, the treasurer shall distribute an additional amount under this subsection (1)(e) for the fiscal year such that the total amount distributed is equal to sixty percent of the estimated long-term sales tax loss.
     (iv) In each fiscal year following the fiscal year in which the distributions in (d) of this subsection (1) are made through fiscal year 2012, the treasurer shall distribute an amount equal to sixty percent of the estimated long-term sales tax loss. For each fiscal year thereafter, the treasurer shall distribute an amount equal to thirty percent of the estimated long-term sales tax loss.
     (2) If the amounts necessary to make the distributions under this section exceed the amount of funds in the streamlined sales and use tax agreement mitigation account, then the distributions under this section shall be reduced ratably on the basis of the amount of estimated sales tax loss.
     (3) Determinations by the department of amounts to be distributed by the state treasurer under this section are final and not appealable.
     (4) For purposes of this section, the following definitions apply:
     (a) "Eligible counties, cities, and transportation authorities" means those counties, cities, and transportation authorities imposing a tax under this chapter that have each experienced an estimated sales tax loss:
     (i) Of a magnitude that is greater than or equal to one-half of one percent of total calendar year 2002 unrestricted current expense revenue; or
     (ii) Greater than or equal to one hundred thousand dollars in magnitude.
     (b) "Estimated sales tax loss" means a loss in sales tax revenues resulting from the implementation of section 501 of this act as estimated by the department and included in appendix A of the streamlined sales and use tax agreement sourcing study published by the department in December 2003.
     (c) "Estimated long-term sales tax loss" means a loss in sales tax revenues, as estimated by the department and as shown in LEAP document X, due to:
     (i) The implementation of section 501 of this act. Loss in revenues is as estimated by the department and included in appendix A of the streamlined sales and use tax agreement sourcing study published by the department in December 2003; and
     (ii) The imposition of the state retail sales tax collection and remittance requirements on remote sellers pursuant to federal authorization under section 1101(1) (a) or (b) of this act, based on the department's statewide estimate of sales tax gain following such changes as reported in the streamlined sales and use tax agreement sourcing study published in December 2003.
     (d) "Unrestricted current expense revenue" means the amount of unrestricted revenue deposited in calendar year 2002 to the general fund of a jurisdiction as reported under the state budget and accounting reporting system requirements to the state auditor's office. For transportation authorities, "unrestricted current expense revenue" shall include only the taxes imposed under this chapter.
     (5) This section expires June 30, 2015.

NEW SECTION.  Sec. 604   A new section is added to chapter 82.14 RCW to read as follows:
     (1) In addition to the deduction provided for in RCW 82.14.050, the department shall deduct an additional amount from the taxes collected for counties, cities, and transportation authorities for the purpose of mitigating any adverse impacts as a result of the implementation of section 501 of this act.
     (2)(a)(i) Except as provided in (a)(ii) and (iii) of this subsection, the amount deducted under this section shall be the product of two percent of the taxes collected and the factor in (b) of this subsection.
     (ii) Deductions shall cease for the remainder of a calendar year when the cumulative amount deducted equals the product of eighty percent of the estimated sales tax gain accruing to the county, city, or transportation authority and the factor in (b) of this subsection. Deductions that have ceased under this subsection (2) shall resume the following calendar year.
     (iii) If the estimated sales tax gain is zero, no amount may be deducted.
     (b)(i) For the fiscal year ending June 30, 2006, the factor is equal to eighty-three one-hundredths;
     (ii) For the fiscal year ending June 30, 2007, the factor is equal to sixty one-hundredths;
     (iii) For the fiscal year ending June 30, 2008, the factor is equal to thirty-six one-hundredths;
     (iv) For the fiscal year ending June 30, 2009, the factor is equal to fourteen one-hundredths.
     (3) The deduction in subsection (2) of this section shall be placed into the streamlined sales and use tax agreement mitigation account established in section 602 of this act.
     (4) For purposes of this section, "estimated sales tax gain" means the estimated increase in sales tax revenues resulting from the implementation of section 501 of this act included in appendix A of the streamlined sales and use tax agreement sourcing study published by the department in December 2003. If no increase is estimated in the study to occur, "estimated sales tax gain" is zero.
     (5) This section expires June 30, 2009.

NEW SECTION.  Sec. 605   A new section is added to chapter 82.14 RCW to read as follows:
     (1) The legislature recognizes that the estimated sales tax loss calculated by the department and included in appendix A of the streamlined sales and use tax agreement sourcing study published by the department in December 2003 may be less accurate for smaller jurisdictions. To address the possibility that certain small jurisdictions face unanticipated adverse financial impacts as a result of the implementation of the sourcing provisions of this act, the legislature finds that it is necessary to provide temporary supplemental mitigation funds.
     (2)(a) The department, in consultation with a committee composed of city, county, and transportation authority officials from eligible small impacted jurisdictions, shall evaluate the actual impact of the implementation of section 501 of this act on eligible small impacted jurisdictions. Committee responsibilities include review and feedback with respect to the department's analysis of actual impacts.
     (b) To evaluate the actual impact, the department shall examine with respect to eligible small impacted jurisdictions the taxpayer data in industries for which the implementation of section 501 of this act results in a significant reallocation of tax revenues between jurisdictions. The department shall compare data pertaining to collections after the effective date of section 501 of this act to data pertaining to collections before the effective date. The department may account and adjust for economic growth in its analysis as necessary.
     (3)(a) Based on the results of the evaluation in subsection (2) of this section, the department shall direct the state treasurer to distribute supplemental mitigation funds from the streamlined sales and use tax agreement mitigation account to eligible small impacted jurisdictions. The amount distributed to a jurisdiction is an amount, when added to funds provided pursuant to section 603 of this act in the previous fiscal year, equals the amount that would have been provided had actual sales tax loss data been used in lieu of estimated sales tax loss data in the calculation under that section.
     (b) No more than two million dollars may be provided under this section to all eligible small impacted jurisdictions in any fiscal year.
     (c) If the amounts necessary to make the distributions under this section exceed the limitation under this subsection (3), then the distributions under this section shall be reduced ratably on the basis of the full amounts calculated for distribution under (a) of this subsection.
     (4) For the purposes of this section, "eligible small impacted jurisdiction" means:
     (a) A county with a population of seventy-two thousand persons or less;
     (b) A city or town with a population of ten thousand persons or less; or
     (c) A transportation authority with a population of fifty thousand persons or less.
     (5) This section expires June 30, 2009.

NEW SECTION.  Sec. 606   A new section is added to chapter 82.32 RCW to read as follows:
     (1)(a) On July 1 of each year, an amount of sales and use taxes under chapters 82.08 and 82.12 RCW shall be deposited into the streamlined sales and use tax agreement mitigation account created under section 602 of this act equal to the product of (i) the amount that is forecasted as of June 30, 2004, by the office of the forecast council to be received by the department during the fiscal year pursuant to the enactment of chapter . . ., Laws of 2004 (this act) from sellers who, under the agreement, register to collect and remit to the department state sales and use taxes and who are otherwise not required to register under RCW 82.32.030(1), and (ii) the factor specified in (b) of this subsection.
     (b)(i) For the fiscal year ending June 30, 2006, the factor is equal to eighty-three one-hundredths.
     (ii) For the fiscal year ending June 30, 2007, the factor is equal to sixty-three one-hundredths.
     (iii) For the fiscal year ending June 30, 2008, the factor is equal to fifty-four one-hundredths.
     (iv) For the fiscal year ending June 30, 2009, the factor is equal to forty-nine one-hundredths.
     (v) For the fiscal year ending June 30, 2010, through the fiscal year ending June 30, 2015, the factor is equal to thirty-nine one-hundredths.
     (2) This section expires June 30, 2015.

NEW SECTION.  Sec. 701   A new section is added to chapter 82.14 RCW to read as follows:
     (1) The legislature finds that the sales and use tax and property tax bases of some local jurisdictions in the state are inadequate to allow the jurisdictions to generate enough tax revenues to pay for core services over the long term. The legislature intends to assist such jurisdictions by providing a portion of the state retail sales tax revenues realized by an expansion of the tax base following federal government action that authorizes states to require remote sellers to collect and remit sales taxes.
     (2) The local sales and property tax equalization account is created in the state treasury. A portion of the retail sales tax receipts received from the imposition of retail sales tax collection and remittance requirements on remote sellers shall be deposited to the account, as provided in section 702 of this act. Moneys in the account may only be spent after appropriation and are to be distributed to local jurisdictions for the purpose of assisting in the provision of core governmental services.

NEW SECTION.  Sec. 702   A new section is added to chapter 82.32 RCW to read as follows:
     Beginning in the fiscal year after the fiscal year in which the legislature requires remote sellers to collect and remit sales taxes pursuant to federal authorization under section 1101(1) (a) or (b) of this act, the treasurer shall transfer from the state general fund to the local sales and property tax equalization account created in section 701 of this act an amount, representing a portion of new collections under chapters 82.08 and 82.12 RCW resulting from the legislative change, equal to eighty million dollars, divided into four equal deposits occurring on July 1, October 1, January 1, and April 1. For each fiscal year thereafter, the state treasurer shall increase the total transfer by the fiscal growth factor, as defined in RCW 43.135.025, forecast for that fiscal year by the office of financial management in November of the preceding year.

NEW SECTION.  Sec. 703   A new section is added to chapter 82.14 RCW to read as follows:
     (1) The local sales and property tax equalization task force is formed for the purpose of providing a recommendation to the governor and to the legislature for a mechanism to distribute funds in the local sales and property tax equalization account created in section 701 of this act.
     (2)(a) Membership on the task force shall be as follows: Two members each from the house of representatives and from the senate, appointed by the leaders of each of the two largest caucuses in each house; a designee of the governor who will coordinate the appointment of the task force chairperson; a representative of the department of revenue; one person representing the large counties of the state, appointed by the governor; one person representing the small counties of the state, appointed by the governor; one person representing the large cities of the state, appointed by the governor; one person representing the small cities of the state, appointed by the governor; and one person representing transportation authorities, appointed by the governor.
     (b) Members of the task force shall serve without compensation, but shall be reimbursed for travel expenses as provided in RCW 43.03.050 and 43.03.060.
     (3) The staffs of the department, the office of financial management, and the fiscal committees of the legislature shall support the task force as needed.
     (4) In arriving at a recommendation, the task force shall consider factors that influence the generation of revenue in local jurisdictions, including the long-term growth of the sales and property tax bases; structural changes to the sales tax base as a result of the implementation of section 501 of this act and enactment of legislation pursuant to federal action under section 1101(1) (a) and (b) of this act; changes to property taxation authority in recent years; and other local economic factors. The task force shall submit its recommendation to the legislature by December 1, 2005.

NEW SECTION.  Sec. 801   A new section is added to chapter 82.32 RCW to read as follows:
     (1) A fundamental precept of allowing the use of a certified service provider is to preserve the privacy of consumers by protecting their anonymity. With very limited exceptions, a certified service provider shall perform its tax calculation, remittance, and reporting functions without retaining the personally identifiable information of consumers.
     (2) The department of revenue shall provide public notification to consumers, including purchasers claiming exemption from tax, of its practices relating to the collection, use, and retention of personally identifiable information.
     (3) When personally identifiable information that has been collected and retained is no longer required to ensure the validity of exemptions from taxation by reason of the consumer's status or the intended use of the goods or services purchased, the information shall no longer be retained by the state of Washington.
     (4) When personally identifiable information regarding an individual is retained by or on behalf of the state of Washington, this state shall provide reasonable access for the individual to his or her own information and a right to correct any inaccurately recorded information.
     (5) If anyone other than a member state of the agreement, or other than a person authorized by Washington law or the agreement, seeks to discover personally identifiable information, the state of Washington shall make a reasonable and timely effort to notify the individual of the request.
     (6) The provisions of this section may be enforced by petitioning the superior court of Thurston county for injunctive relief.

NEW SECTION.  Sec. 901   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The department of revenue shall complete a taxability matrix maintained by the member states of the agreement in downloadable format. The matrix contains terms defined in the agreement. The department of revenue shall provide notice of changes in the taxability of products or services listed in the matrix.
     (2) Sellers and certified service providers are relieved from liability to the state and to local jurisdictions for having charged or collected the incorrect amount of sales or use tax if the error resulted from reliance on erroneous information provided by the department of revenue in the taxability matrix.

NEW SECTION.  Sec. 1001   A new section is added to chapter 82.08 RCW to read as follows:
     When computing the tax levied by RCW 82.08.020, if a shipment consists of taxable tangible personal property and nontaxable tangible personal property, and delivery charges are included in the sales price, the seller must collect and remit tax on the percentage of delivery charges allocated to the taxable tangible property, but does not have to collect and remit tax on the percentage allocated to exempt tangible personal property. The seller may use either of the following percentages to determine the taxable portion of the delivery charges:
     (1) A percentage based on the total sales price of the taxable tangible property compared to the total sales price of all tangible personal property in the shipment; or
     (2) A percentage based on the total weight of the taxable tangible personal property compared to the total weight of all tangible personal property in the shipment.

NEW SECTION.  Sec. 1002   A new section is added to chapter 82.12 RCW to read as follows:
     When computing the tax levied by RCW 82.12.020, if a shipment consists of taxable tangible personal property and nontaxable tangible personal property, and delivery charges are included in the purchase price, the retailer must collect and remit tax on the percentage of delivery charges allocated to the taxable personal property, but does not have to collect and remit tax on the percentage allocated to exempt tangible personal property. The retailer may use either of the following percentages to determine the taxable portion of the delivery charges:
     (1) A percentage based on the total purchase price of the taxable personal property compared to the total purchase price of all tangible personal property in the shipment; or
     (2) A percentage based on the total weight of the taxable tangible personal property compared to the total weight of all tangible personal property in the shipment.

NEW SECTION.  Sec. 1101   (1) Sections 501 through 503, 601 through 606, and 1102 of this act take effect July 1, 2005. Section 401 of this act takes effect when Washington becomes a member state of the streamlined sales and use tax agreement. Section 302 of this act takes effect when:
     (a) The United States congress grants individual states the authority to impose sales and use tax collection duties on remote sellers; or
     (b) It is determined by a court of competent jurisdiction, in a judgment not subject to review, that a state can impose sales and use tax collection duties on remote sellers.
     (2) The remainder of this act takes effect July 1, 2004.

Sec. 1102   2003 c 168 s 902 (uncodified) is amended to read as follows:
     (1) If a court of competent jurisdiction enters a final judgment on the merits that is based on federal or state law, is no longer subject to appeal, and substantially limits or impairs the essential elements of P.L. 106-252, 4 U.S.C. Secs. 116 through 126, or chapter 67, Laws of 2002, then chapter 67, Laws of 2002 is null and void in its entirety, except as provided in subsection (2) of this section.
     (2) ((If the contingency in subsection (1) of this section occurs, section 502, chapter 168, Laws of 2003 is null and void)) Subsection (1) of this section does not apply to section 7, chapter 67, Laws of 2002 on or after April 1, 2005.

NEW SECTION.  Sec. 1103   Part headings used in this act are not any part of the law.

NEW SECTION.  Sec. 1104   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. 1105   If specific funding for the purposes of this act referencing this act by bill or chapter number is not provided by June 30, 2004, in the omnibus appropriations act, this act is null and void.