BILL REQ. #:  S-1597.1 

READ FIRST TIME 02/20/03.   

     AN ACT Relating to sales and use tax exemptions for call centers in distressed areas; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; and creating a new section.

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

NEW SECTION.  Sec. 1   The legislature finds that there are areas of the state that still have very high levels of unemployment. The legislature also finds that additional incentives are needed to promote economic stimulation and new employment opportunities in these distressed areas, and that these incentives are essential to increase economic growth in these areas. The legislature intends to accomplish this by providing a tax incentive for construction, equipping, and maintaining of call centers that locate in distressed areas of the state.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.08 RCW to read as follows:
     (1) The tax levied by RCW 82.08.020 does not apply to sales to a person who operates a call center, of machinery and equipment used in the call center, or to sales of or charges made for labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the machinery and equipment. The purchaser must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must keep a copy of the certificate for the seller's files.
     (2) The tax levied by RCW 82.08.020 does not apply to sales of or charges made for labor and services rendered in respect to constructing or improving of buildings used as a call center, or to sales of tangible personal property that becomes an ingredient or component of such buildings during the course of constructing or improving the buildings. The purchaser must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must keep a copy of the certificate for the seller's files.
     (3) The tax levied by RCW 82.08.020 does not apply to sales of or charges to a person who operates a call center for rental of equipment with an operator if such activity is used in the constructing or improving of a building used as a call center or in regards to eligible machinery and equipment. The purchaser must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must keep a copy of the certificate for the seller's files.
     (4) The tax imposed by RCW 82.08.020 does not apply to sales of toll service, as defined in RCW 82.08.0289, to a person who operates a call center. This exemption does not apply to any other network telephone services of the call center.
     (5)(a) In order to be eligible for the exemption under this section the call center must meet the "twenty-five or more employees" threshold in subsection (6) of this section within one year of commencing operations. Office support, management, and other employees who do not primarily perform customer service and support are not counted in determining if the operation meets the threshold. In addition, if at any time after the threshold is satisfied, employment at the call center falls below the twenty-five employee threshold, the exemption under this section is not available on or after that date, until such time as employment levels meet the threshold.
     (b) If at any time the department determines that a person is not eligible for an exemption under this section, the amount of taxes for which the exemption has been claimed shall be immediately due. The department shall assess interest, but not penalties, on the taxes for which the person is not eligible. The interest shall be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, shall be assessed retroactively to the date the tax exemption was taken, and shall accrue until the taxes for which the exemption has been taken are repaid.
     (6) For purposes of this section and section 3 of this act:
     (a) "Buildings" means those structures used in a call center. If a building is used partly for a call center operation and partly for other purposes, the applicable tax exemption shall be determined by apportionment of the costs of construction. Such apportionment shall be based on square footage. The term "buildings" also includes utility systems for heating, ventilation, air conditioning, plumbing, electrical, or similar systems used in the call center operation.
     (b)(i) "Call center" means a business operation employing twenty-five or more employees who provide customer service and support by responding to inbound telephone calls and electronic contacts, using computer-automated equipment and using an electronic medium or the telephone. "Call center" does not include a business operation engaged in the activity of telemarketing or the solicitation of sales.
     (ii) "Customer service and support" means product support related to goods and services, technical assistance, sales support, and information technology help desk services, and it includes customer service and support related to obtaining and using financial services. "Information technology help desk services" means the following services: Software and hardware maintenance; software and hardware diagnostics and troubleshooting; software and hardware installation; software and hardware repair; software and hardware information and training; and software and hardware upgrade.
     (c)(i) "Machinery and equipment" means commercial fixtures and devices, such as electronic communications equipment, communications systems infrastructure components, computer software, computer hardware, office furniture, and any other fixture and device necessary to maintain the communications operations of a call center. "Machinery and equipment" includes tangible personal property that becomes an ingredient or component of the fixture or device, including repair and replacement parts.
     (ii) "Machinery and equipment" does not include:
     (A) Hand-powered tools, such as hammers and wrenches; and
     (B) Property with a useful life of less than one year.
     (7) Only call centers located in the following areas are eligible for the exemptions under this section:
     (a) A community empowerment zone, as defined in chapter 43.31C RCW;
     (b) A county with fewer than one hundred persons per square mile, as determined annually by the office of financial management and published by the department of revenue effective for the period July 1st through June 30th; or
     (c) A county smaller than two hundred twenty-five square miles, as determined annually by the office of financial management and published by the department of revenue effective for the period July 1st through June 30th.
     (8) A person taking the exemptions under this section must apply to the department for a distressed area call center exemption certificate. The application must be in a form and manner as prescribed by the department. The department shall rule on the application within sixty days. The department shall issue a certificate to those persons who meet the criteria in this section. A certificate is valid for a one-year period.
     (9) A person who takes an exemption under this section shall make an annual report to the department. The report must be filed by January 30th of each year in which the exemption was claimed during the previous year. The report shall be in a letter form and shall include the following information: Confirmation that the taxpayer is operating a call center, location of the call center, how long the call center has been located in an eligible area, the number of employees meeting the threshold in subsection (6)(b) of this section, and the taxpayer name and registration number. Failure to file a report will not result in the loss of eligibility under this section. However, the department, through its research division, shall contact taxpayers who have not filed the report and obtain the data from the taxpayer or assist the taxpayer in the filing of the report, so that the data and information necessary to measure the program's effectiveness is maintained.
     (10)(a) As stated in subsection (7) of this section, the exemption in this section is available only to call centers in eligible areas. In addition, this exemption is limited to those call centers that:
     (i) Are located in an eligible area on or after the effective date of this act; or
     (ii) Commence operations in an eligible area on or after the effective date of this act.
     (b) Call centers that relocate any portion of a call center from within the state to an eligible area are not eligible for the exemption under this section.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The provisions of this chapter do not apply to the use by a person of:
     (a) Machinery and equipment used in a call center located in an eligible area;
     (b) Labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the machinery and equipment; and
     (c) Tangible personal property that becomes an ingredient or component of buildings used as a call center during the course of constructing or improving the buildings.
     (2) The definitions and all of the eligibility and reporting criteria in section 2 of this act apply to this section.