BILL REQ. #:  S-4128.4 

READ FIRST TIME 02/05/04.   

     AN ACT Relating to tax incentives for call centers in rural areas of the state; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; creating a new section; and providing an effective date.

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 tax incentives for call centers, toll services, or network telephone services located 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 of machinery and equipment used by a person who operates a call center located in an eligible area, or to sale of or charges made for labor and service rendered in respect to installing the machinery and equipment. The exemption for labor and services provided by this subsection does not apply to sale of or charges made for labor and services for repairing, replacing, 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 retain a copy of the certificate as part of its permanent records for a period of at least five years.
     (2) The tax levied by RCW 82.08.020 does not apply to sale of or charges made for labor and services rendered in respect to constructing or improving buildings used as a call center located in an eligible area, or to sales of tangible personal property that becomes an ingredient or component of such building 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 retain a copy of the certificate as part of its permanent records for a period of at least five years.
     (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 tangible personal property along with an operator if such activity is used in constructing or improving a building used as a call center located in an eligible area 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 retain a copy of the certificate as part of its permanent records for a period of at least five years.
     (4) The tax levied by RCW 82.08.020 does not apply to sale of toll services, as defined in RCW 82.08.0289, to a person who operates a call center located in an eligible area. This exemption applies to the calendar year in which a call center's operations commence and the immediately subsequent three calendar years. This exemption does not apply to any other network telephone services of the call center. The purchaser must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate as part of its permanent records for a period of at least five years.
     (5) The tax levied by RCW 82.08.020 does not apply to sale of toll services, as defined in RCW 82.08.0289, or to the sale of network telephone services, as defined in RCW 82.04.065, for a person who operated a call center before July 1, 2004. The exemption in this subsection applies only to call centers in a rural area as defined in RCW 82.16.0491 which also qualifies as a distressed area, as defined in RCW 43.165.010. The exemption in this subsection applies beginning July 1, 2004, and expires January 1, 2008. The purchaser must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate as part of its permanent records for a period of at least five years.
     (6)(a) To qualify for the exemptions provided in this section, a call center must employ twenty-five or more employees who provide customer service and support by responding to inbound telephone calls and electronic contacts, using computer-automated equipment, an electronic medium, or the telephone, within one year of commencing call center operations. Office support, management, and other employees who do not primarily perform customer service and support are not included in determining if the operation meets the threshold for the number of employees. In addition, if, at any time after the threshold is satisfied, employment at the call center falls below the twenty-five or more employees, the exemptions under this section are not available on or after that date, until such time as employment levels meet the threshold.
     (b) If a person discontinues the operation of a call center located in an eligible area, the amount of taxes for which the exemption has been claimed for the current calendar year and the preceding three calendar years is 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.
     (7) A person taking the exemptions under this section must apply to the department for a 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 of receipt. The department shall issue an exemption certificate to those persons that qualify as a call center located in an eligible area. The exemption certificate is valid for a one-year period. Call centers taking the exemptions provided by this section must reapply each year to maintain eligibility.
     (8) 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 following any year in which an exemption under this section was taken. The report shall be in letter form and shall include the following information: Taxpayer name and registration number, confirmation that the person is operating a call center, location of the call center, how long the call center has been in that location, the amount of each exemption taken under this section, and the average number of employees providing customer service and support. Failure to file a report will not result in the loss of eligibility under this section. However, the department shall contact the 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 collected.
     (9) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise:
     (a) "Buildings" means those structures used in a call center located in an eligible area. If a building is used partly for a call center located in an eligible area and partly for other purposes, the applicable tax exemption shall be determined by apportioning the costs of the construction. Such apportionment shall be based on square footage and determined according to the ratio of the square footage of that portion of the building(s) used as a call center bears to the square footage of the total building. The term "buildings" also includes utility systems for heating, ventilation, air conditioning, plumbing, electrical, or similar systems used in the call center operation.
     (b) "Call center located in an eligible area" means a business operation:
     (i) 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, an electronic medium, or the telephone; and
     (ii) Commencing the operation of a call center, after July 1, 2004, in one of the following eligible areas:
     (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, 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, effective for the period July 1st through June 30th.
     (c) "Call center located in an eligible area" does not include:
     (i) A call center that relocates any portion of a call center from within the state to an eligible area under this section;
     (ii) A business operation engaged in the activity of telemarketing or the solicitation of sales; or
     (iii) A business that merely incorporates, reincorporates, merges, or otherwise changes or reforms its identity in an attempt to qualify as a call center located in an eligible area.
     (d)(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 for the communications operations of a call center located in an eligible area. "Machinery and equipment" includes tangible personal property that becomes an ingredient or component of the fixture or device.
     (ii) "Machinery and equipment" does not include:
     (A) Hand-powered tools, such as hammer and wrenches;
     (B) Property with a useful life of less than one year; or
     (C) Repair and replacement parts for otherwise eligible machinery and equipment.

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 who operates a call center located in an eligible area of:
     (a) Machinery and equipment used in a call center located in an eligible area;
     (b) Labor and services rendered in respect to installing the machinery and equipment in a call center located in an eligible area; and
     (c) Tangible personal property that becomes an ingredient or component of buildings used in a call center located in an eligible area.
     (2) "Building," "call center located in an eligible area," and "machinery and equipment" have the same meanings given in section 2 of this act.

NEW SECTION.  Sec. 4   This act takes effect July 1, 2004.