BILL REQ. #:  H-0152.4 

Read first time 01/14/2005.   Referred to Committee on Finance.

     AN ACT Relating to tax relief for paper manufacturers; amending RCW 82.12.022; reenacting and amending RCW 82.04.440; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.16 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 82.04 RCW, to be codified between RCW 82.04.020 and 82.04.220, to read as follows:
     "Paper manufacturer" means a person that is primarily engaged in manufacturing pulp, paper, newsprint, or paperboard.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Upon every person who is a paper manufacturer engaging within this state in the business of manufacturing paper and who has acquired and uses pressurized steam pulp washing technology; as to such persons the amount of tax with respect to such business shall, in the case of manufacturers, be equal to the value of the product manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of .2904 percent.
     (2) Upon every person who is a paper manufacturer engaging within this state in the business of making sales at wholesale of paper manufactured by that person and who has acquired and uses pressurized steam pulp washing technology; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the paper multiplied by the rate of .2904 percent.
     (3) To be eligible for the rates under this section, a person must submit, along with the person's first tax return after installation, an affidavit in a form and manner required by the department that indicates that the person has acquired and installed pressurized steam pulp washing technology. An eligible person's activities are subject to a rate under this section beginning with the first reporting period after the technology is installed and operational.
     (4) For the purposes of this section and section 4 of this act, "pressurized steam pulp washing technology" means equipment that utilizes a pressure vessel that discharges steam to wash unbleached pulp for paper product-making purposes and that is designed to reduce water consumption in pulp washing processes relative to conventional pulp washing processes that use drum washers, rewashers, and deckers.

Sec. 3   RCW 82.04.440 and 2004 c 174 s 5 and 2004 c 24 s 7 are each reenacted and amended to read as follows:
     (1) Every person engaged in activities which are within the purview of the provisions of two or more of sections RCW 82.04.230 to 82.04.298, inclusive, shall be taxable under each paragraph applicable to the activities engaged in.
     (2) Persons taxable under RCW 82.04.2909(2), 82.04.250, 82.04.270, section 2(2) of this act, or 82.04.260 (4) or (13) with respect to selling products in this state shall be allowed a credit against those taxes for any (a) manufacturing taxes paid with respect to the manufacturing of products so sold in this state, and/or (b) extracting taxes paid with respect to the extracting of products so sold in this state or ingredients of products so sold in this state. Extracting taxes taken as credit under subsection (3) of this section may also be taken under this subsection, if otherwise allowable under this subsection. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the sale of those products.
     (3) Persons taxable under RCW 82.04.240 or 82.04.260(1)(b) shall be allowed a credit against those taxes for any extracting taxes paid with respect to extracting the ingredients of the products so manufactured in this state. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the manufacturing of those products.
     (4) Persons taxable under RCW 82.04.230, 82.04.240, 82.04.2909(1), ((or)) 82.04.260 (1), (2), (4), (6), or (13), or section 2(1) of this act with respect to extracting or manufacturing products in this state shall be allowed a credit against those taxes for any (i) gross receipts taxes paid to another state with respect to the sales of the products so extracted or manufactured in this state, (ii) manufacturing taxes paid with respect to the manufacturing of products using ingredients so extracted in this state, or (iii) manufacturing taxes paid with respect to manufacturing activities completed in another state for products so manufactured in this state. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the extraction or manufacturing of those products.
     (5) For the purpose of this section:
     (a) "Gross receipts tax" means a tax:
     (i) Which is imposed on or measured by the gross volume of business, in terms of gross receipts or in other terms, and in the determination of which the deductions allowed would not constitute the tax an income tax or value added tax; and
     (ii) Which is also not, pursuant to law or custom, separately stated from the sales price.
     (b) "State" means (i) the state of Washington, (ii) a state of the United States other than Washington, or any political subdivision of such other state, (iii) the District of Columbia, and (iv) any foreign country or political subdivision thereof.
     (c) "Manufacturing tax" means a gross receipts tax imposed on the act or privilege of engaging in business as a manufacturer, and includes (i) the taxes imposed in RCW 82.04.240, 82.04.2909(1), ((and)) 82.04.260 (1), (2), (4), and (13), and section 2(1) of this act, and (ii) similar gross receipts taxes paid to other states.
     (d) "Extracting tax" means a gross receipts tax imposed on the act or privilege of engaging in business as an extractor, and includes the tax imposed in RCW 82.04.230 and similar gross receipts taxes paid to other states.
     (e) "Business", "manufacturer", "extractor", and other terms used in this section have the meanings given in RCW 82.04.020 through 82.04.212, notwithstanding the use of those terms in the context of describing taxes imposed by other states.

NEW SECTION.  Sec. 4   A new section is added to chapter 82.04 RCW to read as follows:
     (1) In computing the tax imposed under this chapter, a credit is allowed for all property taxes paid during the calendar year by a paper manufacturer for pressurized steam pulp washing technology acquired after the effective date of this section.
     (2) A person taking the credit under this section is subject to all the requirements of chapter 82.32 RCW. A credit earned during one calendar year may be carried over to be credited against taxes incurred in the subsequent calendar year, but may not be carried over a second year. Credits carried over must be applied to tax liability before new credits. No refunds may be granted for credits under this section.
     (3) For the purposes of this section, "pressurized steam pulp washing technology" means the same as provided in section 2 of this act.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.04 RCW to read as follows:
     (1) A person who is subject to tax under this chapter on gross income from sales of electricity, natural gas, or manufactured gas made to a paper manufacturer is eligible for an exemption from the tax in the form of a credit, if the contract for sale of electricity or gas to the manufacturing facility specifies that the price charged for the electricity or gas will be reduced by an amount equal to the credit.
     (2) The credit is equal to the gross income from the sale of the electricity or gas to a manufacturing facility multiplied by the corresponding rate in effect at the time of the sale under this chapter.
     (3) The exemption provided for in this section does not apply to amounts received from the remarketing or resale of electricity originally obtained by contract for the manufacturing process.

Sec. 6   RCW 82.12.022 and 2004 c 24 s 12 are each amended to read as follows:
     (1) There is hereby levied and there shall be collected from every person in this state a use tax for the privilege of using natural gas or manufactured gas within this state as a consumer.
     (2) The tax shall be levied and collected in an amount equal to the value of the article used by the taxpayer multiplied by the rate in effect for the public utility tax on gas distribution businesses under RCW 82.16.020. The "value of the article used" does not include any amounts that are paid for the hire or use of a gas distribution business as defined in RCW 82.16.010(7) in transporting the gas subject to tax under this subsection if those amounts are subject to tax under that chapter.
     (3) The tax levied in this section shall not apply to the use of natural or manufactured gas delivered to the consumer by other means than through a pipeline.
     (4) The tax levied in this section shall not apply to the use of natural or manufactured gas if the person who sold the gas to the consumer has paid a tax under RCW 82.16.020 with respect to the gas for which exemption is sought under this subsection.
     (5) The tax levied in this section shall not apply to the use of natural or manufactured gas by an aluminum smelter as that term is defined in RCW 82.04.217 before January 1, 2007.
     (6) The tax levied in this section does not apply to the use of natural or manufactured gas by a paper manufacturing facility. For the purposes of this section, "paper manufacturing facility" means the facility used by a paper manufacturer, as defined in section 1 of this act, for the manufacture of paper.
     (7) There shall be a credit against the tax levied under this section in an amount equal to any tax paid by:
     (a) The person who sold the gas to the consumer when that tax is a gross receipts tax similar to that imposed pursuant to RCW 82.16.020 by another state with respect to the gas for which a credit is sought under this subsection; or
     (b) The person consuming the gas upon which a use tax similar to the tax imposed by this section was paid to another state with respect to the gas for which a credit is sought under this subsection.
     (((7))) (8) The use tax hereby imposed shall be paid by the consumer to the department.
     (((8))) (9) There is imposed a reporting requirement on the person who delivered the gas to the consumer to make a quarterly report to the department. Such report shall contain the volume of gas delivered, name of the consumer to whom delivered, and such other information as the department shall require by rule.
     (((9))) (10) The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of sections 1 through 6, chapter 384, Laws of 1989.

NEW SECTION.  Sec. 7   A new section is added to chapter 82.16 RCW to read as follows:
     (1) A person who is subject to tax under this chapter on gross income from sales of electricity, natural gas, or manufactured gas made to a paper manufacturing facility is eligible for an exemption from the tax in the form of a credit, if the contract for sale of electricity or gas to the paper manufacturing facility specifies that the price charged for the electricity or gas will be reduced by an amount equal to the credit.
     (2) The credit is equal to the gross income from the sale of the electricity or gas to a paper manufacturing facility multiplied by the corresponding rate in effect at the time of the sale for the public utility tax under RCW 82.16.020.
     (3) The exemption provided for in this section does not apply to amounts received from the remarketing or resale of electricity originally obtained by contract for the manufacturing process.
     (4) For the purposes of this section, "paper manufacturing facility" has the same meaning as provided in RCW 82.12.022.

NEW SECTION.  Sec. 8   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, 2005.