"Sec. 1   RCW 82.14.415 and 2006 c 361 s 1 are each amended to read as follows:
     (1) The legislative authority of any city ((with a population less than four hundred thousand and which)) that is located in a county with a population greater than six hundred thousand that annexes an area consistent with its comprehensive plan required by chapter 36.70A RCW, may impose a sales and use tax in accordance with the terms of this chapter. The tax is in addition to other taxes authorized by law and shall be collected from those persons who are taxable by the state under chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the city. The tax may only be imposed by a city if:
     (a) The city has commenced annexation of an area ((under chapter 35.13 or 35A.14 RCW)) having a population of at least ten thousand people prior to January 1, ((2010)) 2015; and
     (b) The city legislative authority determines by resolution or ordinance that the projected cost to provide municipal services to the annexation area exceeds the projected general revenue that the city would otherwise receive from the annexation area on an annual basis.
     (2) The tax authorized under this section is a credit against the state tax under chapter 82.08 or 82.12 RCW. The department of revenue shall perform the collection of such taxes on behalf of the city at no cost to the city and shall remit the tax to the city as provided in RCW 82.14.060.
     (3)(a) Except as provided in (b) of this subsection, the maximum rate of tax any city may impose under this section ((shall be 0.2 percent for the total number of annexed areas the city may annex. The rate of the tax imposed under this section)) is:
     (i) 0.1 percent for each annexed area in which the population ((that)) is greater than ten thousand and less than twenty thousand((. The rate of the tax imposed under this section shall be)); and
     (ii) 0.2 percent for an annexed area in which the population is greater than twenty thousand.
     (b) The maximum rate of tax imposed under this section is 0.85 percent for an annexed area in which the population is greater than ten thousand and the area is annexed by a city with a population greater than four hundred thousand.
     (4)(a) Except as provided in (b) and (c) of this subsection, the maximum cumulative rate of tax a city may impose under subsection (3)(a) of this section is 0.2 percent for the total number of annexed areas the city may annex.
     (b) The maximum cumulative rate of tax a city may impose under subsection (3)(a) of this section is 0.3 percent, beginning July 1, 2011, if the city commenced annexation of an area, prior to January 1, 2010, that would have otherwise allowed the city to increase the rate of tax imposed under this section absent the rate limit imposed in (a) of this subsection.
     (c) The maximum cumulative rate of tax a city may impose under subsection (3)(b) of this section is 0.85 percent for the single annexed area the city may annex and the amount of tax distributed to a city under subsection (3)(b) of this section shall not exceed five million dollars per fiscal year.
     (5) The tax imposed by this section shall only be imposed at the beginning of a fiscal year and shall continue for no more than ten years from the date that each increment of the tax is first imposed. Tax rate increases due to additional annexed areas shall be effective on July 1st of the fiscal year following the fiscal year in which the annexation occurred, provided that notice is given to the department as set forth in subsection (((8))) (9) of this section.
     (((5))) (6) All revenue collected under this section shall be used solely to provide, maintain, and operate municipal services for the annexation area.
     (((6))) (7) The revenues from the tax authorized in this section may not exceed that which the city deems necessary to generate revenue equal to the difference between the city's cost to provide, maintain, and operate municipal services for the annexation area and the general revenues that the cities would otherwise expect to receive from the annexation during a year. If the revenues from the tax authorized in this section and the revenues from the annexation area exceed the costs to the city to provide, maintain, and operate municipal services for the annexation area during a given year, the city shall notify the department and the tax distributions authorized in this section shall be suspended for the remainder of the year.
     (((7))) (8) No tax may be imposed under this section before July 1, 2007. Before imposing a tax under this section, the legislative authority of a city shall adopt an ordinance that includes the following:
     (a) A certification that the amount needed to provide municipal services to the annexed area reflects the city's true and actual costs;
     (b) The rate of tax under this section that shall be imposed within the city; and
     (((b))) (c) The threshold amount for the first fiscal year following the annexation and passage of the ordinance.
     (((8))) (9) The tax shall cease to be distributed to the city for the remainder of the fiscal year once the threshold amount has been reached. No later than March 1st of each year, the city shall provide the department with a certification of the city's true and actual costs to provide municipal services to the annexed area, a new threshold amount for the next fiscal year, and notice of any applicable tax rate changes. Distributions of tax under this section shall begin again on July 1st of the next fiscal year and continue until the new threshold amount has been reached or June 30th, whichever is sooner. Any revenue generated by the tax in excess of the threshold amount shall belong to the state of Washington. Any amount resulting from the threshold amount less the total fiscal year distributions, as of June 30th, shall not be carried forward to the next fiscal year.
     (10) The tax shall cease to be distributed to a city imposing the tax under subsection (3)(b) of this section for the remainder of the fiscal year, if the total distributions to the city imposing the tax exceed five million dollars for the fiscal year.
     (((9))) (11) The following definitions apply throughout this section unless the context clearly requires otherwise:
     (a) "Annexation area" means an area that has been annexed to a city under chapter 35.13 or 35A.14 RCW. "Annexation area" includes all territory described in the city resolution.
     (b) "Commenced annexation" means the initiation of annexation proceedings has taken place under the direct petition method or the election method under chapter 35.13 or 35A.14 RCW.
     (c) "Department" means the department of revenue.
     (((c))) (d) "Municipal services" means those services customarily provided to the public by city government.
     (((d))) (e) "Fiscal year" means the year beginning July 1st and ending the following June 30th.
     (f) "Potential annexation area" means one or more geographic areas that a city has officially designated for potential future annexation, as part of its comprehensive plan adoption process under the state growth management act, chapter 36.70A RCW.
     (((e))) (g) "Threshold amount" means the maximum amount of tax distributions as determined by the city in accordance with subsection (((6))) (7) of this section that the department shall distribute to the city generated from the tax imposed under this section in a fiscal year.

Sec. 2   RCW 9.46.295 and 1974 ex.s. c 155 s 6 are each amended to read as follows:
     (1) Any license to engage in any of the gambling activities authorized by this chapter as now exists or as hereafter amended, and issued under the authority thereof shall be legal authority to engage in the gambling activities for which issued throughout the incorporated and unincorporated area of any county, except that a city located therein with respect to that city, or a county with respect to all areas within that county except for such cities, may absolutely prohibit, but may not change the scope of license, any or all of the gambling activities for which the license was issued.
     (2) A city or town with a prohibition or limitation on house-banked social card game licenses that annexes an area that is within a county that permits house-banked social card games may allow a house-banked social card game business that existed at the time of annexation to continue operating if the city or town is authorized to impose a tax under RCW 82.14.415 and can demonstrate that the continuation of the house-banked social card game business will reduce the credit against the state sales and use tax as provided in RCW 82.14.415(7). A city or town that allows a house-banked social card game business in an annexed area to continue operating is not required to allow additional house-banked social card game businesses."