BILL REQ. #:  S-0394.2 

Read first time 02/12/09.   Referred to Committee on Ways & Means.

     AN ACT Relating to providing sales and use tax exemptions to eligible data centers located in a rural county as defined in RCW 82.14.370(5); adding a new section to chapter 82.08 RCW; and adding a new section to chapter 82.12 RCW.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.08 RCW to read as follows:
     (1) An exemption from the tax imposed by RCW 82.08.020 is provided for sales to qualifying businesses of server equipment, to be installed, in an eligible computer data center, and for sales of labor and services rendered in respect to installing such server equipment. The exemption also applies to the sales of temperature and climate control infrastructure and power infrastructure, including labor and services rendered in respect to constructing, installing, repairing, altering, or improving such infrastructure.
     (2)(a) A person claiming the exemption under this section must present the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files. A seller's failure to retain a copy of the certificate does not disqualify the buyer's exemption claim.
     (b) In order to claim the exemption under this act, a qualifying business must submit an application to the department. The application must include the information necessary, as required by the department, to determine that a business qualifies for the exemption under this act. The department must issue a decision on the application within ninety days of receipt. If the department fails to issue a decision, the application for the exemption is deemed to have been approved.
     (c) In the event that the person claiming the exemption did not claim the exemption in advance of the first qualifying purchase and paid the vendor the sales tax, the department must accept an application after the purchase for purposes of refunding the sales tax paid on the equipment and services described in subsection (1) of this section. The department must issue a decision on the application within ninety days of receipt. If the department fails to issue a decision, the application for the exemption is deemed to have been approved.
     (3) A person who claims an exemption under this section must make an annual report to the department.
     (a) This report must include:
     (i) Information detailing employment, wages, and employer-provided health and retirement benefits per job;
     (ii) Employment by the number of full-time and part-time positions; and
     (iii) The cost of qualifying expenditures for the eligible computer data center.
     (b) The first report filed under this subsection must include employment, wage, and benefit information for the twelve-month period immediately before the installation of any equipment described in subsection (1) of this section.
     (c) Subsequent reports are due by March 31st following the year the eligible computer data center is first placed in commercial service or in the case of a computer data center placed into commercial service prior to the effective date of this act, then the report is due by March 31st following the year of the installation of any equipment described in subsection (1) of this section. The report must be filed annually for the period the eligible computer data center, or the equipment described in subsection (1) of this section that was installed in a computer data center existing prior to the effective date of this act, remains in commercial service.
     (d) Employment, wage, and benefit information is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (4) If a person fails to fulfill the requirements of this section, the department must declare the amount of taxes exempted under this section immediately due and payable. However, the department may not declare the amount of taxes immediately due and payable if the failure was the result of illness, death, natural disasters, or unforeseen computer system failures. Excise taxes payable under this section are subject to interest, as provided under this chapter. Requirements under this section exclusively include:
     (a) The person must submit an annual report as required by subsection (3) of this section.
     (b) The person must increase employment in the state by a minimum of thirty-five family wage jobs no later than six years after the installation of equipment of the computer data center. For purposes of the report required by this section, family wage jobs are new permanent employment positions requiring forty hours of weekly work, or their equivalent, on a full-time basis and paying a wage equivalent to or greater than one hundred fifty percent of the per capita personal income of the county in which the qualified project is located. The person must provide health insurance coverage for the employee.
     This requirement does not apply to existing computer data centers if the equipment and services are those described in subsection (1) of this section and are for the purpose of refreshing, maintaining, or replacing existing equipment due to changes in technology, obsolescence, or defect.
     (c) No later than six years following the date the eligible computer data center begins to provide commercial service, or the date the installation of the equipment is final, the person must document qualifying expenditures equal to or exceeding two hundred million dollars.
     (5) For purposes of this section:
     (a) "Commercial service" means the point at which the equipment described in subsection (1) of this section becomes operational for its intended purposes and excludes testing or other activities in preparation for the same to become operational.
     (b) "Computer data center" means a facility comprised of one or more buildings constructed or refurbished specifically, and used primarily, to house servers and related equipment and support staff, where the facility has the following characteristics:
     (i) Uninterruptible power supplies, generator backup power, or both;
     (ii) Sophisticated fire suppression and prevention systems; and
     (iii) Enhanced physical security, such as: (A) Restricted access to the facility to selected personnel; (B) permanent security guards; video camera surveillance; or an electronic system requiring passcodes, keycards, or biometric scans, such as hand scans and retinal or fingerprint recognition; or (C) security features similar to those in (b)(iii)(A) and (B) of this subsection (5). A computer data center includes, but is not limited to, a web search portal business.
     (c) "Store or manage electronic data" includes, but is not limited to: Providing data storage and backup services, providing computer processing power, and hosting enterprise software applications. The term also includes hosting web sites that provide free or subscription services such as e-mail, web browsing and searching, media applications, and other related online services.
     (d) "Eligible computer data center" means a physical location in the state consisting of a single parcel of real property or adjacent parcels of real property owned by the same taxpayer, acquired or improved through construction of a computer data center with at least twenty thousand square feet of floor space dedicated to housing working servers and located in a rural county as defined in RCW 82.14.370(5).
     (e) "Installation of equipment" means when the first piece of equipment described in subsection (1) of this section is installed at the site and ordering the equipment, preparing the equipment for installation, or other activities in preparation for the installation of such equipment.
     (f) "Power infrastructure" means all fixtures, equipment, and facilities necessary for the transformation, distribution, or management of electricity at an eligible data center. The term includes, but is not limited to, exterior taxpayer-owned electrical substations, generators, wiring, back-up power generation systems, battery systems, and related infrastructure and cogeneration equipment.
     (g)(i) "Qualifying business" means a business entity that: Exists for the primary purpose of engaging in commercial activity for profit; and purchases server equipment, power infrastructure, or temperature and climate control infrastructure on or after July 1, 2011, for use in a computer data center.
     (ii) For purposes of this definition, "business entity" means a corporation, other than a municipal, quasi-municipal, and public or other corporation created by the state or federal government, tribal government, municipality, or political subdivision of the state; association; limited liability company; partnership, including general partnership, limited partnership, and limited liability partnership; or other legal entity. Consistent with this definition, "business entity" does not include the state or federal government or any of their departments, agencies, and institutions; tribal governments; and political subdivisions of this state.
     (h) "Qualifying expenditure" means an investment in real and personal property of two hundred million dollars for capital expenses including, but not limited to, land acquisition, preparation, and improvement, facility design, engineering and construction, and installation of server equipment, temperature and climate control infrastructure, and power infrastructure. Expenditures made prior to July 1, 2011, are deemed qualifying expenditures for purposes of determining eligibility of a computer data center for the exemption offered under this chapter.
     (i) "Server" includes:
     (i) Blade or rack-mount servers and means a computer that is used in a computer data center solely to store or manage electronic data, to provide internet access, navigation, or search functions for the owner or lessee of the computer data center, or for clients of the owner or lessee of the computer data center, or both; or
     (ii) Computers used for research and development to support capabilities to store or manage electronic data or provide internet access, navigation, or search functions.
     (j) "Server equipment" means the server chassis and all computer hardware and software contained within the server chassis. Consistent with this definition, "server equipment" includes the racks upon which the server chassis is installed, cables, and computer peripherals such as keyboards, monitors, printers, mice, and other devices that work outside of the computer.
     (k) "Temperature and climate control infrastructure" means all fixtures, equipment, and facilities necessary for controlling the temperature and humidity at an eligible computer data center. The term includes heating, ventilation, and air conditioning fixtures and equipment; cooling systems; cooling towers; temperature sensors; humidity sensors; fans; and perforated floor tiles.
     (l) "Web search portal business" means an entity among whose primary business is to provide a content and search portal to organize information; to access, search, or navigate the internet, including researching or developing technologies to support capabilities to organize information; and to provide internet access, navigation, and search functionalities.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.12 RCW to read as follows:
     (1) An exemption from the tax imposed by RCW 82.12.020 is provided for sales to qualifying businesses of server equipment, to be installed, in an eligible computer data center, and to charges made for labor and services rendered in respect to installing such server equipment. The exemption also applies to the sales of temperature and climate control infrastructure and power infrastructure, including labor and services rendered in respect to constructing, installing, repairing, altering, or improving such infrastructure. However, this exemption does not apply if the server equipment is withdrawn from an eligible computer data center and not reused in an eligible computer data center. Such item must be taxed at its fair market value at the time of first taxable use in Washington.
      (2) In order to claim the exemption under this act, a qualifying business must submit an application to the department. The application must include the information necessary, as required by the department, to determine that a business qualifies for the exemption under this act. The department must issue a decision on the application within ninety days of its receipt. If the department fails to issue a decision, the application for the exemption is deemed to have been approved.
     (3) The definitions in section 1 of this act apply to this section.
     (4) If a person fails to fulfill the requirements of section 1 of this act, all taxes exempt under this section become immediately due and payable. Excise taxes payable under this section are subject to interest, as provided under this chapter.