BILL REQ. #: S-4858.5
| State of Washington | 61st Legislature | 2010 Regular Session |
Read first time 02/24/10. Referred to Committee on Ways & Means.
AN ACT Relating to increasing state revenues to preserve funding for essential public services by preventing abusive tax avoidance transactions, narrowing or eliminating certain tax preferences, and providing equitable tax treatment; amending RCW 82.04.220, 82.04.2907, 82.04.460, 82.32.090, 82.12.020, 82.45.033, 82.45.070, 82.45.080, 82.45.100, 82.45.220, 43.07.390, 82.04.4292, 82.08.0273, 82.04.423, 82.04.4266, 82.04.250, 82.04.250, 82.04.298, 82.04.334, 82.04.4463, 82.08.806, 82.32.545, 82.32.550, 82.32.630, 82.32.632, 82.45.195, 35.102.150, 48.14.080, 82.48.010, 82.48.020, 82.48.030, 82.48.070, 82.48.080, 82.48.110, 82.45.010, 82.45.080, 82.32.145, 82.60.020, 82.62.010, 82.16.020, 82.16.020, 82.04.4282, 82.08.037, 82.12.037, 82.12.010, 82.14.230, 82.16.110, 82.08.890, 82.12.890, 54.28.011, 82.08.010, 82.08.962, and 82.12.962; reenacting and amending RCW 82.45.010, 82.04.260, 82.04.261, 82.04.440, 82.04.360, 82.04.050, and 82.04.050; adding new sections to chapter 82.04 RCW; adding new sections to chapter 82.32 RCW; adding a new section to chapter 82.48 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; creating new sections; repealing RCW 82.04.44525, 82.04.272, 82.04.062, 82.08.811, 82.12.811, and 82.04.394; providing effective dates; providing contingent effective dates; providing expiration dates; and declaring an emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 101 (1) The legislature finds that out-of-state businesses that do not have a physical presence in Washington
earn significant income from Washington residents from providing
services or collecting royalties on the use of intangible property in
this state. The legislature further finds that these businesses
receive significant benefits and opportunities provided by the state,
such as: Laws providing protection of business interests or regulating
consumer credit; access to courts and judicial process to enforce
business rights, including debt collection and intellectual property
rights; an orderly and regulated marketplace; and police and fire
protection and a transportation system benefiting in-state agents and
other representatives of out-of-state businesses. Therefore, the
legislature intends to extend the state's business and occupation tax
to these companies to ensure that they pay their fair share of the cost
of services that this state renders and the infrastructure it provides.
(2)(a) The legislature also finds that the current cost
apportionment method in RCW 82.04.460(1) for apportioning most service
income has been difficult for both taxpayers and the department to
apply due in large part (i) to the difficulty in assigning certain
costs of doing business inside or outside of this state, and (ii) to
its dissimilarity with the apportionment methods used in other states
for their business activity taxes.
(b) The legislature further finds that there is a trend among
states to adopt a single factor apportionment formula based on sales.
The legislature recognizes that adoption of a sales factor only
apportionment method has the advantages of simplifying apportionment
and making Washington a more attractive place for businesses to expand
their property and payroll. For these reasons, the legislature adopts
single factor sales apportionment for purposes of apportioning royalty
income and certain service income.
(c) Nothing in this act may be construed, however, to authorize
apportionment of the gross income or value of products taxable under
the following business and occupation tax classifications: Retailing,
wholesaling, manufacturing, processing for hire, extracting, extracting
for hire, printing, government contracting, public road construction,
the classifications in RCW 82.04.280 (2), (4), (6), and (7), and any
other activity not specifically included in the definition of
apportionable activities in RCW 82.04.460.
Sec. 102 RCW 82.04.220 and 1961 c 15 s 82.04.220 are each amended
to read as follows:
(1) There is levied and ((shall be)) collected from every person
that has a substantial nexus with this state a tax for the act or
privilege of engaging in business activities. ((Such)) The tax ((shall
be)) is measured by the application of rates against value of products,
gross proceeds of sales, or gross income of the business, as the case
may be.
(2) A person who has a substantial nexus with this state in any tax
year will be deemed to have a substantial nexus with this state for the
following four tax years.
NEW SECTION. Sec. 103 A new section is added to chapter 82.04
RCW to read as follows:
"Engaging within this state" and "engaging within the state," when
used in connection with any apportionable activity as defined in RCW
82.04.460, means that a person generates gross income of the business
from sources within this state, such as customers or intangible
property located in this state, regardless of whether the person is
physically present in this state.
NEW SECTION. Sec. 104 A new section is added to chapter 82.04
RCW to read as follows:
(1) A person engaging in business is deemed to have a substantial
nexus with this state if the person is:
(a) An individual and is a resident or domiciliary of this state;
(b) A business entity and is organized or commercially domiciled in
this state; or
(c) A nonresident individual or a business entity that is organized
or commercially domiciled outside this state, and in any tax year the
person has:
(i) More than fifty thousand dollars of property in this state;
(ii) More than fifty thousand dollars of payroll in this state;
(iii) More than five hundred thousand dollars of receipts from this
state; or
(iv) At least twenty-five percent of the person's total property,
total payroll, or total receipts in this state.
(2)(a) Property counting toward the thresholds in subsection
(1)(c)(i) and (iv) of this section is the average value of the
taxpayer's property, including intangible property, owned or rented and
used in this state during the tax year.
(b)(i) Property owned by the taxpayer, other than loans and credit
card receivables owned by the taxpayer, is valued at its original cost
basis. Loans and credit card receivables owned by the taxpayer are
valued at their outstanding principal balance, without regard to any
reserve for bad debts. However, if a loan or credit card receivable is
charged off in whole or in part for federal income tax purposes, the
portion of the loan or credit card receivable charged off is deducted
from the outstanding principal balance.
(ii) Property rented by the taxpayer is valued at eight times the
net annual rental rate. For purposes of this subsection, "net annual
rental rate" means the annual rental rate paid by the taxpayer less any
annual rental rate received by the taxpayer from subrentals.
(c) The average value of property must be determined by averaging
the values at the beginning and ending of the tax year; but the
department may require the averaging of monthly values during the tax
year if reasonably required to properly reflect the average value of
the taxpayer's property.
(d)(i) For purposes of this subsection (2), loans and credit card
receivables are deemed owned and used in this state as follows:
(A) Loans secured by real property, personal property, or both real
and personal property, are deemed owned and used in the state if the
real property or personal property securing the loan is located within
this state. If the property securing the loan is located both within
this state and one or more other states, the loan is deemed owned and
used in this state if more than fifty percent of the fair market value
of the real or personal property is located within this state. If more
than fifty percent of the fair market value of the real or personal
property is not located within any one state, then the loan is deemed
owned and used in this state if the borrower is located in this state.
The determination of whether the real or personal property securing a
loan is located within this state must be made, as of the time the
original agreement was made, and any and all subsequent substitutions
of collateral must be disregarded.
(B) Loans not secured by real or personal property are deemed owned
and used in this state if the borrower is located in this state.
(C) Credit card receivables are deemed owned and used in this state
if the billing address of the cardholder is in this state.
(ii) The definitions in section 106 of this act apply to this
subsection.
(e) Notwithstanding anything else to the contrary in this
subsection, property counting toward the thresholds in subsection
(1)(c)(i) and (iv) of this section does not include a person's
ownership of, or rights in, computer software as defined in RCW
82.04.215, including computer software used in providing a digital
automated service; master copies of software; and digital goods and
digital codes residing on servers located in this state.
(3)(a) Payroll counting toward the thresholds in subsection
(1)(c)(ii) and (iv) of this section is the total amount paid by the
taxpayer for compensation in this state during the tax year plus
nonemployee compensation paid to representative third parties in this
state. Nonemployee compensation paid to representative third parties
includes the gross amount paid to nonemployees who represent the
taxpayer in interactions with the taxpayer's clients and includes sales
commissions.
(b) Compensation is paid in this state if the compensation is
properly reportable to this state for unemployment compensation tax
purposes, regardless of whether the compensation was actually reported
to this state.
(c) Nonemployee compensation is paid in this state if the service
performed by the representative third party occurs entirely or
primarily within this state.
(d) For purposes of this subsection, "compensation" means wages,
salaries, commissions, and any other form of remuneration paid to
employees or nonemployees and defined as gross income under 26 U.S.C.
Sec. 61 of the federal internal revenue code of 1986, as existing on
July 1, 2010.
(4) Receipts counting toward the thresholds in subsection
(1)(c)(iii) and (iv) of this section are:
(a) Those amounts included in the numerator of the receipts factor
under sections 105 and 106 of this act;
(b) Gross proceeds of sales of the taxpayer in this state, which
include only retail sales and wholesale sales. For purposes of this
subsection (4)(b), gross proceeds of sales are in this state if the
sale is sourced to this state under RCW 82.32.730 for sales tax
purposes or would have been sourced to this state under RCW 82.32.730
if the sale had been taxable under chapter 82.08 RCW;
(c) Gross income of the business of the taxpayer, not otherwise
included within (a) or (b) of this subsection (4), if the gross income
is attributed to this state. For purposes of determining whether gross
income is attributed to this state under this subsection (4)(c), the
provisions of section 105(3)(b) of this act apply; and
(d) The value of products manufactured or extracted in this state
by the taxpayer either directly or by contracting with a processor for
hire or an extractor for hire for the necessary labor or mechanical
services, less any amounts already included in the receipts factor in
(b) of this subsection (4) with respect to the sale of the products
manufactured or extracted in this state.
(5)(a) Each December, the department must review the cumulative
percentage change in the consumer price index. The department must
adjust the thresholds in subsection (1)(c)(i) through (iii) of this
section if the consumer price index has changed by five percent or more
since the later of July 1, 2010, or the date that the thresholds were
last adjusted under this subsection. For purposes of determining the
cumulative percentage change in the consumer price index, the
department must compare the consumer price index available as of
December 1st of the current year with the consumer price index as of
the later of July 1, 2010, or the date that the thresholds were last
adjusted under this subsection. The thresholds must be adjusted to
reflect that cumulative percentage change in the consumer price index.
The adjusted thresholds must be rounded to the nearest one thousand
dollars. Any adjustment will apply to tax periods that begin after the
adjustment is made.
(b) As used in this subsection, "consumer price index" means the
consumer price index for all urban consumers (CPI-U) available from the
bureau of labor statistics of the United States department of labor.
(6) A person with a substantial nexus with this state under the
provisions of subsection (1) of this section based on the amount of
receipts in this state is nevertheless not subject to taxes imposed
under this chapter on any activity not included in the definition of
apportionable activities in RCW 82.04.460, unless the person has a
physical presence in this state, which need only be demonstrably more
than a slightest presence. For purposes of this subsection, a person
is physically present in this state if the person has property or
employees in this state or the person, either directly or through an
agent or other representative, engages in activities in this state that
are significantly associated with the person's ability to establish or
maintain a market for its products in this state.
NEW SECTION. Sec. 105 A new section is added to chapter 82.04
RCW to read as follows:
(1) The apportionable income of a person within the scope of RCW
82.04.460(1) is apportioned to Washington by multiplying its
apportionable income by the receipts factor. Persons who are subject
to tax under more than one of the tax classifications enumerated in RCW
82.04.460(3)(a) (i) through (ix) must calculate a separate receipts
factor for each tax classification that the person is taxable under.
(2) For purposes of subsection (1) of this section, the receipts
factor is a fraction and is calculated as provided in subsections (3)
and (4) of this section and section 106 of this act.
(3)(a) The numerator of the receipts factor is the total gross
income of the business of the taxpayer attributable to this state
during the tax year from engaging in an apportionable activity. The
denominator of the receipts factor is the total gross income of the
business of the taxpayer from engaging in an apportionable activity
everywhere in the world during the tax year.
(b) Except as otherwise provided in this section, for purposes of
computing the receipts factor, gross income of the business generated
from each apportionable activity is attributable to the state:
(i) Where the customer received the benefit of the taxpayer's
service or, in the case of gross income from royalties, where the
customer used the taxpayer's intangible property.
(ii) If the customer received the benefit of the service or used
the intangible property in more than one state, gross income of the
business must be attributed to the state in which the benefit of the
service was primarily received or in which the intangible property was
primarily used.
(iii) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i) or (ii) of this subsection (3),
gross income of the business must be attributed to the state from which
the customer ordered the service or, in the case of royalties, the
office of the customer from which the royalty agreement with the
taxpayer was negotiated.
(iv) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), or (iii) of this
subsection (3), gross income of the business must be attributed to the
state to which the billing statements or invoices are sent to the
customer by the taxpayer.
(v) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), (iii), or (iv) of this
subsection (3), gross income of the business must be attributed to the
state from which the customer sends payment to the taxpayer.
(vi) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), (iii), (iv), or (v) of
this subsection (3), gross income of the business must be attributed to
the state where the customer is located as indicated by the customer's
address: (A) Shown in the taxpayer's business records maintained in
the regular course of business; or (B) obtained during consummation of
the sale or the negotiation of the contract for services or for the use
of the taxpayer's intangible property, including any address of a
customer's payment instrument when readily available to the taxpayer
and no other address is available.
(vii) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), (iii), (iv), (v), or
(vi) of this subsection (3), gross income of the business must be
attributed to the commercial domicile of the taxpayer.
(viii) For purposes of this subsection (3)(b), "customer" means a
person or entity to whom the taxpayer makes a sale or renders services
or from whom the taxpayer otherwise receives gross income of the
business. "Customer" includes anyone who pays royalties or charges in
the nature of royalties for the use of the taxpayer's intangible
property.
(c) Gross income of the business from engaging in an apportionable
activity must be excluded from the denominator of the receipts factor
if, in respect to such activity, at least some of the activity is
performed in this state, and the gross income is attributable under (b)
of this subsection (3) to a state in which the taxpayer is not taxable.
For purposes of this subsection (3)(c), "not taxable" means that the
taxpayer is not subject to a business activities tax by that state,
except that a taxpayer is taxable in a state in which it would be
deemed to have a substantial nexus with that state under the standards
in section 104(1) of this act regardless of whether that state imposes
such a tax. "Business activities tax" means a tax measured by the
amount of, or economic results of, business activity conducted in a
state. The term includes taxes measured in whole or in part on net
income or gross income or receipts. "Business activities tax" does not
include a sales tax, use tax, or a similar transaction tax, imposed on
the sale or acquisition of goods or services, whether or not
denominated a gross receipts tax or a tax imposed on the privilege of
doing business.
(d) This subsection (3) does not apply to financial institutions
with respect to apportionable income taxable under RCW 82.04.290.
Financial institutions must calculate the receipts factor as provided
in section 106 of this act and subsection (4) of this section with
respect to apportionable income taxable under RCW 82.04.290. For
purposes of this subsection, "financial institution" has the same
meaning as in section 106 of this act.
(4) A taxpayer may calculate the receipts factor for the current
tax year based on the most recent calendar year for which information
is available for the full calendar year. If a taxpayer does not
calculate the receipts factor for the current tax year based on
previous calendar year information as authorized in this subsection,
the business must use current year information to calculate the
receipts factor for the current tax year. In either case, a taxpayer
must correct the reporting for the current tax year when complete
information is available to calculate the receipts factor for that
year, but not later than October 31st of the following tax year.
Interest will apply to any additional tax due on a corrected tax
return. Interest must be assessed at the rate provided for delinquent
excise taxes under chapter 82.32 RCW, retroactively to the date the
original return was due, and will accrue until the additional taxes are
paid. Penalties as provided in RCW 82.32.090 will apply to any such
additional tax due only if the current tax year reporting is not
corrected and the additional tax is not paid by October 31st of the
following tax year. Interest as provided in RCW 82.32.060 will apply
to any tax paid in excess of that properly due on a return as a result
of a taxpayer using previous calendar year data or incomplete current-year data to calculate the receipts factor.
(5) Unless the context clearly requires otherwise, the definitions
in this subsection apply throughout this section.
(a) "Apportionable activities" and "apportionable income" have the
same meaning as in RCW 82.04.460.
(b) "State" has the same meaning as in section 106 of this act.
NEW SECTION. Sec. 106 A new section is added to chapter 82.04
RCW to read as follows:
(1) A financial institution must, for purposes of apportioning
gross income of the business taxable under RCW 82.04.290 using the
apportionment method provided in section 105(1) of this act, calculate
the receipts factor as provided in this section and section 105(4) of
this act. Financial institutions that are subject to tax under any
other tax classification enumerated in RCW 82.04.460(3)(a) (i) through
(v) and (vii) through (ix) must calculate a separate receipts factor,
as provided in section 105 of this act, for each of the other tax
classifications that the financial institution is taxable under.
(2)(a)(i) The numerator of the receipts factor includes gross
income from interest, fees, and penalties on loans secured by real
property, personal property, or both real and personal property, if the
real or personal property is located within this state. If the
property securing the loan is located both within this state and one or
more other states, the income described in this subsection (2)(a)(i) is
included in the numerator of the receipts factor if more than fifty
percent of the fair market value of the real or personal property is
located within this state. If more than fifty percent of the fair
market value of the real or personal property is not located within any
one state, then the income described in this subsection (2)(a)(i) is
included in the numerator of the receipts factor if the borrower is
located in this state.
(ii) The denominator of the receipts factor includes gross income
from interest, fees, and penalties on loans secured by real property,
personal property, or both real and personal property, wherever the
property is located.
(iii) The determination of whether the real or personal property
securing a loan is located within this state must be made as of the
time the original agreement was made and any and all subsequent
substitutions of collateral must be disregarded.
(b) The numerator of the receipts factor includes gross income from
interest, fees, and penalties on loans not secured by real or personal
property if the borrower is located in this state. The denominator of
the receipts factor includes gross income from interest, fees, and
penalties on loans that are not secured by real or personal property,
regardless of where the borrower is located.
(c) The receipts factor includes gross income from net gains, which
may not be less than zero, on the sale of loans. Net gains on the sale
of loans includes income recorded under the coupon stripping rules of
26 U.S.C. Sec. 1286 of the federal internal revenue code of 1986, as
existing on July 1, 2010.
(i) The amount of net gains, which may not be less than zero, on
the sale of loans secured by real property, personal property, or both
real and personal property, included in the numerator of the receipts
factor is determined by multiplying such net gains by a fraction. The
numerator of the fraction is the amount included in the numerator of
the receipts factor under (a) of this subsection (2). The denominator
of the fraction is the amount included in the denominator of the
receipts factor under (a) of this subsection (2).
(ii) The amount of net gains, which may not be less than zero, from
the sale of loans not secured by real or personal property included in
the numerator of the receipts factor is determined by multiplying such
net gains by a fraction. The numerator of the fraction is the amount
included in the numerator of the receipts factor under (b) of this
subsection (2). The denominator of the fraction is the amount included
in the denominator of the receipts factor under (b) of this subsection
(2).
(iii) The denominator of the receipts factor includes gross income
from net gains, which may not be less than zero, on all sales of loans.
(d) Loan servicing fees are included in the receipts factor as
provided in (d)(i) and (ii) of this subsection (2).
(i)(A)(I) The numerator of the receipts factor includes gross
income from loan servicing fees derived from loans secured by real
property, personal property, or both real and personal property,
multiplied by a fraction. The numerator of the fraction is the amount
included in the numerator of the receipts factor under (a) of this
subsection (2). The denominator of the fraction is the amount included
in the denominator of the receipts factor under (a) of this subsection
(2).
(II) The denominator of the receipts factor includes gross income
from all loan servicing fees derived from loans secured by real
property, personal property, or both real and personal property.
(B)(I) The numerator of the receipts factor includes gross income
from loan servicing fees derived from loans not secured by real or
personal property multiplied by a fraction. The numerator of the
fraction is the amount included in the numerator of the receipts factor
under (b) of this subsection (2). The denominator of the fraction is
the amount included in the denominator of the receipts factor under (b)
of this subsection (2).
(II) The denominator of the receipts factor includes gross income
from all loan servicing fees derived from loans not secured by real or
personal property.
(ii) If the financial institution receives loan servicing fees for
servicing either the secured or the unsecured loans of another, the
numerator of the receipts factor includes such fees if the borrower is
located in this state. The denominator of the receipts factor includes
all such fees.
(e)(i) Interest, dividends, net gains (which may not be less than
zero), and other income from investment assets and activities and from
trading assets and activities, as provided in this subsection (2)(e),
are included in the receipts factor. Investment assets and activities
and trading assets and activities include but are not limited to:
Investment securities; trading account assets; federal funds;
securities purchased and sold under agreements to resell or repurchase;
options; futures contracts; forward contracts; notional principal
contracts such as swaps; equities; and foreign currency transactions.
(ii) The numerator of the receipts factor includes gross income
from interest, dividends, net gains (which may not be less than zero),
and other receipts from investment assets and activities and from
trading assets and activities described in (e)(i) of this subsection
(2) that are attributable to this state. The denominator of the
receipts factor includes all such gross income wherever earned.
(A) The amount of interest, dividends, net gains (which may not be
less than zero), and other income from investment assets and activities
in the investment account to be attributed to this state and included
in the numerator of the receipts factor is determined by multiplying
all such income from such assets and activities by a fraction. The
numerator of the fraction is the average value of such assets that are
properly assigned to a regular place of business of the financial
institution within this state. The denominator of the fraction is the
average value of all such assets.
(B)(I) The amount of interest from federal funds sold and purchased
and from securities purchased under resale agreements and securities
sold under repurchase agreements attributable to this state and
included in the numerator of the receipts factor is determined by
multiplying the amount described in (e)(ii)(B)(II) of this subsection
(2) from such funds and such securities by a fraction. The numerator
of the fraction is the average value of federal funds sold and
securities purchased under agreements to resell that are properly
assigned to a regular place of business of the financial institution
within this state. The denominator of the fraction is the average
value of all such funds and such securities.
(II) The amount used for purposes of making the calculation in
(e)(ii)(B)(I) of this subsection (2) is the amount by which interest
from federal funds sold and securities purchased under resale
agreements exceeds interest expense on federal funds purchased and
securities sold under repurchase agreements.
(C)(I) The amount of interest, dividends, gains and other income
from trading assets and activities, including but not limited to assets
and activities in the matched book, in the arbitrage book, and foreign
currency transactions, but excluding amounts described in (e)(ii)(A) or
(B) of this subsection (2), attributable to this state and included in
the numerator of the receipts factor is determined by multiplying the
amount described in (e)(ii)(C)(II) of this subsection (2) by a
fraction. The numerator of the fraction is the average value of such
trading assets that are properly assigned to a regular place of
business of the financial institution within this state. The
denominator of the fraction is the average value of all such assets.
(II) The amount used for purposes of making the calculation in
(e)(ii)(C)(I) of this subsection (2) is the amount by which interest,
dividends, gains and other receipts from trading assets and activities,
including but not limited to assets and activities in the matched book,
in the arbitrage book, and foreign currency transactions, exceed
amounts paid in lieu of interest, amounts paid in lieu of dividends,
and losses from such assets and activities.
(D) For purposes of this subsection (2)(e)(ii), average value must
be determined using the rules for determining the average value of
property set forth in section 104(2) of this act.
(iii) In lieu of using the method set forth in (e)(ii) of this
subsection (2), the financial institution may elect, or the department
may require, in order to fairly represent the business activity of the
financial institution in this state, the use of the method set forth in
this subsection (2)(e)(iii).
(A) The amount of interest, dividends, net gains (which may not be
less than zero), and other income from investment assets and activities
in the investment account to be attributed to this state and included
in the numerator of the receipts factor is determined by multiplying
all such income from such assets and activities by a fraction. The
numerator of the fraction is the gross income from such assets and
activities that are properly assigned to a regular place of business of
the financial institution within this state. The denominator of the
fraction is the gross income from all such assets and activities.
(B) The amount of interest from federal funds sold and purchased
and from securities purchased under resale agreements and securities
sold under repurchase agreements attributable to this state and
included in the numerator of the receipts factor is determined by
multiplying the amount described in (e)(ii)(B)(II) of this subsection
(2) from such funds and such securities by a fraction. The numerator
of the fraction is the gross income from such funds and such securities
that are properly assigned to a regular place of business of the
financial institution within this state. The denominator of the
fraction is the gross income from all such funds and such securities.
(C) The amount of interest, dividends, gains and other receipts
from trading assets and activities, including but not limited to assets
and activities in the matched book, in the arbitrage book, and foreign
currency transactions, but excluding amounts described in (e)(ii)(A) or
(B) of this subsection (2), attributable to this state and included in
the numerator of the receipts factor is determined by multiplying the
amount described in (e)(ii)(C)(II) of this subsection (2) by a
fraction. The numerator of the fraction is the gross income from such
trading assets and activities that are properly assigned to a regular
place of business of the financial institution within this state. The
denominator of the fraction is the gross income from all such assets
and activities.
(iv) If the financial institution elects or is required by the
department to use the method set forth in (e)(iii) of this subsection
(2), it must use this method for subsequent tax returns unless the
financial institution receives prior permission from the department to
use, or the department requires, a different method.
(v) The financial institution has the burden of proving that an
investment asset or activity or trading asset or activity was properly
assigned to a regular place of business outside of this state by
demonstrating that the day-to-day decisions regarding the asset or
activity occurred at a regular place of business outside this state.
If the day-to-day decisions regarding an investment asset or activity
or trading asset or activity occur at more than one regular place of
business and one such regular place of business is in this state and
one such regular place of business is outside this state, such asset or
activity is considered to be located at the regular place of business
of the financial institution where the investment or trading policies
or guidelines with respect to the asset or activity are established.
Such policies and guidelines are presumed, subject to rebuttal by
preponderance of the evidence, to be established at the commercial
domicile of the financial institution.
(f) The numerator of the receipts factor includes gross income from
interest, fees, and penalties on credit card receivables, and gross
income from fees charged to cardholders, such as annual fees, if the
billing address of the cardholder is in this state. The denominator of
the receipts factor includes gross income from interest, fees, and
penalties on all credit card receivables, and gross income from fees
charged to all cardholders, such as annual fees.
(g)(i) The numerator of the receipts factor includes gross income
from net gains, which may not be less than zero, from the sale of
credit card receivables multiplied by a fraction. The numerator of the
fraction is the amount included in the numerator of the receipts factor
under (f) of this subsection (2). The denominator of the fraction is
the amount included in the denominator of the receipts factor under (f)
of this subsection (2).
(ii) The denominator of the receipts factor includes gross income
from net gains, which may not be less than zero, from all sales of
credit card receivables.
(h)(i) The numerator of the receipts factor includes gross income
from all credit card issuer's reimbursement fees multiplied by a
fraction. The numerator of the fraction is the amount included in the
numerator of the receipts factor under (f) of this subsection (2). The
denominator of the fraction is the amount included in the denominator
of the receipts factor under (f) of this subsection (2).
(ii) The denominator of the receipts factor includes gross income
from all credit card issuer's reimbursement fees.
(i) The numerator of the receipts factor includes gross income from
merchant discounts if the commercial domicile of the merchant is in
this state. The denominator of the receipts factor includes gross
income from all merchant discounts. For purposes of this subsection
(2)(i), gross income must be computed net of any cardholder charge
backs but may not be reduced by any interchange transaction fees or by
any issuer's reimbursement fees paid to another for charges made by its
cardholders.
(j) Apportionable income that would be attributable under this
subsection (2) to a state in which the financial institution is not
taxable must be excluded from the denominator of the receipts factor if
at least some of the activity that generated the income is performed in
this state, and the gross income is attributable under this subsection
(2) to a state in which the taxpayer is not taxable. For purposes of
this subsection (2)(j), "not taxable" has the same meaning as in
section 105 of this act.
(k)(i) The numerator of the receipts factor includes apportionable
income taxable under RCW 82.04.290 and not otherwise included in the
receipts factor under this subsection (2) if the activity producing the
apportionable income is performed in this state. If the activity is
performed both inside and outside this state, the numerator of the
receipts factor includes apportionable income taxable under RCW
82.04.290 and not otherwise included in the receipts factor under this
subsection (2) if a greater proportion of the activity producing the
apportionable income is performed in this state based on cost of
performance.
(ii) The denominator of the receipts factor includes apportionable
income taxable under RCW 82.04.290 from activities performed
everywhere, where the apportionable income taxable under RCW 82.04.290
is not otherwise included in the receipts factor under this subsection
(2).
(3) Except as otherwise provided in subsection (4) of this section,
the definitions in the multistate tax commission's recommended formula
for the apportionment and allocation of net income of financial
institutions, adopted November 17, 1994, as existing on the effective
date of this section, apply to this section.
(4) Unless the context clearly requires otherwise, the definitions
in this subsection apply throughout this section.
(a) "Apportionable income" has the same meaning as in RCW
82.04.460.
(b) "Credit card" means a card or device existing for the purpose
of obtaining money, property, labor, or services on credit.
(c) "Financial institution" has the same meaning as in WAC 458-20-14601. However, the department may not make any substantive changes to
the definition of "financial institution" in WAC 458-20-14601 unless
the changes implement a legislative amendment to this definition of
financial institution.
(d) "State" means a state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or possession
of the United States, or any foreign country or political subdivision
of a foreign country.
Sec. 107 RCW 82.04.2907 and 2009 c 535 s 407 are each amended to
read as follows:
(1) Upon every person engaging within this state in the business of
receiving income from royalties ((or charges in the nature of royalties
for the granting of intangible rights, such as copyrights, licenses,
patents, or franchise fees)), the amount of tax with respect to
((such)) the business ((shall be)) is equal to the gross income from
royalties ((or charges in the nature of royalties from the business))
multiplied by the rate of 0.484 percent.
(2) For the purposes of this section, "gross income from royalties"
means compensation for the use of intangible property, ((such as))
including charges in the nature of royalties, regardless of where the
intangible property will be used. For purposes of this subsection,
"intangible property" includes copyrights, patents, licenses,
franchises, trademarks, trade names, and similar items. ((It)) "Gross
income from royalties" does not include compensation for any natural
resource, the licensing of prewritten computer software to the end
user, or the licensing ((or use)) of digital goods, digital codes, or
digital automated services to the end user as defined in RCW
82.04.190(11).
Sec. 108 RCW 82.04.460 and 2004 c 174 s 6 are each amended to
read as follows:
(1) Except as otherwise provided in this section, any person
((rendering services)) earning apportionable income taxable under ((RCW
82.04.290 or 82.04.2908)) this chapter and ((maintaining places of
business both within and without this state which contribute to the
rendition of such services shall)) also taxable in another state, must,
for the purpose of computing tax liability under ((RCW 82.04.290 or
82.04.2908)) this chapter, apportion to this state, in accordance with
section 105 of this act, that portion of the person's ((gross))
apportionable income ((which is)) derived from ((services rendered))
business activities performed within this state. ((Where such
apportionment cannot be accurately made by separate accounting methods,
the taxpayer shall apportion to this state that proportion of the
taxpayer's total income which the cost of doing business within the
state bears to the total cost of doing business both within and without
the state.))
(2) ((Notwithstanding the provision of subsection (1) of this
section, persons doing business both within and without the state who
receive gross income from service charges, as defined in RCW 63.14.010
(relating to amounts charged for granting the right or privilege to
make deferred or installment payments) or who receive gross income from
engaging in business as financial institutions within the scope of
chapter 82.14A RCW (relating to city taxes on financial institutions)
shall apportion or allocate gross income taxable under RCW 82.04.290 to
this state pursuant to rules promulgated by the department consistent
with uniform rules for apportionment or allocation developed by the
states.)) The department ((
(3)shall)) may by rule provide a method or
methods of apportioning or allocating gross income derived from sales
of telecommunications service and competitive telephone service((s))
taxed under this chapter, if the gross proceeds of sales subject to tax
under this chapter do not fairly represent the extent of the taxpayer's
income attributable to this state. ((The rules shall be, so far as
feasible, consistent with the methods of apportionment contained in
this section and shall require the consideration of those facts,
circumstances, and apportionment factors as will result in an equitable
and constitutionally permissible division of the services.)) The rule
must provide for an equitable and constitutionally permissible division
of the tax base.
(3) For purposes of this section, the following definitions apply
unless the context clearly requires otherwise:
(a) "Apportionable income" means gross income of the business
generated from engaging in apportionable activities, including income
received from apportionable activities performed outside this state if
the income would be taxable under this chapter if received from
activities in this state, less the exemptions and deductions allowable
under this chapter. For purposes of this subsection, "apportionable
activities" means only those activities taxed under:
(i) RCW 82.04.255;
(ii) RCW 82.04.260 (3), (5), (6), (7), (8), (9), (10), and (13);
(iii) RCW 82.04.280(5);
(iv) RCW 82.04.285;
(v) RCW 82.04.286;
(vi) RCW 82.04.290;
(vii) RCW 82.04.2907;
(viii) RCW 82.04.2908; and
(ix) RCW 82.04.260(14), 82.04.263, and 82.04.280(1), but only to
the extent of any activity that would be taxable under any of the
provisions enumerated under (a)(i) through (viii) of this subsection
(3) if the tax classifications in RCW 82.04.260(14), 82.04.263, and
82.04.280(1) did not exist.
(b)(i) "Taxable in another state" means that the taxpayer is
subject to a business activities tax by another state on its income
received from engaging in apportionable activities; or the taxpayer is
not subject to a business activities tax by another state on its income
received from engaging in apportionable activities, but any other state
has jurisdiction to subject the taxpayer to a business activities tax
on such income under the substantial nexus standards in section 104(1)
of this act.
(ii) For purposes of this subsection (3)(b):
(A) "Business activities tax" has the same meaning as in section
105 of this act; and
(B) "State" has the same meaning as in section 106 of this act.
NEW SECTION. Sec. 201 A new section is added to chapter 82.32
RCW to read as follows:
(1) The department must disregard, for tax purposes, abusive tax
avoidance transactions. In disregarding an abusive tax avoidance
transaction, the department may:
(a) Recharacterize the nature of income, such as recharacterizing
dividends received from a related entity as income received for
providing services to that entity;
(b) Disregard the form of a corporate or other entity, even when
legal formalities have been observed, when the form of entity is used
as part of an abusive tax avoidance transaction;
(c) Treat the tax effects of the transaction, plan, or arrangement
according to its underlying substance rather than its form;
(d) Treat a series of formally separate steps as a single
transaction or a single transaction as a series of transactions; and
(e) Take any other reasonable steps necessary to deny the tax
benefit that would otherwise arise as a result of the abusive tax
avoidance transaction.
(2) For purposes of this section, "abusive tax avoidance
transaction" means the avoidance of any tax collected by the department
under the provisions of this chapter by means of a transaction, plan,
or arrangement that lacks economic substance.
(3)(a) A transaction, plan, or arrangement will be considered as
having economic substance only if:
(i) The transaction, plan, or arrangement changes in a meaningful
way, apart from its tax effects, the taxpayer's economic position;
(ii) The taxpayer has a substantial nontax purpose for entering
into the transaction, plan, or arrangement; and
(iii) The transaction, plan, or arrangement is an objectively
reasonable means of accomplishing the substantial nontax purpose.
(b) A transaction, plan, or arrangement that carries some risk of
loss and profit potential may nevertheless be found to lack economic
substance if the economic risks and profit potential are so
insignificant when compared to the tax benefits that a reasonable
person would conclude that the taxpayer would not have engaged in the
transaction, plan, or arrangement absent its tax effects.
(c) An objective of achieving favorable financial accounting
benefits arising from tax savings is not deemed to be a substantial
nontax purpose for entering into a transaction, plan, or arrangement.
(d)(i) Except as provided in (d)(ii) of this subsection (3) the
burden is on the department to establish that a transaction, plan, or
arrangement lacks economic substance.
(ii) If the taxpayer fails to produce records requested by the
department that are relevant in determining whether a transaction,
plan, or arrangement has economic substance, the burden is on the
taxpayer to establish that the transaction, plan, or arrangement has
economic substance.
(4)(a) Notwithstanding anything to the contrary in this section,
the department may not disregard or recharacterize transactions as
provided in subsection (1)(a) through (e) of this section between
affiliated persons, except where the form of the transaction or a
related series of transactions is adopted for the purpose of
disguising:
(i) Income received, or otherwise avoiding tax on the receipt of
income, from a person that is not affiliated with the taxpayer; or
(ii) The purchase or sale of property or services from or to a
person that is not affiliated with the taxpayer.
(b) For purposes of this subsection, "affiliated" means under
common control. "Control" means the possession, directly or
indirectly, of more than fifty percent of the power to direct or cause
the direction of the management and policies of a person, whether
through the ownership of voting shares, by contract, or otherwise.
(5) The provisions of this section are cumulative and nonexclusive
and do not affect any other remedies provided to the department under
statutory or common law.
(6) The department must by rule, and as resources allow, provide
guidance on what it considers to be an abusive tax avoidance
transaction. The adoption of a rule as required under this subsection
is not a condition precedent for the department to use the authority
provided in this section to disregard abusive tax avoidance
transactions. Any rules adopted under this section must include
examples of abusive tax avoidance transactions.
NEW SECTION. Sec. 202 A new section is added to chapter 82.32
RCW to read as follows:
(1)(a) The department may not use section 201 of this act to
disregard any transaction, plan, or arrangement initiated before July
1, 2010, if, in respect to such transaction, plan, or arrangement, the
taxpayer had reported its tax liability in conformance with either
specific written instructions provided by the department to the
taxpayer, a determination published under the authority of RCW
82.32.410, or other document published by the department.
(b) This section does not apply if the transaction, plan, or
arrangement engaged in by the taxpayer differs materially from the
transaction, plan, or arrangement that was addressed in the specific
written instructions, published determination, or other published
document.
(2) For purposes of this section, "specific written instructions"
means tax reporting instructions provided to a taxpayer and which
specifically identifies the taxpayer to whom the instructions apply.
Specific written instructions may be provided as part of an audit, tax
assessment, determination, closing agreement, or in response to a
binding ruling request.
Sec. 203 RCW 82.32.090 and 2006 c 256 s 6 are each amended to
read as follows:
(1) If payment of any tax due on a return to be filed by a taxpayer
is not received by the department of revenue by the due date, there
((shall be)) is assessed a penalty of five percent of the amount of the
tax; and if the tax is not received on or before the last day of the
month following the due date, there ((shall be)) is assessed a total
penalty of fifteen percent of the amount of the tax under this
subsection; and if the tax is not received on or before the last day of
the second month following the due date, there ((shall be)) is assessed
a total penalty of twenty-five percent of the amount of the tax under
this subsection. No penalty so added shall be less than five dollars.
(2) If the department of revenue determines that any tax has been
substantially underpaid, there ((shall be)) is assessed a penalty of
five percent of the amount of the tax determined by the department to
be due. If payment of any tax determined by the department to be due
is not received by the department by the due date specified in the
notice, or any extension thereof, there ((shall be)) is assessed a
total penalty of fifteen percent of the amount of the tax under this
subsection; and if payment of any tax determined by the department to
be due is not received on or before the thirtieth day following the due
date specified in the notice of tax due, or any extension thereof,
there ((shall be)) is assessed a total penalty of twenty-five percent
of the amount of the tax under this subsection. No penalty so added
((shall)) may be less than five dollars. As used in this section,
"substantially underpaid" means that the taxpayer has paid less than
eighty percent of the amount of tax determined by the department to be
due for all of the types of taxes included in, and for the entire
period of time covered by, the department's examination, and the amount
of underpayment is at least one thousand dollars.
(3) If a warrant ((be)) is issued by the department ((of revenue))
for the collection of taxes, increases, and penalties, there ((shall
be)) is added thereto a penalty of ten percent of the amount of the
tax, but not less than ten dollars.
(4) If the department finds that a person has engaged in any
business or performed any act upon which a tax is imposed under this
title and that person has not obtained from the department a
registration certificate as required by RCW 82.32.030, the department
((shall)) must impose a penalty of five percent of the amount of tax
due from that person for the period that the person was not registered
as required by RCW 82.32.030. The department ((shall)) may not impose
the penalty under this subsection (4) if a person who has engaged in
business taxable under this title without first having registered as
required by RCW 82.32.030, prior to any notification by the department
of the need to register, obtains a registration certificate from the
department.
(5) If the department finds that all or any part of a deficiency
resulted from the disregard of specific written instructions as to
reporting or tax liabilities, the department ((shall)) must add a
penalty of ten percent of the amount of the additional tax found due
because of the failure to follow the instructions. A taxpayer
disregards specific written instructions when the department ((of
revenue)) has informed the taxpayer in writing of the taxpayer's tax
obligations and the taxpayer fails to act in accordance with those
instructions unless the department has not issued final instructions
because the matter is under appeal pursuant to this chapter or
departmental regulations. The department ((shall)) may not assess the
penalty under this section upon any taxpayer who has made a good faith
effort to comply with the specific written instructions provided by the
department to that taxpayer. Specific written instructions may be
given as a part of a tax assessment, audit, determination, or closing
agreement, provided that such specific written instructions ((shall))
apply only to the taxpayer addressed or referenced on such documents.
Any specific written instructions by the department ((of revenue
shall)) must be clearly identified as such and ((shall)) must inform
the taxpayer that failure to follow the instructions may subject the
taxpayer to the penalties imposed by this subsection.
(6) If the department finds that all or any part of a deficiency
resulted from engaging in an abusive tax avoidance transaction, as
defined in section 201 of this act, the department must assess a
penalty of thirty-five percent of the additional tax found to be due as
a result of engaging in the abusive tax avoidance transaction. The
penalty provided in this subsection may be assessed together with any
other applicable penalties provided in this section on the same tax
found to be due, except for the evasion penalty provided in subsection
(7) of this section. The department may not assess the penalty under
this subsection if, before the department discovers the taxpayer's use
of an abusive tax avoidance transaction, the taxpayer discloses its
participation in the abusive tax avoidance transaction to the
department.
(7) If the department finds that all or any part of the deficiency
resulted from an intent to evade the tax payable ((hereunder)), a
further penalty of fifty percent of the additional tax found to be due
((shall)) must be added.
(((7))) (8) The penalties imposed under subsections (1) through (4)
of this section can each be imposed on the same tax found to be due.
This subsection does not prohibit or restrict the application of other
penalties authorized by law.
(((8))) (9) The department ((of revenue)) may not impose both the
evasion penalty and the penalty for disregarding specific written
instructions or the penalty provided in subsection (6) of this section
on the same tax found to be due.
(((9))) (10) For the purposes of this section, "return" means any
document a person is required by the state of Washington to file to
satisfy or establish a tax or fee obligation that is administered or
collected by the department ((of revenue)), and that has a statutorily
defined due date.
NEW SECTION. Sec. 204 (1) The legislature finds that this
state's tax policy with respect to the taxation of transactions between
affiliated entities and the income derived from such transactions
(intercompany transactions) has motivated some taxpayers to engage in
transactions designed solely or primarily to minimize the tax effects
of intercompany transactions. The legislature further finds that some
intercompany transactions result from taxpayers that are required to
establish affiliated entities to comply with regulatory mandates and
that transactions between such affiliates effectively increases the tax
burden in this state on the affiliated group of entities.
(2) Therefore, as existing resources allow, the department of
revenue is directed to conduct a review of the state's tax policy with
respect to the taxation of intercompany transactions. The review must
include the impacts of such transactions under the state's business and
occupation tax and state and local sales and use taxes. The department
may include other taxes in the review as it deems appropriate.
(3) In conducting the review, the department must examine how this
state's tax policy compares to the tax policy of other states with
respect to the taxation of intercompany transactions. The department's
review must include an analysis of potential alternatives to the
current policy of taxing intercompany transactions, including their
estimated revenue impacts if practicable.
(4) In conducting this review, the department may seek input from
members of the business community and others as it deems appropriate.
(5) The department must report its findings to the fiscal
committees of the house of representatives and senate by December 1,
2010. However, if the department has not completed its review by
December 1, 2010, the department must provide the fiscal committees of
the legislature with a brief status report by December 1, 2010, and the
final report by December 1, 2011.
Sec. 205 RCW 82.12.020 and 2009 c 535 s 305 are each amended to
read as follows:
(1) There is ((hereby)) levied and ((there shall be)) collected
from every person in this state a tax or excise for the privilege of
using within this state as a consumer any:
(a) Article of tangible personal property ((purchased at retail,
or)) acquired by ((lease, gift, repossession, or bailment, or extracted
or produced or manufactured by the person so using the same, or
otherwise furnished to a person engaged in any business taxable under
RCW 82.04.280 (2) or (7))) the user in any manner, including tangible
personal property acquired at a casual or isolated sale, and including
by-products used by the manufacturer thereof, except as otherwise
provided in this chapter, irrespective of whether the article or
similar articles are manufactured or are available for purchase within
this state;
(b) Prewritten computer software, regardless of the method of
delivery, but excluding prewritten computer software that is either
provided free of charge or is provided for temporary use in viewing
information, or both;
(c) Services defined as a retail sale in RCW 82.04.050 (2) (a) or
(g), (3)(a), or (6)(b), excluding services defined as a retail sale in
RCW 82.04.050(6)(b) that are provided free of charge;
(d) Extended warranty; or
(e)(i) Digital good, digital code, or digital automated service,
including the use of any services provided by a seller exclusively in
connection with digital goods, digital codes, or digital automated
services, whether or not a separate charge is made for such services.
(ii) With respect to the use of digital goods, digital automated
services, and digital codes acquired by purchase, the tax imposed in
this subsection (1)(e) applies in respect to:
(A) Sales in which the seller has granted the purchaser the right
of permanent use;
(B) Sales in which the seller has granted the purchaser a right of
use that is less than permanent;
(C) Sales in which the purchaser is not obligated to make continued
payment as a condition of the sale; and
(D) Sales in which the purchaser is obligated to make continued
payment as a condition of the sale.
(iii) With respect to digital goods, digital automated services,
and digital codes acquired other than by purchase, the tax imposed in
this subsection (1)(e) applies regardless of whether or not the
consumer has a right of permanent use or is obligated to make continued
payment as a condition of use.
(2) The provisions of this chapter do not apply in respect to the
use of any article of tangible personal property, extended warranty,
digital good, digital code, digital automated service, or service
taxable under RCW 82.04.050 (2) (a) or (g), (3)(a), or (6)(b), if the
sale to, or the use by, the present user or the present user's bailor
or donor has already been subjected to the tax under chapter 82.08 RCW
or this chapter and the tax has been paid by the present user or by the
present user's bailor or donor.
(3)(a) Except as provided in this section, payment of the tax
imposed by this chapter or chapter 82.08 RCW by one purchaser or user
of tangible personal property, extended warranty, digital good, digital
code, digital automated service, or other service does not have the
effect of exempting any other purchaser or user of the same property,
extended warranty, digital good, digital code, digital automated
service, or other service from the taxes imposed by such chapters.
(b) The tax imposed by this chapter does not apply:
(i) If the sale to, or the use by, the present user or his or her
bailor or donor has already been subjected to the tax under chapter
82.08 RCW or this chapter and the tax has been paid by the present user
or by his or her bailor or donor;
(ii) In respect to the use of any article of tangible personal
property acquired by bailment and the tax has once been paid based on
reasonable rental as determined by RCW 82.12.060 measured by the value
of the article at time of first use multiplied by the tax rate imposed
by chapter 82.08 RCW or this chapter as of the time of first use;
(iii) In respect to the use of any article of tangible personal
property acquired by bailment, if the property was acquired by a
previous bailee from the same bailor for use in the same general
activity and the original bailment was prior to June 9, 1961; or
(iv) To the use of digital goods or digital automated services,
which were obtained through the use of a digital code, if the sale of
the digital code to, or the use of the digital code by, the present
user or the present user's bailor or donor has already been subjected
to the tax under chapter 82.08 RCW or this chapter and the tax has been
paid by the present user or by the present user's bailor or donor.
(4)(a) Except as provided in (b) of this subsection (4), the tax is
levied and must be collected in an amount equal to the value of the
article used, value of the digital good or digital code used, value of
the extended warranty used, or value of the service used by the
taxpayer, multiplied by the applicable rates in effect for the retail
sales tax under RCW 82.08.020.
(b) In the case of a seller required to collect use tax from the
purchaser, the tax must be collected in an amount equal to the purchase
price multiplied by the applicable rate in effect for the retail sales
tax under RCW 82.08.020.
(5) For purposes of the tax imposed in this section, "person"
includes anyone within the definition of "buyer," "purchaser," and
"consumer" in RCW 82.08.010.
Sec. 206 RCW 82.45.010 and 2008 c 116 s 3 and 2008 c 6 s 701 are
each reenacted and amended to read as follows:
(1) As used in this chapter, the term "sale" ((shall have)) has its
ordinary meaning and ((shall)) includes any conveyance, grant,
assignment, quitclaim, or transfer of the ownership of or title to real
property, including standing timber, or any estate or interest therein
for a valuable consideration, and any contract for such conveyance,
grant, assignment, quitclaim, or transfer, and any lease with an option
to purchase real property, including standing timber, or any estate or
interest therein or other contract under which possession of the
property is given to the purchaser, or any other person at the
purchaser's direction, and title to the property is retained by the
vendor as security for the payment of the purchase price. The term
also includes the grant, assignment, quitclaim, sale, or transfer of
improvements constructed upon leased land.
(2)(a) The term "sale" also includes the transfer or acquisition
within any twelve-month period of a controlling interest in any entity
with an interest in real property located in this state for a valuable
consideration.
(b) For the sole purpose of determining whether, pursuant to the
exercise of an option, a controlling interest was transferred or
acquired within a twelve-month period, the date that the option
agreement was executed is the date on which the transfer or acquisition
of the controlling interest is deemed to occur. For all other purposes
under this chapter, the date upon which the option is exercised is the
date of the transfer or acquisition of the controlling interest.
(c) For purposes of this subsection, all acquisitions of persons
acting in concert ((shall)) must be aggregated for purposes of
determining whether a transfer or acquisition of a controlling interest
has taken place. The department ((of revenue shall)) must adopt
standards by rule to determine when persons are acting in concert. In
adopting a rule for this purpose, the department ((shall)) must
consider the following:
(((a))) (i) Persons ((shall)) must be treated as acting in concert
when they have a relationship with each other such that one person
influences or controls the actions of another through common ownership;
and
(((b))) (ii) When persons are not commonly owned or controlled,
they ((shall)) must be treated as acting in concert only when the unity
with which the purchasers have negotiated and will consummate the
transfer of ownership interests supports a finding that they are acting
as a single entity. If the acquisitions are completely independent,
with each purchaser buying without regard to the identity of the other
purchasers, then the acquisitions ((shall be)) are considered separate
acquisitions.
(3) The term "sale" ((shall)) does not include:
(a) A transfer by gift, devise, or inheritance.
(b) A transfer of any leasehold interest other than of the type
mentioned above.
(c) A cancellation or forfeiture of a vendee's interest in a
contract for the sale of real property, whether or not such contract
contains a forfeiture clause, or deed in lieu of foreclosure of a
mortgage.
(d) The partition of property by tenants in common by agreement or
as the result of a court decree.
(e) The assignment of property or interest in property from one
spouse or one domestic partner to the other spouse or other domestic
partner in accordance with the terms of a decree of dissolution of
marriage or state registered domestic partnership or in fulfillment of
a property settlement agreement.
(f) The assignment or other transfer of a vendor's interest in a
contract for the sale of real property, even though accompanied by a
conveyance of the vendor's interest in the real property involved.
(g) Transfers by appropriation or decree in condemnation
proceedings brought by the United States, the state or any political
subdivision thereof, or a municipal corporation.
(h) A mortgage or other transfer of an interest in real property
merely to secure a debt, or the assignment thereof.
(i) Any transfer or conveyance made pursuant to a deed of trust or
an order of sale by the court in any mortgage, deed of trust, or lien
foreclosure proceeding or upon execution of a judgment, or deed in lieu
of foreclosure to satisfy a mortgage or deed of trust.
(j) A conveyance to the federal housing administration or veterans
administration by an authorized mortgagee made pursuant to a contract
of insurance or guaranty with the federal housing administration or
veterans administration.
(k) A transfer in compliance with the terms of any lease or
contract upon which the tax as imposed by this chapter has been paid or
where the lease or contract was entered into prior to the date this tax
was first imposed.
(l) The sale of any grave or lot in an established cemetery.
(m) A sale by the United States, this state or any political
subdivision thereof, or a municipal corporation of this state.
(n) A sale to a regional transit authority or public corporation
under RCW 81.112.320 under a sale/leaseback agreement under RCW
81.112.300.
(o) A transfer of real property, however effected, if it consists
of a mere change in identity or form of ownership of an entity where
there is no change in the beneficial ownership. These include
transfers to a corporation or partnership which is wholly owned by the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner((: PROVIDED, That)). However, if thereafter such transferee
corporation or partnership voluntarily transfers such real property, or
such transferor, spouse or domestic partner, or children of the
transferor or the transferor's spouse or domestic partner voluntarily
transfer stock in the transferee corporation or interest in the
transferee partnership capital, as the case may be, to other than
(((1))) (i) the transferor and/or the transferor's spouse or domestic
partner or children of the transferor or the transferor's spouse or
domestic partner, (((2))) (ii) a trust having the transferor and/or the
transferor's spouse or domestic partner or children of the transferor
or the transferor's spouse or domestic partner as the only
beneficiaries at the time of the transfer to the trust, or (((3)))
(iii) a corporation or partnership wholly owned by the original
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner, within three years of the original transfer to which this
exemption applies, and the tax on the subsequent transfer has not been
paid within sixty days of becoming due, excise taxes ((shall)) become
due and payable on the original transfer as otherwise provided by law.
(p)(i) A transfer that for federal income tax purposes does not
involve the recognition of gain or loss for entity formation,
liquidation or dissolution, and reorganization, including but not
limited to nonrecognition of gain or loss because of application of
((section)) 26 U.S.C. Sec. 332, 337, 351, 368(a)(1), 721, or 731 of the
internal revenue code of 1986, as amended.
(ii) However, the transfer described in (p)(i) of this subsection
cannot be preceded or followed within a twelve-month period by another
transfer or series of transfers, that, when combined with the otherwise
exempt transfer or transfers described in (p)(i) of this subsection,
results in the transfer of a controlling interest in the entity for
valuable consideration, and in which one or more persons previously
holding a controlling interest in the entity receive cash or property
in exchange for any interest the person or persons acting in concert
hold in the entity. This subsection (3)(p)(ii) does not apply to that
part of the transfer involving property received that is the real
property interest that the person or persons originally contributed to
the entity or when one or more persons who did not contribute real
property or belong to the entity at a time when real property was
purchased receive cash or personal property in exchange for that person
or persons' interest in the entity. The real estate excise tax under
this subsection (3)(p)(ii) is imposed upon the person or persons who
previously held a controlling interest in the entity.
(q) A qualified sale of a manufactured/mobile home community, as
defined in RCW 59.20.030, that takes place on or after June 12, 2008,
but before December 31, 2018.
Sec. 207 RCW 82.45.033 and 1993 sp.s. c 25 s 505 are each amended
to read as follows:
(1) As used in this chapter, the term "controlling interest" has
the following meaning:
(((1))) (a) In the case of a corporation, either fifty percent or
more of the total combined voting power of all classes of stock of the
corporation entitled to vote, or fifty percent of the capital, profits,
or beneficial interest in the voting stock of the corporation; and
(((2))) (b) In the case of a partnership, association, trust, or
other entity, fifty percent or more of the capital, profits, or
beneficial interest in such partnership, association, trust, or other
entity.
(2) The department may, at the department's option, enforce the
obligation of the seller under this chapter as provided in this
subsection (2):
(a) In the transfer or acquisition of a controlling interest as
defined in subsection (1)(a) of this section, either against the
corporation in which a controlling interest is transferred or acquired,
against the person or persons who acquired the controlling interest in
the corporation or, when the corporation is not a publicly traded
company, against the person or persons who transferred the controlling
interest in the corporation; and
(b) In the transfer or acquisition of a controlling interest as
defined in subsection (1)(b) of this section, either against the entity
in which a controlling interest is transferred or acquired or against
the person or persons who transferred or acquired the controlling
interest in the entity.
Sec. 208 RCW 82.45.070 and 1969 ex.s. c 223 s 28A.45.070 are each
amended to read as follows:
The tax ((herein)) provided for in this chapter and any interest or
penalties thereon ((shall be)) is a specific lien upon each ((piece))
parcel of real property located in this state that is either sold or
that is owned by an entity in which a controlling interest has been
transferred or acquired. The lien attaches from the time of sale until
the tax ((shall have been)) is paid, which lien may be enforced in the
manner prescribed for the foreclosure of mortgages.
Sec. 209 RCW 82.45.080 and 1980 c 154 s 3 are each amended to
read as follows:
(1) The tax levied under this chapter ((shall be)) is the
obligation of the seller and the department ((of revenue)) may, at the
department's option, enforce the obligation through an action of debt
against the seller or the department may proceed in the manner
prescribed for the foreclosure of mortgages ((and resort to)). The
department's use of one course of enforcement ((shall)) is not ((be))
an election not to pursue the other.
(2) For purposes of this section and notwithstanding any other
provisions of law, the seller is the parent corporation of a wholly
owned subsidiary, when such subsidiary is the transferor to a third-
party transferee and the subsidiary is dissolved before paying the tax
imposed under this chapter.
Sec. 210 RCW 82.45.100 and 2007 c 111 s 112 are each amended to
read as follows:
(1) Payment of the tax imposed under this chapter is due and
payable immediately at the time of sale, and if not paid within one
month thereafter ((shall)) will bear interest from the time of sale
until the date of payment.
(a) Interest imposed before January 1, 1999, ((shall be)) is
computed at the rate of one percent per month.
(b) Interest imposed after December 31, 1998, ((shall be)) is
computed on a monthly basis at the rate as computed under RCW
82.32.050(2). The rate so computed ((shall)) must be adjusted on the
first day of January of each year for use in computing interest for
that calendar year. The department ((of revenue shall)) must provide
written notification to the county treasurers of the variable rate on
or before December 1st of the year preceding the calendar year in which
the rate applies.
(2) In addition to the interest described in subsection (1) of this
section, if the payment of any tax is not received by the county
treasurer or the department of revenue, as the case may be, within one
month of the date due, there ((shall be)) is assessed a penalty of five
percent of the amount of the tax; if the tax is not received within two
months of the date due, there ((shall)) will be assessed a total
penalty of ten percent of the amount of the tax; and if the tax is not
received within three months of the date due, there ((shall)) will be
assessed a total penalty of twenty percent of the amount of the tax.
The payment of the penalty described in this subsection ((shall be)) is
collectible from the seller only, and RCW 82.45.070 does not apply to
the penalties described in this subsection.
(3) If the tax imposed under this chapter is not received by the
due date, the transferee ((shall be)) is personally liable for the tax,
along with any interest as provided in subsection (1) of this section,
unless((:)) an instrument evidencing the sale is recorded in the official
real property records of the county in which the property conveyed is
located((
(a); or)).
(b) Either the transferor or transferee notifies the department of
revenue in writing of the occurrence of the sale within thirty days
following the date of the sale
(4) If upon examination of any affidavits or from other information
obtained by the department or its agents it appears that all or a
portion of the tax is unpaid, the department ((shall)) must assess
against the taxpayer the additional amount found to be due plus
interest and penalties as provided in subsections (1) and (2) of this
section. The department ((shall)) must notify the taxpayer by mail, or
electronically as provided in RCW 82.32.135, of the additional amount
and the same ((shall)) becomes due and ((shall)) must be paid within
thirty days from the date of the notice, or within such further time as
the department may provide.
(5) No assessment or refund may be made by the department more than
four years after the date of sale except upon a showing of:
(a) Fraud or misrepresentation of a material fact by the taxpayer;
(b) A failure by the taxpayer to record documentation of a sale or
otherwise report the sale to the county treasurer; or
(c) A failure of the transferor or transferee to report the sale
under RCW 82.45.090(2).
(6) Penalties collected on taxes due under this chapter under
subsection (2) of this section and RCW 82.32.090 (2) through (7)
((shall)) must be deposited in the housing trust fund as described in
chapter 43.185 RCW.
Sec. 211 RCW 82.45.220 and 2005 c 326 s 3 are each amended to
read as follows:
(1) An organization that fails to report a transfer of the
controlling interest in the organization under RCW 43.07.390 to the
secretary of state and is later determined to be subject to real estate
excise taxes due to the transfer, ((shall be)) is subject to the
provisions of RCW 82.45.100 as well as the evasion penalty in RCW
82.32.090(((6))) (7).
(2) Subsection (1) of this section also applies to the failure to
report to the secretary of state the granting of an option to acquire
an interest in the organization if the exercise of the option would
result in a sale as defined in RCW 82.45.010(2).
Sec. 212 RCW 43.07.390 and 2005 c 326 s 2 are each amended to
read as follows:
(1)(a) The secretary of state ((shall)) must adopt rules requiring
any entity that is required to file an annual report with the secretary
of state, including entities under Titles 23, 23B, 24, and 25 RCW, to
disclose: (i) Any transfer ((in)) of the controlling interest ((of))
in the entity ((and any interest in real property)); and (ii) the
granting of any option to acquire an interest in the entity if the
exercise of the option would result in a sale as defined in RCW
82.45.010(2).
(b) The disclosure requirement in this subsection only applies to
entities owning an interest in real property located in this state.
(2) This information ((shall)) must be made available to the
department of revenue upon request for the purposes of tracking the
transfer of the controlling interest in entities owning real property
and to determine when the real estate excise tax is applicable in such
cases.
(3) For the purposes of this section, "controlling interest" has
the same meaning as provided in RCW 82.45.033.
NEW SECTION. Sec. 301 In 1980, the legislature adopted a
business and occupation tax deduction to financial businesses for
amounts derived from interest received on investments or loans
primarily secured by first mortgages or trust deeds on nontransient
residential properties which was codified in RCW 82.04.4292. However,
the Washington state supreme court in Homestreet, Inc. v. Dep't of
Revenue, 166 Wn.2d 444 (2009) held that a mortgage lender was entitled
to a business and occupation tax deduction under RCW 82.04.4292 for the
portion of interest it retained for servicing loans and mortgage-backed
securities that it sold on a service-retained basis on the secondary
market. The legislature finds that inclusion of interest retained for
servicing loans and mortgage-backed securities was not within the
legislative intent when the deduction provided in 82.04.4292 was
adopted in 1980. Therefore, by this act, the legislature declares that
the deduction provided by RCW 82.04.4292 does not apply to fees that
are received in exchange for services, regardless of whether the source
of the fees is or may have been interest when paid by a borrower.
Sec. 302 RCW 82.04.4292 and 1980 c 37 s 12 are each amended to
read as follows:
(1) In computing tax there may be deducted from the measure of tax
by those engaged in banking, loan, security or other financial
businesses, amounts derived from interest received on investments or
loans primarily secured by first mortgages or trust deeds on
nontransient residential properties.
(2) Interest deductible under this section includes the portion of
fees charged to borrowers, including points and loan origination fees,
that is recognized over the life of the loan as an adjustment to yield
in the taxpayer's books and records according to generally accepted
accounting principles.
(3) Subsections (1) and (2) of this section notwithstanding, the
following is a nonexclusive list of items that are not deductible under
this section:
(a) Fees for specific services such as: Document preparation fees;
finder fees; brokerage fees; title examination fees; fees for credit
checks; notary fees; loan application fees; interest lock-in fees if
the loan is not made; servicing fees, including servicing fees received
by lenders when they sell loans or mortgage-backed or mortgage-related
securities in the secondary market while retaining the right to service
the loans or securities and receive a portion of the interest payments
as the servicing fee; and similar fees or amounts;
(b) Fees received in consideration for an agreement to make funds
available for a specific period of time at specified terms, commonly
referred to as commitment fees;
(c) Any other fees, or portion of a fee, that is not recognized
over the life of the loan as an adjustment to yield in the taxpayer's
books and records according to generally accepted accounting
principles; and
(d) Gains on the sale of valuable rights such as:
(i) Service release premiums, which are amounts received when
servicing rights are sold; and
(ii) Gains on the sale of loans.
(4) The total amount a person may deduct under this section for any
calendar year may not exceed one hundred million dollars.
Sec. 401 RCW 82.08.0273 and 2009 c 535 s 512 are each amended to
read as follows:
(1) Subject to the conditions and limitations in this section, an
exemption from the tax levied by RCW 82.08.020 ((does not apply to)) in
the form of a remittance from the department is provided for sales to
nonresidents of this state of tangible personal property, digital
goods, and digital codes, when such property is for use outside this
state((, and)). The exemption applies only if the purchaser:
(a) Is a bona fide resident of a state or possession or Province of
Canada other than the state of Washington and such state, possession,
or Province of Canada does not impose a retail sales tax or use tax of
three percent or more or, if imposing such a tax, permits Washington
residents exemption from otherwise taxable sales by reason of their
residence((,)); and
(b) Agrees, when requested, to grant the department of revenue
access to such records and other forms of verification at ((his or
her)) the purchaser's place of residence to assure that such purchases
are not first used substantially in the state of Washington.
(2) Notwithstanding anything to the contrary in this chapter, if
parts or other tangible personal property are installed by the seller
during the course of repairing, cleaning, altering, or improving motor
vehicles, trailers, or campers and the seller makes a separate charge
for the tangible personal property, the tax levied by RCW 82.08.020
does not apply to the separately stated charge to a nonresident
purchaser for the tangible personal property but only if the separately
stated charge does not exceed either the seller's current publicly
stated retail price for the tangible personal property or, if no
publicly stated retail price is available, the seller's cost for the
tangible personal property. However, the exemption provided by this
section does not apply if tangible personal property is installed by
the seller during the course of repairing, cleaning, altering, or
improving motor vehicles, trailers, or campers and the seller makes a
single nonitemized charge for providing the tangible personal property
and service. All of the ((requirements)) provisions in subsections (1)
and (3) through (((6))) (7) of this section apply to this subsection.
(3)(a) Any person claiming exemption from retail sales tax under
the provisions of this section must ((display)) pay the state and local
sales tax to the seller at the time of purchase and then request a
remittance from the department in accordance with this subsection and
subsection (4) of this section. A request for remittance must include
proof of ((his or her current nonresident)) the person's status as
((provided in this section)) a nonresident at the time of the purchase
for which a remittance is requested. The request for a remittance must
also include any additional information and documentation as required
by the department, which may include a description of the item
purchased for which a remittance is requested, the sales price of the
item, the amount of state and local sales tax paid on the item, the
date of the purchase, the name of the seller and the physical address
where the sale took place, and copies of sales receipts showing the
qualified purchases.
(b) Acceptable proof of a nonresident person's status includes one
piece of identification such as a valid driver's license from the
jurisdiction in which the out-of-state residency is claimed or a valid
identification card which has a photograph of the holder and is issued
by the out-of-state jurisdiction. Identification under this subsection
(3)(b) must show the holder's residential address and have as one of
its legal purposes the establishment of residency in that out-of-state
jurisdiction.
(4) ((Nothing in this section requires the vendor to make tax
exempt retail sales to nonresidents. A vendor may choose to make sales
to nonresidents, collect the sales tax, and remit the amount of sales
tax collected to the state as otherwise provided by law. If the vendor
chooses to make a sale to a nonresident without collecting the sales
tax, the vendor shall, in good faith, examine the proof of
nonresidence, determine whether the proof is acceptable under
subsection (3)(b) of this section, and maintain records for each
nontaxable sale which shall show the type of proof accepted, including
any identification numbers where appropriate, and the expiration date,
if any)) (a)(i) Beginning January 1, 2011, through December 31, 2011,
a person may request a remittance from the department for state and
local sales taxes paid by the person on qualified retail purchases made
in Washington between July 1, 2010, and December 31, 2010.
(ii) Beginning January 1, 2012, a person may request a remittance
from the department during any calendar year for state and local sales
taxes paid by the person on qualified retail purchases made in
Washington during the immediately preceding calendar year only. No
application may be made with respect to purchases made before the
immediately preceding calendar year.
(b) The remittance request, including proof of nonresident status
and any other documentation and information required by the department,
must be made using an electronic application process as prescribed by
the department. Only one remittance request may be made by a person
per calendar year.
(c) The total amount of a remittance request must be at least
twenty-five dollars. The department must deny any request for a
remittance that is less than twenty-five dollars.
(d) The department will examine the applicant's proof of
nonresident status and any other documentation and information as
required in the application to determine whether the applicant is
entitled to a remittance under this section.
(5)(a) Any person making fraudulent statements to the department,
which includes the offer of fraudulent or fraudulently procured
identification or ((fraudulently procured identification to a vendor))
fraudulent sales receipts, in order to ((purchase goods without
paying)) receive a remittance of retail sales tax is guilty of perjury
under chapter 9A.72 RCW.
(b) Any person ((making tax exempt purchases under this section by
displaying)) requesting a remittance of sales tax from the department
by providing proof of identification or sales receipts not ((his or
her)) the person's own, or counterfeit identification or sales
receipts, with intent to violate the provisions of this section, is
guilty of a misdemeanor and, in addition, is liable for the tax and
subject to a penalty equal to the greater of one hundred dollars or the
tax due on such purchases.
(6)(((a) Any vendor who makes sales without collecting the tax to
a person who does not hold valid identification establishing out-of-
state residency, and any vendor who fails to maintain records of sales
to nonresidents as provided in this section, is personally liable for
the amount of tax due.)) The exemption provided by this
section is for both state and local sales taxes. For purposes of this
section, "local sales tax" means a sales tax imposed by a local
government under the authority of chapter 82.14 RCW, RCW 81.104.170, or
other provision of law, and which is imposed on the same taxable event
as the state sales tax imposed in this chapter.
(b) Any vendor who makes sales without collecting the retail sales
tax under this section and who has actual knowledge that the
purchaser's proof of identification establishing out-of-state residency
is fraudulent is guilty of a misdemeanor and, in addition, is liable
for the tax and subject to a penalty equal to the greater of one
thousand dollars or the tax due on such sales. In addition, both the
purchaser and the vendor are liable for any penalties and interest
assessable under chapter 82.32 RCW
(7) A nonresident who receives a refund of sales tax from the
seller for any reason with respect to a purchase made in this state is
not entitled to a remittance for the tax paid on the purchase. A
person who receives both a remittance under this section and a refund
from the seller with respect to the same purchase must immediately
repay the remittance to the department. Interest as provided in
chapter 82.32 RCW applies to amounts due under this section from the
date that the department made the remittance until the amount due under
this subsection is paid to the department. A person who receives a
remittance with respect to a purchase for which the person had, at the
time the person submitted the application for a remittance, already
received a refund of sales tax from the seller is also liable for the
evasion penalty in RCW 82.32.090(6) and is ineligible to receive any
further remittances from the department under this section.
NEW SECTION. Sec. 501 (1) In 1983, the legislature provided a
business and occupation tax exemption in RCW 82.04.423 for certain out-of-state sellers that sold consumer products exclusively to or through
a direct seller's representative, which was codified in RCW 82.04.423.
The intent of the legislature in enacting this exemption was to provide
a narrow exemption for out-of-state businesses engaged in direct sales
of consumer products, typically accomplished through in-home parties or
door-to-door selling.
(2) In Dot Foods, Inc. v. Dep't of Revenue, 166 Wn.2d 912 (2009),
the Washington state supreme court held that the exemption in RCW
82.04.423 applied to a taxpayer: (a) That sold nonconsumer products
through its representative in addition to consumer products; and (b)
whose consumer products were ultimately sold at retail in permanent
retail establishments. This decision raises questions about the
taxpayers intended to benefit from the narrow exemption in RCW
82.04.432.
(3) The legislature recognizes that some out-of-state businesses
selling consumer products in this state may be eligible for the
exemption under RCW 82.04.423 under the broadened interpretation or
could easily restructure their business operations to qualify for the
exemption. The legislature further finds that optimal tax policy does
not provide favorable treatment to out-of-state businesses, which a
broadened interpretation of RCW 82.04.423 could lead to; but rather,
the best tax policy is to have equitable tax treatment for businesses,
both within and without the state.
(4) Therefore, the legislature finds that it is necessary to
reaffirm the legislature's intent in establishing the direct sellers'
exemption by amending RCW 82.04.423 retroactively to conform the
exemption to the original intent of the legislature and by
prospectively ending the direct sellers' exemption effective July 1,
2010.
Sec. 502 RCW 82.04.423 and 1983 1st ex.s. c 66 s 5 are each
amended to read as follows:
(1) Prior to July 1, 2010, this chapter ((shall)) does not apply to
any person in respect to gross income derived from the business of
making sales at wholesale or retail if such person:
(a) Does not own or lease real property within this state; and
(b) Does not regularly maintain a stock of tangible personal
property in this state for sale in the ordinary course of business; and
(c) Is not a corporation incorporated under the laws of this state;
and
(d) Makes sales in this state exclusively to or through a direct
seller's representative.
(2) For purposes of this section, the term "direct seller's
representative" means a person who buys only consumer products on a
buy-sell basis or a deposit-commission basis for resale, by the buyer
or any other person, in the home or otherwise than in a permanent
retail establishment, or who sells at retail, or solicits the sale at
retail of, only consumer products in the home or otherwise than in a
permanent retail establishment; and
(a) Substantially all of the remuneration paid to such person,
whether or not paid in cash, for the performance of services described
in this subsection is directly related to sales or other output,
including the performance of services, rather than the number of hours
worked; and
(b) The services performed by the person are performed pursuant to
a written contract between such person and the person for whom the
services are performed and such contract provides that the person will
not be treated as an employee with respect to such purposes for federal
tax purposes.
(3) Nothing in this section ((shall)) may be construed to imply
that a person exempt from tax under this section was engaged in a
business activity taxable under this chapter prior to ((the enactment
of this section)) August 23, 1983.
NEW SECTION. Sec. 601 (1)(a) In 1967, the legislature authorized
a preferential business and occupation tax rate for slaughtering,
breaking, and/or processing perishable meat products and/or selling the
same at wholesale. The Washington state supreme court interpreted RCW
82.04.260(4), in Agrilink Foods, Inc. v. Department of Revenue, 153
Wn.2d 392 (2005), holding the preferential business and occupation tax
rate on the slaughtering, breaking, and/or processing of perishable
meat products applied to the processing of perishable meat products
into nonperishable finished products, such as canned food.
(b) In this act, the legislature intends to ensure that the
exemption applies to activities such as slaughtering, breaking, and/or
processing perishable meat products and/or selling such products at
wholesale by requiring that the end product be a perishable meat
product; a nonperishable meat product that is comprised primarily of
animal carcass by weight or volume, other than a canned meat product;
or a meat by-product.
(2) The legislature finds that the rationale of the Agrilink
decision, if applied to these tax preferences, could result in
preferential tax treatment for any processed food product that
contained any fresh fruit or vegetable as an ingredient, however small
the amount. Therefore, the legislature intends, by this act, to
provide direction on its policy regarding preferential tax treatment
for these activities.
(a) A business and occupation tax exemption is provided for (i)
manufacturing by canning, preserving, freezing, processing, or
dehydrating fresh fruits or vegetables, and (ii) selling such products
at wholesale by the manufacturer to purchasers who transport the goods
out of state in the ordinary course of business. This exemption
expires July 1, 2012, and is replaced by a preferential business and
occupation tax rate.
(b) The legislature intends to narrow the tax preference provided
to fruit and vegetable manufacturers by requiring that the end product
be comprised either (i) exclusively of fruits and/or vegetables, or
(ii) of any combination of fruits, vegetables, and certain other
substances that, cumulatively, may not exceed the amount of fruits and
vegetables contained in the product measured by weight or volume.
NEW SECTION. Sec. 602 A new section is added to chapter 82.04
RCW to read as follows:
(1) Upon every person engaging within this state in the business of
manufacturing:
(a) Perishable meat products, by slaughtering, breaking, or
processing, if the finished product is a perishable meat product; as to
such persons the tax imposed is equal to the value of the perishable
meat products manufactured, or, in the case of a processor for hire,
the gross income of the business, multiplied by the rate of 0.138
percent;
(b) Meat products, by dehydration, curing, smoking, or any
combination of these activities, if the finished meat products are not
canned; as to such persons the tax imposed is equal to the value of the
meat products manufactured, or, in the case of a processor for hire,
the gross income of the business, multiplied by the rate of 0.138
percent;
(c) Hides, tallow, meat meal, and other similar meat by-products,
if such products are derived in part from animals and manufactured in
a rendering plant licensed under chapter 16.68 RCW; as to such persons
the tax imposed is equal to the value of the products manufactured, or,
in the case of a processor for hire, the gross income of the business,
multiplied by the rate of 0.138 percent.
(2) Upon every person engaging within this state in the business of
selling at wholesale:
(a) Perishable meat products; as to such persons the tax imposed is
equal to the gross proceeds derived from such sales multiplied by the
rate of 0.138 percent;
(b) Meat products that have been manufactured by the seller by
dehydration, curing, smoking, or any combination of such activities, if
the finished meat products are not canned; as to such persons the tax
imposed is equal to the gross proceeds derived from such sales
multiplied by the rate of 0.138 percent;
(c) Hides, tallow, meat meal, and other similar meat by-products,
if such products are derived in part from animals and manufactured by
the seller in a rendering plant; as to such persons the tax imposed is
equal to the gross proceeds derived from such sales multiplied by the
rate of 0.138 percent.
(3) The definitions in this subsection apply throughout this
section unless the context clearly requires otherwise.
(a) "Animal" means all members of the animal kingdom except humans,
fish, and insects.
(b) "Carcass" means all or any parts, including viscera, of a
slaughtered animal.
(c) "Fish" means any water-breathing animal, including shellfish.
(d) "Hide" means any unprocessed animal pelt or skin.
(e)(i) "Meat products" means:
(A) Products comprised exclusively of animal carcass; and
(B) Except as provided in (e)(ii) of this subsection (3), products,
such as jerky, sausage, and other cured meat products, that are
comprised primarily of animal carcass by weight or volume and may also
contain water; nitrates; nitrites; acids; binders and extenders;
natural or synthetic casings; colorings; flavorings such as soy sauce,
liquid smoke, seasonings, citric acid, sugar, molasses, corn syrup, and
vinegar; and similar substances.
(ii) "Meat products" does not include products containing any
cereal grains or cereal-grain products, dairy products, legumes and
legume products, fruit or vegetable products as defined in RCW
82.04.260, and similar ingredients, unless the ingredient is used as a
flavoring. For purposes of this subsection, "flavoring" means a
substance that contains the flavoring constituents derived from a
spice, fruit or fruit juice, vegetable or vegetable juice, edible
yeast, herb, bark, bud, root, leaf, or any other edible substance of
plant origin, whose primary function in food is flavoring or seasoning
rather than nutritional, and which may legally appear as "natural
flavor," "flavor," or "flavorings" in the ingredient statement on the
label of the meat product.
(iii) "Meat products" includes only products that are intended for
human consumption as food or animal consumption as feed.
(f) "Perishable" means having a high risk of spoilage within thirty
days of manufacture without any refrigeration or freezing.
(g) "Rendering plant" means any place of business or location where
dead animals or any part or portion thereof, or packing house refuse,
are processed for the purpose of obtaining the hide, skin, grease
residue, or any other by-product whatsoever.
Sec. 603 RCW 82.04.4266 and 2006 c 354 s 3 are each amended to
read as follows:
(1) This chapter ((shall)) does not apply to the value of products
or the gross proceeds of sales derived from:
(a) Manufacturing fruit((s)) or vegetable((s)) products by canning,
preserving, freezing, processing, or dehydrating fresh fruits or
vegetables; or
(b) Selling at wholesale fruit((s)) or vegetable((s)) products
manufactured by the seller by canning, preserving, freezing,
processing, or dehydrating fresh fruits or vegetables and sold to
purchasers who transport in the ordinary course of business the goods
out of this state. A person taking an exemption under this subsection
(1)(b) must keep and preserve records for the period required by RCW
82.32.070 establishing that the goods were transported by the purchaser
in the ordinary course of business out of this state.
(2)(a) "Fruit or vegetable products" means:
(i) Products comprised exclusively of fruits, vegetables, or both;
and
(ii) Products comprised of fruits, vegetables, or both, and which
may also contain water, sugar, salt, seasonings, preservatives,
binders, stabilizers, flavorings, yeast, and similar substances.
However, the amount of all ingredients contained in the product, other
than fruits, vegetables, and water, may not exceed the amount of fruits
and vegetables contained in the product measured by weight or volume.
(b) "Fruit or vegetable products" includes only products that are
intended for human consumption as food or animal consumption as feed.
(3) This section expires July 1, 2012.
Sec. 604 RCW 82.04.260 and 2009 c 479 s 64, 2009 c 461 s 1, and
2009 c 162 s 34 are each reenacted and amended to read as follows:
(1) Upon every person engaging within this state in the business of
manufacturing:
(a) Wheat into flour, barley into pearl barley, soybeans into
soybean oil, canola into canola oil, canola meal, or canola by-products, or sunflower seeds into sunflower oil; as to such persons the
amount of tax with respect to such business ((shall be)) is equal to
the value of the flour, pearl barley, oil, canola meal, or canola by-product manufactured, multiplied by the rate of 0.138 percent;
(b) Beginning July 1, 2012, seafood products that remain in a raw,
raw frozen, or raw salted state at the completion of the manufacturing
by that person; or selling manufactured seafood products that remain in
a raw, raw frozen, or raw salted state at the completion of the
manufacturing, to purchasers who transport in the ordinary course of
business the goods out of this state; as to such persons the amount of
tax with respect to such business ((shall be)) is equal to the value of
the products manufactured or the gross proceeds derived from such
sales, multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing
that the goods were transported by the purchaser in the ordinary course
of business out of this state;
(c) Beginning July 1, 2012, dairy products that as of September 20,
2001, are identified in 21 C.F.R., chapter 1, parts 131, 133, and 135,
including by-products from the manufacturing of the dairy products such
as whey and casein; or selling the same to purchasers who transport in
the ordinary course of business the goods out of state; as to such
persons the tax imposed ((shall be)) is equal to the value of the
products manufactured or the gross proceeds derived from such sales
multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing
that the goods were transported by the purchaser in the ordinary course
of business out of this state;
(d)(i) Beginning July 1, 2012, fruit((s)) or vegetable((s))
products by canning, preserving, freezing, processing, or dehydrating
fresh fruits or vegetables, or selling at wholesale fruit((s)) or
vegetable((s)) products manufactured by the seller by canning,
preserving, freezing, processing, or dehydrating fresh fruits or
vegetables and sold to purchasers who transport in the ordinary course
of business the goods out of this state; as to such persons the amount
of tax with respect to such business ((shall be)) is equal to the value
of the products manufactured or the gross proceeds derived from such
sales multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing
that the goods were transported by the purchaser in the ordinary course
of business out of this state;
(ii) For purposes of this subsection, "fruit or vegetable products"
means:
(A) Products comprised exclusively of fruits, vegetables, or both;
or
(B) Products comprised of fruits, vegetables, or both, and which
may also contain water, sugar, salt, seasonings, preservatives,
binders, stabilizers, flavorings, yeast, and similar substances.
However, the amount of all ingredients contained in the product, other
than fruits, vegetables, and water, may not exceed the amount of fruits
and vegetables contained in the product measured by weight or volume;
(iii) "Fruit and vegetable products" includes only products that
are intended for human consumption as food or animal consumption as
feed;
(e) Until July 1, 2009, alcohol fuel, biodiesel fuel, or biodiesel
feedstock, as those terms are defined in RCW 82.29A.135; as to such
persons the amount of tax with respect to the business ((shall be)) is
equal to the value of alcohol fuel, biodiesel fuel, or biodiesel
feedstock manufactured, multiplied by the rate of 0.138 percent; and
(f) Alcohol fuel or wood biomass fuel, as those terms are defined
in RCW 82.29A.135; as to such persons the amount of tax with respect to
the business ((shall be)) is equal to the value of alcohol fuel or wood
biomass fuel manufactured, multiplied by the rate of 0.138 percent.
(2) Upon every person engaging within this state in the business of
splitting or processing dried peas; as to such persons the amount of
tax with respect to such business ((shall be)) is equal to the value of
the peas split or processed, multiplied by the rate of 0.138 percent.
(3) Upon every nonprofit corporation and nonprofit association
engaging within this state in research and development, as to such
corporations and associations, the amount of tax with respect to such
activities ((shall be)) is equal to the gross income derived from such
activities multiplied by the rate of 0.484 percent.
(4) ((Upon every person engaging within this state in the business
of slaughtering, breaking and/or processing perishable meat products
and/or selling the same at wholesale only and not at retail; as to such
persons the tax imposed shall be equal to the gross proceeds derived
from such sales multiplied by the rate of 0.138 percent.)) Upon every person engaging within this state in the business
of acting as a travel agent or tour operator; as to such persons the
amount of the tax with respect to such activities ((
(5)shall be)) is equal
to the gross income derived from such activities multiplied by the rate
of 0.275 percent.
(((6))) (5) Upon every person engaging within this state in
business as an international steamship agent, international customs
house broker, international freight forwarder, vessel and/or cargo
charter broker in foreign commerce, and/or international air cargo
agent; as to such persons the amount of the tax with respect to only
international activities ((shall be)) is equal to the gross income
derived from such activities multiplied by the rate of 0.275 percent.
(((7))) (6) Upon every person engaging within this state in the
business of stevedoring and associated activities pertinent to the
movement of goods and commodities in waterborne interstate or foreign
commerce; as to such persons the amount of tax with respect to such
business ((shall be)) is equal to the gross proceeds derived from such
activities multiplied by the rate of 0.275 percent. Persons subject to
taxation under this subsection ((shall be)) are exempt from payment of
taxes imposed by chapter 82.16 RCW for that portion of their business
subject to taxation under this subsection. Stevedoring and associated
activities pertinent to the conduct of goods and commodities in
waterborne interstate or foreign commerce are defined as all activities
of a labor, service or transportation nature whereby cargo may be
loaded or unloaded to or from vessels or barges, passing over, onto or
under a wharf, pier, or similar structure; cargo may be moved to a
warehouse or similar holding or storage yard or area to await further
movement in import or export or may move to a consolidation freight
station and be stuffed, unstuffed, containerized, separated or
otherwise segregated or aggregated for delivery or loaded on any mode
of transportation for delivery to its consignee. Specific activities
included in this definition are: Wharfage, handling, loading,
unloading, moving of cargo to a convenient place of delivery to the
consignee or a convenient place for further movement to export mode;
documentation services in connection with the receipt, delivery,
checking, care, custody and control of cargo required in the transfer
of cargo; imported automobile handling prior to delivery to consignee;
terminal stevedoring and incidental vessel services, including but not
limited to plugging and unplugging refrigerator service to containers,
trailers, and other refrigerated cargo receptacles, and securing ship
hatch covers.
(((8))) (7)(a) Upon every person engaging within this state in the
business of disposing of low-level waste, as defined in RCW 43.145.010;
as to such persons the amount of the tax with respect to such business
((shall be)) is equal to the gross income of the business, excluding
any fees imposed under chapter 43.200 RCW, multiplied by the rate of
3.3 percent.
(b) If the gross income of the taxpayer is attributable to
activities both within and without this state, the gross income
attributable to this state ((shall)) must be determined in accordance
with the methods of apportionment required under RCW 82.04.460.
(((9))) (8) Upon every person engaging within this state as an
insurance producer or title insurance agent licensed under chapter
48.17 RCW or a surplus line broker licensed under chapter 48.15 RCW; as
to such persons, the amount of the tax with respect to such licensed
activities ((shall be)) is equal to the gross income of such business
multiplied by the rate of 0.484 percent.
(((10))) (9) Upon every person engaging within this state in
business as a hospital, as defined in chapter 70.41 RCW, that is
operated as a nonprofit corporation or by the state or any of its
political subdivisions, as to such persons, the amount of tax with
respect to such activities ((shall be)) is equal to the gross income of
the business multiplied by the rate of 0.75 percent through June 30,
1995, and 1.5 percent thereafter.
(((11))) (10)(a) Beginning October 1, 2005, upon every person
engaging within this state in the business of manufacturing commercial
airplanes, or components of such airplanes, or making sales, at retail
or wholesale, of commercial airplanes or components of such airplanes,
manufactured by the seller, as to such persons the amount of tax with
respect to such business ((shall)), in the case of manufacturers,
((be)) is equal to the value of the product manufactured and the gross
proceeds of sales of the product manufactured, or in the case of
processors for hire, ((be)) is equal to the gross income of the
business, multiplied by the rate of:
(i) 0.4235 percent from October 1, 2005, through ((the later of))
June 30, 2007; and
(ii) 0.2904 percent beginning July 1, 2007.
(b) Beginning July 1, 2008, upon every person who is not eligible
to report under the provisions of (a) of this subsection (((11))) (10)
and is engaging within this state in the business of manufacturing
tooling specifically designed for use in manufacturing commercial
airplanes or components of such airplanes, or making sales, at retail
or wholesale, of such tooling manufactured by the seller, as to such
persons the amount of tax with respect to such business ((shall)), in
the case of manufacturers, ((be)) is equal to the value of the product
manufactured and the gross proceeds of sales of the product
manufactured, or in the case of processors for hire, ((be)) is equal to
the gross income of the business, multiplied by the rate of 0.2904
percent.
(c) For the purposes of this subsection (((11))) (10), "commercial
airplane" and "component" have the same meanings as provided in RCW
82.32.550.
(d) In addition to all other requirements under this title, a
person eligible for the tax rate under this subsection (((11))) (10)
must report as required under RCW 82.32.545.
(e) This subsection (((11))) (10) does not apply on and after July
1, 2024.
(((12))) (11)(a) Until July 1, 2024, upon every person engaging
within this state in the business of extracting timber or extracting
for hire timber; as to such persons the amount of tax with respect to
the business ((shall)), in the case of extractors, ((be)) is equal to
the value of products, including by-products, extracted, or in the case
of extractors for hire, ((be)) is equal to the gross income of the
business, multiplied by the rate of 0.4235 percent from July 1, 2006,
through June 30, 2007, and 0.2904 percent from July 1, 2007, through
June 30, 2024.
(b) Until July 1, 2024, upon every person engaging within this
state in the business of manufacturing or processing for hire: (i)
Timber into timber products or wood products; or (ii) timber products
into other timber products or wood products; as to such persons the
amount of the tax with respect to the business ((shall)), in the case
of manufacturers, ((be)) is equal to the value of products, including
by-products, manufactured, or in the case of processors for hire,
((be)) is equal to the gross income of the business, multiplied by the
rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and
0.2904 percent from July 1, 2007, through June 30, 2024.
(c) Until July 1, 2024, upon every person engaging within this
state in the business of selling at wholesale: (i) Timber extracted by
that person; (ii) timber products manufactured by that person from
timber or other timber products; or (iii) wood products manufactured by
that person from timber or timber products; as to such persons the
amount of the tax with respect to the business ((shall be)) is equal to
the gross proceeds of sales of the timber, timber products, or wood
products multiplied by the rate of 0.4235 percent from July 1, 2006,
through June 30, 2007, and 0.2904 percent from July 1, 2007, through
June 30, 2024.
(d) Until July 1, 2024, upon every person engaging within this
state in the business of selling standing timber; as to such persons
the amount of the tax with respect to the business ((shall be)) is
equal to the gross income of the business multiplied by the rate of
0.2904 percent. For purposes of this subsection (((12))) (11)(d),
"selling standing timber" means the sale of timber apart from the land,
where the buyer is required to sever the timber within thirty months
from the date of the original contract, regardless of the method of
payment for the timber and whether title to the timber transfers
before, upon, or after severance.
(e) For purposes of this subsection, the following definitions
apply:
(i) "Biocomposite surface products" means surface material products
containing, by weight or volume, more than fifty percent recycled paper
and that also use nonpetroleum-based phenolic resin as a bonding agent.
(ii) "Paper and paper products" means products made of interwoven
cellulosic fibers held together largely by hydrogen bonding. "Paper
and paper products" includes newsprint; office, printing, fine, and
pressure-sensitive papers; paper napkins, towels, and toilet tissue;
kraft bag, construction, and other kraft industrial papers; paperboard,
liquid packaging containers, containerboard, corrugated, and solid-fiber containers including linerboard and corrugated medium; and
related types of cellulosic products containing primarily, by weight or
volume, cellulosic materials. "Paper and paper products" does not
include books, newspapers, magazines, periodicals, and other printed
publications, advertising materials, calendars, and similar types of
printed materials.
(iii) "Recycled paper" means paper and paper products having fifty
percent or more of their fiber content that comes from postconsumer
waste. For purposes of this subsection (((12))) (11)(e)(iii),
"postconsumer waste" means a finished material that would normally be
disposed of as solid waste, having completed its life cycle as a
consumer item.
(iv) "Timber" means forest trees, standing or down, on privately or
publicly owned land. "Timber" does not include Christmas trees that
are cultivated by agricultural methods or short-rotation hardwoods as
defined in RCW 84.33.035.
(v) "Timber products" means:
(A) Logs, wood chips, sawdust, wood waste, and similar products
obtained wholly from the processing of timber, short-rotation hardwoods
as defined in RCW 84.33.035, or both;
(B) Pulp, including market pulp and pulp derived from recovered
paper or paper products; and
(C) Recycled paper, but only when used in the manufacture of
biocomposite surface products.
(vi) "Wood products" means paper and paper products; dimensional
lumber; engineered wood products such as particleboard, oriented strand
board, medium density fiberboard, and plywood; wood doors; wood
windows; and biocomposite surface products.
(((13))) (12) Upon every person engaging within this state in
inspecting, testing, labeling, and storing canned salmon owned by
another person, as to such persons, the amount of tax with respect to
such activities ((shall be)) is equal to the gross income derived from
such activities multiplied by the rate of 0.484 percent.
(((14))) (13) Upon every person engaging within this state in the
business of printing a newspaper, publishing a newspaper, or both, the
amount of tax on such business is equal to the gross income of the
business multiplied by the rate of 0.2904 percent.
Sec. 605 RCW 82.04.250 and 2008 c 81 s 5 are each amended to read
as follows:
(1) Upon every person engaging within this state in the business of
making sales at retail, except persons taxable as retailers under other
provisions of this chapter, as to such persons, the amount of tax with
respect to such business ((shall be)) is equal to the gross proceeds of
sales of the business, multiplied by the rate of 0.471 percent.
(2) Upon every person engaging within this state in the business of
making sales at retail that are exempt from the tax imposed under
chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or
82.08.0263, except persons taxable under RCW 82.04.260(((11))) (10) or
subsection (3) of this section, as to such persons, the amount of tax
with respect to such business ((shall be)) is equal to the gross
proceeds of sales of the business, multiplied by the rate of 0.484
percent.
(3) Upon every person classified by the federal aviation
administration as a federal aviation regulation part 145 certificated
repair station and that is engaging within this state in the business
of making sales at retail that are exempt from the tax imposed under
chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or
82.08.0263, as to such persons, the amount of tax with respect to such
business ((shall be)) is equal to the gross proceeds of sales of the
business, multiplied by the rate of .2904 percent.
Sec. 606 RCW 82.04.250 and 2007 c 54 s 5 are each amended to read
as follows:
(1) Upon every person engaging within this state in the business of
making sales at retail, except persons taxable as retailers under other
provisions of this chapter, as to such persons, the amount of tax with
respect to such business ((shall be)) is equal to the gross proceeds of
sales of the business, multiplied by the rate of 0.471 percent.
(2) Upon every person engaging within this state in the business of
making sales at retail that are exempt from the tax imposed under
chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or
82.08.0263, except persons taxable under RCW 82.04.260(((11))) (10), as
to such persons, the amount of tax with respect to such business
((shall be)) is equal to the gross proceeds of sales of the business,
multiplied by the rate of 0.484 percent.
Sec. 607 RCW 82.04.261 and 2007 c 54 s 7 and 2007 c 48 s 4 are
each reenacted and amended to read as follows:
(1) In addition to the taxes imposed under RCW 82.04.260(((12)))
(11), a surcharge is imposed on those persons who are subject to any of
the taxes imposed under RCW 82.04.260(((12))) (11). Except as
otherwise provided in this section, the surcharge is equal to 0.052
percent. The surcharge is added to the rates provided in RCW
82.04.260(((12))) (11) (a), (b), (c), and (d). The surcharge and this
section expire July 1, 2024.
(2) All receipts from the surcharge imposed under this section
((shall)) must be deposited into the forest and fish support account
created in RCW 76.09.405.
(3)(a) The surcharge imposed under this section ((shall be)) is
suspended if:
(i) Receipts from the surcharge total at least eight million
dollars during any fiscal biennium; or
(ii) The office of financial management certifies to the department
that the federal government has appropriated at least two million
dollars for participation in forest and fish report-related activities
by federally recognized Indian tribes located within the geographical
boundaries of the state of Washington for any federal fiscal year.
(b)(i) The suspension of the surcharge under (a)(i) of this
subsection (3) ((shall)) takes effect on the first day of the calendar
month that is at least thirty days after the end of the month during
which the department determines that receipts from the surcharge total
at least eight million dollars during the fiscal biennium. The
surcharge ((shall be)) is imposed again at the beginning of the
following fiscal biennium.
(ii) The suspension of the surcharge under (a)(ii) of this
subsection (3) ((shall)) takes effect on the later of the first day of
October of any federal fiscal year for which the federal government
appropriates at least two million dollars for participation in forest
and fish report-related activities by federally recognized Indian
tribes located within the geographical boundaries of the state of
Washington, or the first day of a calendar month that is at least
thirty days following the date that the office of financial management
makes a certification to the department under subsection (5) of this
section. The surcharge ((shall be)) is imposed again on the first day
of the following July.
(4)(a) If, by October 1st of any federal fiscal year, the office of
financial management certifies to the department that the federal
government has appropriated funds for participation in forest and fish
report-related activities by federally recognized Indian tribes located
within the geographical boundaries of the state of Washington but the
amount of the appropriation is less than two million dollars, the
department ((shall)) must adjust the surcharge in accordance with this
subsection.
(b) The department ((shall)) must adjust the surcharge by an amount
that the department estimates will cause the amount of funds deposited
into the forest and fish support account for the state fiscal year that
begins July 1st and that includes the beginning of the federal fiscal
year for which the federal appropriation is made, to be reduced by
twice the amount of the federal appropriation for participation in
forest and fish report-related activities by federally recognized
Indian tribes located within the geographical boundaries of the state
of Washington.
(c) Any adjustment in the surcharge ((shall)) takes effect at the
beginning of a calendar month that is at least thirty days after the
date that the office of financial management makes the certification
under subsection (5) of this section.
(d) The surcharge ((shall be)) is imposed again at the rate
provided in subsection (1) of this section on the first day of the
following state fiscal year unless the surcharge is suspended under
subsection (3) of this section or adjusted for that fiscal year under
this subsection.
(e) Adjustments of the amount of the surcharge by the department
are final and ((shall)) may not be used to challenge the validity of
the surcharge imposed under this section.
(f) The department ((shall)) must provide timely notice to affected
taxpayers of the suspension of the surcharge or an adjustment of the
surcharge.
(5) The office of financial management ((shall)) must make the
certification to the department as to the status of federal
appropriations for tribal participation in forest and fish report-related activities.
Sec. 608 RCW 82.04.298 and 2008 c 49 s 1 are each amended to read
as follows:
(1) The amount of tax with respect to a qualified grocery
distribution cooperative's sales of groceries or related goods for
resale, excluding items subject to tax under ((RCW 82.04.260(4)))
section 602 of this act, to customer-owners of the grocery distribution
cooperative is equal to the gross proceeds of sales of the grocery
distribution cooperative multiplied by the rate of one and one-half
percent.
(2) A qualified grocery distribution cooperative is allowed a
deduction from the gross proceeds of sales of groceries or related
goods for resale, excluding items subject to tax under ((RCW
82.04.260(4))) section 602 of this act, to customer-owners of the
grocery distribution cooperative that is equal to the portion of the
gross proceeds of sales for resale that represents the actual cost of
the merchandise sold by the grocery distribution cooperative to
customer-owners.
(3) The definitions in this subsection apply throughout this
section unless the context clearly requires otherwise.
(a) "Grocery distribution cooperative" means an entity that sells
groceries and related items to customer-owners of the grocery
distribution cooperative and has customer-owners, in the aggregate, who
own a majority of the outstanding ownership interests of the grocery
distribution cooperative or of the entity controlling the grocery
distribution cooperative. "Grocery distribution cooperative" includes
an entity that controls a grocery distribution cooperative.
(b) "Qualified grocery distribution cooperative" means:
(i) A grocery distribution cooperative that has been determined by
a court of record of the state of Washington to be not engaged in
wholesaling or making sales at wholesale, within the meaning of RCW
82.04.270 or any similar provision of a municipal ordinance that
imposes a tax on gross receipts, gross proceeds of sales, or gross
income, with respect to purchases made by customer-owners, and
subsequently changes its form of doing business to make sales at
wholesale of groceries or related items to its customer-owners; or
(ii) A grocery distribution cooperative that has acquired
substantially all of the assets of a grocery distribution cooperative
described in (b)(i) of this subsection.
(c) "Customer-owner" means a person who has an ownership interest
in a grocery distribution cooperative and purchases groceries and
related items at wholesale from that grocery distribution cooperative.
(d) "Controlling" means holding fifty percent or more of the voting
interests of an entity and having at least equal power to direct or
cause the direction of the management and policies of the entity,
whether through the ownership of voting securities, by contract, or
otherwise.
Sec. 609 RCW 82.04.334 and 2007 c 48 s 3 are each amended to read
as follows:
This chapter does not apply to any sale of standing timber excluded
from the definition of "sale" in RCW 82.45.010(3). The definitions in
RCW 82.04.260(((12))) (11) apply to this section.
Sec. 610 RCW 82.04.440 and 2006 c 300 s 8 and 2006 c 84 s 6 are
each reenacted and amended to read as follows:
(1) Every person engaged in activities that are subject to tax
under two or more provisions of RCW 82.04.230 through 82.04.298,
inclusive, ((shall be)) is taxable under each provision applicable to
those activities.
(2) Persons taxable under RCW 82.04.2909(2), 82.04.250, 82.04.270,
82.04.294(2), or 82.04.260 (1) (b), (c), (((4),)) or (d), (10), or
(11), or (((12))) section 602(2) of this act with respect to selling
products in this state, including those persons who are also taxable
under RCW 82.04.261, ((shall be)) are 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)) may not exceed the tax
liability arising under this chapter with respect to the sale of those
products.
(3) Persons taxable as manufacturers under RCW 82.04.240 or
82.04.260 (1)(b) or (((12))) (11), including those persons who are also
taxable under RCW 82.04.261, ((shall be)) are 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)) may 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),
82.04.294(1), 82.04.2404, or 82.04.260 (1), (2), (((4),)) (10), or
(11), or (((12))) section 602(1) of this act, including those persons
who are also taxable under RCW 82.04.261, with respect to extracting or
manufacturing products in this state ((shall be)) are 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)) may 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, 82.04.2404,
82.04.2909(1), 82.04.260 (1), (2), (((4),)) (10), and (11), ((and
(12))) section 602(1) of this act, and 82.04.294(1); (ii) the tax
imposed under RCW 82.04.261 on persons who are engaged in business as
a manufacturer; and (iii) 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 (i)
the tax imposed on extractors in RCW 82.04.230 and 82.04.260(((12)))
(11); (ii) the tax imposed under RCW 82.04.261 on persons who are
engaged in business as an extractor; and (iii) 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.
Sec. 611 RCW 82.04.4463 and 2008 c 81 s 8 are each amended to
read as follows:
(1) In computing the tax imposed under this chapter, a credit is
allowed for property taxes and leasehold excise taxes paid during the
calendar year.
(2) The credit is equal to:
(a)(i)(A) Property taxes paid on buildings, and land upon which the
buildings are located, constructed after December 1, 2003, and used
exclusively in manufacturing commercial airplanes or components of such
airplanes; and
(B) Leasehold excise taxes paid with respect to buildings
constructed after January 1, 2006, the land upon which the buildings
are located, or both, if the buildings are used exclusively in
manufacturing commercial airplanes or components of such airplanes; and
(C) Property taxes or leasehold excise taxes paid on, or with
respect to, buildings constructed after June 30, 2008, the land upon
which the buildings are located, or both, and used exclusively for
aerospace product development or in providing aerospace services, by
persons not within the scope of (a)(i)(A) and (B) of this subsection
(2) and are: (I) Engaged in manufacturing tooling specifically
designed for use in manufacturing commercial airplanes or their
components; or (II) taxable under RCW 82.04.290(3) or 82.04.250(3); or
(ii) Property taxes attributable to an increase in assessed value
due to the renovation or expansion, after: (A) December 1, 2003, of a
building used exclusively in manufacturing commercial airplanes or
components of such airplanes; and (B) June 30, 2008, of buildings used
exclusively for aerospace product development or in providing aerospace
services, by persons not within the scope of (a)(ii)(A) of this
subsection (2) and are: (I) Engaged in manufacturing tooling
specifically designed for use in manufacturing commercial airplanes or
their components; or (II) taxable under RCW 82.04.290(3) or
82.04.250(3); and
(b) An amount equal to:
(i)(A) Property taxes paid, by persons taxable under RCW
82.04.260(((11))) (10)(a), on machinery and equipment exempt under RCW
82.08.02565 or 82.12.02565 and acquired after December 1, 2003;
(B) Property taxes paid, by persons taxable under RCW
82.04.260(((11))) (10)(b), on machinery and equipment exempt under RCW
82.08.02565 or 82.12.02565 and acquired after June 30, 2008; or
(C) Property taxes paid, by persons taxable under RCW
((82.04.0250(3) [82.04.250(3)])) 82.04.250(3) or 82.04.290(3), on
computer hardware, computer peripherals, and software exempt under RCW
82.08.975 or 82.12.975 and acquired after June 30, 2008.
(ii) For purposes of determining the amount eligible for credit
under (i)(A) and (B) of this subsection (2)(b), the amount of property
taxes paid is multiplied by a fraction.
(((I))) (A) The numerator of the fraction is the total taxable
amount subject to the tax imposed under RCW 82.04.260(((11))) (10) (a)
or (b) on the applicable business activities of manufacturing
commercial airplanes, components of such airplanes, or tooling
specifically designed for use in the manufacturing of commercial
airplanes or components of such airplanes.
(((II))) (B) The denominator of the fraction is the total taxable
amount subject to the tax imposed under all manufacturing
classifications in chapter 82.04 RCW.
(((III))) (C) For purposes of both the numerator and denominator of
the fraction, the total taxable amount refers to the total taxable
amount required to be reported on the person's returns for the calendar
year before the calendar year in which the credit under this section is
earned. The department may provide for an alternative method for
calculating the numerator in cases where the tax rate provided in RCW
82.04.260(((11))) (10) for manufacturing was not in effect during the
full calendar year before the calendar year in which the credit under
this section is earned.
(((IV))) (D) No credit is available under (b)(i)(A) or (B) of this
subsection (2) if either the numerator or the denominator of the
fraction is zero. If the fraction is greater than or equal to nine-tenths, then the fraction is rounded to one.
(((V))) (E) As used in (((III))) (b)(ii)(C) of this subsection
(2)(((b)(ii)(C))), "returns" means the tax returns for which the tax
imposed under this chapter is reported to the department.
(3) The definitions in this subsection apply throughout this
section, unless the context clearly indicates otherwise.
(a) "Aerospace product development" has the same meaning as
provided in RCW 82.04.4461.
(b) "Aerospace services" has the same meaning given in RCW
82.08.975.
(c) "Commercial airplane" and "component" have the same meanings as
provided in RCW 82.32.550.
(4) A credit earned during one calendar year may be carried over to
be credited against taxes incurred in a subsequent calendar year, but
may not be carried over a second year. No refunds may be granted for
credits under this section.
(5) In addition to all other requirements under this title, a
person taking the credit under this section must report as required
under RCW 82.32.545.
(6) This section expires July 1, 2024.
Sec. 612 RCW 82.08.806 and 2009 c 461 s 5 are each amended to
read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to sales, to a
printer or publisher, of computer equipment, including repair parts and
replacement parts for such equipment, when the computer equipment is
used primarily in the printing or publishing of any printed material,
or to sales of or charges made for labor and services rendered in
respect to installing, repairing, cleaning, altering, or improving the
computer equipment. This exemption applies only to computer equipment
not otherwise exempt under RCW 82.08.02565.
(2) A person taking the exemption under this section must keep
records necessary for the department to verify eligibility under this
section. This exemption is available only when the purchaser provides
the seller with an exemption certificate in a form and manner
prescribed by the department. The seller ((shall)) must retain a copy
of the certificate for the seller's files.
(3) The definitions in this subsection (3) apply throughout this
section, unless the context clearly requires otherwise.
(a) "Computer" has the same meaning as in RCW 82.04.215.
(b) "Computer equipment" means a computer and the associated
physical components that constitute a computer system, including
monitors, keyboards, printers, modems, scanners, pointing devices, and
other computer peripheral equipment, cables, servers, and routers.
"Computer equipment" also includes digital cameras and computer
software.
(c) "Computer software" has the same meaning as in RCW 82.04.215.
(d) "Primarily" means greater than fifty percent as measured by
time.
(e) "Printer or publisher" means a person, as defined in RCW
82.04.030, who is subject to tax under RCW 82.04.260(((14))) (13) or
82.04.280(1).
(4) "Computer equipment" does not include computer equipment that
is used primarily for administrative purposes including but not limited
to payroll processing, accounting, customer service, telemarketing, and
collection. If computer equipment is used simultaneously for
administrative and nonadministrative purposes, the administrative use
((shall)) must be disregarded during the period of simultaneous use for
purposes of determining whether the computer equipment is used
primarily for administrative purposes.
Sec. 613 RCW 82.32.545 and 2008 c 81 s 10 are each amended to
read as follows:
(1) The legislature finds that accountability and effectiveness are
important aspects of setting tax policy. In order to make policy
choices regarding the best use of limited state resources the
legislature needs information on how a tax incentive is used.
(2)(a) A person who reports taxes under RCW 82.04.260(((11))) (10),
82.04.250(3), or 82.04.290(3), or who claims an exemption or credit
under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and
82.04.4463 ((shall)) must make an annual report to the department
detailing employment, wages, and employer-provided health and
retirement benefits for employment positions in Washington. However,
persons engaged in manufacturing commercial airplanes or components of
such airplanes may report employment, wage, and benefit information per
job at the manufacturing site. The report ((shall)) may not include
names of employees. The report ((shall)) must also detail employment
by the total number of full-time, part-time, and temporary positions.
The first report filed under this subsection ((shall)) must include
employment, wage, and benefit information for the twelve-month period
immediately before first use of a preferential tax rate under RCW
82.04.260(((11))) (10), 82.04.250(3), or 82.04.290(3), or tax exemption
or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137,
84.36.655, and 82.04.4463, unless a survey covering this twelve-month
period was filed as required by a statute repealed by chapter 81, Laws
of 2008. The report is due by March 31st following any year in which
a preferential tax rate under RCW 82.04.260(((11))) (10), 82.04.250(3),
or 82.04.290(3), is used, or tax exemption or credit under RCW
82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463
is taken. This information is not subject to the confidentiality
provisions of RCW 82.32.330 and may be disclosed to the public upon
request.
(b) If a person fails to submit an annual report under (a) of this
subsection by the due date of the report, the department ((shall)) must
declare the amount of taxes exempted or credited, or reduced in the
case of the preferential business and occupation tax rate, for that
year to be immediately due and payable. Excise taxes payable under
this subsection are subject to interest but not penalties, as provided
under this chapter. This information is not subject to the
confidentiality provisions of RCW 82.32.330 and may be disclosed to the
public upon request.
(3) By November 1, 2010, and by November 1, 2023, the fiscal
committees of the house of representatives and the senate, in
consultation with the department, ((shall)) must report to the
legislature on the effectiveness of chapter 1, Laws of 2003 2nd sp.
sess., chapter 177, Laws of 2006, and chapter 81, Laws of 2008 in
regard to keeping Washington competitive. The report ((shall)) must
measure the effect of these laws on job retention, net jobs created for
Washington residents, company growth, diversification of the state's
economy, cluster dynamics, and other factors as the committees select.
The reports ((shall)) must include a discussion of principles to apply
in evaluating whether the legislature should reenact any or all of the
tax preferences in chapter 1, Laws of 2003 2nd sp. sess., chapter 177,
Laws of 2006, and chapter 81, Laws of 2008.
Sec. 614 RCW 82.32.550 and 2008 c 81 s 12 are each amended to
read as follows:
(1)(((a) Chapter 1, Laws of 2003 2nd sp. sess. takes effect on the
first day of the month in which the governor and a manufacturer of
commercial airplanes sign a memorandum of agreement regarding an
affirmative final decision to site a significant commercial airplane
final assembly facility in Washington state. The department shall
provide notice of the effective date of chapter 1, Laws of 2003 2nd sp.
sess. to affected taxpayers, the legislature, and others as deemed
appropriate by the department.)) "Commercial airplane" has its ordinary meaning, which is an
airplane certified by the federal aviation administration for
transporting persons or property, and any military derivative of such
an airplane.
(b) Chapter 1, Laws of 2003 2nd sp. sess. is contingent upon the
siting of a significant commercial airplane final assembly facility in
the state of Washington. If a memorandum of agreement under subsection
(1) of this section is not signed by June 30, 2005, chapter 1, Laws of
2003 2nd sp. sess. is null and void.
(c)(i) The rate in RCW 82.04.260(11)(a)(ii) takes effect July 1,
2007.
(ii) If on December 31, 2007, final assembly of a superefficient
airplane has not begun in Washington state, the department shall
provide notice of such to affected taxpayers, the legislature, and
others as deemed appropriate by the department.
(2) The definitions in this subsection apply throughout this
section.
(a)
(((b))) (2) "Component" means a part or system certified by the
federal aviation administration for installation or assembly into a
commercial airplane.
(((c) "Final assembly of a superefficient airplane" means the
activity of assembling an airplane from components parts necessary for
its mechanical operation such that the finished commercial airplane is
ready to deliver to the ultimate consumer.)) (3) "Superefficient airplane" means a twin aisle airplane
that carries between two hundred and three hundred fifty passengers,
with a range of more than seven thousand two hundred nautical miles, a
cruising speed of approximately mach .85, and that uses fifteen to
twenty percent less fuel than other similar airplanes on the market.
(d) "Significant commercial airplane final assembly facility" means
a location with the capacity to produce at least thirty-six
superefficient airplanes a year.
(e) "Siting" means a final decision by a manufacturer to locate a
significant commercial airplane final assembly facility in Washington
state.
(f)
Sec. 615 RCW 82.32.630 and 2007 c 48 s 6 are each amended to read
as follows:
(1) The legislature finds that accountability and effectiveness are
important aspects of setting tax policy. In order to make policy
choices regarding the best use of limited state resources, the
legislature needs information on how a tax incentive is used.
(2)(a) A person who reports taxes under RCW 82.04.260(((12) shall))
(11) must file a complete annual survey with the department. The
survey is due by March 31st following any year in which a person
reports taxes under RCW 82.04.260(((12))) (11). The department may
extend the due date for timely filing of annual surveys under this
section as provided in RCW 82.32.590. The survey ((shall)) must
include the amount of tax reduced under the preferential rate in RCW
82.04.260(((12))) (11). The survey ((shall)) must also include the
following information for employment positions in Washington:
(i) The number of total employment positions;
(ii) Full-time, part-time, and temporary employment positions as a
percent of total employment;
(iii) The number of employment positions according to the following
wage bands: Less than thirty thousand dollars; thirty thousand dollars
or greater, but less than sixty thousand dollars; and sixty thousand
dollars or greater. A wage band containing fewer than three
individuals may be combined with another wage band; and
(iv) The number of employment positions that have employer-provided
medical, dental, and retirement benefits, by each of the wage bands.
(b) The first survey filed under this subsection ((shall)) must
include employment, wage, and benefit information for the twelve-month
period immediately before first use of a preferential tax rate under
RCW 82.04.260(((12))) (11).
(c) As part of the annual survey, the department may request
additional information, including the amount of investment in equipment
used in the activities taxable under the preferential rate in RCW
82.04.260(((12))) (11), necessary to measure the results of, or
determine eligibility for, the preferential tax rate in RCW
82.04.260(((12))) (11).
(d) All information collected under this section, except the amount
of the tax reduced under the preferential rate in RCW 82.04.260(((12)))
(11), is deemed taxpayer information under RCW 82.32.330. Information
on the amount of tax reduced is not subject to the confidentiality
provisions of RCW 82.32.330 and may be disclosed to the public upon
request, except as provided in (e) of this subsection. If the amount
of the tax reduced as reported on the survey is different than the
amount actually reduced based on the taxpayer's excise tax returns or
otherwise allowed by the department, the amount actually reduced may be
disclosed.
(e) Persons for whom the actual amount of the tax reduction is less
than ten thousand dollars during the period covered by the survey may
request the department to treat the amount of the tax reduction as
confidential under RCW 82.32.330.
(f) Small harvesters as defined in RCW 84.33.035 are not required
to file the annual survey under this section.
(3) If a person fails to submit a complete annual survey under
subsection (2) of this section by the due date or any extension under
RCW 82.32.590, the department shall declare the amount of taxes reduced
under the preferential rate in RCW 82.04.260(((12))) (11) for the
period covered by the survey to be immediately due and payable. The
department ((shall)) must assess interest, but not penalties, on the
taxes. Interest ((shall)) must be assessed at the rate provided for
delinquent excise taxes under this chapter, retroactively to the date
the reduced taxes were due, and ((shall)) will accrue until the amount
of the reduced taxes is repaid.
(4) The department ((shall)) must use the information from the
annual survey required under subsection (2) of this section to prepare
summary descriptive statistics by category. The department ((shall))
must report these statistics to the legislature each year by September
1st. The requirement to prepare and report summary descriptive
statistics ((shall)) ceases after September 1, 2025.
(5) By November 1, 2011, and November 1, 2023, the fiscal
committees of the house of representatives and the senate, in
consultation with the department, ((shall)) must report to the
legislature on the effectiveness of the preferential tax rate provided
in RCW 82.04.260(((12))) (11). The report shall measure the effect of
the preferential tax rate provided in RCW 82.04.260(((12))) (11) on job
retention, net jobs created for Washington residents, company growth,
and other factors as the committees select. The report ((shall)) must
include a discussion of principles to apply in evaluating whether the
legislature should continue the preferential tax rate provided in RCW
82.04.260(((12))) (11).
Sec. 616 RCW 82.32.632 and 2009 c 461 s 6 are each amended to
read as follows:
(1)(a) Every person claiming the preferential rate provided in RCW
82.04.260(((14))) (13) must file a complete annual report with the
department. The report is due by March 31st of the year following any
calendar year in which a person is eligible to claim the preferential
rate provided in RCW 82.04.260(((14))) (13). The department may extend
the due date for timely filing of annual reports under this section as
provided in RCW 82.32.590.
(b) The report must include information detailing employment,
wages, and employer-provided health and retirement benefits for
employment positions in Washington for the year that the preferential
rate was claimed. The report must not include names of employees. The
report must also detail employment by the total number of full-time,
part-time, and temporary positions for the year that the tax preference
was claimed.
(c) If a person filing a report under this section did not file a
report with the department in the previous calendar year, the report
filed under this section must also include employment, wage, and
benefit information for the calendar year immediately preceding the
calendar year for which the preferential rate provided in RCW
82.04.260(((14))) (13) was claimed.
(2) As part of the annual report, the department may request
additional information necessary to measure the results of, or
determine eligibility for, the preferential rate provided in RCW
82.04.260(((14))) (13).
(3) Other than information requested under subsection (2) of this
section, the information contained in an annual report filed under this
section is not subject to the confidentiality provisions of RCW
82.32.330 and may be disclosed to the public upon request.
(4) Except as otherwise provided by law, if a person claims the
preferential rate provided in RCW 82.04.260(((14))) (13) but fails to
submit a report by the due date or any extension under RCW 82.32.590,
the department must declare the amount of the tax preference claimed
for the previous calendar year to be immediately due and payable. The
department must assess interest, but not penalties, on the amounts due
under this subsection. The interest must be assessed at the rate
provided for delinquent taxes under this chapter, retroactively to the
date the tax preference was claimed, and accrues until the taxes for
which the tax preference was claimed are repaid. Amounts due under
this subsection are not subject to the confidentiality provisions of
RCW 82.32.330 and may be disclosed to the public upon request.
(5) By November 1, 2014, and November 1, 2016, the fiscal
committees of the house of representatives and the senate, in
consultation with the department, must report to the legislature on the
effectiveness of the preferential rate provided in RCW
82.04.260(((14))) (13). The report must measure the effect of the
preferential rate provided in RCW 82.04.260(((14))) (13) on job
retention, net jobs created for Washington residents, industry growth,
and other factors as the committees select. The report must include a
discussion of principles to apply in evaluating whether the legislature
should continue the preferential rate provided in RCW 82.04.260(((14)))
(13).
Sec. 617 RCW 82.45.195 and 2007 c 48 s 7 are each amended to read
as follows:
A sale of standing timber is exempt from tax under this chapter if
the gross income from such sale is taxable under RCW 82.04.260(((12)))
(11)(d).
Sec. 618 RCW 35.102.150 and 2009 c 461 s 4 are each amended to
read as follows:
Notwithstanding RCW 35.102.130, a city that imposes a business and
occupation tax must allocate a person's gross income from the
activities of printing, and of publishing newspapers, periodicals, or
magazines, to the principal place in this state from which the
taxpayer's business is directed or managed. As used in this section,
the activities of printing, and of publishing newspapers, periodicals,
or magazines are those activities to which the tax rates in RCW
82.04.260(((14))) (13) and 82.04.280(1) apply.
Sec. 619 RCW 48.14.080 and 2009 c 535 s 1102 are each amended to
read as follows:
(1) As to insurers, other than title insurers and taxpayers under
RCW 48.14.0201, the taxes imposed by this title ((shall be)) are in
lieu of all other taxes, except as otherwise provided in this section.
(2) Subsection (1) of this section does not apply with respect to:
(a) Taxes on real and tangible personal property;
(b) Excise taxes on the sale, purchase, use, or possession of (i)
real property; (ii) tangible personal property; (iii) extended
warranties; (iv) services, including digital automated services as
defined in RCW 82.04.192; and (v) digital goods and digital codes as
those terms are defined in RCW 82.04.192; and
(c) The tax imposed in RCW 82.04.260(((10))) (9), regarding public
and nonprofit hospitals.
(3) For the purposes of this section, the term "taxes" includes
taxes imposed by the state or any county, city, town, municipal
corporation, quasi-municipal corporation, or other political
subdivision.
NEW SECTION. Sec. 701 (1) The legislature recognizes that the
business and occupation tax applies to all activities engaged in with
the object of gain, benefit, or advantage to the taxpayer or to another
person or class, directly or indirectly, unless a specific exemption
applies.
(2) One of the major business and occupation tax exemptions is
provided in RCW 82.04.360 for income earned as an employee or servant
as distinguished from income earned as an independent contractor. The
legislature's intent in providing this exemption was to exempt employee
wages from the business and occupation tax but not to exempt income
earned as an independent contractor.
(3) The legislature finds that corporate directors are not
employees or servants of the corporation whose board they serve on and
therefore are not entitled to a business and occupation tax exemption
under RCW 82.04.360. The legislature further finds that there are no
business and occupation tax exemptions for compensation received for
serving as a member of a corporation's board of directors.
(4) The legislature also finds that there is a widespread
misunderstanding among corporate directors that the business and
occupation tax does not apply to the compensation they receive for
serving as a director of a corporation. It is the legislature's
expectation that the department of revenue will take appropriate
measures to ensure that corporate directors understand and comply with
their business and occupation tax obligations with respect to their
director compensation. However, because of the widespread
misunderstanding by corporate directors of their liability for business
and occupation tax on director compensation, the legislature finds that
it is appropriate in this unique situation to provide limited relief
against the retroactive assessment of business and occupation taxes on
corporate director compensation.
(5) The legislature also reaffirms its intent that all income of
all independent contractors is subject to business and occupation tax
unless specifically exempt under the Constitution or laws of this state
or the United States.
Sec. 702 RCW 82.04.360 and 1991 c 324 s 19 and 1991 c 275 s 2 are
each reenacted and amended to read as follows:
(1) This chapter ((shall)) does not apply to any person in respect
to his or her employment in the capacity of an employee or servant as
distinguished from that of an independent contractor. For the purposes
of this section, the definition of employee shall include those persons
that are defined in section 3121(d)(3)(B) of the federal internal
revenue code of 1986, as amended through January 1, 1991.
(2) ((A booth renter, as defined by RCW 18.16.020, is an
independent contractor for purposes of this chapter.)) Until July 1,
2010, this chapter does not apply to amounts received by an individual
from a corporation as compensation for serving as a member of that
corporation's board of directors. Beginning July 1, 2010, such amounts
are taxable under RCW 82.04.290(2).
NEW SECTION. Sec. 703 The sole reason for deleting the language
in RCW 82.04.360(2) is because RCW 18.16.020 no longer defines the term
"booth renter." This should not be construed as a substantive change
in the law.
NEW SECTION. Sec. 704 In accordance with Article VIII, section
5 of the state Constitution, sections 702 and 2705 of this act do not
authorize refunds of business and occupation tax validly collected
before July 1, 2010, on amounts received by an individual from a
corporation as compensation for serving as a member of that
corporation's board of directors.
Sec. 801 RCW 82.48.010 and 1995 c 318 s 4 are each amended to
read as follows:
For the purposes of this chapter, unless otherwise required by the
context:
(1) "Department" means the department of transportation.
(2) "Aircraft" means any weight-carrying device or structure for
navigation of the air which is designed to be supported by the air;
(((2))) (3) "Secretary" means the secretary of transportation;
(((3))) (4) "Person" includes a firm, partnership, limited
liability company, or corporation((;)).
(4) "Small multi-engine fixed wing" means any piston-driven multi-engine fixed wing aircraft with a maximum gross weight as listed by the
manufacturer of less than seventy-five hundred pounds; and
(5) "Large multi-engine fixed wing" means any piston-driven multi-engine fixed wing aircraft with a maximum gross weight as listed by the
manufacturer of seventy-five hundred pounds or more
Sec. 802 RCW 82.48.020 and 2000 c 229 s 4 are each amended to
read as follows:
(1) ((An annual excise tax is hereby imposed for the privilege of
using any aircraft in the state. A current certificate of air
worthiness with a current inspection date from the appropriate federal
agency and/or the purchase of aviation fuel shall constitute the
necessary evidence of aircraft use or intended use. The tax shall)) An
annual excise tax is imposed for the privilege of using any aircraft in
the state. The amount of the tax is five-tenths of one percent of the
taxable value of the aircraft, as determined under section 803 of this
act.
(2) The tax imposed under this section must be collected annually
or under a staggered collection schedule as required by the secretary
by rule. ((No additional tax shall be imposed under this chapter upon
any aircraft upon the transfer of ownership thereof, if the tax imposed
by this chapter with respect to such aircraft has already been paid for
the year in which transfer of ownership occurs. A violation of this
subsection is a misdemeanor punishable as provided under chapter 9A.20
RCW.)) (3) Persons who are required to register aircraft under
chapter 47.68 RCW and who register aircraft in another state or foreign
country and avoid the ((
(2)Washington)) aircraft excise tax imposed under
this section are liable for ((such)) the unpaid excise tax. A
violation of this subsection is a gross misdemeanor.
(4) The department of revenue may, under chapter 82.32 RCW, assess
and collect the unpaid excise tax imposed under ((chapter 82.32 RCW))
this section, including the penalties and interest provided in chapter
82.32 RCW.
(((3))) (5) Except as provided under subsection((s (1) and (2)))
(3) of this section, a violation of this chapter is a misdemeanor
punishable as provided in chapter 9A.20 RCW.
NEW SECTION. Sec. 803 A new section is added to chapter 82.48
RCW to read as follows:
The department must prepare at least once each year a depreciation
schedule for use in the determination of fair market value for the
purposes of this chapter. The schedule must be based upon information
available to the department pertaining to the current fair market value
of aircraft. The fair market value of an aircraft for the purposes of
this chapter must be based on the most recent purchase price
depreciated according to the year of the most recent purchase of the
aircraft. The most recent purchase price is the consideration, whether
money, credit, rights, or other property expressed in terms of money,
paid or given or contracted to be paid or given by the purchaser to the
seller for the aircraft.
Sec. 804 RCW 82.48.030 and 1983 2nd ex.s. c 3 s 22 are each
amended to read as follows:
(1) ((The amount of the tax imposed by this chapter for each
calendar year shall be as follows:
Sec. 805 RCW 82.48.070 and 1987 c 220 s 7 are each amended to
read as follows:
The secretary ((shall)) must give a receipt to each person paying
((the)) excise tax under this chapter.
Sec. 806 RCW 82.48.080 and 1995 c 170 s 2 are each amended to
read as follows:
The secretary ((shall)) must regularly pay to the state treasurer
the excise taxes collected under this chapter((, which shall be
credited by the state treasurer as follows: Ninety percent to the
general fund and ten percent to the aeronautics account in the
transportation fund for administrative expenses)) for deposit into the
general fund.
Sec. 807 RCW 82.48.110 and 1967 ex.s. c 9 s 6 are each amended to
read as follows:
((The first tax to be collected under this chapter shall be for the
calendar year 1968.)) (1) No aircraft with respect to which the excise
tax imposed by this chapter is payable ((shall)) may be listed and
assessed for ad valorem taxation so long as this chapter remains in
effect((, and any such assessment heretofore made except under
authority of section 13, chapter 49, Laws of 1949 and section
82.48.110, chapter 15, Laws of 1961 is hereby directed to be canceled:
PROVIDED, That)).
(2) Any aircraft, whether or not subject to the provisions of this
chapter, with respect to which the excise tax imposed by this chapter
will not be paid or has not been paid for any year ((shall)) must be
listed and assessed for ad valorem taxation in that year, and the ad
valorem tax liability resulting from such listing and assessment
((shall)) must be collected in the same manner as though this chapter
had not been passed((: PROVIDED FURTHER, That this chapter shall not
be construed to affect any ad valorem tax based upon assessed
valuations made in 1948 and/or any preceding year for taxes payable in
1949 or any preceding year, which ad valorem tax liability tax for any
such years shall remain payable and collectible in the same manner as
though this chapter had not been passed)).
Sec. 901 RCW 82.45.010 and 2010 c ... s 206 (section 206 of this
act) are each amended to read as follows:
(1) As used in this chapter, the term "sale" has its ordinary
meaning and includes any conveyance, grant, assignment, quitclaim, or
transfer of the ownership of or title to real property, including
standing timber, or any estate or interest therein for a valuable
consideration, and any contract for such conveyance, grant, assignment,
quitclaim, or transfer, and any lease with an option to purchase real
property, including standing timber, or any estate or interest therein
or other contract under which possession of the property is given to
the purchaser, or any other person at the purchaser's direction, and
title to the property is retained by the vendor as security for the
payment of the purchase price. The term also includes the grant,
assignment, quitclaim, sale, or transfer of improvements constructed
upon leased land.
(2)(a) The term "sale" also includes the transfer or acquisition
within any twelve-month period of a controlling interest in any entity
with an interest in real property located in this state for a valuable
consideration.
(b) For the sole purpose of determining whether, pursuant to the
exercise of an option, a controlling interest was transferred or
acquired within a twelve-month period, the date that the option
agreement was executed is the date on which the transfer or acquisition
of the controlling interest is deemed to occur. For all other purposes
under this chapter, the date upon which the option is exercised is the
date of the transfer or acquisition of the controlling interest.
(c) For purposes of this subsection, all acquisitions of persons
acting in concert must be aggregated for purposes of determining
whether a transfer or acquisition of a controlling interest has taken
place. The department must adopt standards by rule to determine when
persons are acting in concert. In adopting a rule for this purpose,
the department must consider the following:
(i) Persons must be treated as acting in concert when they have a
relationship with each other such that one person influences or
controls the actions of another through common ownership; and
(ii) When persons are not commonly owned or controlled, they must
be treated as acting in concert only when the unity with which the
purchasers have negotiated and will consummate the transfer of
ownership interests supports a finding that they are acting as a single
entity. If the acquisitions are completely independent, with each
purchaser buying without regard to the identity of the other
purchasers, then the acquisitions are considered separate acquisitions.
(3) The term "sale" does not include:
(a) A transfer by gift, devise, or inheritance.
(b) A transfer of any leasehold interest other than of the type
mentioned above.
(c) A cancellation or forfeiture of a vendee's interest in a
contract for the sale of real property, whether or not such contract
contains a forfeiture clause, or deed in lieu of foreclosure of a
mortgage.
(d) The partition of property by tenants in common by agreement or
as the result of a court decree.
(e) The assignment of property or interest in property from one
spouse or one domestic partner to the other spouse or other domestic
partner in accordance with the terms of a decree of dissolution of
marriage or state registered domestic partnership or in fulfillment of
a property settlement agreement.
(f) The assignment or other transfer of a vendor's interest in a
contract for the sale of real property, even though accompanied by a
conveyance of the vendor's interest in the real property involved.
(g) Transfers by appropriation or decree in condemnation
proceedings brought by the United States, the state or any political
subdivision thereof, or a municipal corporation.
(h) A mortgage or other transfer of an interest in real property
merely to secure a debt, or the assignment thereof.
(i) ((Any)) A transfer or conveyance made (i) to the beneficiary of
a deed of trust pursuant to a trustee's sale in the nonjudicial
foreclosure of a deed of trust ((or)); (ii) to the mortgagee,
beneficiary of the deed of trust, or lienholder pursuant to an order of
sale by the court in the judicial foreclosure of any mortgage, deed of
trust, or lien ((foreclosure proceeding or upon execution of a
judgment, or)); (iii) to the mortgagee by the mortgagor or to the
beneficiary of a deed of trust by the grantor pursuant to deed in lieu
of foreclosure to satisfy a mortgage or deed of trust; or (iv) to the
judgment creditor pursuant to a writ of execution to enforce a
judgment.
(j) A conveyance to the federal housing administration or veterans
administration by an authorized mortgagee made pursuant to a contract
of insurance or guaranty with the federal housing administration or
veterans administration.
(k) A transfer in compliance with the terms of any lease or
contract upon which the tax as imposed by this chapter has been paid or
where the lease or contract was entered into prior to the date this tax
was first imposed.
(l) The sale of any grave or lot in an established cemetery.
(m) A sale by the United States, this state or any political
subdivision thereof, or a municipal corporation of this state.
(n) A sale to a regional transit authority or public corporation
under RCW 81.112.320 under a sale/leaseback agreement under RCW
81.112.300.
(o) A transfer of real property, however effected, if it consists
of a mere change in identity or form of ownership of an entity where
there is no change in the beneficial ownership. These include
transfers to a corporation or partnership which is wholly owned by the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner. However, if thereafter such transferee corporation or
partnership voluntarily transfers such real property, or such
transferor, spouse or domestic partner, or children of the transferor
or the transferor's spouse or domestic partner voluntarily transfer
stock in the transferee corporation or interest in the transferee
partnership capital, as the case may be, to other than (i) the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner, (ii) a trust having the transferor and/or the transferor's
spouse or domestic partner or children of the transferor or the
transferor's spouse or domestic partner as the only beneficiaries at
the time of the transfer to the trust, or (iii) a corporation or
partnership wholly owned by the original transferor and/or the
transferor's spouse or domestic partner or children of the transferor
or the transferor's spouse or domestic partner, within three years of
the original transfer to which this exemption applies, and the tax on
the subsequent transfer has not been paid within sixty days of becoming
due, excise taxes become due and payable on the original transfer as
otherwise provided by law.
(p)(i) A transfer that for federal income tax purposes does not
involve the recognition of gain or loss for entity formation,
liquidation or dissolution, and reorganization, including but not
limited to nonrecognition of gain or loss because of application of 26
U.S.C. Sec. 332, 337, 351, 368(a)(1), 721, or 731 of the internal
revenue code of 1986, as amended.
(ii) However, the transfer described in (p)(i) of this subsection
cannot be preceded or followed within a twelve-month period by another
transfer or series of transfers, that, when combined with the otherwise
exempt transfer or transfers described in (p)(i) of this subsection,
results in the transfer of a controlling interest in the entity for
valuable consideration, and in which one or more persons previously
holding a controlling interest in the entity receive cash or property
in exchange for any interest the person or persons acting in concert
hold in the entity. This subsection (3)(p)(ii) does not apply to that
part of the transfer involving property received that is the real
property interest that the person or persons originally contributed to
the entity or when one or more persons who did not contribute real
property or belong to the entity at a time when real property was
purchased receive cash or personal property in exchange for that person
or persons' interest in the entity. The real estate excise tax under
this subsection (3)(p)(ii) is imposed upon the person or persons who
previously held a controlling interest in the entity.
(q) A qualified sale of a manufactured/mobile home community, as
defined in RCW 59.20.030, that takes place on or after June 12, 2008,
but before December 31, 2018.
Sec. 902 RCW 82.45.080 and 1980 c 154 s 3 are each amended to
read as follows:
(1) The tax levied under this chapter ((shall be)) is the
obligation of the seller and the department ((of revenue)) may, at the
department's option, enforce the obligation through an action of debt
against the seller or the department may proceed in the manner
prescribed for the foreclosure of mortgages ((and resort to)). The
department's use of one course of enforcement ((shall)) is not ((be))
an election not to pursue the other.
(2) For purposes of this section and notwithstanding any other
provisions of law, in a sale involving a judicial or nonjudicial
foreclosure or enforcement of a judgment, the seller is the:
(a) Beneficiary of a deed of trust in any transfer or conveyance to
any party other than such beneficiary pursuant to a trustee's sale in
the nonjudicial foreclosure of the deed of trust;
(b) Mortgagee, beneficiary of a deed of trust, or lienholder in any
transfer or conveyance to any party other than such mortgagee,
beneficiary, or lienholder pursuant to an order of sale by the court in
the judicial foreclosure of any mortgage, deed of trust, or lien; and
(c) Judgment creditor in any transfer or conveyance to any party
other than such creditor pursuant to a writ of execution to enforce a
judgment.
Sec. 1001 RCW 82.32.145 and 1995 c 318 s 2 are each amended to
read as follows:
(1) ((Upon termination, dissolution, or abandonment of a corporate
or limited liability company business, any officer, member, manager, or
other person having control or supervision of retail sales tax funds
collected and held in trust under RCW 82.08.050, or who is charged with
the responsibility for the filing of returns or the payment of retail
sales tax funds collected and held in trust under RCW 82.08.050, shall
be personally liable for any unpaid taxes and interest and penalties on
those taxes, if such officer or other person wilfully fails to pay or
to cause to be paid any taxes due from the corporation pursuant to
chapter 82.08 RCW. For the purposes of this section, any retail sales
taxes that have been paid but not collected shall be deductible from
the retail sales taxes collected but not paid.)) Whenever the department has issued a
warrant under RCW 82.32.210 for the collection of unpaid taxes from a
limited liability business entity and that business entity has been
terminated, dissolved, or abandoned, or is insolvent, the department
may pursue collection of the entity's unpaid taxes, including penalties
and interest on those taxes, against any or all of the responsible
individuals. For purposes of this subsection, "insolvent" means the
condition that results when the sum of the entity's debts exceeds the
fair market value of its assets. The department may presume that an
entity is insolvent if the entity refuses to disclose to the department
the nature of its assets and liabilities.
For purposes of this subsection "wilfully fails to pay or to cause
to be paid" means that the failure was the result of an intentional,
conscious, and voluntary course of action.
(2) The officer, member or manager, or other person shall be liable
only for taxes collected which
(2) Personal liability under this section may be imposed for state
and local sales and use taxes, state business and occupation taxes, and
any other state and local taxes collected by the department in respect
to which the provisions of this chapter apply, regardless of whether
the tax is denominated a tax, fee, charge, or some other term.
(3)(a) For a responsible individual who is the current or a former
chief executive or chief financial officer, liability under this
section applies regardless of fault or whether the individual was or
should have been aware of the unpaid tax liability of the limited
liability business entity.
(b) For any other responsible individual, liability under this
section applies only if he or she willfully fails to pay or to cause to
be paid to the department the taxes due from the limited liability
business entity.
(4)(a) Except as provided in this subsection (4)(a), a responsible
individual who is the current or a former chief executive or chief
financial officer is liable under this section only for tax liability
accrued during the period that he or she was the chief executive or
chief financial officer. However, if the responsible individual had
the responsibility or duty to remit payment of the limited liability
business entity's taxes to the department during any period of time
that the person was not the chief executive or chief financial officer,
that individual is also liable for tax liability that became due during
the period that he or she had the duty to remit payment of the limited
liability business entity's taxes to the department but was not the
chief executive or chief financial officer.
(b) All other responsible individuals are liable under this section
only for tax liability that became due during the period he or she had
the ((control, supervision,)) responsibility((,)) or duty to ((act for
the corporation described in subsection (1) of this section, plus
interest and penalties on those taxes.)) remit payment of the limited liability business entity's
taxes to the department.
(3)
(5) Persons ((liable under)) described in subsection (((1))) (3)(b)
of this section are exempt from liability under this section in
situations where nonpayment of the ((retail sales tax funds held in
trust)) limited liability business entity's taxes is due to reasons
beyond their control as determined by the department by rule.
(((4))) (6) Any person having been issued a notice of assessment
under this section is entitled to the appeal procedures under RCW
82.32.160, 82.32.170, 82.32.180, 82.32.190, and 82.32.200.
(((5) This section applies only in situations where the department
has determined that there is no reasonable means of collecting the
retail sales tax funds held in trust directly from the corporation.)) (7) This section does not relieve the ((
(6)corporation or))
limited liability ((company)) business entity of ((other tax
liabilities)) its tax liability or otherwise impair other tax
collection remedies afforded by law.
(((7))) (8) Collection authority and procedures prescribed in this
chapter apply to collections under this section.
(9) The definitions in this subsection apply throughout this
section unless the context clearly requires otherwise.
(a) "Chief executive" means: The president of a corporation; or
for other entities or organizations other than corporations or if the
corporation does not have a president as one of its officers, the
highest ranking executive manager or administrator in charge of the
management of the company or organization.
(b) "Chief financial officer" means: The treasurer of a
corporation; or for entities or organizations other than corporations
or if a corporation does not have a treasurer as one of its officers,
the highest senior manager who is responsible for overseeing the
financial activities of the entire company or organization.
(c) "Limited liability business entity" means a type of business
entity that generally shields its owners from personal liability for
the debts, obligations, and liabilities of the entity, or a business
entity that is managed or owned in whole or in part by an entity that
generally shields its owners from personal liability for the debts,
obligations, and liabilities of the entity. Limited liability business
entities include corporations, limited liability companies, limited
liability partnerships, trusts, general partnerships and joint ventures
in which one or more of the partners or parties are also limited
liability business entities, and limited partnerships in which one or
more of the general partners are also limited liability business
entities.
(d) "Manager" has the same meaning as in RCW 25.15.005.
(e) "Member" has the same meaning as in RCW 25.15.005, except that
the term only includes members of member-managed limited liability
companies.
(f) "Officer" means any officer or assistant officer of a
corporation, including the president, vice-president, secretary, and
treasurer.
(g)(i) "Responsible individual" includes any current or former
officer, manager, member, partner, or trustee of a limited liability
business entity with an unpaid tax warrant issued by the department.
(ii) "Responsible individual" also includes any current or former
employee or other individual, but only if the individual had the
responsibility or duty to remit payment of the limited liability
business entity's unpaid tax liability reflected in a tax warrant
issued by the department.
(iii) Whenever any taxpayer has one or more limited liability
business entities as a member, manager, or partner, "responsible
individual" also includes any current and former officers, members, or
managers of the limited liability business entity or entities or of any
other limited liability business entity involved directly in the
management of the taxpayer. For purposes of this subsection
(9)(g)(iii), "taxpayer" means a limited liability business entity with
an unpaid tax warrant issued against it by the department.
(h) "Willfully fails to pay or to cause to be paid" means that the
failure was the result of an intentional, conscious, and voluntary
course of action.
NEW SECTION. Sec. 1101 RCW 82.04.44525 (Credit -- New employment
for international service activities in eligible areas -- Designation of
census tracts for eligibility -- Records -- Tax due upon ineligibility--Interest assessment -- Information from employment security department)
and 2009 c 535 s 1104, 2008 c 81 s 9, & 1998 c 313 s 2 are each
repealed.
NEW SECTION. Sec. 1201 RCW 82.04.272 (Tax on warehousing and
reselling prescription drugs) and 2003 c 168 s 401 & 1998 c 343 s 1 are
each repealed.
Sec. 1301 RCW 82.60.020 and 2006 c 142 s 1 are each amended to
read as follows:
Unless the context clearly requires otherwise, the definitions in
this section apply throughout this chapter.
(1) "Applicant" means a person applying for a tax deferral under
this chapter.
(2) "Department" means the department of revenue.
(3) "Eligible area" means a rural county as defined in RCW
82.14.370.
(4)(a) "Eligible investment project" means an investment project in
an eligible area as defined in subsection (3) of this section.
(b) The lessor or owner of a qualified building is not eligible for
a deferral unless:
(i) The underlying ownership of the buildings, machinery, and
equipment vests exclusively in the same person; or
(ii)(A) The lessor by written contract agrees to pass the economic
benefit of the deferral to the lessee;
(B) The lessee that receives the economic benefit of the deferral
agrees in writing with the department to complete the annual survey
required under RCW 82.60.070; and
(C) The economic benefit of the deferral passed to the lessee is no
less than the amount of tax deferred by the lessor and is evidenced by
written documentation of any type of payment, credit, or other
financial arrangement between the lessor or owner of the qualified
building and the lessee.
(c) "Eligible investment project" does not include any portion of
an investment project undertaken by a light and power business as
defined in RCW 82.16.010(((5)))(4), other than that portion of a
cogeneration project that is used to generate power for consumption
within the manufacturing site of which the cogeneration project is an
integral part, or investment projects ((which)) that have already
received deferrals under this chapter.
(5) "Investment project" means an investment in qualified buildings
or qualified machinery and equipment, including labor and services
rendered in the planning, installation, and construction of the
project.
(6) "Manufacturing" means the same as defined in RCW 82.04.120.
"Manufacturing" also includes:
(a) Before July 1, 2010: (i) Computer programming, the production
of computer software, and other computer-related services, but only
when the computer programming, production of computer software, or
other computer-related services are performed by a manufacturer as
defined in RCW 82.04.110 and contribute to the production of a new,
different, or useful substance or article of tangible personal property
for sale; (ii) the activities performed by research and development
laboratories and commercial testing laboratories((,)); and (iii) the
conditioning of vegetable seeds; and
(b) Beginning July 1, 2010: (i) The activities performed by
research and development laboratories and commercial testing
laboratories; and (ii) the conditioning of vegetable seeds.
(7) "Person" has the meaning given in RCW 82.04.030.
(8) "Qualified buildings" means construction of new structures, and
expansion or renovation of existing structures for the purpose of
increasing floor space or production capacity used for manufacturing
((and)) or research and development activities, including plant offices
and warehouses or other facilities for the storage of raw material or
finished goods if such facilities are an essential or an integral part
of a factory, mill, plant, or laboratory used for manufacturing or
research and development. If a building is used partly for
manufacturing or research and development and partly for other
purposes, the applicable tax deferral shall be determined by
apportionment of the costs of construction under rules adopted by the
department.
(9) "Qualified employment position" means a permanent full-time
employee employed in the eligible investment project during the entire
tax year. The term "entire tax year" means a full-time position that
is filled for a period of twelve consecutive months. The term "full-time" means at least thirty-five hours a week, four hundred fifty-five
hours a quarter, or one thousand eight hundred twenty hours a year.
(10) "Qualified machinery and equipment" means all new industrial
and research fixtures, equipment, and support facilities that are an
integral and necessary part of a manufacturing or research and
development operation. "Qualified machinery and equipment" includes:
Computers; software; data processing equipment; laboratory equipment;
manufacturing components such as belts, pulleys, shafts, and moving
parts; molds, tools, and dies; operating structures; and all equipment
used to control or operate the machinery.
(11) "Recipient" means a person receiving a tax deferral under this
chapter.
(12) "Research and development" means the development, refinement,
testing, marketing, and commercialization of a product, service, or
process before commercial sales have begun, but only when such
activities are intended to ultimately result in the production of a
new, different, or useful substance or article of tangible personal
property for sale. As used in this subsection, "commercial sales"
excludes sales of prototypes or sales for market testing if the total
gross receipts from such sales of the product, service, or process do
not exceed one million dollars.
Sec. 1302 RCW 82.62.010 and 2007 c 485 s 1 are each amended to
read as follows:
Unless the context clearly requires otherwise, the definitions in
this section apply throughout this chapter.
(1) "Applicant" means a person applying for a tax credit under this
chapter.
(2) "Department" means the department of revenue.
(3) "Eligible area" means an area as defined in RCW 82.60.020.
(4)(a) "Eligible business project" means manufacturing or research
and development activities which are conducted by an applicant in an
eligible area at a specific facility, provided the applicant's average
qualified employment positions at the specific facility will be at
least fifteen percent greater in the four consecutive full calendar
quarters after the calendar quarter during which the first qualified
employment position is filled than the applicant's average qualified
employment positions at the same facility in the four consecutive full
calendar quarters immediately preceding the calendar quarter during
which the first qualified employment position is filled.
(b) "Eligible business project" does not include any portion of a
business project undertaken by a light and power business as defined in
RCW 82.16.010(((5)))(4) or that portion of a business project creating
qualified full-time employment positions outside an eligible area.
(5) "First qualified employment position" means the first qualified
employment position filled for which a credit under this chapter is
sought.
(6) "Manufacturing" means the same as defined in RCW 82.04.120.
"Manufacturing" also includes:
(a) Before July 1, 2010: (i) Computer programming, the production
of computer software, and other computer-related services, but only
when the computer programming, production of computer software, or
other computer-related services are performed by a manufacturer as
defined in RCW 82.04.110 and contribute to the production of a new,
different, or useful substance or article of tangible personal property
for sale; and (ii) the activities performed by research and development
laboratories and commercial testing laboratories; and
(b) Beginning July 1, 2010: (i) The activities performed by
research and development laboratories and commercial testing
laboratories; and (ii) the conditioning of vegetable seeds.
(7) "Person" has the meaning given in RCW 82.04.030.
(8)(a)(i) "Qualified employment position" means a permanent full-time employee employed in the eligible business project during four
consecutive full calendar quarters.
(ii) For seasonal employers, "qualified employment position" also
includes the equivalent of a full-time employee in work hours for four
consecutive full calendar quarters.
(b) For purposes of this subsection, "full time" means a normal
work week of at least thirty-five hours.
(c) Once a permanent, full-time employee has been employed, a
position does not cease to be a qualified employment position solely
due to periods in which the position goes vacant, as long as:
(i) The cumulative period of any vacancies in that position is not
more than one hundred twenty days in the four-quarter period; and
(ii) During a vacancy, the employer is training or actively
recruiting a replacement permanent, full-time employee for the
position.
(9) "Recipient" means a person receiving tax credits under this
chapter.
(10) "Research and development" means the development, refinement,
testing, marketing, and commercialization of a product, service, or
process before commercial sales have begun, but only when such
activities are intended to ultimately result in the production of a
new, different, or useful substance or article of tangible personal
property for sale. As used in this subsection, "commercial sales"
excludes sales of prototypes or sales for market testing if the total
gross receipts from such sales of the product, service, or process do
not exceed one million dollars.
(11) "Seasonal employee" means an employee of a seasonal employer
who works on a seasonal basis. For the purposes of this subsection and
subsection (12) of this section, "seasonal basis" means a continuous
employment period of less than twelve consecutive months.
(12) "Seasonal employer" means a person who regularly hires more
than fifty percent of its employees to work on a seasonal basis.
Sec. 1401 RCW 82.16.020 and 2009 c 469 s 702 are each amended to
read as follows:
(1) There is levied and ((there shall be)) collected from every
person a tax for the act or privilege of engaging within this state in
any one or more of the businesses herein mentioned. The tax ((shall
be)) is equal to the gross income of the business, multiplied by the
rate set out after the business, as follows:
(a) Express, sewerage collection, and telegraph businesses: Three
and six-tenths percent;
(b) Light and power business: Three and sixty-two one-hundredths
percent;
(c) Gas distribution business: Three and six-tenths percent;
(d) Urban transportation business: ((Six-tenths)) one and
eight-tenths of one percent;
(e) Vessels under sixty-five feet in length, except tugboats,
operating upon the waters within the state: Six-tenths of one percent;
(f) Motor transportation, railroad, railroad car, and tugboat
businesses, and all public service businesses other than ones mentioned
above: One and eight-tenths of one percent;
(g) Water distribution business: Four and seven-tenths percent;
(h) Log transportation business: One and twenty-eight one-hundredths percent.
(2) An additional tax is imposed equal to the rate specified in RCW
82.02.030 multiplied by the tax payable under subsection (1) of this
section.
(3) Twenty percent of the moneys collected under subsection (1) of
this section on water distribution businesses and sixty percent of the
moneys collected under subsection (1) of this section on sewerage
collection businesses ((shall)) must be deposited in the public works
assistance account created in RCW 43.155.050.
Sec. 1402 RCW 82.16.020 and 1996 c 150 s 2 are each amended to
read as follows:
(1) There is levied and ((there shall be)) collected from every
person a tax for the act or privilege of engaging within this state in
any one or more of the businesses herein mentioned. The tax ((shall
be)) is equal to the gross income of the business, multiplied by the
rate set out after the business, as follows:
(a) Express, sewerage collection, and telegraph businesses: Three
and six-tenths percent;
(b) Light and power business: Three and sixty-two one-hundredths
percent;
(c) Gas distribution business: Three and six-tenths percent;
(d) Urban transportation business: ((Six-tenths)) One and eight-tenths of one percent;
(e) Vessels under sixty-five feet in length, except tugboats,
operating upon the waters within the state: Six-tenths of one percent;
(f) Motor transportation, railroad, railroad car, and tugboat
businesses, and all public service businesses other than ones mentioned
above: One and eight-tenths of one percent;
(g) Water distribution business: Four and seven-tenths percent.
(2) An additional tax is imposed equal to the rate specified in RCW
82.02.030 multiplied by the tax payable under subsection (1) of this
section.
(3) Twenty percent of the moneys collected under subsection (1) of
this section on water distribution businesses and sixty percent of the
moneys collected under subsection (1) of this section on sewerage
collection businesses ((shall)) must be deposited in the public works
assistance account created in RCW 43.155.050.
Sec. 1501 RCW 82.04.050 and 2009 c 563 s 301 and 2009 c 535 s 301
are each reenacted and amended to read as follows:
(1) "Sale at retail" or "retail sale" means every sale of tangible
personal property (including articles produced, fabricated, or
imprinted) to all persons irrespective of the nature of their business
and including, among others, without limiting the scope hereof, persons
who install, repair, clean, alter, improve, construct, or decorate real
or personal property of or for consumers other than a sale to a person
who presents a seller's permit or uniform exemption certificate in
conformity with RCW 82.04.470 and who:
(a) Purchases for the purpose of resale as tangible personal
property in the regular course of business without intervening use by
such person, but a purchase for the purpose of resale by a regional
transit authority under RCW 81.112.300 is not a sale for resale; or
(b) Installs, repairs, cleans, alters, imprints, improves,
constructs, or decorates real or personal property of or for consumers,
if such tangible personal property becomes an ingredient or component
of such real or personal property without intervening use by such
person; or
(c) Purchases for the purpose of consuming the property purchased
in producing for sale a new article of tangible personal property or
substance, of which such property becomes an ingredient or component or
is a chemical used in processing, when the primary purpose of such
chemical is to create a chemical reaction directly through contact with
an ingredient of a new article being produced for sale; or
(d) Purchases for the purpose of consuming the property purchased
in producing ferrosilicon which is subsequently used in producing
magnesium for sale, if the primary purpose of such property is to
create a chemical reaction directly through contact with an ingredient
of ferrosilicon; or
(e) Purchases for the purpose of providing the property to
consumers as part of competitive telephone service, as defined in RCW
82.04.065. The term shall include every sale of tangible personal
property which is used or consumed or to be used or consumed in the
performance of any activity classified as a "sale at retail" or "retail
sale" even though such property is resold or utilized as provided in
(a), (b), (c), (d), or (e) of this subsection following such use. The
term also means every sale of tangible personal property to persons
engaged in any business which is taxable under RCW 82.04.280 (2) and
(7), 82.04.290, and 82.04.2908; or
(f) Purchases for the purpose of satisfying the person's
obligations under an extended warranty as defined in subsection (7) of
this section, if such tangible personal property replaces or becomes an
ingredient or component of property covered by the extended warranty
without intervening use by such person.
(2) The term "sale at retail" or "retail sale" includes the sale of
or charge made for tangible personal property consumed and/or for labor
and services rendered in respect to the following:
(a) The installing, repairing, cleaning, altering, imprinting, or
improving of tangible personal property of or for consumers, including
charges made for the mere use of facilities in respect thereto, but
excluding charges made for the use of self-service laundry facilities,
and also excluding sales of laundry service to nonprofit health care
facilities, and excluding services rendered in respect to live animals,
birds and insects;
(b) The constructing, repairing, decorating, or improving of new or
existing buildings or other structures under, upon, or above real
property of or for consumers, including the installing or attaching of
any article of tangible personal property therein or thereto, whether
or not such personal property becomes a part of the realty by virtue of
installation, and shall also include the sale of services or charges
made for the clearing of land and the moving of earth excepting the
mere leveling of land used in commercial farming or agriculture;
(c) The constructing, repairing, or improving of any structure
upon, above, or under any real property owned by an owner who conveys
the property by title, possession, or any other means to the person
performing such construction, repair, or improvement for the purpose of
performing such construction, repair, or improvement and the property
is then reconveyed by title, possession, or any other means to the
original owner;
(d) The cleaning, fumigating, razing, or moving of existing
buildings or structures, but may not include the charge made for
janitorial services; and for purposes of this section the term
"janitorial services" shall mean those cleaning and caretaking services
ordinarily performed by commercial janitor service businesses
including, but not limited to, wall and window washing, floor cleaning
and waxing, and the cleaning in place of rugs, drapes and upholstery.
The term "janitorial services" does not include painting, papering,
repairing, furnace or septic tank cleaning, snow removal or
sandblasting;
(e) Automobile towing and similar automotive transportation
services, but not in respect to those required to report and pay taxes
under chapter 82.16 RCW;
(f) The furnishing of lodging and all other services by a hotel,
rooming house, tourist court, motel, trailer camp, and the granting of
any similar license to use real property, as distinguished from the
renting or leasing of real property, and it is presumed that the
occupancy of real property for a continuous period of one month or more
constitutes a rental or lease of real property and not a mere license
to use or enjoy the same. For the purposes of this subsection, it
shall be presumed that the sale of and charge made for the furnishing
of lodging for a continuous period of one month or more to a person is
a rental or lease of real property and not a mere license to enjoy the
same;
(g) The installing, repairing, altering, or improving of digital
goods for consumers;
(h) Persons taxable under (a), (b), (c), (d), (e), (f), and (g) of
this subsection when such sales or charges are for property, labor and
services which are used or consumed in whole or in part by such persons
in the performance of any activity defined as a "sale at retail" or
"retail sale" even though such property, labor and services may be
resold after such use or consumption. Nothing contained in this
subsection shall be construed to modify subsection (1) of this section
and nothing contained in subsection (1) of this section may be
construed to modify this subsection.
(3) The term "sale at retail" or "retail sale" includes the sale of
or charge made for personal, business, or professional services
including amounts designated as interest, rents, fees, admission, and
other service emoluments however designated, received by persons
engaging in the following business activities:
(a) Amusement and recreation services including but not limited to
golf, pool, billiards, skating, bowling, ski lifts and tows, day trips
for sightseeing purposes, and others, when provided to consumers;
(b) Abstract, title insurance, and escrow services;
(c) Credit bureau services;
(d) Automobile parking and storage garage services;
(e) Landscape maintenance and horticultural services but excluding
(i) horticultural services provided to farmers and (ii) pruning,
trimming, repairing, removing, and clearing of trees and brush near
electric transmission or distribution lines or equipment, if performed
by or at the direction of an electric utility;
(f) Service charges associated with tickets to professional
sporting events; and
(g) The following personal services: Physical fitness services,
tanning salon services, tattoo parlor services, steam bath services,
turkish bath services, escort services, and dating services.
(4)(a) The term also includes:
(i) The renting or leasing of tangible personal property to
consumers; and
(ii) Providing tangible personal property along with an operator
for a fixed or indeterminate period of time. A consideration of this
is that the operator is necessary for the tangible personal property to
perform as designed. For the purpose of this subsection (4)(a)(ii), an
operator must do more than maintain, inspect, or set up the tangible
personal property.
(b) The term does not include the renting or leasing of tangible
personal property where the lease or rental is for the purpose of
sublease or subrent.
(5) The term also includes the providing of "competitive telephone
service," "telecommunications service," or "ancillary services," as
those terms are defined in RCW 82.04.065, to consumers.
(6)(a) The term also includes the sale of prewritten computer
software other than a sale to a person who presents a seller's permit
or uniform exemption certificate in conformity with RCW 82.04.470,
regardless of the method of delivery to the end user. For purposes of
this subsection (6)(a), the sale of prewritten computer software
includes the sale of or charge made for a key or an enabling or
activation code, where the key or code is required to activate
prewritten computer software and put the software into use. There is
no separate sale of the key or code from the prewritten computer
software, regardless of how the sale may be characterized by the vendor
or by the purchaser.
The term "retail sale" does not include the sale of or charge made
for:
(i) Custom software; or
(ii) The customization of prewritten computer software.
(b) The term also includes the charge made to consumers for the
right to access and use prewritten computer software, where possession
of the software is maintained by the seller or a third party,
regardless of whether the charge for the service is on a per use, per
user, per license, subscription, or some other basis.
(7) The term also includes the sale of or charge made for an
extended warranty to a consumer. For purposes of this subsection,
"extended warranty" means an agreement for a specified duration to
perform the replacement or repair of tangible personal property at no
additional charge or a reduced charge for tangible personal property,
labor, or both, or to provide indemnification for the replacement or
repair of tangible personal property, based on the occurrence of
specified events. The term "extended warranty" does not include an
agreement, otherwise meeting the definition of extended warranty in
this subsection, if no separate charge is made for the agreement and
the value of the agreement is included in the sales price of the
tangible personal property covered by the agreement. For purposes of
this subsection, "sales price" has the same meaning as in RCW
82.08.010.
(8)(a) The term also includes the following sales to consumers of
digital goods, digital codes, and digital automated services:
(i) Sales in which the seller has granted the purchaser the right
of permanent use;
(ii) Sales in which the seller has granted the purchaser a right of
use that is less than permanent;
(iii) Sales in which the purchaser is not obligated to make
continued payment as a condition of the sale; and
(iv) Sales in which the purchaser is obligated to make continued
payment as a condition of the sale.
(b) A retail sale of digital goods, digital codes, or digital
automated services under this subsection (8) includes any services
provided by the seller exclusively in connection with the digital
goods, digital codes, or digital automated services, whether or not a
separate charge is made for such services.
(c) For purposes of this subsection, "permanent" means perpetual or
for an indefinite or unspecified length of time. A right of permanent
use is presumed to have been granted unless the agreement between the
seller and the purchaser specifies or the circumstances surrounding the
transaction suggest or indicate that the right to use terminates on the
occurrence of a condition subsequent.
(9) The term does not include the sale of or charge made for labor
and services rendered in respect to the building, repairing, or
improving of any street, place, road, highway, easement, right-of-way,
mass public transportation terminal or parking facility, bridge,
tunnel, or trestle which is owned by a municipal corporation or
political subdivision of the state or by the United States and which is
used or to be used primarily for foot or vehicular traffic including
mass transportation vehicles of any kind.
(10) The term also does not include sales of:
(a) Chemical sprays or washes ((to persons for the purpose of
postharvest treatment of fruit for the prevention of scald, fungus,
mold, or decay, nor does it include sales of)), fertilizer, and spray
materials as provided in section 1503 of this act; and
(b) Feed, seed, seedlings, ((fertilizer,)) and agents for enhanced
pollination including insects such as bees((, and spray materials)) to:
(((a))) (i) Persons who participate in the federal conservation
reserve program, the environmental quality incentives program, the
wetlands reserve program, ((and)) or the wildlife habitat incentives
program, or their successors administered by the United States
department of agriculture;
(((b))) (ii) Farmers for the purpose of producing for sale any
agricultural product; and
(((c))) (iii) Farmers acting under cooperative habitat development
or access contracts with an organization exempt from federal income tax
under ((Title)) 26 U.S.C. Sec. 501(c)(3) of the federal internal
revenue code or the Washington state department of fish and wildlife to
produce or improve wildlife habitat on land that the farmer owns or
leases.
(11) The term does not include the sale of or charge made for labor
and services rendered in respect to the constructing, repairing,
decorating, or improving of new or existing buildings or other
structures under, upon, or above real property of or for the United
States, any instrumentality thereof, or a county or city housing
authority created pursuant to chapter 35.82 RCW, including the
installing, or attaching of any article of tangible personal property
therein or thereto, whether or not such personal property becomes a
part of the realty by virtue of installation. Nor does the term
include the sale of services or charges made for the clearing of land
and the moving of earth of or for the United States, any
instrumentality thereof, or a county or city housing authority. Nor
does the term include the sale of services or charges made for cleaning
up for the United States, or its instrumentalities, radioactive waste
and other by-products of weapons production and nuclear research and
development.
(12) The term does not include the sale of or charge made for
labor, services, or tangible personal property pursuant to agreements
providing maintenance services for bus, rail, or rail fixed guideway
equipment when a regional transit authority is the recipient of the
labor, services, or tangible personal property, and a transit agency,
as defined in RCW 81.104.015, performs the labor or services.
Sec. 1502 RCW 82.04.050 and 2009 c 563 s 301 and 2009 c 535 s 301
are each reenacted and amended to read as follows:
(1) "Sale at retail" or "retail sale" means every sale of tangible
personal property (including articles produced, fabricated, or
imprinted) to all persons irrespective of the nature of their business
and including, among others, without limiting the scope hereof, persons
who install, repair, clean, alter, improve, construct, or decorate real
or personal property of or for consumers other than a sale to a person
who presents a seller's permit or uniform exemption certificate in
conformity with RCW 82.04.470 and who:
(a) Purchases for the purpose of resale as tangible personal
property in the regular course of business without intervening use by
such person, but a purchase for the purpose of resale by a regional
transit authority under RCW 81.112.300 is not a sale for resale; or
(b) Installs, repairs, cleans, alters, imprints, improves,
constructs, or decorates real or personal property of or for consumers,
if such tangible personal property becomes an ingredient or component
of such real or personal property without intervening use by such
person; or
(c) Purchases for the purpose of consuming the property purchased
in producing for sale a new article of tangible personal property or
substance, of which such property becomes an ingredient or component or
is a chemical used in processing, when the primary purpose of such
chemical is to create a chemical reaction directly through contact with
an ingredient of a new article being produced for sale; or
(d) Purchases for the purpose of consuming the property purchased
in producing ferrosilicon which is subsequently used in producing
magnesium for sale, if the primary purpose of such property is to
create a chemical reaction directly through contact with an ingredient
of ferrosilicon; or
(e) Purchases for the purpose of providing the property to
consumers as part of competitive telephone service, as defined in RCW
82.04.065. The term shall include every sale of tangible personal
property which is used or consumed or to be used or consumed in the
performance of any activity classified as a "sale at retail" or "retail
sale" even though such property is resold or utilized as provided in
(a), (b), (c), (d), or (e) of this subsection following such use. The
term also means every sale of tangible personal property to persons
engaged in any business which is taxable under RCW 82.04.280 (2) and
(7), 82.04.290, and 82.04.2908; or
(f) Purchases for the purpose of satisfying the person's
obligations under an extended warranty as defined in subsection (7) of
this section, if such tangible personal property replaces or becomes an
ingredient or component of property covered by the extended warranty
without intervening use by such person.
(2) The term "sale at retail" or "retail sale" includes the sale of
or charge made for tangible personal property consumed and/or for labor
and services rendered in respect to the following:
(a) The installing, repairing, cleaning, altering, imprinting, or
improving of tangible personal property of or for consumers, including
charges made for the mere use of facilities in respect thereto, but
excluding charges made for the use of self-service laundry facilities,
and also excluding sales of laundry service to nonprofit health care
facilities, and excluding services rendered in respect to live animals,
birds and insects;
(b) The constructing, repairing, decorating, or improving of new or
existing buildings or other structures under, upon, or above real
property of or for consumers, including the installing or attaching of
any article of tangible personal property therein or thereto, whether
or not such personal property becomes a part of the realty by virtue of
installation, and shall also include the sale of services or charges
made for the clearing of land and the moving of earth excepting the
mere leveling of land used in commercial farming or agriculture;
(c) The constructing, repairing, or improving of any structure
upon, above, or under any real property owned by an owner who conveys
the property by title, possession, or any other means to the person
performing such construction, repair, or improvement for the purpose of
performing such construction, repair, or improvement and the property
is then reconveyed by title, possession, or any other means to the
original owner;
(d) The cleaning, fumigating, razing, or moving of existing
buildings or structures, but may not include the charge made for
janitorial services; and for purposes of this section the term
"janitorial services" shall mean those cleaning and caretaking services
ordinarily performed by commercial janitor service businesses
including, but not limited to, wall and window washing, floor cleaning
and waxing, and the cleaning in place of rugs, drapes and upholstery.
The term "janitorial services" does not include painting, papering,
repairing, furnace or septic tank cleaning, snow removal or
sandblasting;
(e) Automobile towing and similar automotive transportation
services, but not in respect to those required to report and pay taxes
under chapter 82.16 RCW;
(f) The furnishing of lodging and all other services by a hotel,
rooming house, tourist court, motel, trailer camp, and the granting of
any similar license to use real property, as distinguished from the
renting or leasing of real property, and it is presumed that the
occupancy of real property for a continuous period of one month or more
constitutes a rental or lease of real property and not a mere license
to use or enjoy the same. For the purposes of this subsection, it
shall be presumed that the sale of and charge made for the furnishing
of lodging for a continuous period of one month or more to a person is
a rental or lease of real property and not a mere license to enjoy the
same;
(g) The installing, repairing, altering, or improving of digital
goods for consumers;
(h) Persons taxable under (a), (b), (c), (d), (e), (f), and (g) of
this subsection when such sales or charges are for property, labor and
services which are used or consumed in whole or in part by such persons
in the performance of any activity defined as a "sale at retail" or
"retail sale" even though such property, labor and services may be
resold after such use or consumption. Nothing contained in this
subsection shall be construed to modify subsection (1) of this section
and nothing contained in subsection (1) of this section may be
construed to modify this subsection.
(3) The term "sale at retail" or "retail sale" includes the sale of
or charge made for personal, business, or professional services
including amounts designated as interest, rents, fees, admission, and
other service emoluments however designated, received by persons
engaging in the following business activities:
(a) Amusement and recreation services including but not limited to
golf, pool, billiards, skating, bowling, ski lifts and tows, day trips
for sightseeing purposes, and others, when provided to consumers;
(b) Abstract, title insurance, and escrow services;
(c) Credit bureau services;
(d) Automobile parking and storage garage services;
(e) Landscape maintenance and horticultural services but excluding
(i) horticultural services provided to farmers and (ii) pruning,
trimming, repairing, removing, and clearing of trees and brush near
electric transmission or distribution lines or equipment, if performed
by or at the direction of an electric utility;
(f) Service charges associated with tickets to professional
sporting events; and
(g) The following personal services: Physical fitness services,
tanning salon services, tattoo parlor services, steam bath services,
turkish bath services, escort services, and dating services.
(4)(a) The term also includes:
(i) The renting or leasing of tangible personal property to
consumers; and
(ii) Providing tangible personal property along with an operator
for a fixed or indeterminate period of time. A consideration of this
is that the operator is necessary for the tangible personal property to
perform as designed. For the purpose of this subsection (4)(a)(ii), an
operator must do more than maintain, inspect, or set up the tangible
personal property.
(b) The term does not include the renting or leasing of tangible
personal property where the lease or rental is for the purpose of
sublease or subrent.
(5) The term also includes the providing of "competitive telephone
service," "telecommunications service," or "ancillary services," as
those terms are defined in RCW 82.04.065, to consumers.
(6)(a) The term also includes the sale of prewritten computer
software other than a sale to a person who presents a seller's permit
or uniform exemption certificate in conformity with RCW 82.04.470,
regardless of the method of delivery to the end user. For purposes of
this subsection (6)(a), the sale of prewritten computer software
includes the sale of or charge made for a key or an enabling or
activation code, where the key or code is required to activate
prewritten computer software and put the software into use. There is
no separate sale of the key or code from the prewritten computer
software, regardless of how the sale may be characterized by the vendor
or by the purchaser.
The term "retail sale" does not include the sale of or charge made
for:
(i) Custom software; or
(ii) The customization of prewritten computer software.
(b) The term also includes the charge made to consumers for the
right to access and use prewritten computer software, where possession
of the software is maintained by the seller or a third party,
regardless of whether the charge for the service is on a per use, per
user, per license, subscription, or some other basis.
(7) The term also includes the sale of or charge made for an
extended warranty to a consumer. For purposes of this subsection,
"extended warranty" means an agreement for a specified duration to
perform the replacement or repair of tangible personal property at no
additional charge or a reduced charge for tangible personal property,
labor, or both, or to provide indemnification for the replacement or
repair of tangible personal property, based on the occurrence of
specified events. The term "extended warranty" does not include an
agreement, otherwise meeting the definition of extended warranty in
this subsection, if no separate charge is made for the agreement and
the value of the agreement is included in the sales price of the
tangible personal property covered by the agreement. For purposes of
this subsection, "sales price" has the same meaning as in RCW
82.08.010.
(8)(a) The term also includes the following sales to consumers of
digital goods, digital codes, and digital automated services:
(i) Sales in which the seller has granted the purchaser the right
of permanent use;
(ii) Sales in which the seller has granted the purchaser a right of
use that is less than permanent;
(iii) Sales in which the purchaser is not obligated to make
continued payment as a condition of the sale; and
(iv) Sales in which the purchaser is obligated to make continued
payment as a condition of the sale.
(b) A retail sale of digital goods, digital codes, or digital
automated services under this subsection (8) includes any services
provided by the seller exclusively in connection with the digital
goods, digital codes, or digital automated services, whether or not a
separate charge is made for such services.
(c) For purposes of this subsection, "permanent" means perpetual or
for an indefinite or unspecified length of time. A right of permanent
use is presumed to have been granted unless the agreement between the
seller and the purchaser specifies or the circumstances surrounding the
transaction suggest or indicate that the right to use terminates on the
occurrence of a condition subsequent.
(9) The term does not include the sale of or charge made for labor
and services rendered in respect to the building, repairing, or
improving of any street, place, road, highway, easement, right-of-way,
mass public transportation terminal or parking facility, bridge,
tunnel, or trestle which is owned by a municipal corporation or
political subdivision of the state or by the United States and which is
used or to be used primarily for foot or vehicular traffic including
mass transportation vehicles of any kind.
(10) The term also does not include sales of:
(a) Chemical sprays or washes ((to persons for the purpose of
postharvest treatment of fruit for the prevention of scald, fungus,
mold, or decay, nor does it include sales of)), fertilizer, and spray
materials as provided in section 1504 of this act; and
(b) Feed, seed, seedlings, ((fertilizer,)) and agents for enhanced
pollination including insects such as bees((, and spray materials)) to:
(((a))) (i) Persons who participate in the federal conservation
reserve program, the environmental quality incentives program, the
wetlands reserve program, ((and)) or the wildlife habitat incentives
program, or their successors administered by the United States
department of agriculture;
(((b))) (ii) Farmers for the purpose of producing for sale any
agricultural product; and
(((c))) (iii) Farmers acting under cooperative habitat development
or access contracts with an organization exempt from federal income tax
under ((Title)) 26 U.S.C. Sec. 501(c)(3) of the federal internal
revenue code or the Washington state department of fish and wildlife to
produce or improve wildlife habitat on land that the farmer owns or
leases.
(11) The term does not include the sale of or charge made for labor
and services rendered in respect to the constructing, repairing,
decorating, or improving of new or existing buildings or other
structures under, upon, or above real property of or for the United
States, any instrumentality thereof, or a county or city housing
authority created pursuant to chapter 35.82 RCW, including the
installing, or attaching of any article of tangible personal property
therein or thereto, whether or not such personal property becomes a
part of the realty by virtue of installation. Nor does the term
include the sale of services or charges made for the clearing of land
and the moving of earth of or for the United States, any
instrumentality thereof, or a county or city housing authority. Nor
does the term include the sale of services or charges made for cleaning
up for the United States, or its instrumentalities, radioactive waste
and other by-products of weapons production and nuclear research and
development.
(12) The term does not include the sale of or charge made for
labor, services, or tangible personal property pursuant to agreements
providing maintenance services for bus, rail, or rail fixed guideway
equipment when a regional transit authority is the recipient of the
labor, services, or tangible personal property, and a transit agency,
as defined in RCW 81.104.015, performs the labor or services.
NEW SECTION. Sec. 1503 A new section is added to chapter 82.04
RCW to read as follows:
(1) As provided by RCW 82.04.050(10), the term "sale at retail" or
"retail sale" does not include sales of:
(a) Registered chemical sprays or washes to persons for the purpose
of postharvest treatment of fruit for the prevention of scald, fungus,
mold, or decay; and
(b) Registered fertilizer and spray materials to:
(i) Persons who participate in the federal conservation reserve
program, the environmental quality incentives program, the wetlands
reserve program, or the wildlife habitat incentives program, or their
successors administered by the United States department of agriculture;
(ii) Farmers for the purpose of producing for sale any agricultural
product; and
(iii) Farmers acting under cooperative habitat development or
access contracts with an organization exempt from federal income tax
under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code or
the Washington state department of fish and wildlife to produce or
improve wildlife habitat on land that the farmer owns or leases.
(2) The definitions in this subsection apply to this section:
(a) "Brand name materials list" means a list established by the
state department of agriculture of materials allowed for use in organic
production, processing, or handling under standards of the national
organic program.
(b) "National organic program" means a program authorized by the
organic foods production act of 1990, as amended, 7 U.S.C. Sec. 6501 et
seq., and the rules adopted thereunder for agricultural products
marketed and labeled using the term "organic" or a derivative of the
term "organic."
(c) "Registered" means registration by the state department of
agriculture and inclusion in the brand name materials list as provided
under section 9, chapter . . . ([House Bill No. 2460] [Senate Bill No.
6228]), Laws of 2010.
NEW SECTION. Sec. 1504 A new section is added to chapter 82.04
RCW to read as follows:
(1) As provided by RCW 82.04.050(10), the term "sale at retail" or
"retail sale" does not include sales of:
(a) Listed chemical sprays or washes to persons for the purpose of
postharvest treatment of fruit for the prevention of scald, fungus,
mold, or decay; and
(b) Listed fertilizer and spray materials to:
(i) Persons who participate in the federal conservation reserve
program, the environmental quality incentives program, the wetlands
reserve program, or the wildlife habitat incentives program, or their
successors administered by the United States department of agriculture;
(ii) Farmers for the purpose of producing for sale any agricultural
product; and
(iii) Farmers acting under cooperative habitat development or
access contracts with an organization exempt from federal income tax
under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code or
the Washington state department of fish and wildlife to produce or
improve wildlife habitat on land that the farmer owns or leases.
(2) The definitions in this subsection apply to this section:
(a) "Listed" means inclusion in the OMRI products list published by
the organic materials review institute as of July 1, 2010, or such
subsequent date as the department may provide by rule, consistent with
the purposes of this section.
(b) "National organic program" means a program authorized by the
organic foods production act of 1990, as amended, 7 U.S.C. Sec. 6501 et
seq., and the rules adopted thereunder for agricultural products
marketed and labeled using the term "organic" or a derivative of the
term "organic."
(c) "OMRI products list" means a directory of products that the
organic materials review institute has reviewed and determined are
allowed for use in organic production, processing, or handling under
standards of the national organic program.
(d) "Organic materials review institute" means an organization
exempt from tax under 26 U.S.C. Sec. 501(c)(3) of the federal internal
revenue code that provides a third-party review of materials that are
allowed for use in organic production, processing, or handling under
standards of the national organic program.
Sec. 1601 RCW 82.04.4282 and 2009 c 535 s 410 are each amended to
read as follows:
In computing tax there may be deducted from the measure of tax
amounts derived from bona fide (1) dues and initiation fees paid to
nonprofit organizations exempt from the federal income tax under 26
U.S.C. Sec. 501(c)(3), (c)(4), (c)(5), (c)(6), (c)(8), (c)(10), or
(c)(19) of the federal internal revenue code, as amended as of January
1, 2010, (2) ((dues, (3))) contributions, (((4))) (3) donations,
(((5))) (4) tuition fees, (((6))) (5) charges made by a nonprofit trade
or professional organization for attending or occupying space at a
trade show, convention, or educational seminar sponsored by the
nonprofit trade or professional organization, which trade show,
convention, or educational seminar is not open to the general public,
(((7))) (6) charges made for operation of privately operated
kindergartens, and (((8))) (7) endowment funds. This section may not
be construed to exempt any person, association, or society from tax
liability upon selling tangible personal property, digital goods,
digital codes, or digital automated services, or upon providing
facilities or other services for which a special charge is made to
members or others. If dues are in exchange for any significant amount
of goods or services rendered by the recipient thereof to members
without any additional charge to the member, or if the dues are
graduated upon the amount of goods or services rendered, the value of
such goods or services ((shall)) may not be considered as a deduction
under this section.
NEW SECTION. Sec. 1701 The legislature intends with sections
1702 and 1703 of this act to supersede the holding of the supreme court
of the state of Washington in Puget Sound National Bank v. Department
of Revenue, 123 Wn.2d 284 (1994).
Sec. 1702 RCW 82.08.037 and 2007 c 6 s 102 are each amended to
read as follows:
(1) A seller is entitled to a credit or refund for sales taxes
previously paid on bad debts, as that term is used in 26 U.S.C. Sec.
166, as amended or renumbered as of January 1, 2003.
(2) For purposes of this section, "bad debts" does not include:
(a) Amounts due on property that remains in the possession of the
seller until the full purchase price is paid;
(b) Expenses incurred in attempting to collect debt; ((and))
(c) Debts sold or assigned by the seller to third parties, where
the third party is without recourse against the seller; and
(d) Repossessed property.
(3) If a credit or refund of sales tax is taken for a bad debt and
the debt is subsequently collected in whole or in part, the tax on the
amount collected must be paid and reported on the return filed for the
period in which the collection is made.
(4) Payments on a previously claimed bad debt are applied first
proportionally to the taxable price of the property or service and the
sales or use tax thereon, and secondly to interest, service charges,
and any other charges.
(5) If the seller uses a certified service provider as defined in
RCW 82.32.020 to administer its sales tax responsibilities, the
certified service provider may claim, on behalf of the seller, the
credit or refund allowed by this section. The certified service
provider must credit or refund the full amount received to the seller.
(6) The department ((shall)) must allow an allocation of bad debts
among member states to the streamlined sales tax agreement, as defined
in RCW 82.58.010(1), if the books and records of the person claiming
bad debts support the allocation.
(7) A person's right to claim a credit or refund under this section
is not assignable. No person other than the original seller in the
transaction that generated the bad debt or, as provided in subsection
(5) of this section, a certified service provider, is entitled to claim
a credit or refund under this section. If the original seller in the
transaction that generated the bad debt has sold or assigned the debt
instrument to a third party with recourse, the original seller may
claim a credit or refund under this section only after the debt
instrument is reassigned by the third party to the original seller.
Sec. 1703 RCW 82.12.037 and 2007 c 6 s 103 are each amended to
read as follows:
(1) A seller is entitled to a credit or refund for use taxes
previously paid on bad debts, as that term is used in 26 U.S.C. Sec.
166, as amended or renumbered as of January 1, 2003.
(2) For purposes of this section, "bad debts" does not include:
(a) Amounts due on property that remains in the possession of the
seller until the full purchase price is paid;
(b) Expenses incurred in attempting to collect debt; ((and))
(c) Debts sold or assigned by the seller to third parties, where
the third party is without recourse against the seller; and
(d) Repossessed property.
(3) If a credit or refund of use tax is taken for a bad debt and
the debt is subsequently collected in whole or in part, the tax on the
amount collected must be paid and reported on the return filed for the
period in which the collection is made.
(4) Payments on a previously claimed bad debt are applied first
proportionally to the taxable price of the property or service and the
sales or use tax thereon, and secondly to interest, service charges,
and any other charges.
(5) If the seller uses a certified service provider as defined in
RCW 82.32.020 to administer its use tax responsibilities, the certified
service provider may claim, on behalf of the seller, the credit or
refund allowed by this section. The certified service provider must
credit or refund the full amount received to the seller.
(6) The department ((shall)) must allow an allocation of bad debts
among member states to the streamlined sales and use tax agreement, as
defined in RCW 82.58.010(1), if the books and records of the person
claiming bad debts support the allocation.
(7) A person's right to claim a credit or refund under this section
is not assignable. No person other than the original seller in the
transaction that generated the bad debt or, as provided in subsection
(5) of this section, a certified service provider, is entitled to claim
a credit or refund under this section. If the original seller in the
transaction that generated the bad debt has sold or assigned the debt
instrument to a third party with recourse, the original seller may
claim a credit or refund under this section only after the debt
instrument is reassigned by the third party to the original seller.
Sec. 1801 RCW 82.12.010 and 2009 c 535 s 304 are each amended to
read as follows:
For the purposes of this chapter:
(1) "Purchase price" means the same as sales price as defined in
RCW 82.08.010;
(2)(a) "Value of the article used" shall be the purchase price for
the article of tangible personal property, the use of which is taxable
under this chapter. The term also includes, in addition to the
purchase price, the amount of any tariff or duty paid with respect to
the importation of the article used. In case the article used is
acquired by lease or by gift or is extracted, produced, or manufactured
by the person using the same or is sold under conditions wherein the
purchase price does not represent the true value thereof, the value of
the article used ((shall be)) is determined as nearly as possible
according to the retail selling price at place of use of similar
products of like quality and character under such rules as the
department may prescribe.
(b) In case the articles used are acquired by bailment, the value
of the use of the articles so used ((shall)) must be in an amount
representing a reasonable rental for the use of the articles so bailed,
determined as nearly as possible according to the value of such use at
the places of use of similar products of like quality and character
under such rules as the department of revenue may prescribe. In case
any such articles of tangible personal property are used in respect to
the construction, repairing, decorating, or improving of, and which
become or are to become an ingredient or component of, new or existing
buildings or other structures under, upon, or above real property of or
for the United States, any instrumentality thereof, or a county or city
housing authority created pursuant to chapter 35.82 RCW, including the
installing or attaching of any such articles therein or thereto,
whether or not such personal property becomes a part of the realty by
virtue of installation, then the value of the use of such articles so
used ((shall be)) is determined according to the retail selling price
of such articles, or in the absence of such a selling price, as nearly
as possible according to the retail selling price at place of use of
similar products of like quality and character or, in the absence of
either of these selling price measures, such value may be determined
upon a cost basis, in any event under such rules as the department of
revenue may prescribe.
(c) In the case of articles owned by a user engaged in business
outside the state which are brought into the state for no more than one
hundred eighty days in any period of three hundred sixty-five
consecutive days and which are temporarily used for business purposes
by the person in this state, the value of the article used ((shall))
must be an amount representing a reasonable rental for the use of the
articles, unless the person has paid tax under this chapter or chapter
82.08 RCW upon the full value of the article used, as defined in (a) of
this subsection.
(d) In the case of articles manufactured or produced by the user
and used in the manufacture or production of products sold or to be
sold to the department of defense of the United States, the value of
the articles used ((shall be)) is determined according to the value of
the ingredients of such articles.
(e) In the case of an article manufactured or produced for purposes
of serving as a prototype for the development of a new or improved
product, the value of the article used ((shall be)) is determined by:
(i) The retail selling price of such new or improved product when first
offered for sale; or (ii) the value of materials incorporated into the
prototype in cases in which the new or improved product is not offered
for sale.
(f) In the case of an article purchased with a direct pay permit
under RCW 82.32.087, the value of the article used ((shall be)) is
determined by the purchase price of such article if, but for the use of
the direct pay permit, the transaction would have been subject to sales
tax;
(3) "Value of the service used" means the purchase price for the
digital automated service or other service, the use of which is taxable
under this chapter. If the service is received by gift or under
conditions wherein the purchase price does not represent the true value
thereof, the value of the service used ((shall)) must be determined as
nearly as possible according to the retail selling price at place of
use of similar services of like quality and character under rules the
department may prescribe;
(4) "Value of the extended warranty used" means the purchase price
for the extended warranty, the use of which is taxable under this
chapter. If the extended warranty is received by gift or under
conditions wherein the purchase price does not represent the true value
of the extended warranty, the value of the extended warranty used
((shall)) must be determined as nearly as possible according to the
retail selling price at place of use of similar extended warranties of
like quality and character under rules the department may prescribe;
(5) "Value of the digital good or digital code used" means the
purchase price for the digital good or digital code, the use of which
is taxable under this chapter. If the digital good or digital code is
acquired other than by purchase, the value of the digital good or
digital code must be determined as nearly as possible according to the
retail selling price at place of use of similar digital goods or
digital codes of like quality and character under rules the department
may prescribe;
(6) "Use," "used," "using," or "put to use" have their ordinary
meaning, and mean:
(a) With respect to tangible personal property, except for natural
gas and manufactured gas, the first act within this state by which the
taxpayer takes or assumes dominion or control over the article of
tangible personal property (as a consumer), and include installation,
storage, withdrawal from storage, distribution, or any other act
preparatory to subsequent actual use or consumption within this state;
(b) With respect to a service defined in RCW 82.04.050(2)(a), the
first act within this state after the service has been performed by
which the taxpayer takes or assumes dominion or control over the
article of tangible personal property upon which the service was
performed (as a consumer), and includes installation, storage,
withdrawal from storage, distribution, or any other act preparatory to
subsequent actual use or consumption of the article within this state;
(c) With respect to an extended warranty, the first act within this
state after the extended warranty has been acquired by which the
taxpayer takes or assumes dominion or control over the article of
tangible personal property to which the extended warranty applies, and
includes installation, storage, withdrawal from storage, distribution,
or any other act preparatory to subsequent actual use or consumption of
the article within this state;
(d) With respect to a digital good or digital code, the first act
within this state by which the taxpayer, as a consumer, views,
accesses, downloads, possesses, stores, opens, manipulates, or
otherwise uses or enjoys the digital good or digital code;
(e) With respect to a digital automated service, the first act
within this state by which the taxpayer, as a consumer, uses, enjoys,
or otherwise receives the benefit of the service;
(f) With respect to a service defined as a retail sale in RCW
82.04.050(6)(b), the first act within this state by which the taxpayer,
as a consumer, accesses the prewritten computer software; ((and))
(g) With respect to a service defined as a retail sale in RCW
82.04.050(2)(g), the first act within this state after the service has
been performed by which the taxpayer, as a consumer, views, accesses,
downloads, possesses, stores, opens, manipulates, or otherwise uses or
enjoys the digital good upon which the service was performed; and
(h) With respect to natural gas or manufactured gas, the use of
which is taxable under RCW 82.12.022, including gas that is also
taxable under the authority of RCW 82.14.230, the first act within this
state by which the taxpayer consumes the gas by burning the gas or
storing the gas in the taxpayer's own facilities for later consumption
by the taxpayer;
(7) "Taxpayer" and "purchaser" include all persons included within
the meaning of the word "buyer" and the word "consumer" as defined in
chapters 82.04 and 82.08 RCW;
(8)(a)(i) Except as provided in (a)(ii) of this subsection (8),
"retailer" means every seller as defined in RCW 82.08.010 and every
person engaged in the business of selling tangible personal property at
retail and every person required to collect from purchasers the tax
imposed under this chapter.
(ii) "Retailer" does not include a professional employer
organization when a covered employee coemployed with the client under
the terms of a professional employer agreement engages in activities
that constitute a sale of tangible personal property, extended
warranty, digital good, digital code, or a sale of any digital
automated service or service defined as a retail sale in RCW 82.04.050
(2)(a) or (g), (3)(a), or (6)(b) that is subject to the tax imposed by
this chapter. In such cases, the client, and not the professional
employer organization, is deemed to be the retailer and is responsible
for collecting and remitting the tax imposed by this chapter.
(b) For the purposes of (a) of this subsection, the terms "client,"
"covered employee," "professional employer agreement," and
"professional employer organization" have the same meanings as in RCW
82.04.540;
(9) "Extended warranty" has the same meaning as in RCW
82.04.050(7);
(10) The meaning ascribed to words and phrases in chapters 82.04
and 82.08 RCW, insofar as applicable, shall have full force and effect
with respect to taxes imposed under the provisions of this chapter.
"Consumer," in addition to the meaning ascribed to it in chapters 82.04
and 82.08 RCW insofar as applicable, shall also mean any person who
distributes or displays, or causes to be distributed or displayed, any
article of tangible personal property, except newspapers, the primary
purpose of which is to promote the sale of products or services. With
respect to property distributed to persons within this state by a
consumer as defined in this subsection (10), the use of the property
shall be deemed to be by such consumer.
Sec. 1802 RCW 82.14.230 and 1989 c 384 s 2 are each amended to
read as follows:
(1) The governing body of any city, while not required by
legislative mandate to do so, may, by resolution or ordinance for the
purposes authorized by this chapter, fix and impose on every person a
use tax for the privilege of using natural gas or manufactured gas in
the city as a consumer.
(2) The tax ((shall be)) is imposed in an amount equal to the value
of the article used by the taxpayer multiplied by the rate in effect
for the tax on natural gas businesses under RCW 35.21.870 in the city
in which the article is used. The "value of the article used," does
not include any amounts that are paid for the hire or use of a natural
gas business in transporting the gas subject to tax under this
subsection if those amounts are subject to tax under RCW 35.21.870.
(3) The tax imposed under this section ((shall)) does 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 35.21.870 with respect to the
gas for which exemption is sought under this subsection.
(4) There ((shall be)) is 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 35.21.870 by
another ((state)) municipality or other unit of local government 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))
municipality or other unit of local government with respect to the gas
for which a credit is sought under this subsection.
(5) The use tax ((hereby)) imposed ((shall)) must be paid by the
consumer. The administration and collection of the tax ((hereby))
imposed ((shall be)) is pursuant to RCW 82.14.050.
Sec. 1901 RCW 82.16.110 and 2009 c 469 s 504 are each amended to
read as follows:
The definitions in this section apply throughout this chapter
unless the context clearly requires otherwise.
(1)(a) "Community solar project" means:
(i) A solar energy system that produces a maximum instantaneous
power output of one hundred kilowatts of electricity and is owned by
local individuals, households, nonprofit organizations, or nonutility
businesses that is placed on the property owned by a cooperating local
governmental entity that is not in the light and power business or in
the gas distribution business; or
(ii) A utility-owned solar energy system that produces a maximum
instantaneous power output of one hundred kilowatts of electricity and
that is voluntarily funded by the utility's ratepayers where, in
exchange for their financial support, the utility gives contributors a
payment or credit on their utility bill for the value of the
electricity produced by the project.
(b) For the purposes of "community solar project" as defined in (a)
of this subsection:
(i) "Nonprofit organization" means an organization exempt from
taxation under Title 26 U.S.C. Sec. 501(c)(3) of the federal internal
revenue code of 1986, as amended, as of January 1, 2009; and
(ii) "Utility" means a light and power business, an electric
cooperative, or a mutual corporation that provides electricity service.
(2) "Customer-generated electricity" means a community solar
project or the alternating current electricity that is generated from
a renewable energy system located in Washington and installed on an
individual's, businesses', or local government's real property that is
also provided electricity generated by a light and power business.
Except for community solar projects, a system located on a leasehold
interest does not qualify under this definition. Except for utility-owned community solar projects, "customer-generated electricity" does
not include electricity generated by a light and power business with
greater than one thousand megawatt hours of annual sales or a gas
distribution business.
(3) "Economic development kilowatt-hour" means the actual kilowatt-hour measurement of customer-generated electricity multiplied by the
appropriate economic development factor.
(4) "Local governmental entity" means any unit of local government
of this state including, but not limited to, counties, cities, towns,
municipal corporations, quasi-municipal corporations, special purpose
districts, and school districts.
(5) "Photovoltaic cell" means a device that converts light directly
into electricity without moving parts.
(6) "Renewable energy system" means a solar energy system, an
anaerobic digester as defined in RCW 82.08.900, or a wind generator
used for producing electricity.
(7) "Solar energy system" means any device or combination of
devices or elements that rely upon direct sunlight as an energy source
for use in the generation of electricity.
(8) "Solar inverter" means the device used to convert direct
current to alternating current in a photovoltaic cell system.
(9) "Solar module" means the smallest nondivisible self-contained
physical structure housing interconnected photovoltaic cells and
providing a single direct current electrical output.
Sec. 2001 RCW 82.08.890 and 2009 c 469 s 601 are each amended to
read as follows:
(1) Except for sales made between July 1, 2010, and June 30, 2013,
the tax levied by RCW 82.08.020 does not apply to sales to eligible
persons of:
(a) Qualifying livestock nutrient management equipment;
(b) Labor and services rendered in respect to installing,
repairing, cleaning, altering, or improving qualifying livestock
nutrient management equipment; and
(c)(i) Labor and services rendered in respect to repairing,
cleaning, altering, or improving of qualifying livestock nutrient
management facilities, or to tangible personal property that becomes an
ingredient or component of qualifying livestock nutrient management
facilities in the course of repairing, cleaning, altering, or improving
of such facilities.
(ii) The exemption provided in this subsection (1)(c) does not
apply to the sale of or charge made for: (A) Labor and services
rendered in respect to the constructing of new, or replacing previously
existing, qualifying livestock nutrient management facilities; or (B)
tangible personal property that becomes an ingredient or component of
qualifying livestock nutrient management facilities during the course
of constructing new, or replacing previously existing, qualifying
livestock nutrient management facilities.
(2) The exemption provided in subsection (1) of this section
applies to sales made after the livestock nutrient management plan is:
(a) Certified under chapter 90.64 RCW; (b) approved as part of the
permit issued under chapter 90.48 RCW; or (c) approved as required
under subsection (4)(c)(iii) of this section.
(3)(a) The department of revenue must provide an exemption
certificate to an eligible person upon application by that person. The
department of agriculture must provide a list of eligible persons, as
defined in subsection (4)(c)(i) and (ii) of this section, to the
department of revenue. Conservation districts must maintain lists of
eligible persons as defined in subsection (4)(c)(iii) of this section
to allow the department of revenue to verify eligibility. The
application must be in a form and manner prescribed by the department
and must contain information regarding the location of the dairy or
animal feeding operation and other information the department may
require.
(b) A person claiming an exemption under this section must keep
records necessary for the department to verify eligibility under this
section. The exemption is available only when the buyer provides 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.
(4) The definitions in this subsection apply to this section and
RCW 82.12.890 unless the context clearly requires otherwise:
(a) "Animal feeding operation" means a lot or facility, other than
an aquatic animal production facility, where the following conditions
are met:
(i) Animals, other than aquatic animals, have been, are, or will be
stabled or confined and fed or maintained for a total of forty-five
days or more in any twelve-month period; and
(ii) Crops, vegetation, forage growth, or postharvest residues are
not sustained in the normal growing season over any portion of the lot
or facility.
(b) "Conservation district" means a subdivision of state government
organized under chapter 89.08 RCW.
(c) "Eligible person" means a person: (i) Licensed to produce milk
under chapter 15.36 RCW who has a certified dairy nutrient management
plan, as required by chapter 90.64 RCW; (ii) who owns an animal feeding
operation and has a permit issued under chapter 90.48 RCW; or (iii) who
owns an animal feeding operation and has a nutrient management plan
approved by a conservation district as meeting natural resource
conservation service field office technical guide standards and who
possesses an exemption certificate under RCW 82.08.855.
(d) "Handling and treatment of livestock manure" means the
activities of collecting, storing, moving, or transporting livestock
manure, separating livestock manure solids from liquids, or applying
livestock manure to the agricultural lands of an eligible person other
than through the use of pivot or linear type traveling irrigation
systems.
(e) "Permit" means either a state waste discharge permit or a
national pollutant discharge elimination system permit, or both.
(f) "Qualifying livestock nutrient management equipment" means the
following tangible personal property for exclusive use in the handling
and treatment of livestock manure, including repair and replacement
parts for such equipment: (i) Aerators; (ii) agitators; (iii) augers;
(iv) conveyers; (v) gutter cleaners; (vi) hard-hose reel traveler
irrigation systems; (vii) lagoon and pond liners and floating covers;
(viii) loaders; (ix) manure composting devices; (x) manure spreaders;
(xi) manure tank wagons; (xii) manure vacuum tanks; (xiii) poultry
house cleaners; (xiv) poultry house flame sterilizers; (xv) poultry
house washers; (xvi) poultry litter saver machines; (xvii) pipes;
(xviii) pumps; (xix) scrapers; (xx) separators; (xxi) slurry injectors
and hoses; and (xxii) wheelbarrows, shovels, and pitchforks.
(g) "Qualifying livestock nutrient management facilities" means the
following structures and facilities for exclusive use in the handling
and treatment of livestock manure: (i) Flush systems; (ii) lagoons;
(iii) liquid livestock manure storage structures, such as concrete
tanks or glass-lined steel tanks; and (iv) structures used solely for
the dry storage of manure, including roofed stacking facilities.
Sec. 2002 RCW 82.12.890 and 2009 c 469 s 602 are each amended to
read as follows:
(1) The provisions of this chapter do not apply with respect to the
use by an eligible person of:
(a) Qualifying livestock nutrient management equipment;
(b) Labor and services rendered in respect to installing,
repairing, cleaning, altering, or improving qualifying livestock
nutrient management equipment; and
(c)(i) Tangible personal property that becomes an ingredient or
component of qualifying livestock nutrient management facilities in the
course of repairing, cleaning, altering, or improving of such
facilities.
(ii) The exemption provided in this subsection (1)(c) does not
apply to the use of tangible personal property that becomes an
ingredient or component of qualifying livestock nutrient management
facilities during the course of constructing new, or replacing
previously existing, qualifying livestock nutrient management
facilities.
(2)(a) To be eligible, the equipment and facilities must be used
exclusively for activities necessary to maintain a livestock nutrient
management plan.
(b) The exemption applies to the use of tangible personal property
and labor and services made after the livestock nutrient management
plan is: (i) Certified under chapter 90.64 RCW; (ii) approved as part
of the permit issued under chapter 90.48 RCW; or (iii) approved as
required under RCW 82.08.890(4)(c)(iii).
(3) The exemption certificate and recordkeeping requirements of RCW
82.08.890 apply to this section. The definitions in RCW 82.08.890
apply to this section.
(4) The exemption provided in this section does not apply to the
use of tangible personal property and services described in subsection
(1)(a), (b), and (c)(i) of this section if first use of the property or
services occurs in this state between July 1, 2010, and June 30, 2013.
NEW SECTION. Sec. 2101 RCW 82.04.062 ("Sale at wholesale," "sale
at retail" excludes sale of precious metal bullion and monetized
bullion -- Computation of tax) and 1985 c 471 s 5 are each repealed.
NEW SECTION. Sec. 2102 The repeal in section 2101 of this act
does not affect any existing right acquired or liability or obligation
incurred under the statute repealed or under any rule or order adopted
under that statute nor does it affect any proceeding instituted under
the repealed statute.
NEW SECTION. Sec. 2103 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 the sale of
precious metal bullion or monetized bullion.
(2) The definitions in this subsection apply to this section.
(a) "Precious metal bullion" means any precious metal that has been
put through a process of smelting or refining, including, but not
limited to, gold, silver, platinum, rhodium, and palladium, and which
is in such state or condition that its value depends upon its contents
and not upon its form.
(b) "Monetized bullion" means coins or other forms of money
manufactured from gold, silver, or other metals and used as a medium of
exchange under the laws of this state, the United States, or any
foreign nation, but does not include coins or money sold to be
manufactured into jewelry or works of art.
NEW SECTION. Sec. 2104 A new section is added to chapter 82.12
RCW to read as follows:
(1) The provisions of this chapter do not apply with respect to the
use of precious metal bullion or monetized bullion.
(2) The definitions in section 2303 of this act apply to this
section.
Sec. 2201 RCW 54.28.011 and 1957 c 278 s 12 are each amended to
read as follows:
"Gross revenue" ((shall)) means the amount received from the sale
of electric energy, which also includes any regularly recurring charge
billed to consumers as a condition of receiving electric energy, and
excluding any tax levied by a municipal corporation upon the district
pursuant to RCW 54.28.070.
NEW SECTION. Sec. 2301 The following acts or parts of acts are
each repealed:
(1) RCW 82.08.811 (Exemptions -- Coal used at coal-fired thermal
electric generation facility -- Application -- Demonstration of progress in
air pollution control -- Notice of emissions violations -- Reapplication--Payments on cessation of operation) and 1997 c 368 s 4; and
(2) RCW 82.12.811 (Exemptions -- Coal used at coal-fired thermal
electric generation facility -- Application -- Demonstration of progress in
air pollution control -- Notice of emissions violations -- Reapplication--Payments on cessation of operation) and 1997 c 368 s 6.
Sec. 2401 RCW 82.08.010 and 2009 c 535 s 303 are each amended to
read as follows:
(1) For the purposes of this chapter:
(((1)(a))) (a)(i) "Selling price" includes "sales price." "Sales
price" means the total amount of consideration, ((except separately
stated trade-in property of like kind,)) including cash, credit,
property, and services, for which tangible personal property, extended
warranties, digital goods, digital codes, digital automated services,
or other services defined as a "retail sale" under RCW 82.04.050 are
sold, leased, or rented, valued in money, whether received in money or
otherwise. No deduction from the total amount of consideration is
allowed for the following: (((i))) (A) The seller's cost of the
property sold; (((ii))) (B) the cost of materials used, labor or
service cost, interest, losses, all costs of transportation to the
seller, all taxes imposed on the seller, and any other expense of the
seller; (((iii))) (C) charges by the seller for any services necessary
to complete the sale, other than delivery and installation charges;
(((iv))) (D) delivery charges; and (((v))) (E) installation charges.
(ii) When tangible personal property is rented or leased under
circumstances that the consideration paid does not represent a
reasonable rental for the use of the articles so rented or leased, the
"selling price" shall be determined as nearly as possible according to
the value of such use at the places of use of similar products of like
quality and character under such rules as the department may prescribe;
(((b))) (iii) "Selling price" or "sales price" does not include:
Discounts, including cash, term, or coupons that are not reimbursed by
a third party that are allowed by a seller and taken by a purchaser on
a sale; interest, financing, and carrying charges from credit extended
on the sale of tangible personal property, extended warranties, digital
goods, digital codes, digital automated services, or other services, if
the amount is separately stated on the invoice, bill of sale, or
similar document given to the purchaser; and any taxes legally imposed
directly on the consumer that are separately stated on the invoice,
bill of sale, or similar document given to the purchaser;
(((c))) (iv) "Selling price" or "sales price" includes
consideration received by the seller from a third party if:
(((i))) (A) The seller actually receives consideration from a party
other than the purchaser, and the consideration is directly related to
a price reduction or discount on the sale;
(((ii))) (B) The seller has an obligation to pass the price
reduction or discount through to the purchaser;
(((iii))) (C) The amount of the consideration attributable to the
sale is fixed and determinable by the seller at the time of the sale of
the item to the purchaser; and
(((iv))) (D) One of the criteria in this subsection (1)(((c)))
(a)(iv)(D) is met:
(((A))) (I) The purchaser presents a coupon, certificate, or other
documentation to the seller to claim a price reduction or discount
where the coupon, certificate, or documentation is authorized,
distributed, or granted by a third party with the understanding that
the third party will reimburse any seller to whom the coupon,
certificate, or documentation is presented;
(((B))) (II) The purchaser identifies himself or herself to the
seller as a member of a group or organization entitled to a price
reduction or discount, however a "preferred customer" card that is
available to any patron does not constitute membership in such a group;
or
(((C))) (III) The price reduction or discount is identified as a
third party price reduction or discount on the invoice received by the
purchaser or on a coupon, certificate, or other documentation presented
by the purchaser;
(((2)(a))) (b)(i) "Seller" means every person, including the state
and its departments and institutions, making sales at retail or retail
sales to a buyer, purchaser, or consumer, whether as agent, broker, or
principal, except "seller" does not mean:
(((i))) (A) The state and its departments and institutions when
making sales to the state and its departments and institutions; or
(((ii))) (B) A professional employer organization when a covered
employee coemployed with the client under the terms of a professional
employer agreement engages in activities that constitute a sale at
retail that is subject to the tax imposed by this chapter. In such
cases, the client, and not the professional employer organization, is
deemed to be the seller and is responsible for collecting and remitting
the tax imposed by this chapter.
(((b))) (ii) For the purposes of (a)(i) of this subsection, the
terms "client," "covered employee," "professional employer agreement,"
and "professional employer organization" have the same meanings as in
RCW 82.04.540;
(((3))) (c) "Buyer," "purchaser," and "consumer" include, without
limiting the scope hereof, every individual, receiver, assignee,
trustee in bankruptcy, trust, estate, firm, copartnership, joint
venture, club, company, joint stock company, business trust,
corporation, association, society, or any group of individuals acting
as a unit, whether mutual, cooperative, fraternal, nonprofit, or
otherwise, municipal corporation, quasi municipal corporation, and also
the state, its departments and institutions and all political
subdivisions thereof, irrespective of the nature of the activities
engaged in or functions performed, and also the United States or any
instrumentality thereof;
(((4))) (d) "Delivery charges" means charges by the seller of
personal property or services for preparation and delivery to a
location designated by the purchaser of personal property or services
including, but not limited to, transportation, shipping, postage,
handling, crating, and packing;
(((5))) (e) "Direct mail" means printed material delivered or
distributed by United States mail or other delivery service to a mass
audience or to addressees on a mailing list provided by the purchaser
or at the direction of the purchaser when the cost of the items are not
billed directly to the recipients. "Direct mail" includes tangible
personal property supplied directly or indirectly by the purchaser to
the direct mail seller for inclusion in the package containing the
printed material. "Direct mail" does not include multiple items of
printed material delivered to a single address;
(((6))) (f) The meaning attributed in chapter 82.04 RCW to the
terms "tax year," "taxable year," "person," "company," "sale," "sale at
retail," "retail sale," "sale at wholesale," "wholesale," "business,"
"engaging in business," "cash discount," "successor," "consumer," "in
this state" and "within this state" ((shall)) apply equally to the
provisions of this chapter;
(((7))) (g) For the purposes of the taxes imposed under this
chapter and under chapter 82.12 RCW, "tangible personal property" means
personal property that can be seen, weighed, measured, felt, or
touched, or that is in any other manner perceptible to the senses.
Tangible personal property includes electricity, water, gas, steam, and
prewritten computer software; and
(((8))) (h) "Extended warranty" has the same meaning as in RCW
82.04.050(7)((;)).
(((9))) (2) The definitions in RCW 82.04.192 apply to this
chapter((; and)).
(((10))) (3) For the purposes of the taxes imposed under this
chapter and chapter 82.12 RCW, whenever the terms "property" or
"personal property" are used, those terms must be construed to include
digital goods and digital codes unless:
(a) It is clear from the context that the term "personal property"
is intended only to refer to tangible personal property;
(b) It is clear from the context that the term "property" is
intended only to refer to tangible personal property, real property, or
both; or
(c) To construe the term "property" or "personal property" as
including digital goods and digital codes would yield unlikely, absurd,
or strained consequences.
Sec. 2501 RCW 82.08.962 and 2009 c 469 s 101 are each amended to
read as follows:
(1)(a) Except as provided in RCW 82.08.963, purchasers who have
paid the tax imposed by RCW 82.08.020 on machinery and equipment used
directly in generating electricity using fuel cells, wind, sun, biomass
energy, tidal or wave energy, geothermal resources, anaerobic
digestion, technology that converts otherwise lost energy from exhaust,
or landfill gas as the principal source of power, or to sales of or
charges made for labor and services rendered in respect to installing
such machinery and equipment, are eligible for an exemption as provided
in this section, but only if the purchaser develops with such
machinery, equipment, and labor a facility capable of generating not
less than one thousand watts of electricity.
(b) Except for energy generated by wind, beginning on July 1, 2009,
through June 30, ((2011)) 2010, the tax levied by RCW 82.08.020 does
not apply to the sale of machinery and equipment described in (a) of
this subsection that are used directly in generating electricity or to
sales of or charges made for labor and services rendered in respect to
installing such machinery and equipment.
(c)(i) For energy generated by wind, except as provided otherwise
in (ii) of this subsection (c), beginning on July 1, 2010, through June
30, 2011, the tax levied by RCW 82.08.020 does not apply to the sale to
a local electric utility, or to a person contracting with a local
electric utility for the sale of electric power generated by a facility
containing such machinery and equipment, of machinery and equipment
described in (a) of this subsection that are used directly in
generating electricity or to sales of or charges made for labor and
services rendered in respect to installing such machinery and
equipment.
(ii) Any project using wind to generate electricity, which begins
construction by December 31, 2010, may receive the exemption from sales
tax under this section.
(d) Except for energy generated by wind, beginning on July 1, 2011,
through June 30, 2013, the amount of the exemption under this
subsection (1) is equal to seventy-five percent of the state and local
sales tax paid. The purchaser is eligible for an exemption under this
subsection (1)(d) in the form of a remittance.
(e)(i) For energy generated by wind, except as provided otherwise
in (ii) of this subsection (e), beginning on July 1, 2011, through June
30, 2013, the amount of the exemption under this subsection (1) is
equal to seventy-five percent of the state and local sales tax paid by
a local electric utility for such machinery and equipment, or to a
person contracting with a local electric utility for the sale of
electric power generated by a facility containing such machinery and
equipment. The purchaser is eligible for an exemption under this
subsection (1)(((c))) (e) in the form of a remittance.
(ii) Any project using wind to generate electricity, which begins
construction by December 31, 2010, may receive the exemption from sales
tax under this section.
(2) For purposes of this section and RCW 82.12.962, the following
definitions apply:
(a) "Biomass energy" includes: (i) By-products of pulping and wood
manufacturing process; (ii) animal waste; (iii) solid organic fuels
from wood; (iv) forest or field residues; (v) wooden demolition or
construction debris; (vi) food waste; (vii) liquors derived from algae
and other sources; (viii) dedicated energy crops; (ix) biosolids; and
(x) yard waste. "Biomass energy" does not include wood pieces that
have been treated with chemical preservatives such as creosote,
pentachlorophenol, or copper-chrome-arsenic; wood from old growth
forests; or municipal solid waste.
(b) "Fuel cell" means an electrochemical reaction that generates
electricity by combining atoms of hydrogen and oxygen in the presence
of a catalyst.
(c) "Landfill gas" means biomass fuel, of the type qualified for
federal tax credits under Title 26 U.S.C. Sec. 29 of the federal
internal revenue code, collected from a "landfill" as defined under RCW
70.95.030.
(d)(i) "Machinery and equipment" means fixtures, devices, and
support facilities that are integral and necessary to the generation of
electricity using fuel cells, wind, sun, biomass energy, tidal or wave
energy, geothermal resources, anaerobic digestion, technology that
converts otherwise lost energy from exhaust, or landfill gas as the
principal source of power.
(ii) "Machinery and equipment" does not include: (A) Hand-powered
tools; (B) property with a useful life of less than one year; (C)
repair parts required to restore machinery and equipment to normal
working order; (D) replacement parts that do not increase productivity,
improve efficiency, or extend the useful life of machinery and
equipment; (E) buildings; or (F) building fixtures that are not
integral and necessary to the generation of electricity that are
permanently affixed to and become a physical part of a building.
(e) "Local electric utility" means an electrical company whose
rates are regulated by the Washington utilities and transportation
commission under chapter 80.28 RCW; a municipal electric utility formed
under Title 35 RCW, a public utility district formed under Title 54
RCW, an irrigation district formed under chapter 87.03 RCW, a
cooperative formed under chapter 23.86 RCW, or a mutual corporation or
association formed under chapter 24.06 RCW, that is engaged in the
business of distributing electricity to more than one retail electric
customer in the state; and a joint operating agency formed under
chapter 43.52 RCW.
(f) "Person" means the same as defined under RCW 82.04.030.
(3)(a) Machinery and equipment is "used directly" in generating
electricity by wind energy, solar energy, biomass energy, tidal or wave
energy, geothermal resources, anaerobic digestion, technology that
converts otherwise lost energy from exhaust, or landfill gas power if
it provides any part of the process that captures the energy of the
wind, sun, biomass energy, tidal or wave energy, geothermal resources,
anaerobic digestion, technology that converts otherwise lost energy
from exhaust, or landfill gas, converts that energy to electricity, and
stores, transforms, or transmits that electricity for entry into or
operation in parallel with electric transmission and distribution
systems.
(b) Machinery and equipment is "used directly" in generating
electricity by fuel cells if it provides any part of the process that
captures the energy of the fuel, converts that energy to electricity,
and stores, transforms, or transmits that electricity for entry into or
operation in parallel with electric transmission and distribution
systems.
(4)(a) A purchaser claiming an exemption in the form of a
remittance under subsection (1)(((c))) (d) of this section must pay the
tax imposed by RCW 82.08.020 and all applicable local sales taxes
imposed under the authority of chapters 82.14 and 81.104 RCW. The
purchaser may then apply to the department for remittance in a form and
manner prescribed by the department. A purchaser may not apply for a
remittance under this section more frequently than once per quarter.
The purchaser must specify the amount of exempted tax claimed and the
qualifying purchases for which the exemption is claimed. The purchaser
must retain, in adequate detail, records to enable the department to
determine whether the purchaser is entitled to an exemption under this
section, including: Invoices; proof of tax paid; and documents
describing the machinery and equipment.
(b) The department must determine eligibility under this section
based on the information provided by the purchaser, which is subject to
audit verification by the department. The department must on a
quarterly basis remit exempted amounts to qualifying purchasers who
submitted applications during the previous quarter.
(5) This section expires July 1, 2013.
Sec. 2502 RCW 82.12.962 and 2009 c 469 s 102 are each amended to
read as follows:
(1)(a) Except as provided in RCW 82.12.963, consumers who have paid
the tax imposed by RCW 82.12.020 on machinery and equipment used
directly in generating electricity using fuel cells, wind, sun, biomass
energy, tidal or wave energy, geothermal resources, anaerobic
digestion, technology that converts otherwise lost energy from exhaust,
or landfill gas as the principal source of power, or to sales of or
charges made for labor and services rendered in respect to installing
such machinery and equipment, are eligible for an exemption as provided
in this section, but only if the purchaser develops with such
machinery, equipment, and labor a facility capable of generating not
less than one thousand watts of electricity.
(b) Except for energy generated by wind, beginning on July 1, 2009,
through June 30, ((2011)) 2010, the provisions of this chapter do not
apply in respect to the use of machinery and equipment described in (a)
of this subsection that are used directly in generating electricity or
to sales of or charges made for labor and services rendered in respect
to installing such machinery and equipment.
(c)(i) For energy generated by wind, except as provided otherwise
in (ii) of this subsection (c), beginning on July 1, 2010, through June
30, 2011, the provisions of this chapter do not apply in respect to the
use by a local electric utility, or by a person contracting with a
local electric utility for the sale of electric power generated by a
facility containing such machinery and equipment, of machinery and
equipment described in (a) of this subsection that are used directly in
generating electricity or to sales of or charges made for labor and
services rendered in respect to installing such machinery and
equipment.
(ii) Any project using wind to generate electricity, which begins
construction by December 31, 2010, may receive the exemption from use
tax under this section.
(d) Except for energy generated by wind, beginning on July 1, 2011,
through June 30, 2013, the amount of the exemption under this
subsection (1) is equal to seventy-five percent of the state and local
sales tax paid. The purchaser is eligible for an exemption under this
subsection (1)(d) in the form of a remittance.
(e)(i) For energy generated by wind, except as provided otherwise
in (ii) of this subsection (e), beginning on July 1, 2011, through June
30, 2013, the amount of the exemption under this subsection (1) is
equal to seventy-five percent of the state and local sales tax paid by
a local electric utility for such machinery and equipment, or to a
person contracting with a local electric utility for the sale of
electric power generated by a facility containing such machinery and
equipment. The consumer is eligible for an exemption under this
subsection (1)(((c))) (e) in the form of a remittance.
(ii) Any project using wind to generate electricity, which begins
construction by December 31, 2010, may receive the exemption from use
tax under this section.
(2)(a) A person claiming an exemption in the form of a remittance
under subsection (1)(((c))) (e) of this section must pay the tax
imposed by RCW 82.12.020 and all applicable local use taxes imposed
under the authority of chapters 82.14 and 81.104 RCW. The consumer may
then apply to the department for remittance in a form and manner
prescribed by the department. A consumer may not apply for a
remittance under this section more frequently than once per quarter.
The consumer must specify the amount of exempted tax claimed and the
qualifying purchases or acquisitions for which the exemption is
claimed. The consumer must retain, in adequate detail, records to
enable the department to determine whether the consumer is entitled to
an exemption under this section, including: Invoices; proof of tax
paid; and documents describing the machinery and equipment.
(b) The department must determine eligibility under this section
based on the information provided by the consumer, which is subject to
audit verification by the department. The department must on a
quarterly basis remit exempted amounts to qualifying consumers who
submitted applications during the previous quarter.
(3) Purchases exempt under RCW 82.08.962 are also exempt from the
tax imposed under RCW 82.12.020.
(4) The definitions in RCW 82.08.962 apply to this section.
(5) This section expires June 30, 2013.
NEW SECTION. Sec. 2601 RCW 82.04.394 (Exemptions -- Amounts
received by property management company for on-site personnel) and 1998
c 338 s 2 are each repealed.
NEW SECTION. Sec. 2701 (1) Except as provided in subsection (2)
of this section, if any provision of sections 101 through 108 of this
act or its application to any person or circumstance is held invalid,
the remainder of sections 101 through 108 of this act or the
application of the provision to other persons or circumstances is not
affected.
(2) If a court of competent jurisdiction, in a final judgment not
subject to appeal, adjudges any provision of section 104(1)(c) of this
act unconstitutional or otherwise invalid, sections 101 through 108 of
this act are null and void in their entirety.
NEW SECTION. Sec. 2702 Sections 101 through 108 of this act
apply with respect to gross income of the business, as defined in RCW
82.04.080, including gross income from royalties as defined in RCW
82.04.2907, generated on and after July 1, 2010. For purposes of
calculating the thresholds in section 104(1)(c) of this act for the
2010 tax year, property, payroll, and receipts are based on the entire
2010 tax year.
NEW SECTION. Sec. 2703 Sections 201 through 212 of this act must
be construed liberally to effectuate the legislature's intent to ensure
that all businesses and individuals pay their fair share of taxes.
NEW SECTION. Sec. 2704 (1) Except as provided in subsection (2)
of this section, section 201 of this act applies to tax periods
beginning January 1, 2006.
(2) Section 201 of this act does not apply to any tax periods
ending before July 1, 2010, that were included in a completed field
audit conducted by the department.
NEW SECTION. Sec. 2705 Sections 502 and 702 of this act apply
both retroactively and prospectively.
NEW SECTION. Sec. 2706 Section 502 of this act does not affect
any final judgments, not subject to appeal, entered by a court of
competent jurisdiction before the effective date of this section.
NEW SECTION. Sec. 2707 Sections 901 and 902 of this act apply to
transfers or conveyances as described in RCW 82.45.010(3)(i) occurring
on and after April 1, 2010.
NEW SECTION. Sec. 2708 Sections 501, 502, and 2705 of this act
are necessary for the immediate preservation of the public peace,
health, or safety, or support of the state government and its existing
public institutions, and take effect immediately.
NEW SECTION. Sec. 2709 Except for sections 501, 502, 606, and
2705 of this act, 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 April
1, 2010.
NEW SECTION. Sec. 2710 Section 605 of this act expires July 1,
2011.
NEW SECTION. Sec. 2711 Section 606 of this act takes effect July
1, 2011.
NEW SECTION. Sec. 2712 Section 1401 of this act expires June 30,
2013.
NEW SECTION. Sec. 2713 Section 1402 of this act takes effect
June 30, 2013.
NEW SECTION. Sec. 2714 Sections 1702 and 1703 of this act apply
to claims for credit or refund filed with the department of revenue
after June 30, 2010.
NEW SECTION. Sec. 2715 Sections 1502 and 1504 of this act take
effect July 1, 2010, if chapter . . . ([House Bill No. 2460] [Senate
Bill No. 6228]), Laws of 2010 is not enacted as of July 1, 2010.
NEW SECTION. Sec. 2716 Sections 1501 and 1503 of this act take
effect July 1, 2010, if chapter . . . ([House Bill No. 2460] [Senate
Bill No. 6228]), Laws of 2010 is enacted as of July 1, 2010.
NEW SECTION. Sec. 2717 If any provision of this act or its
application to any person or circumstance is held invalid, the
remainder of the act or the application of the provision to other
persons or circumstances is not affected.