BILL REQ. #:  Z-0830.2 

Read first time 12/08/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to increasing tax revenue; amending RCW 82.04.120, 82.04.260, 82.04.280, 82.04.298, 82.04.440, 82.04.460, 82.08.02565, 82.08.806, 35.102.150, 82.04.4292, 82.04.4281, 82.04.650, 82.04.110, 82.08.020, 82.12.020, and 82.24.026; reenacting and amending RCW 82.32.790; adding new sections to chapter 82.04 RCW; adding a new chapter to Title 82 RCW; creating new sections; repealing RCW 82.08.0273; repealing 2010 c 106 s 206, 2009 c 461 s 3, 2006 c 300 s 7, and 2003 c 149 s 4; prescribing penalties; and providing an effective date.

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

NEW SECTION.  Sec. 101   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 products, including by-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 products, including by-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 products, including by-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) 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) Except as provided in (e)(i) of this subsection (3), "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. 102   RCW 82.04.120 and 2011 c 23 s 3 are each amended to read as follows:
     (1) "Manufacture" and "to manufacture" embraces all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different or useful substance or article of tangible personal property is produced for sale or commercial or industrial use, and includes:
     (a) The production or fabrication of special made or custom made articles;
     (b) The production or fabrication of dental appliances, devices, restorations, substitutes, or other dental laboratory products by a dental laboratory or dental technician;
     (c) Cutting, delimbing, and measuring of felled, cut, or taken trees; ((and))
     (d) Crushing and/or blending of rock, sand, stone, gravel, or ore; and
     (e) Printing.
     (2) "To manufacture" does not include:
     (a) Conditioning of seed for use in planting; cubing hay or alfalfa;
     (b) Activities which consist of cutting, grading, or ice glazing seafood which has been cooked, frozen, or canned outside this state;
     (c) The growing, harvesting, or producing of agricultural products;
     (d) Packing of agricultural products, including sorting, washing, rinsing, grading, waxing, treating with fungicide, packaging, chilling, or placing in controlled atmospheric storage;
     (e) The production of digital goods;
     (f) The production of computer software if the computer software is delivered from the seller to the purchaser by means other than tangible storage media, including the delivery by use of a tangible storage media where the tangible storage media is not physically transferred to the purchaser; and
     (g) Any activity that is integral to any public service business as defined in RCW 82.16.010 and with respect to which the gross income associated with such activity: (i) Is subject to tax under chapter 82.16 RCW; or (ii) would be subject to tax under chapter 82.16 RCW if such activity were conducted in this state or if not for an exemption or deduction.
     (3) With respect to wastewater treatment facilities:
     (a) "To manufacture" does not include the treatment of wastewater, the production of reclaimed water, and the production of class B biosolids; and
     (b) "To manufacture" does include the production of class A or exceptional quality biosolids, but only with respect to the processing activities that occur after the biosolids have reached class B standards.

Sec. 103   RCW 82.04.260 and 2011 c 2 s 203 (Initiative Measure No. 1107) are each 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 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)) such seafood products ((that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing,)) by the manufacturer 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 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)) such dairy products by the manufacturer to purchasers who transport in the ordinary course of business the goods out of state; as to such persons the tax imposed 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 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 is equal to the value of alcohol fuel, biodiesel fuel, or biodiesel feedstock manufactured, multiplied by the rate of 0.138 percent; and
     (f) Wood biomass fuel as defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business is equal to the value of 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 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 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 is equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
     (5))) 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 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 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 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 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 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 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 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 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 ((is)), in the case of manufacturers, 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, is equal to the gross income of the business, multiplied by the rate of:
     (i) 0.4235 percent from October 1, 2005, through 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 ((is)), in the case of manufacturers, 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 reporting under the tax rate provided in this subsection (((11))) (10) must file a complete annual report with the department under RCW 82.32.534.
     (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 timber for hire ((timber)); as to such persons the amount of tax with respect to the business ((is)), in the case of extractors, is equal to the value of products, including by-products, extracted, or in the case of extractors for hire, 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 ((is)), in the case of manufacturers, is equal to the value of products, including by-products, manufactured, or in the case of processors for hire, 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 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 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.
     (f) Except for small harvesters as defined in RCW 84.33.035, a person reporting under the tax rate provided in this subsection (((12))) (11) must file a complete annual survey with the department under RCW 82.32.585.
     (((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 is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.
     (((14))) (13)(a) Upon every person engaging within this state in the business of:
     (i) Printing a newspaper, the amount of tax on such business is equal to the value of the newspapers printed multiplied by the rate of 0.2904 percent;
     (ii) 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; or
     (iii) Selling, at retail or wholesale, newspapers that the person has printed or published, the amount of tax on such business is equal to the gross proceeds of sales multiplied by the rate of 0.2904 percent.
     (b) For purposes of this subsection, the following definitions apply:
     (i) "Publishing" has the same meaning as in RCW 82.04.280(2)(d); and
     (ii) "Value of the newspapers" has the same meaning as "value of products" in RCW 82.04.450.
     (((b))) (c) A person reporting under the tax rate provided in this subsection (((14))) (13) must file a complete annual report with the department under RCW 82.32.534.

Sec. 104   RCW 82.04.280 and 2010 c 106 s 205 are each amended to read as follows:
     (1) Upon every person engaging within this state in the business of: (a) ((Printing materials other than newspapers, and of)) Publishing periodicals ((or magazines)); (b) building, repairing or improving 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 and including any readjustment, reconstruction or relocation of the facilities of any public, private or cooperatively owned utility or railroad in the course of such building, repairing or improving, the cost of which readjustment, reconstruction, or relocation, is the responsibility of the public authority whose street, place, road, highway, easement, right-of-way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle is being built, repaired or improved; (c) extracting for hire or processing for hire, except persons taxable as extractors for hire or processors for hire under another section of this chapter; (d) operating a cold storage warehouse or storage warehouse, but not including the rental of cold storage lockers; (e) representing and performing services for fire or casualty insurance companies as an independent resident managing general agent licensed under the provisions of chapter 48.17 RCW; (f) radio and television broadcasting, excluding network, national and regional advertising computed as a standard deduction based on the national average thereof as annually reported by the federal communications commission, or in lieu thereof by itemization by the individual broadcasting station, and excluding that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the 100 micro-volt signal strength and delivery by wire, if any; (g) engaging in activities which bring a person within the definition of consumer contained in RCW 82.04.190(6); as to such persons, the amount of tax on such business is equal to the gross income of the business multiplied by the rate of 0.484 percent.
     (2) For the purposes of this section, the following definitions apply unless the context clearly requires otherwise.
     (a) "Cold storage warehouse" means a storage warehouse used to store fresh and/or frozen perishable fruits or vegetables, meat, seafood, dairy products, or fowl, or any combination thereof, at a desired temperature to maintain the quality of the product for orderly marketing.
     (b) "Storage warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation, except field warehouses, fruit warehouses, fruit packing plants, warehouses licensed under chapter 22.09 RCW, public garages storing automobiles, railroad freight sheds, docks and wharves, and "self-storage" or "mini storage" facilities whereby customers have direct access to individual storage areas by separate entrance. "Storage warehouse" does not include a building or structure, or that part of such building or structure, in which an activity taxable under RCW 82.04.272 is conducted.
     (c) "Periodical ((or magazine))" means a printed publication, ((other than a newspaper)) including a magazine, issued regularly at stated intervals at least once every three months, including any supplement or special edition of the publication. "Periodical" does not include a newspaper.
     (d) "Publishing" means publishing activities other than selling printed materials, and includes items such as advertising.

Sec. 105   RCW 82.04.298 and 2011 c 2 s 204 (Initiative Measure No. 1107) 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 101 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 101 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. 106   RCW 82.04.440 and 2011 c 2 s 205 (Initiative Measure No. 1107) are each 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, 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), or (d), (((4))) (10), (11), or (((12))) (13)(a)(iii), or section 101(2) of this act with respect to selling products in this state, including those persons who are also taxable under RCW 82.04.261, 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 may not exceed the tax liability arising under this chapter with respect to the sale of those products. No credit may be claimed under this subsection against the tax imposed under section 401 of this act.
     (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, 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 may not exceed the tax liability arising under this chapter with respect to the manufacturing of those products. No credit may be claimed under this subsection against the tax imposed under section 401 of this act.
     (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), (11), or (((12))) (13)(a)(i), or section 101(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 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 may not exceed the tax liability arising under this chapter with respect to the extraction or manufacturing of those products. No credit may be claimed under this subsection against the tax imposed under section 401 of this act.
     (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), (11), and (((12))) (13)(a)(i), or section 101(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. "Manufacturing tax" does not include the tax imposed in section 401 of this act.
     (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 [82.04.217])) 82.04.217, notwithstanding the use of those terms in the context of describing taxes imposed by other states.

Sec. 107   RCW 82.04.460 and 2011 c 174 s 203 are each amended to read as follows:
     (1) Except as otherwise provided in this section, any person earning apportionable income taxable under this chapter and also taxable in another state must, for the purpose of computing tax liability under this chapter, apportion to this state, in accordance with RCW 82.04.462, that portion of the person's apportionable income derived from business activities performed within this state.
     (2) The department must by rule provide a method of apportioning the apportionable income of financial institutions, where such apportionable income is taxable under RCW 82.04.290. The rule adopted by the department must, to the extent feasible, be consistent with the multistate tax commission's recommended formula for the apportionment and allocation of net income of financial institutions as existing on June 1, 2010, or such subsequent date as may be provided by the department by rule, consistent with the purposes of this section, except that:
     (a) The department's rule must provide for a single factor apportionment method based on the receipts factor; and
     (b) The definition of "financial institution" contained in appendix A to the multistate tax commission's recommended formula for the apportionment and allocation of net income of financial institutions is advisory only.
     (3) The department may by rule provide a method or methods of apportioning or allocating gross income derived from sales of telecommunications service and competitive telephone service 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 rule must provide for an equitable and constitutionally permissible division of the tax base.
     (4) 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), (4), (5), (6), (7), (8), (9), and (12);
     (iii) RCW 82.04.280 (1)(e);
     (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;
     (ix) RCW 82.04.263, 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 (4) if the tax classification in RCW 82.04.263 did not exist; and
     (x) RCW 82.04.260(13)(a)(ii) and 82.04.280(1)(a), but only with respect to advertising.
     (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 RCW 82.04.067(1).
     (ii) For purposes of this subsection (4)(b), "business activities tax" and "state" have the same meaning as in RCW 82.04.462.

NEW SECTION.  Sec. 108   A new section is added to chapter 82.04 RCW to read as follows:
     (1) An eligible publisher is entitled to a credit equal to the amount of manufacturing tax imposed on the publisher for printing the printed material in respect to which tax is imposed on the publishing of such material under RCW 82.04.260(13)(a)(ii) or 82.04.280(1)(a). The amount of the credit may not exceed the amount of tax otherwise due under RCW 82.04.260(13)(a)(ii) and 82.04.280(1)(a) with respect to the publishing of the printed material.
     (2) For purposes of this subsection, the following definitions apply.
     (a) "Eligible publisher" means any person that:
     (i) Is taxable under RCW 82.04.260(13)(a)(ii) on the activity of publishing a newspaper or RCW 82.04.280(1)(a) on the activity of publishing a periodical;
     (ii) Is also subject to a manufacturing tax on the activity of printing such newspaper or periodical; and
     (iii) Does not make retail or wholesale sales of such newspaper or periodical.
     (b) "Manufacturing tax" means a gross receipts tax imposed on the act or privilege of engaging in business as a printer, including the taxes imposed by RCW 82.04.240 and 82.04.260(13)(a)(i) and similar gross receipts taxes imposed by other states.

Sec. 109   RCW 82.08.02565 and 2011 c 23 s 2 are each amended to read as follows:
     (1)(a) The tax levied by RCW 82.08.020 does not apply to sales to a manufacturer or processor for hire of machinery and equipment used directly in a manufacturing operation or research and development operation, to sales to a person engaged in testing for a manufacturer or processor for hire of machinery and equipment used directly in a testing operation, or to sales of or charges made for labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the machinery and equipment.
     (b) Sellers making tax-exempt sales under this section must obtain from the purchaser an exemption certificate in a form and manner prescribed by the department by rule. The seller must retain a copy of the certificate for the seller's files.
     (2) For purposes of this section and RCW 82.12.02565:
     (a) "Machinery and equipment" means industrial fixtures, devices, and support facilities, and tangible personal property that becomes an ingredient or component thereof, including repair parts and replacement parts. "Machinery and equipment" includes pollution control equipment installed and used in a manufacturing operation, testing operation, or research and development operation to prevent air pollution, water pollution, or contamination that might otherwise result from the manufacturing operation, testing operation, or research and development operation. "Machinery and equipment" also includes digital goods.
     (b) "Machinery and equipment" does not include:
     (i) Hand-powered tools;
     (ii) Property with a useful life of less than one year;
     (iii) Buildings, other than machinery and equipment that is permanently affixed to or becomes a physical part of a building; and
     (iv) Building fixtures that are not integral to the manufacturing operation, testing operation, or research and development operation that are permanently affixed to and become a physical part of a building, such as utility systems for heating, ventilation, air conditioning, communications, plumbing, or electrical.
     (c) Machinery and equipment is "used directly" in a manufacturing operation, testing operation, or research and development operation if the machinery and equipment:
     (i) Acts upon or interacts with an item of tangible personal property;
     (ii) Conveys, transports, handles, or temporarily stores an item of tangible personal property at the manufacturing site or testing site;
     (iii) Controls, guides, measures, verifies, aligns, regulates, or tests tangible personal property at the site or away from the site;
     (iv) Provides physical support for or access to tangible personal property;
     (v) Produces power for, or lubricates machinery and equipment;
     (vi) Produces another item of tangible personal property for use in the manufacturing operation, testing operation, or research and development operation;
     (vii) Places tangible personal property in the container, package, or wrapping in which the tangible personal property is normally sold or transported; or
     (viii) Is integral to research and development as defined in RCW 82.63.010.
     (d) "Manufacturer" means a person that qualifies as a manufacturer under RCW 82.04.110. (("Manufacturer" also includes a person that prints newspapers or other materials.))
     (e) "Manufacturing" means only those activities that come within the definition of "to manufacture" in RCW 82.04.120 and are taxed as manufacturing or processing for hire under chapter 82.04 RCW, or would be taxed as such if such activity were conducted in this state or if not for an exemption or deduction. (("Manufacturing" also includes printing newspapers or other materials.)) An activity is not taxed as manufacturing or processing for hire under chapter 82.04 RCW if the activity is within the purview of chapter 82.16 RCW.
     (f) "Manufacturing operation" means the manufacturing of articles, substances, or commodities for sale as tangible personal property. A manufacturing operation begins at the point where the raw materials enter the manufacturing site and ends at the point where the processed material leaves the manufacturing site. With respect to the production of class A or exceptional quality biosolids by a wastewater treatment facility, the manufacturing operation begins at the point where class B biosolids undergo additional processing to achieve class A or exceptional quality standards. Notwithstanding anything to the contrary in this section, the term also includes 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. The term does not include the preparation of food products on the premises of a person selling food products at retail.
     (g) "Cogeneration" means the simultaneous generation of electrical energy and low-grade heat from the same fuel.
     (h) "Research and development operation" means engaging in research and development as defined in RCW 82.63.010 by a manufacturer or processor for hire.
     (i) "Testing" means activities performed to establish or determine the properties, qualities, and limitations of tangible personal property.
     (j) "Testing operation" means the testing of tangible personal property for a manufacturer or processor for hire. A testing operation begins at the point where the tangible personal property enters the testing site and ends at the point where the tangible personal property leaves the testing site. The term also includes the testing of tangible personal property for use in 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. The term does not include the testing of tangible personal property for use in the production of electricity by a light and power business as defined in RCW 82.16.010 or the preparation of food products on the premises of a person selling food products at retail.

Sec. 110   RCW 82.08.806 and 2011 c 174 s 204 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 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 82.04.240 on printing materials other than newspapers, 82.04.260(13), or 82.04.280(1)(a).
     (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 must be disregarded during the period of simultaneous use for purposes of determining whether the computer equipment is used primarily for administrative purposes.

Sec. 111   RCW 35.102.150 and 2011 c 174 s 201 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((,)) or 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((,)) or periodicals((, or magazines)) are those activities to which the tax rates in RCW 82.04.260(13) and 82.04.280(1)(a) apply, including the sale of newspapers or periodicals by the printer or publisher of the newspaper or periodical; printing materials other than newspapers; and the sale of printed material other than newspapers and periodicals by the person that printed such material.

NEW SECTION.  Sec. 112   2010 c 106 s 206, 2009 c 461 s 3, 2006 c 300 s 7, and 2003 c 149 s 4 are each repealed.

Sec. 113   RCW 82.32.790 and 2010 c 114 s 201 and 2010 c 106 s 401 are each reenacted and amended to read as follows:
     (1)(a) ((Section 206, chapter 106, Laws of 2010,)) Sections 104, 110, 117, 123, 125, 129, 131, and 150, chapter 114, Laws of 2010, ((section 3, chapter 461, Laws of 2009, section 7, chapter 300, Laws of 2006, and section 4)) and sections 1, 2, 3, 5 through 10, and 12, chapter 149, Laws of 2003 are contingent upon the siting and commercial operation of a significant semiconductor microchip fabrication facility in the state of Washington.
     (b) For the purposes of this section:
     (i) "Commercial operation" means the same as "commencement of commercial production" as used in RCW 82.08.965.
     (ii) "Semiconductor microchip fabrication" means "manufacturing semiconductor microchips" as defined in RCW 82.04.426.
     (iii) "Significant" means the combined investment of new buildings and new machinery and equipment in the buildings, at the commencement of commercial production, will be at least one billion dollars.
     (2) Sections 104, 110, 117, 123, 125, 129, 131, and 150, chapter 114, Laws of 2010, and sections 1, 2, 3, 5 through 10, and 12, chapter 149, Laws of 2003 takes effect the first day of the month in which a contract for the construction of a significant semiconductor fabrication facility is signed, as determined by the director of the department of revenue.
     (3)(a) The department of revenue must provide notice of the effective date of sections 104, 110, 117, 123, 125, 129, 131, and 150, chapter 114, Laws of 2010(([,] section 3, chapter 461, Laws of 2009, section 7, chapter 300, Laws of 2006, and section 4)) and sections 1, 2, 3, 5 through 10, and 12, chapter 149, Laws of 2003 to affected taxpayers, the legislature, and others as deemed appropriate by the department.
     (b) If, after making a determination that a contract has been signed and sections 104, 110, 117, 123, 125, 129, 131, and 150, chapter 114, Laws of 2010, and sections 1, 2, 3, 5 through 10, and 12, chapter 149, Laws of 2003 ((is)) are effective, the department discovers that commencement of commercial production did not take place within three years of the date the contract was signed, the department must make a determination that sections 104, 110, 117, 123, 125, 129, 131, and 150, chapter 114, Laws of 2010, and sections 1, 2, 3, 5 through 10, and 12, chapter 149, Laws of 2003 ((is)) are no longer effective, and all taxes that would have been otherwise due are deemed deferred taxes and are immediately assessed and payable from any person reporting tax under RCW 82.04.240(2) or claiming an exemption or credit under ((section 2 or 5 through 10, chapter 149, Laws of 2003)) RCW 82.04.426, 82.04.448, 82.08.965, 82.08.970, 82.12.965, 82.12.970, or 84.36.645. The department is not authorized to make a second determination regarding the effective date of sections 104, 110, 117, 123, 125, 129, 131, and 150, chapter 114, Laws of 2010, and sections 1, 2, 3, 5 through 10, and 12, chapter 149, Laws of 2003.

Sec. 201   RCW 82.04.4292 and 2010 1st sp.s. c 23 s 301 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, 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; 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;
     (d) Gains on the sale of valuable rights such as service release premiums, which are amounts received when servicing rights are sold; and
     (e) Gains on the sale of loans, except deferred loan origination fees and points deductible under subsection (2) of this section, are not to be considered part of the proceeds of sale of the loan.
     (4) Notwithstanding subsection (3) of this section, in computing tax there may be deducted from the measure of tax by those engaged in banking, loan, security, or other financial businesses, amounts received for servicing loans primarily secured by first mortgages or trust deeds on nontransient residential properties, including such loans that secure mortgage-backed or mortgage-related securities, but only if:
     (a)(i) The loans were originated by the person claiming a deduction under this subsection (4) and that person either sold the loans on the secondary market or securitized the loans and sold the securities on the secondary market; or
     (ii)(A) The person claiming a deduction under this subsection (4) acquired the loans from the person that originated the loans through a merger or acquisition of substantially all of the assets of the person who originated the loans, or the person claiming a deduction under this subsection (4) is affiliated with the person that originated the loans((. 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)); and
     (B) Either the person who originated the loans or the person claiming a deduction under this subsection (4) sold the loans on the secondary market or securitized the loans and sold the securities on the secondary market; and
     (b) The amounts received for servicing the loans are determined by a percentage of the interest paid by the borrower and are only received if the borrower makes interest payments.
     (5) The deductions provided in this section do not apply to:
     (a) Investment conduits and securitization entities as defined in RCW 82.04.650; or
     (b) Any person that is located in more than ten states. For the purposes of this subsection, a person is located in a state if:
     (i) The person or an affiliate of the person maintains a branch, office, or one or more employees or representatives in the state; and
     (ii) Such in-state presence allows borrowers or potential borrowers to contact the branch, office, employee, or representative concerning the acquiring, negotiating, renegotiating, or restructuring of, or making payments on, mortgages issued or to be issued by the person or an affiliate of the person.
     (6) For purposes of this section, "affiliate" means a person is affiliated with another person, and "affiliated" has the same meaning as in RCW 82.04.645.
     (7) No person may claim any deduction under this section for interest received on and after the effective date of any final judgment, decree, or order of a court of competent jurisdiction, not subject to appeal, adjudging any provision of section 201, chapter . . ., Laws of 2011 2nd sp. sess. (section 201 of this act) or its application to any person or circumstance as unconstitutional under either the Constitution of the state or of the United States.

Sec. 202   RCW 82.04.4281 and 2007 c 54 s 9 are each amended to read as follows:
     (1) In computing tax there may be deducted from the measure of tax:
     (a) Amounts derived from investments;
     (b) Amounts derived as dividends or distributions from the capital account by a parent from its subsidiary entities; and
     (c) Amounts derived from interest on loans between subsidiary entities and a parent entity or between subsidiaries of a common parent entity, but only if the total investment and loan income is less than five percent of gross receipts of the business annually.
     (2) The following are not deductible under subsection (1)(a) of this section:
     (a) Amounts received from loans, except as provided in subsection (1)(c) of this section, or the extension of credit to another, revolving credit arrangements, installment sales, the acceptance of payment over time for goods or services, or any of the foregoing that have been transferred by the originator of the same to an affiliate of the transferor; ((or))
     (b) Amounts received by a banking, lending, or security business; or
     (c) Amounts received by investment conduits or securitization entities from investments or loans primarily secured by mortgages or trust deeds on real property.
     (3) The definitions in this subsection apply only to this section.
     (a) "Banking business" means a person engaging in business as a national or state-chartered bank, a mutual savings bank, a savings and loan association, a trust company, an alien bank, a foreign bank, a credit union, a stock savings bank, or a similar entity that is chartered under Title 30, 31, 32, or 33 RCW, or organized under Title 12 U.S.C.
     (b) "Lending business" means a person engaged in the business of making secured or unsecured loans of money, or extending credit, and (i) more than one-half of the person's gross income is earned from such activities and (ii) more than one-half of the person's total expenditures are incurred in support of such activities.
     (c) The terms "loan" and "extension of credit" do not include ownership of or trading in publicly traded debt instruments, or substantially equivalent instruments offered in a private placement.
     (d) "Security business" means a person, other than an issuer, who is engaged in the business of effecting transactions in securities as a broker, dealer, or broker-dealer, as those terms are defined in the securities act of Washington, chapter 21.20 RCW, or the federal securities act of 1933. "Security business" does not include any company excluded from the definition of broker or dealer under the federal investment company act of 1940 or any entity that is not an investment company by reason of sections 3(c)(1) and 3(c)(3) through 3(c)(14) thereof.
     (e) "Investment conduits" and "securitization entities" have the same meaning as in RCW 82.04.650.

Sec. 203   RCW 82.04.650 and 2010 1st sp.s. c 23 s 111 are each amended to read as follows:
     (1) This chapter does not apply to amounts received by investment conduits or securitization entities from cash and securities.
     (2) For purposes of this section, the following definitions apply:
     (a) "Investment conduit" means an entity formed by a financial institution as defined in RCW 82.04.080 for the express purpose of holding or owning cash or securities if the entity formed:
     (i) Has no employees;
     (ii) Has no direct profit-making motive;
     (iii) Owns no tangible assets, other than cash or securities;
     (iv) Holds or owns cash or securities solely as a conduit, allocating its income to holders of its ownership interests; and
     (v) Has, within twelve months of its organization or initial capitalization date, issued ownership interests to other than affiliated persons, equal to or greater than twenty-five percent of its total issued ownership interests.
     (b) "Securities" has the same meaning as in section 2 of the securities act of 1933 and includes eligible assets as defined by Rule 3a-7 of the investment company act, as the law and rule exist on June 1, 2010, or such subsequent date as may be provided by the department by rule, consistent with the purposes of this section. Securities do not include investments directly or indirectly secured primarily by real property, including but not limited to mortgages, trust deeds, mortgage backed securities, and collateralized mortgage obligations.
     (c) "Securitization entity" means an entity created by a bank holding company if the entity created:
     (i) Has no employees;
     (ii) Has no direct profit-making motive;
     (iii) Owns no tangible assets, other than cash, fixed or revolving discrete pools of credit or charge card receivables originated by a financial institution, or securities;
     (iv) Acts solely as a conduit, allocating its income to holders of its ownership interests; and
     (v) Has as its sole business activities the:
     (A) Acquisition of such discrete pools of credit or charge card receivables; and
     (B) Issuance or causing the issuance of securities primarily to persons not affiliated with the entity.
     (d) "Bank holding company" has the same meaning as provided in the bank holding company act of 1956, as existing on June 1, 2010, or such subsequent date as may be provided by the department by rule, consistent with the purposes of this section.
     (e) "No direct profit-making motive" means that all of an entity's income, less a reasonable servicing fee, is paid to holders of its ownership interests.
     (f) "Ownership interest" means interests categorized as debt or equity for purposes of federal tax or generally accepted accounting principles.
     (g) "Affiliated" has the same meaning as in RCW 82.04.645.

Sec. 301   RCW 82.04.110 and 2009 c 535 s 405 are each amended to read as follows:
     (1) Except as otherwise provided in this section, "manufacturer" means every person who, either directly or by contracting with others for the necessary labor or mechanical services, manufactures for sale or for commercial or industrial use from his or her own materials or ingredients any articles, substances, or commodities.
     (2)(a) When the owner of equipment or facilities furnishes, or sells to the customer prior to manufacture, all or a portion of the materials that become a part or whole of the manufactured article, the department ((shall)) must prescribe equitable rules for determining tax liability.
     (b) A person who produces aluminum master alloys is a processor for hire rather than a manufacturer, regardless of the portion of the aluminum provided by that person's customer. For the purposes of this subsection (2)(b), "aluminum master alloy" means an alloy registered with the aluminum association as a grain refiner or a hardener alloy using the American national standards institute designating system H35.3.
     (3) Except as provided in subsection (5) of this section, a nonresident of this state who is the owner of materials processed for it in this state by a processor for hire ((shall)) is not ((be)) deemed to be engaged in business in this state as a manufacturer because of the performance of such processing work for it in this state.
     (4) Except as provided in subsection (5) of this section, the owner of materials from which a nuclear fuel assembly is made for it by a processor for hire ((shall)) is not ((be)) subject to tax under this chapter as a manufacturer of the fuel assembly.
     (5) A nonresident of this state who is the owner of materials processed for it in this state or from which a nuclear fuel assembly is made for it in this state, by a processor for hire, is engaged within this state in business as a manufacturer if the nonresident owner of the materials and processor for hire are affiliated. For purposes of this subsection, "affiliated" has the same meaning as in RCW 82.04.645.
     (6) For purposes of this section, the terms "articles," "substances," "materials," "ingredients," and "commodities" do not include digital goods.

NEW SECTION.  Sec. 401   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Beginning July 1, 2012, an additional tax is imposed on every person engaging within this state as a specified petroleum business. The tax equals the taxable amounts required to be reported on the state combined excise tax return for wholesale sales and for all manufacturing activities subject to tax under this chapter, multiplied by the rate of 0.60 percent. The tax imposed in this section is in addition to the tax imposed under any other provision of this chapter on the same wholesale sales and manufacturing activities. The credits provided in RCW 82.04.440 do not apply to the tax imposed in this section.
     (2) The additional tax imposed under subsection (1) of this section applies during every twelve-month period beginning six months following any tax year in which a taxpayer qualifies as a specified petroleum business.
     (3) For purposes of this section, the following definitions apply:
     (a) "Specified petroleum business" means a petroleum business that is a member of a consolidated group that:
     (i) Reported annual net income for a tax year of at least one billion dollars; and
     (ii) The annual net income for that tax year was five percent or more of total revenue reported for federal income tax purposes for that tax year.
     (b) "Consolidated group" means all petroleum businesses whose income is reported on a consolidated basis to the federal internal revenue service and may include a single entity.
     (c) "Tax year" means the tax year used by the consolidated group to report its income to the federal internal revenue service.
     (d) "Petroleum business" means a person in the business of refining crude oil into refined petroleum products by fractionation, straight distillation, cracking, or similar methods.
     (e) "Annual net income" is the amount subject to income tax as reported on the annual return filed with the federal internal revenue service.
     (4) The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of this section. The rules, to the extent possible without being inconsistent with this section, must follow the internal revenue code and the regulations and rulings of the United States department of the treasury with respect to the federal income tax. The department may adopt as a part of these rules any portions of the internal revenue code and treasury department regulations and rulings, in whole or in part.

NEW SECTION.  Sec. 402   Section 401 of this act applies to business activities engaged in within this state after June 30, 2012.

NEW SECTION.  Sec. 501   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Beginning July 1, 2012, an additional tax is imposed on every person engaging within this state in business as a specified financial business. The tax equals the taxable amount required to be reported on the state combined excise tax return for activities taxable under RCW 82.04.290 multiplied by the rate of 1.5 percent. The tax imposed in this section is in addition to the tax imposed by RCW 82.04.290 on the same activities.
     (2) The additional tax imposed by subsection (1) of this section applies during the twelve-month period beginning July 1st immediately following any calendar year in which a financial business qualifies as a specified financial business.
     (3) For the purposes of this section, the following definitions apply:
     (a) "Specified financial business" means a financial business that is a member of a consolidated financial business group that on its consolidated financial statement for a calendar year:
     (i) Reported annual net income before taxes of at least one billion dollars; and
     (ii) The annual net income before taxes was five percent or more of its total revenue for that year. The department must define "total revenue" by rule in such a way that a person's total revenue can be determined by reference to the person's consolidated financial statement.
     (b) "Consolidated financial statement" means the consolidated financial business group's financial statements prepared according to generally accepted accounting principles and filed with the federal financial institutions examination council, or successor agency.
     (c) "Consolidated financial business group" means all financial businesses that are affiliated. For purposes of this subsection, "affiliated" has the same meaning as in RCW 82.04.645.
     (d) "Financial business" means any person who is:
     (i) Chartered under Title 30, 31, 32, or 33 RCW;
     (ii) Registered under the federal bank holding company act of 1956;
     (iii) Registered as a savings and loan holding company under the national bank act;
     (iv) Organized as a national bank association pursuant to the national bank act;
     (v) A savings association or federal savings bank as defined in the federal deposit insurance act;
     (vi) A bank or thrift institution incorporated or organized under the laws of any state;
     (vii) Organized under the provisions of 12 U.S.C. Secs. 611 through 631;
     (viii) An agency or branch of a foreign depository as defined in 12 U.S.C. Sec. 3101;
     (ix) A credit union; or
     (x) A production credit association organized under the federal farm credit act of 1933.

NEW SECTION.  Sec. 502   Section 501 of this act applies to business activities engaged in within this state after June 30, 2012.

Sec. 601   RCW 82.08.020 and 2011 c 171 s 120 are each amended to read as follows:
     (1) There is levied and collected a tax equal to six and five-tenths percent of the selling price on each retail sale in this state of:
     (a) Tangible personal property, unless the sale is specifically excluded from the RCW 82.04.050 definition of retail sale;
     (b) Digital goods, digital codes, and digital automated services, if the sale is included within the RCW 82.04.050 definition of retail sale;
     (c) Services, other than digital automated services, included within the RCW 82.04.050 definition of retail sale;
     (d) Extended warranties to consumers; and
     (e) Anything else, the sale of which is included within the RCW 82.04.050 definition of retail sale.
     (2) There is levied and collected an additional tax on each retail car rental, regardless of whether the vehicle is licensed in this state, equal to five and nine-tenths percent of the selling price. The revenue collected under this subsection must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (3)(a) Beginning July 1, 2003, there is levied and collected an additional tax of three-tenths of one percent of the selling price on each retail sale of a motor vehicle in this state, other than retail car rentals taxed under subsection (2) of this section. The revenue collected under this subsection must be deposited in the multimodal transportation account created in RCW 47.66.070.
     (((4))) (b) For purposes of this subsection (3) ((of this section)), "motor vehicle" has the meaning provided in RCW 46.04.320, but does not include farm tractors or farm vehicles as defined in RCW 46.04.180 and 46.04.181, off-road vehicles as defined in RCW 46.04.365, nonhighway vehicles as defined in RCW 46.09.310, and snowmobiles as defined in RCW 46.04.546.
     (4)(a) In addition to the taxes imposed in subsections (1) and (3) of this section, there is levied and collected a tax equal to five percent of the selling price of a passenger motor vehicle if:
     (i) The selling price of the passenger motor vehicle exceeds fifty thousand dollars; or
     (ii) In the case of a lease requiring periodic payments, the fair market value of the passenger motor vehicle, without any deduction for the value of separately stated trade-in property of like kind, exceeds fifty thousand dollars at the inception of the lease.
     (b) The additional tax imposed in this subsection applies regardless of whether the vehicle is used for personal, business, or other purposes.
     (c) For purposes of this subsection, "passenger motor vehicle" means any motor vehicle that is designed for carrying ten passengers or fewer, including cars, light trucks, limousines, motorcycles, motor homes, passenger vans, and sport utility vehicles. For purposes of this subsection (4)(c), the definitions in chapter 46.04 RCW apply.
     (d) For purposes of the tax imposed in this subsection only, "selling price" has the same meaning as in RCW 82.08.010 except that no deduction may be made for the value of separately stated trade-in property of like kind.
     (5) Beginning on December 8, 2005, 0.16 percent of the taxes collected under subsection (1) of this section must be dedicated to funding comprehensive performance audits required under RCW 43.09.470. The revenue identified in this subsection must be deposited in the performance audits of government account created in RCW 43.09.475.
     (6) The taxes imposed under this chapter apply to successive retail sales of the same property.
     (7) The rates provided in this section apply to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

Sec. 602   RCW 82.12.020 and 2010 1st sp.s. c 23 s 206 are each amended to read as follows:
     (1) There is levied and 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 acquired by 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 otherwise provided in (((b) of this subsection (4))) this section, 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.
     (6)(a) The tax imposed in this section at the rate provided in RCW 82.08.020(4) applies to the use of a passenger motor vehicle as defined in RCW 82.08.020(4) if the value of the passenger motor vehicle exceeds fifty thousand dollars at the time that it is first used in this state by the consumer.
     (b) The measure of the tax imposed in this section at the rate provided in RCW 82.08.020(4) is the value of the passenger motor vehicle.
     (c) "Value of the passenger motor vehicle" means the fair market value of the passenger motor vehicle, which must be determined without any deduction for separately stated trade-in property of like kind. In the case of a leased passenger motor vehicle in which the consumer is required to make periodic lease payments, "value of the passenger motor vehicle" means the fair market value of the passenger motor vehicle at the inception of the lease.

NEW SECTION.  Sec. 603   The additional sales and use tax imposed in sections 601 and 602 of this act applies only to passenger motor vehicles acquired by the taxpayer on and after the effective date of this section. In the case of leased passenger motor vehicles, the additional sales and use tax imposed in sections 601 and 602 of this act applies only with respect to leases entered into by the taxpayer on or after the effective date of this section.

NEW SECTION.  Sec. 701   RCW 82.08.0273 (Exemptions -- Sales to nonresidents of tangible personal property, digital goods, and digital codes for use outside the state -- Proof of nonresident status--Penalties) and 2011 c 7 s 1, 2010 c 106 s 215, 2009 c 535 s 512, 2007 c 135 s 2, 2003 c 53 s 399, 1993 c 444 s 1, 1988 c 96 s 1, 1982 1st ex.s. c 5 s 1, & 1980 c 37 s 39 are each repealed.

NEW SECTION.  Sec. 702   The repeal in section 701 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 proceedings instituted under it.

Sec. 801   RCW 82.24.026 and 2011 c 334 s 1 are each amended to read as follows:
     (1) In addition to the tax imposed upon the sale, use, consumption, handling, possession, or distribution of cigarettes set forth in RCW 82.24.020, there is imposed a tax in an amount equal to:
     (a) Three cents per cigarette; and
     (b) Beginning July 1, 2012, one and twenty-five hundredths cent per cigarette.
     ((Beginning July 1, 2010,)) (2) The revenue collected under this section must be deposited into the general fund.

NEW SECTION.  Sec. 901   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Department" means the department of revenue.
     (2) "Gambling activity" means the risking of any money or other thing of value for gain contingent in whole or in part upon lot, chance, the operating of a gambling device, or the happening or outcome of a sporting or other event. The term includes, but is not limited to, lotteries, bingo, slot machines, video lottery terminals, keno, poker, horse racing, dog racing, Jai Alai, sweepstakes, raffles, pull-tabs, scratch tickets, wagering pools, sports betting, poker tournaments, parimutuel wagering, and any other wagering, betting, or gaming activities. An activity may be a "gambling activity" regardless of the medium used to conduct the activity, which can include, but is not limited to, activities conducted at a physical location, through the internet, over the phone, or by mail. "Gambling activity" does not include bona fide contests of skill, speed, strength, or endurance in which awards are made only to entrants or the owners of entries and bona fide business or financial transactions.
     (3) "Gambling operator" means any person that conducts a gambling activity.
     (4) "Gross winnings" means the gross income received from engaging in any gambling activity without deduction for gambling activity losses or any other expenses. Gross winnings include amounts received whether paid in cash, cash equivalent, or noncash form of remuneration or prize, including real property, personal property, and services. Real property, personal property, and services must be valued at fair market value. Gross winnings include amounts paid in a lump sum or structured as an annuity paid over time.
     (5) "Nonresident" means:
     (a) With respect to natural persons, an individual whose domicile is not in this state and who does not reside in this state for more than one hundred eighty-three days during the tax year; and
     (b) With respect to entities, a person who is domiciled outside this state. For purposes of this subsection (5)(b), an entity will be considered to be domiciled outside this state if the principal place from which the entity is directed or managed is located outside this state.
     (6) "Person" means any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, municipal corporation, corporation, limited liability company, association, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise; this or any other state of the United States; any commonwealth, territory, or possession of the United States; the District of Columbia; and any foreign country or political subdivision of a foreign country. The term "person" may be construed to include federally recognized Indian tribes only where the context clearly requires such a construction.
     (7) "Reportable winnings" means gross winnings that are required to be reported by the gambling operator to the United States internal revenue service for income tax purposes on Form W-2G or similar form.
     (8) "Resident" means:
     (a) With respect to natural persons, an individual whose domicile is in this state or whose domicile is not in this state but who resides in this state for more than one hundred eighty-three days during the tax year; and
     (b) With respect to entities, a person who is domiciled in this state. For purposes of this subsection (8)(b), an entity will be considered to be domiciled in this state if the principal place from which the entity is directed or managed is located in this state.
     (9) "Responsible person" means a gambling operator that is responsible for paying gross winnings to taxpayers for gambling activity conducted in Washington. "Responsible person" does not include any federally recognized Indian tribe or any other person that the state may not compel to withhold and remit the tax imposed by section 902 of this act.
     (10) "Taxpayer" means a resident that receives reportable winnings from a gambling operator for gambling activity conducted within or outside this state and a nonresident that receives reportable winnings from a gambling operator for gambling activity conducted within this state. If the winner is not the person receiving reportable winnings from the gambling operator, the "taxpayer" is the person that received the reportable winnings from the gambling operator. "Taxpayer" does not include any enrolled member of a federally recognized Indian tribe with respect to gross winnings received from gambling activity conducted within the jurisdiction of such tribe or any other person that is exempt from the tax imposed in section 902 of this act under the Constitution or laws of the United States.

NEW SECTION.  Sec. 902   (1) A tax is imposed on every resident taxpayer for the privilege of receiving reportable winnings from gambling activity engaged in by the taxpayer within and outside of this state. The amount of such tax is the taxpayer's reportable winnings multiplied by a rate of one and one-half percent.
     (2) A tax is imposed on every nonresident taxpayer for the privilege of receiving reportable winnings from gambling activity engaged in within this state. The amount of such tax is the taxpayer's reportable winnings from gambling activity engaged in within this state multiplied by a rate of one and one-half percent.

NEW SECTION.  Sec. 903   (1) In computing the tax due under section 902(1) of this act, a credit is allowed for taxes legally imposed by and paid by the taxpayer to any other state, with respect to the same reportable winnings subject to tax under section 902(1) of this act, regardless of whether the other state's tax is imposed on gross winnings or allows for deductions for gambling losses or gambling expenses.
     (2) The credit under this section may not exceed the amount of tax otherwise due under section 902(1) of this act.
     (3) For purposes of this section, "state" means a state, possession, territory, or commonwealth of the United States other than the state of Washington; a political subdivision of such other state, possession, territory, or commonwealth of the United States; the District of Columbia; or any foreign country or political subdivision of a foreign country.

NEW SECTION.  Sec. 904   The tax imposed by section 902 of this act does not apply to any amounts that the state is prohibited from taxing under the Constitution of this state or the Constitution or laws of the United States.

NEW SECTION.  Sec. 905   (1) Every responsible person must withhold and remit to the department the tax imposed by section 902 of this act on all of the reportable winnings paid by the responsible person to any taxpayer for gambling activity conducted in this state.
     (2) The responsible person and taxpayer are jointly and severally liable for any tax that must be withheld under this section. If the responsible person properly withholds the tax imposed under section 902 of this act, the taxpayer is relieved of liability for the tax.
     (3) The tax required to be withheld and remitted to the department under this section by responsible persons, along with returns as prescribed by the department, are due monthly within twenty-five days after the end of the month in which the tax imposed in section 902 of this act was required to be withheld. The department may relieve any responsible person or class of responsible persons from the requirement to report and remit taxes monthly and may establish an alternative frequency for reporting and remitting the tax as provided in RCW 82.32.045(2).
     (4) In cases where no responsible person is required to withhold and remit the tax due under section 902 of this act or fails to do so, the taxpayer is solely liable for reporting and paying the tax to the department.
     (5) The department may require responsible persons to file returns and remit taxes electronically in accordance with RCW 82.32.080 and 82.32.085.
     (6) The tax withheld by a responsible person as required by this section is held in trust by the responsible person until paid to the department. Any responsible person that appropriates or converts withheld taxes to the responsible person's own use or to any use other than the payment of the tax to the extent that the taxes withheld are not available for payment on the due date as prescribed in this chapter is guilty of a gross misdemeanor.
     (7)(a) If any responsible person does not withhold the tax imposed in this chapter as required by this section, or having withheld the tax, fails to pay it to the department in the manner prescribed by this chapter, whether such failure is the result of the responsible person's own acts or the result of acts or conditions beyond the responsible person's control, the responsible person is, nevertheless, personally liable for the amount of the tax, including any applicable penalties and interest assessed on those taxes under chapter 82.32 RCW.
     (b) Personal liability under this subsection for withheld taxes, including penalties and interest, also extends to any employee, officer, or agent of the responsible person that had supervision of taxes withheld as required by this section or the authority, whether express or implied, to ensure that withheld taxes were remitted to the department. The department may issue an assessment under this subsection (7)(b) to an individual only if the responsible person is a limited liability business entity and has been terminated, dissolved, abandoned, or is insolvent. For purposes of this section, the definitions and presumptions in RCW 82.32.145 apply.

NEW SECTION.  Sec. 906   (1) Taxpayers are required to report tax liability incurred under section 902 of this act on returns as prescribed by the department and remit any tax due no later than January 31st of the year immediately following the tax year covered by the return. The department may, in its sole discretion, relieve taxpayers of the responsibility to file returns if the full amount of tax due on their reportable winnings was withheld by one or more responsible parties.
     (2) The department may require taxpayers to file returns and remit taxes electronically in accordance with RCW 82.32.080 and 82.32.085.
     (3) If a taxpayer fails to report and pay the tax imposed in section 902 of this act by the due date or any extension granted by the department, the department must assess a penalty of twenty-five percent of the tax due under section 902 of this act. This penalty is in addition to any applicable penalties imposed in RCW 82.32.090.

NEW SECTION.  Sec. 907   The taxable event for purposes of the taxes required to be withheld and remitted under section 905 of this act or reported and paid under section 906 of this act occurs on the day that reportable winnings are paid or transferred to the taxpayer. If reportable winnings are paid in the form of a structured annuity, a taxable event occurs on each day that an annuity payment is issued to the taxpayer.

NEW SECTION.  Sec. 908   The provisions of chapter 82.32 RCW not inconsistent with this chapter apply to the assessment and collection of the tax imposed in section 902 of this act.

NEW SECTION.  Sec. 909   The department may adopt rules necessary to administer this chapter. In adopting rules, the department must consider the utility of consistency with relevant rules adopted by the federal internal revenue service. The department must develop any forms needed to report and remit taxes imposed under this chapter in such form and manner as prescribed by the department.

NEW SECTION.  Sec. 1001   Sections 901 through 909 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION.  Sec. 1002   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.

NEW SECTION.  Sec. 1003   This act takes effect July 1, 2012.