BILL REQ. #:  Z-0575.1 

Read first time 02/21/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to making changes to laws administered by the department of revenue that do not create any new or, except for the deduction in RCW 82.04.4297, broaden any existing tax preference as defined in RCW 43.136.021 or increase any person's tax burden; amending RCW 82.04.220, 82.12.040, 82.04.4297, 82.04.431, and 43.06.400; repealing RCW 82.16.140 and 82.32.570; and providing an effective date.

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

Sec. 1   RCW 82.04.220 and 2010 1st sp.s. c 23 s 102 are each amended to read as follows:
     (1) There is levied and collected from every person that has a substantial nexus with this state a tax for the act or privilege of engaging in business activities. The tax is measured by the application of rates against value of products, gross proceeds of sales, or gross income of the business, as the case may be.
     (2) A person who has a substantial nexus with this state in any tax year under the provisions of RCW 82.04.067 will be deemed to have a substantial nexus with this state for the following tax year.

NEW SECTION.  Sec. 2   The following acts or parts of acts are each repealed:
     (1) RCW 82.16.140 (Renewable energy system cost recovery -- Report to legislature) and 2010 c 202 s 4 & 2005 c 300 s 5; and
     (2) RCW 82.32.570 (Smelter tax incentives -- Goals -- Annual report) and 2010 1st sp.s. c 2 s 6, 2006 c 182 s 6, & 2004 c 24 s 14.

Sec. 3   RCW 82.12.040 and 2010 c 106 s 221 are each amended to read as follows:
     (1) Every person who maintains in this state a place of business or a stock of goods, or engages in business activities within this state, shall obtain from the department a certificate of registration, and shall, at the time of making sales of tangible personal property, digital goods, digital codes, digital automated services, extended warranties, or sales of any service defined as a retail sale in RCW 82.04.050 (2) (a) or (g), (3)(a), or (6)(b), or making transfers of either possession or title, or both, of tangible personal property for use in this state, collect from the purchasers or transferees the tax imposed under this chapter. The tax to be collected under this section must be in an amount equal to the purchase price multiplied by the rate in effect for the retail sales tax under RCW 82.08.020. For the purposes of this chapter, the phrase "maintains in this state a place of business" shall include the solicitation of sales and/or taking of orders by sales agents or traveling representatives. For the purposes of this chapter, "engages in business activity within this state" includes every activity which is sufficient under the Constitution of the United States for this state to require collection of tax under this chapter. The department must in rules specify activities which constitute engaging in business activity within this state, and must keep the rules current with future court interpretations of the Constitution of the United States.
     (2) Every person who engages in this state in the business of acting as an independent selling agent for persons who do not hold a valid certificate of registration, and who receives compensation by reason of sales of tangible personal property, digital goods, digital codes, digital automated services, extended warranties, or sales of any service defined as a retail sale in RCW 82.04.050 (2) (a) or (g), (3)(a), or (6)(b), of his or her principals for use in this state, must, at the time such sales are made, collect from the purchasers the tax imposed on the purchase price under this chapter, and for that purpose is deemed a retailer as defined in this chapter.
     (3) The tax required to be collected by this chapter is deemed to be held in trust by the retailer until paid to the department, and any retailer who appropriates or converts the tax collected to the retailer's own use or to any use other than the payment of the tax provided herein to the extent that the money required to be collected is not available for payment on the due date as prescribed is guilty of a misdemeanor. In case any seller fails to collect the tax herein imposed or having collected the tax, fails to pay the same to the department in the manner prescribed, whether such failure is the result of the seller's own acts or the result of acts or conditions beyond the seller's control, the seller is nevertheless personally liable to the state for the amount of such tax, unless the seller has taken from the buyer a copy of a direct pay permit issued under RCW 82.32.087.
     (4) Any retailer who refunds, remits, or rebates to a purchaser, or transferee, either directly or indirectly, and by whatever means, all or any part of the tax levied by this chapter is guilty of a misdemeanor.
     (5) Notwithstanding subsections (1) through (4) of this section, any person making sales is not obligated to collect the tax imposed by this chapter if:
     (a) The person's activities in this state, whether conducted directly or through another person, are limited to:
     (i) The storage, dissemination, or display of advertising;
     (ii) The taking of orders; or
     (iii) The processing of payments; and
     (b) The activities are conducted electronically via a web site on a server or other computer equipment located in Washington that is not owned or operated by the person making sales into this state nor owned or operated by an affiliated person. "Affiliated persons" has the same meaning as provided in RCW 82.04.424.
     (6) Subsection (5) of this section expires when: (a) The United States congress grants individual states the authority to impose sales and use tax collection duties on remote sellers; or (b) it is determined by a court of competent jurisdiction, in a judgment not subject to review, that a state can impose sales and use tax collection duties on remote sellers.
     (7) Notwithstanding subsections (1) through (4) of this section, any person making sales is not obligated to collect the tax imposed by this chapter if the person would have been obligated to collect retail sales tax on the sale absent a specific exemption provided in chapter 82.08 RCW, and there is no corresponding use tax exemption in this chapter. Nothing in this subsection (7) may be construed as relieving purchasers from liability for reporting and remitting the tax due under this chapter directly to the department.
     (8) Notwithstanding subsections (1) through (4) of this section, any person making sales is not obligated to collect the tax imposed by this chapter if the state is prohibited under the Constitution or laws of the United States from requiring the person to collect the tax imposed by this chapter.

Sec. 4   RCW 82.04.4297 and 2002 c 314 s 3 are each amended to read as follows:
     In computing tax there may be deducted from the measure of tax amounts received from the United States or any instrumentality thereof or from the state of Washington or any municipal corporation or political subdivision thereof as compensation for, or to support, health or social welfare services rendered by a health or social welfare organization or by a municipal corporation or political subdivision, except deductions are not allowed under this section for amounts that are received under an employee benefit plan. For purposes of this section, amounts received under subcontracts pursuant to chapter 74.13 RCW are deemed to be received from the state of Washington.

Sec. 5   RCW 82.04.431 and 2008 c 137 s 1 are each amended to read as follows:
     (1) For the purposes of RCW 82.04.4297, 82.04.4311, 82.08.02915, 82.12.02915, and 82.08.997, the term "health or social welfare organization" means an organization, including any community action council, which renders health or social welfare services as defined in subsection (2) of this section, which is a not-for-profit corporation under chapter 24.03 RCW and which is managed by a governing board of not less than eight individuals none of whom is a paid employee of the organization or which is a corporation sole under chapter 24.12 RCW. Health or social welfare organization does not include a corporation providing professional services as authorized in chapter 18.100 RCW. In addition a corporation in order to be exempt under RCW 82.04.4297 shall satisfy the following conditions:
     (a) No part of its income may be paid directly or indirectly to its members, stockholders, officers, directors, or trustees except in the form of services rendered by the corporation in accordance with its purposes and bylaws;
     (b) Salary or compensation paid to its officers and executives must be only for actual services rendered, and at levels comparable to the salary or compensation of like positions within the public service of the state;
     (c) Assets of the corporation must be irrevocably dedicated to the activities for which the exemption is granted and, on the liquidation, dissolution, or abandonment by the corporation, may not inure directly or indirectly to the benefit of any member or individual except a nonprofit organization, association, or corporation which also would be entitled to the exemption;
     (d) The corporation must be duly licensed or certified where licensing or certification is required by law or regulation;
     (e) The amounts received qualifying for exemption must be used for the activities for which the exemption is granted;
     (f) Services must be available regardless of race, color, national origin, or ancestry; and
     (g) The director of revenue shall have access to its books in order to determine whether the corporation is exempt from taxes within the intent of RCW 82.04.4297 and this section.
     (2) The term "health or social welfare services" includes and is limited to:
     (a) Mental health, drug, or alcoholism counseling or treatment;
     (b) Family counseling;
     (c) Health care services;
     (d) Therapeutic, diagnostic, rehabilitative, or restorative services for the care of the sick, aged, or physically, developmentally, or emotionally-disabled individuals;
     (e) Activities which are for the purpose of preventing or ameliorating juvenile delinquency or child abuse, including recreational activities for those purposes;
     (f) Care of orphans or foster children;
     (g) Day care of children;
     (h) Employment development, training, and placement;
     (i) Legal services to the indigent;
     (j) Weatherization assistance or minor home repair for low-income homeowners or renters;
     (k) Assistance to low-income homeowners and renters to offset the cost of home heating energy, through direct benefits to eligible households or to fuel vendors on behalf of eligible households;
     (l) Community services to low-income individuals, families, and groups, which are designed to have a measurable and potentially major impact on causes of poverty in communities of the state; ((and))
     (m) Temporary medical housing, as defined in RCW 82.08.997, if the housing is provided only:
     (i) While the patient is receiving medical treatment at a hospital required to be licensed under RCW 70.41.090 or at an outpatient clinic associated with such hospital, including any period of recuperation or observation immediately following such medical treatment; and
     (ii) By a person that does not furnish lodging or related services to the general public; and
     (n) Performance contract management of child welfare services under chapter 74.13 RCW.

Sec. 6   RCW 43.06.400 and 1999 c 372 s 5 are each amended to read as follows:
     (1) Beginning in January ((1984)) 2014, and in January of every fourth year thereafter, the department of revenue ((shall)) must submit to the legislature prior to the regular session a listing of the amount of reduction for the current and next biennium in the revenues of the state or the revenues of local government collected by the state as a result of tax exemptions. The listing ((shall)) must include an estimate of the revenue lost from the tax exemption, the purpose of the tax exemption, the persons, organizations, or parts of the population which benefit from the tax exemption, and whether or not the tax exemption conflicts with another state program. The listing ((shall)) must include but not be limited to the following revenue sources:
     (((1))) (a) Real and personal property tax exemptions under Title 84 RCW;
     (((2))) (b) Business and occupation tax exemptions, deductions, and credits under chapter 82.04 RCW;
     (((3))) (c) Retail sales and use tax exemptions under chapters 82.08, 82.12, and 82.14 RCW;
     (((4))) (d) Public utility tax exemptions and deductions under chapter 82.16 RCW;
     (((5))) (e) Food fish and shellfish tax exemptions under chapter 82.27 RCW;
     (((6))) (f) Leasehold excise tax exemptions under chapter 82.29A RCW;
     (((7))) (g) Motor vehicle and special fuel tax exemptions and refunds under chapters 82.36 and 82.38 RCW;
     (((8))) (h) Aircraft fuel tax exemptions under chapter 82.42 RCW;
     (((9))) (i) Motor vehicle excise tax exclusions under chapter 82.44 RCW; and
     (((10))) (j) Insurance premiums tax exemptions under chapter 48.14 RCW.
     (2) The department of revenue ((shall)) must prepare the listing required by this section with the assistance of any other agencies or departments as may be required.
     (3) The department of revenue ((shall)) must present the listing to the ways and means committees of each house in public hearings.
     (4) Beginning in January ((1984)) 2014, and every four years thereafter the governor is requested to review the report from the department of revenue and may submit recommendations to the legislature with respect to the repeal or modification of any tax exemption. The ways and means committees of each house and the appropriate standing committee of each house ((shall)) must hold public hearings and take appropriate action on the recommendations submitted by the governor.
     (5) As used in this section, "tax exemption" means an exemption, exclusion, or deduction from the base of a tax; a credit against a tax; a deferral of a tax; or a preferential tax rate.

NEW SECTION.  Sec. 7   Sections 4 and 5 of this act take effect August 1, 2011.