BILL REQ. #:  S-0835.2 

Read first time 02/18/13.   Referred to Committee on Ways & Means.

     AN ACT Relating to affirming centralized payroll services as nontaxable between affiliated companies; and adding a new section to chapter 82.04 RCW.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.04 RCW to read as follows:
     (1) This chapter does not apply to gross proceeds that a qualified employer of record engaged in providing paymaster services derived from amounts received from an affiliated business entity to advance or reimburse employee costs of a qualified employee. However, no exclusion from gross proceeds is allowed under this section for any employee costs incurred in connection with a contractual obligation of the taxpayer to provide services.
     (2) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Affiliated" has the same meaning as provided in RCW 82.32.655(7).
     (b) "Concurrent employer" is any employer within an affiliated group that has a functional employment relationship with a qualified employee.
     (c) "Employee costs" are the actual cost of wages and salaries, benefits, workers' compensation, payroll taxes, withholding, or other assessments paid to or on behalf of an employee.
     (d) "Functional employment relationship" means having control over the work schedule and activities of the employees and control over all employment decisions such as salary, discipline, hiring, or layoffs.
     (e) "Identified share" is a share that is fixed and certain, although it may vary in accordance with actual hours worked for each concurrent employer. A concurrent employer's identified share for any employee must be consistent with the amount of labor provided by the employee to the concurrent employer. An identified share must be established in a written agreement enforceable against both parties.
     (f) "Paymaster services" means providing payroll and related human resource services.
     (g) "Qualified employee" means an employee with whom an affiliate has a functional employment relationship. Except as provided in (g)(i) and (ii) of this subsection (2), neither the employer of record, nor any other affiliate, may have a functional employment relationship with the employee.
     (i) An employee may be considered a qualified employee and have a functional employment relationship with two or more affiliates, who share employee costs only if:
     (A) Each affiliate is entitled to an identified share of the functional employment relationship and is solely contractually obligated to the qualified employee for the proportionate share of employee costs; and
     (B) No affiliate has any liability to any other affiliate for any share of employee costs for any qualified employee in excess of that affiliate's identified share.
     (ii) If one of the affiliates is an employer of record, an employee may be considered a qualified employee and have a functional employment relationship with two or more affiliates who share employee costs only if:
     (A) Each affiliate, including the employer of record, is entitled to an identified share of the functional employment relationship and is solely contractually obligated to the employee for the proportionate share of employee costs. An otherwise qualified employer of record may retain statutory or common law liability to the employees or to third parties in excess of the employer of record's identified share of employee costs;
     (B) No affiliate has any liability to any other affiliate for any share of employee costs in excess of that affiliate's identified share; and
     (C) The employer of record is not selling labor-related services to any other affiliate with an identified share of the employment costs. For the purposes of this subsection (2)(g), an employer of record is presumed to be selling labor-related services, if the employer of record is in the business of selling to third parties the type of labor or services being performed by the employee.
     (h) "Qualified employer of record" is a person who:
     (i) Has no functional employment relationship with a qualified employee, except as described in (g) of this subsection;
     (ii) Has no contractual liability with a qualified employee for the employee costs, except as provided in (g) of this subsection. A qualified employer of record may have statutory or common law liability to the qualified employees or to third parties for employee costs; and
     (iii) Is not providing staffing services as defined in RCW 82.04.540.