BILL REQ. #:  S-3787.2 

Read first time 01/24/14.   Referred to Committee on Transportation.

     AN ACT Relating to imposing motor vehicle fuel taxes on compressed natural gas and liquefied natural gas used for transportation purposes; amending RCW 82.38.030, 82.38.075, 82.80.010, 82.80.110, 82.80.120, 82.47.010, 82.47.020, 46.16A.060, 46.37.467, 82.04.310, 82.04.120, 82.12.022, 82.14.230, 35.21.870, and 82.14.030; adding a new section to chapter 82.16 RCW; creating new sections; and providing an effective date.

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

NEW SECTION.  Sec. 1   It is the intent of the legislature to appropriately tax natural gas, the sale of compressed natural gas, or liquefied natural gas, for use as transportation fuel by a motor vehicle. Current practice taxes natural gas as a traditional home heating or electric generation fuel while not taking into account the benefits of natural gas use as a transportation fuel. This act is intended to clarify for future use the appropriate taxation of natural gas, when used as a transportation fuel, in a manner similar to gasoline and diesel. Use of compressed natural gas or liquefied natural gas will provide environmental benefits to the citizens of Washington and spur economic development across the state.

Sec. 2   RCW 82.38.030 and 2013 c 225 s 103 are each amended to read as follows:
     (1) There is levied and imposed upon fuel licensees a tax at the rate of twenty-three cents per each gallon of fuel, other than liquefied natural gas and compressed natural gas, each one and one-half gallons of liquefied natural gas, or each one hundred twenty-seven cubic feet of compressed natural gas, measured at standard pressure and temperature.
     (2) Beginning July 1, 2003, an additional and cumulative tax rate of five cents per each gallon of fuel, other than liquefied natural gas and compressed natural gas, each one and one-half gallons of liquefied natural gas, or each one hundred twenty-seven cubic feet of compressed natural gas, measured at standard pressure and temperature is imposed on fuel licensees. This subsection (2) expires when the bonds issued for transportation 2003 projects are retired.
     (3) Beginning July 1, 2005, an additional and cumulative tax rate of three cents per each gallon of fuel, other than liquefied natural gas and compressed natural gas, each one and one-half gallons of liquefied natural gas, or each one hundred twenty-seven cubic feet of compressed natural gas, measured at standard pressure and temperature is imposed on fuel licensees.
     (4) Beginning July 1, 2006, an additional and cumulative tax rate of three cents per each gallon of fuel, other than liquefied natural gas and compressed natural gas, each one and one-half gallons of liquefied natural gas, or each one hundred twenty-seven cubic feet of compressed natural gas, measured at standard pressure and temperature is imposed on fuel licensees.
     (5) Beginning July 1, 2007, an additional and cumulative tax rate of two cents per each gallon of fuel, other than liquefied natural gas and compressed natural gas, each one and one-half gallons of liquefied natural gas or other unit containing the energy equivalent to a gallon of diesel fuel, or each one hundred twenty-seven cubic feet of compressed natural gas, measured at standard pressure and temperature is imposed on fuel licensees.
     (6) Beginning July 1, 2008, an additional and cumulative tax rate of one and one-half cents per each gallon of fuel, other than liquefied natural gas and compressed natural gas, each one and one-half gallons of liquefied natural gas, or each one hundred twenty-seven cubic feet of compressed natural gas, measured at standard pressure and temperature is imposed on fuel licensees.
     (7) Taxes are imposed when:
     (a) Fuel is removed in this state from a terminal if the fuel is removed at the rack unless the removal is by a licensed supplier or distributor for direct delivery to a destination outside of the state, or the removal is by a fuel supplier for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;
     (b) Fuel is removed in this state from a refinery if either of the following applies:
     (i) The removal is by bulk transfer and the refiner or the owner of the fuel immediately before the removal is not a licensed supplier; or
     (ii) The removal is at the refinery rack unless the removal is to a licensed supplier or distributor for direct delivery to a destination outside of the state, or the removal is to a licensed supplier for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;
     (c) Fuel enters into this state for sale, consumption, use, or storage, unless the fuel enters this state for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320, if either of the following applies:
     (i) The entry is by bulk transfer and the importer is not a licensed supplier; or
     (ii) The entry is not by bulk transfer;
     (d) Fuel enters this state by means outside the bulk transfer-terminal system and is delivered directly to a licensed terminal unless the owner is a licensed distributor or supplier;
     (e) Fuel is sold or removed in this state to an unlicensed entity unless there was a prior taxable removal, entry, or sale of the fuel;
     (f) Blended fuel is removed or sold in this state by the blender of the fuel. The number of gallons of blended fuel subject to tax is the difference between the total number of gallons of blended fuel removed or sold and the number of gallons of previously taxed fuel used to produce the blended fuel;
     (g) Dyed special fuel is used on a highway, as authorized by the internal revenue code, unless the use is exempt from the fuel tax;
     (h) Dyed special fuel is held for sale, sold, used, or is intended to be used in violation of this chapter;
     (i) Special fuel purchased by an international fuel tax agreement licensee under RCW 82.38.320 is used on a highway; and
     (j) Fuel is sold by a licensed fuel supplier to a fuel distributor or fuel blender and the fuel is not removed from the bulk transfer-terminal system.

Sec. 3   RCW 82.38.075 and 2013 c 225 s 110 are each amended to read as follows:
      (1) To encourage the use of nonpolluting fuels, an annual license fee in lieu of the tax imposed by RCW 82.38.030 is imposed upon the use of liquefied natural gas, compressed natural gas, or propane used in any motor vehicle. The annual license fee must be based upon the following schedule and formula:

Sec. 4   RCW 82.80.010 and 2013 c 225 s 641 are each amended to read as follows:
     (1) ((For purposes of this section:)) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Distributor" means every person who imports, refines, manufactures, produces, or compounds motor vehicle fuel and special fuel as defined in RCW 82.38.020((, respectively,)) and sells or distributes the fuel into a county((;)).
     (b) "Person" has the same meaning as in RCW 82.04.030.
     (2) Subject to the conditions of this section, any county may levy, by approval of its legislative body and a majority of the registered voters of the county voting on the proposition at a general or special election, additional excise taxes equal to ten percent of the statewide ((motor vehicle fuel tax rate under RCW 82.38.030 on each gallon of motor vehicle fuel)) fuel tax rates under RCW 82.38.030 on motor vehicle fuel and special fuel as defined in RCW 82.38.020 and on each gallon of special fuel as defined in RCW 82.38.020 sold within the boundaries of the county. Vehicles paying an annual license fee under RCW 82.38.075 are exempt from the county fuel excise tax. An election held under this section must be held not more than twelve months before the date on which the proposed tax is to be levied. The ballot setting forth the proposition must state the tax rate that is proposed. The county's authority to levy additional excise taxes under this section includes the incorporated and unincorporated areas of the county. The additional excise taxes are subject to the same exceptions and rights of refund as applicable to other motor vehicle fuel and special fuel excise taxes levied under chapter 82.38 RCW. The proposed tax may not be levied less than one month from the date the election results are certified by the county election officer. The commencement date for the levy of any tax under this section must be the first day of January, April, July, or October.
     (3) The local option motor vehicle fuel tax on ((each gallon of)) motor vehicle fuel and on ((each gallon of)) special fuel is imposed upon the distributor of the fuel.
     (4) A taxable event for the purposes of this section occurs upon the first distribution of the fuel within the boundaries of a county to a retail outlet, bulk fuel user, or ultimate user of the fuel.
     (5) All administrative provisions in chapters 82.01, 82.03, and 82.32 RCW, insofar as they are applicable, apply to local option fuel taxes imposed under this section.
     (6) Before the effective date of the imposition of the fuel taxes under this section, a county must contract with the department of revenue for the administration and collection of the taxes. The contract must provide that a percentage amount, not to exceed one percent of the taxes imposed under this section, will be deposited into the local tax administration account created in the custody of the state treasurer. The department of revenue may spend money from this account, upon appropriation, for the administration of the local taxes imposed under this section.
     (7) The state treasurer must distribute monthly to the levying county and cities contained therein the proceeds of the additional excise taxes collected under this section, after the deductions for payments and expenditures as provided in RCW 46.68.090(1) (a) and (b) and under the conditions and limitations provided in RCW 82.80.080.
     (8) The proceeds of the additional excise taxes levied under this section must be used strictly for transportation purposes in accordance with RCW 82.80.070.
     (9) A county may not levy the tax under this section if they are levying the tax in RCW 82.80.110 or if they are a member of a regional transportation investment district levying the tax in RCW 82.80.120.

Sec. 5   RCW 82.80.110 and 2013 c 225 s 642 are each amended to read as follows:
     (1) ((For purposes of this section:)) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Distributor" means every person who imports, refines, manufactures, produces, or compounds motor vehicle fuel and special fuel as defined in RCW 82.38.020((, respectively,)) and sells or distributes the fuel into a county((;)).
     (b) "Person" has the same meaning as in RCW 82.04.030.
     (2) For purposes of dedication to a regional transportation investment district plan under chapter 36.120 RCW, subject to the conditions of this section, a county may levy additional excise taxes equal to ten percent of the statewide ((motor vehicle fuel tax rate under RCW 82.38.030 on each gallon of motor vehicle fuel as defined in RCW 82.38.020 and on each gallon of special fuel)) fuel tax rates under RCW 82.38.030 on motor vehicle fuel and special fuel as defined in RCW ((82.32.020 [82.38.020])) 82.38.020 sold within the boundaries of the county. The additional excise tax is subject to the approval of the county's legislative body and a majority of the registered voters of the county voting on the proposition at a general or special election. An election held under this section must be held not more than twelve months before the date on which the proposed tax is to be levied. The ballot setting forth the proposition must state that the revenues from the tax will be used for a regional transportation investment district plan. The county's authority to levy additional excise taxes under this section includes the incorporated and unincorporated areas of the county. Vehicles paying an annual license fee under RCW 82.38.075 are exempt from the county fuel excise tax. The additional excise taxes are subject to the same exceptions and rights of refund as applicable to other motor vehicle fuel and special fuel excise taxes levied under chapter 82.38 RCW. The proposed tax may not be levied less than one month from the date the election results are certified by the county election officer. The commencement date for the levy of any tax under this section will be the first day of January, April, July, or October.
     (3) The local option motor vehicle fuel tax on ((each gallon of)) motor vehicle fuel and on ((each gallon of)) special fuel is imposed upon the distributor of the fuel.
     (4) A taxable event for the purposes of this section occurs upon the first distribution of the fuel within the boundaries of a county to a retail outlet, bulk fuel user, or ultimate user of the fuel.
     (5) All administrative provisions in chapters 82.01, 82.03, and 82.32 RCW, insofar as they are applicable, apply to local option fuel taxes imposed under this section.
     (6) Before the effective date of the imposition of the fuel taxes under this section, a county must contract with the department of revenue for the administration and collection of the taxes. The contract must provide that a percentage amount, not to exceed one percent of the taxes imposed under this section, will be deposited into the local tax administration account created in the custody of the state treasurer. The department of revenue may spend money from this account, upon appropriation, for the administration of the local taxes imposed under this section.
     (7) The state treasurer must distribute monthly to the county levying the tax as part of a regional transportation investment plan, after the deductions for payments and expenditures as provided in RCW 46.68.090(1) (a) and (b).
     (8) The proceeds of the additional taxes levied by a county in this section, to be used as a part of a regional transportation investment plan, must be used in accordance with chapter 36.120 RCW, but only for those areas that are considered "highway purposes" as that term is construed in Article II, section 40 of the state Constitution.
     (9) A county may not levy the tax under this section if they are a member of a regional transportation investment district that is levying the tax in RCW 82.80.120 or the county is levying the tax in RCW 82.80.010.

Sec. 6   RCW 82.80.120 and 2013 c 225 s 643 are each amended to read as follows:
     (1) ((For purposes of this section:)) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Distributor" means every person who imports, refines, manufactures, produces, or compounds motor vehicle fuel and special fuel as defined in RCW 82.38.020((, respectively,)) and sells or distributes the fuel into a county((;)).
     (b) "Person" has the same meaning as in RCW 82.04.030;
     (c) "District" means a regional transportation investment district under chapter 36.120 RCW.
     (2) A regional transportation investment district under chapter 36.120 RCW, subject to the conditions of this section, may levy additional excise taxes equal to ten percent of the statewide motor vehicle fuel tax rate under RCW 82.38.030 on each gallon of motor vehicle fuel as defined in RCW 82.38.020 and on each gallon of special fuel as defined in RCW 82.38.020 sold within the boundaries of the district. The additional excise tax is subject to the approval of a majority of the voters within the district boundaries. Vehicles paying an annual license fee under RCW 82.38.075 are exempt from the district's fuel excise tax. The additional excise taxes are subject to the same exceptions and rights of refund as applicable to other motor vehicle fuel and special fuel excise taxes levied under chapter 82.38 RCW. The proposed tax may not be levied less than one month from the date the election results are certified. The commencement date for the levy of any tax under this section will be the first day of January, April, July, or October.
     (3) The local option motor vehicle fuel tax on ((each gallon of)) motor vehicle fuel and on ((each gallon of)) special fuel is imposed upon the distributor of the fuel.
     (4) A taxable event for the purposes of this section occurs upon the first distribution of the fuel within the boundaries of the district to a retail outlet, bulk fuel user, or ultimate user of the fuel.
     (5) All administrative provisions in chapters 82.01, 82.03, and 82.32 RCW, insofar as they are applicable, apply to local option fuel taxes imposed under this section.
     (6) Before the effective date of the imposition of the fuel taxes under this section, a district must contract with the department of revenue for the administration and collection of the taxes. The contract must provide that a percentage amount, not to exceed one percent of the taxes imposed under this section, will be deposited into the local tax administration account created in the custody of the state treasurer. The department of revenue may spend money from this account, upon appropriation, for the administration of the local taxes imposed under this section.
     (7) The state treasurer must distribute monthly to the district levying the tax as part of the regional transportation investment district plan, after the deductions for payments and expenditures as provided in RCW 46.68.090(1) (a) and (b).
     (8) The proceeds of the additional taxes levied by a district in this section, to be used as a part of a regional transportation investment district plan, must be used in accordance with chapter 36.120 RCW, but only for those areas that are considered "highway purposes" as that term is construed in Article II, section 40 of the state Constitution.
     (9) A district may only levy the tax under this section if the district is comprised of boundaries identical to the boundaries of a county or counties. A district may not levy the tax in this section if a member county is levying the tax in RCW 82.80.010 or 82.80.110.

Sec. 7   RCW 82.47.010 and 1998 c 176 s 85 are each amended to read as follows:
     ((The definitions set forth in this section shall apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Motor vehicle fuel" has the meaning given in RCW 82.36.010.
     (2) "Special fuel" has the meaning given in RCW 82.38.020.
     (3) "Motor vehicle" has the meaning given in RCW 82.36.010.))
     For purposes of this chapter, unless the context clearly requires otherwise, "fuel," "motor vehicle fuel," "special fuel," and "motor vehicle" have the meaning given in RCW 82.38.020.

Sec. 8   RCW 82.47.020 and 1991 c 173 s 1 are each amended to read as follows:
     (1) The legislative authority of a border area jurisdiction may, by resolution for the purposes authorized in this chapter and by approval of a majority of the registered voters of the jurisdiction voting on the proposition at a general or special election, fix and impose an excise tax on the retail sale of motor vehicle fuel and special fuel within the jurisdiction. An election held under this section must be held not more than twelve months before the date on which the proposed tax is to be levied. The ballot setting forth the proposition ((shall)) must state the tax rate that is proposed. The rate of such tax ((shall)) must be in increments of one-tenth of ((a)) one cent ((per gallon and shall not exceed one cent per gallon)), not to exceed one cent, per: (a) Each gallon of fuel, other than liquefied natural gas or compressed natural gas; (b) each one and one-half gallons of liquefied natural gas; or (c) each one hundred twenty-seven cubic feet of compressed natural gas, measured at standard pressure and temperature.
     (2) The tax imposed in this section ((shall)) must be collected and paid to the jurisdiction but once in respect to any motor vehicle fuel or special fuel. This tax ((shall be)) is in addition to any other tax authorized or imposed by law.
     (3) For purposes of this chapter, the term "border area jurisdictions" means all cities and towns within ten miles of an international border crossing and any transportation benefit district established under RCW 36.73.020 which has within its boundaries an international border crossing.

NEW SECTION.  Sec. 9   A new section is added to chapter 82.16 RCW to read as follows:
     (1) The provisions of this chapter do not apply to sales by a gas distribution business of:
     (a) Compressed natural gas or liquefied natural gas, where the compressed natural gas or liquefied natural gas is to be sold or used as transportation fuel; or
     (b) Natural gas from which the buyer manufactures compressed natural gas or liquefied natural gas, where the compressed natural gas or liquefied natural gas is to be sold or used as transportation fuel.
     (2) The exemption is available only when the buyer provides the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files.
     (3) For the purposes of this section, "transportation fuel" means fuel for the generation of power to propel a motor vehicle as defined in RCW 46.04.320, a vessel as defined in RCW 88.02.310, or a locomotive or railroad car.

Sec. 10   RCW 46.16A.060 and 2011 c 114 s 6 are each amended to read as follows:
     (1) The department, county auditor or other agent, or subagent appointed by the director may not issue or renew a motor vehicle registration or change the registered owner of a registered vehicle for any motor vehicle required to be inspected under chapter 70.120 RCW, unless the application for issuance or renewal is: (a) Accompanied by a valid certificate of compliance or a valid certificate of acceptance issued as required under chapter 70.120 RCW; or (b) exempt, as described in subsection (2) of this section. The certificates must have a date of validation that is within twelve months of the assigned registration renewal date. Certificates for fleet or owner tested diesel vehicles may have a date of validation that is within twelve months of the assigned registration renewal date.
     (2) The following motor vehicles are exempt from emission test requirements:
     (a) Motor vehicles that are less than five years old or more than twenty-five years old;
     (b) Motor vehicles that are a 2009 model year or newer;
     (c) Motor vehicles powered exclusively by electricity, propane, compressed natural gas, liquefied natural gas, or liquid petroleum gas;
     (d) Motorcycles as defined in RCW 46.04.330 and motor-driven cycles as defined in RCW 46.04.332;
     (e) Farm vehicles as defined in RCW 46.04.181;
     (f) Street rod vehicles as defined in RCW 46.04.572 and custom vehicles as defined in RCW 46.04.161;
     (g) Used vehicles that are offered for sale by a motor vehicle dealer licensed under chapter 46.70 RCW;
     (h) Classes of motor vehicles exempted by the director of the department of ecology; and
     (i) Hybrid motor vehicles that obtain a rating by the environmental protection agency of at least fifty miles per gallon of gas during city driving. For purposes of this section, a hybrid motor vehicle is one that uses propulsion units powered by both electricity and gas.
     (3) The department of ecology ((shall)) must provide information to motor vehicle owners:
     (a) Regarding the boundaries of emission contributing areas and restrictions established under this section that apply to vehicles registered in such areas; and
     (b) On the relationship between motor vehicles and air pollution and steps motor vehicle owners should take to reduce motor vehicle related air pollution.
     (4) The department of licensing ((shall)) must:
     (a) Notify all registered motor vehicle owners affected by the emission testing program that they must have an emission test to renew their registration;
     (b) Adopt rules implementing and enforcing this section, except for subsection (2)(e) of this section, as specified in chapter 34.05 RCW.
     (5) A motor vehicle may not be registered, leased, rented, or sold for use in the state, starting with the model year as provided in RCW 70.120A.010, unless the vehicle:
     (a) Has seven thousand five hundred miles or more; or
     (b)(i) Is consistent with the vehicle emission standards and carbon dioxide equivalent emission standards adopted by the department of ecology; and
     (ii) Has a California certification label for all emission standards, and carbon dioxide equivalent emission standards necessary to meet fleet average requirements.
     (6) The department of licensing, in consultation with the department of ecology, may adopt rules necessary to implement this section and may provide for reasonable exemptions to these requirements. The department of ecology may exempt public safety vehicles from meeting the standards where the department finds that vehicles necessary to meet the needs of public safety agencies are not otherwise reasonably available.

Sec. 11   RCW 46.37.467 and 1995 c 369 s 23 are each amended to read as follows:
     (1) Every automobile, truck, motorcycle, motor home, or off-road vehicle that is fueled by an alternative fuel source ((shall)) must bear a reflective placard issued by the national fire protection association indicating that the vehicle is so fueled. Violation of this subsection is a traffic infraction.
     (2) As used in this section "alternative fuel source" includes propane, compressed natural gas, liquefied natural gas, liquid petroleum gas, or any chemically similar gas but does not include gasoline or diesel fuel.
     (3) If a placard for a specific alternative fuel source has not been issued by the national fire protection association, a placard issued by the chief of the Washington state patrol, through the director of fire protection, shall be required. The chief of the Washington state patrol, through the director of fire protection, ((shall)) must develop rules for the design, size, and placement of the placard which ((shall)) remains effective until a specific placard is issued by the national fire protection association.

Sec. 12   RCW 82.04.310 and 2007 c 58 s 1 are each amended to read as follows:
     (1) This chapter ((shall)) does not apply to any person in respect to a business activity with respect to which tax liability is specifically imposed under the provisions of chapter 82.16 RCW including amounts derived from activities for which a deduction is allowed under RCW 82.16.050. The exemption in this subsection does not apply to sales of natural gas, including compressed natural gas and liquefied natural gas, by a gas distribution business, if such sales are exempt from the tax imposed under chapter 82.16 RCW as provided in section 9 of this act.
     (2) This chapter does not apply to amounts received by any person for the sale of electrical energy for resale within or outside the state.
     (3)(a) This chapter does not apply to amounts received by any person for the sale of natural or manufactured gas in a calendar year if that person sells within the United States a total amount of natural or manufactured gas in that calendar year that is no more than twenty percent of the amount of natural or manufactured gas that it consumes within the United States in the same calendar year.
     (b) For purposes of determining whether a person has sold within the United States a total amount of natural or manufactured gas in a calendar year that is no more than twenty percent of the amount of natural or manufactured gas that it consumes within the United States in the same calendar year, the following transfers of gas are not considered to be the sale of natural or manufactured gas:
     (i) The transfer of any natural or manufactured gas as a result of the acquisition of another business, through merger or otherwise; or
     (ii) The transfer of any natural or manufactured gas accomplished solely to comply with federal regulatory requirements imposed on the pipeline transportation of such gas when it is shipped by a third-party manager of a person's pipeline transportation.

Sec. 13   RCW 82.04.120 and 2011 c 23 s 3 are each amended to read as follows:
     (1) "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) The production of compressed natural gas or liquefied natural gas for use as a transportation fuel as defined in section 9 of this act.
     (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) Except as provided in subsection (1)(e) of this section, 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. 14   RCW 82.12.022 and 2011 c 174 s 304 are each amended to read as follows:
     (1) A use tax is levied on every person in this state for the privilege of using natural gas or manufactured gas, including compressed natural gas and liquefied natural gas, within this state as a consumer.
     (2) The tax must be levied and collected in an amount equal to the value of the article used by the taxpayer multiplied by the rate in effect for the public utility tax on gas distribution businesses under RCW 82.16.020. The "value of the article used" does not include any amounts that are paid for the hire or use of a gas distribution business as defined in RCW 82.16.010(2) in transporting the gas subject to tax under this subsection if those amounts are subject to tax under that chapter.
     (3) The tax levied in this section does not apply to the use of natural or manufactured gas delivered to the consumer by other means than through a pipeline.
     (4) The tax levied in this section does not apply to the use of natural or manufactured gas if the person who sold the gas to the consumer has paid a tax under RCW 82.16.020 with respect to the gas for which exemption is sought under this subsection.
     (5)(a) The tax levied in this section does not apply to the use of natural or manufactured gas by an aluminum smelter as that term is defined in RCW 82.04.217 before January 1, 2017.
     (b) A person claiming the exemption provided in this subsection (5) must file a complete annual report with the department under RCW 82.32.534.
     (6) The tax imposed by this section does not apply to the use of natural gas, compressed natural gas, or liquefied natural gas, if the consumer uses the gas for transportation fuel as defined in section 9 of this act.
     (7) There is a credit against the tax levied under this section in an amount equal to any tax paid by:
     (a) The person who sold the gas to the consumer when that tax is a gross receipts tax similar to that imposed pursuant to RCW 82.16.020 by another state with respect to the gas for which a credit is sought under this subsection; or
     (b) The person consuming the gas upon which a use tax similar to the tax imposed by this section was paid to another state with respect to the gas for which a credit is sought under this subsection.
     (((7))) (8) The use tax imposed in this section must be paid by the consumer to the department.
     (((8))) (9) There is imposed a reporting requirement on the person who delivered the gas to the consumer to make a quarterly report to the department. Such report must contain the volume of gas delivered, name of the consumer to whom delivered, and such other information as the department may require by rule.
     (((9))) (10) The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of sections 1 through 6, chapter 384, Laws of 1989.

Sec. 15   RCW 82.14.230 and 2010 c 127 s 5 are each amended to read as follows:
     (1) The governing body of any city, while not required by legislative mandate to do so, may, by resolution or ordinance for the purposes authorized by this chapter, fix and impose on every person a use tax for the privilege of using natural gas or manufactured gas in the city as a consumer.
     (2) The tax is imposed in an amount equal to the value of the article used by the taxpayer multiplied by the rate in effect for the tax on natural gas businesses under RCW 35.21.870 in the city in which the article is used. The "value of the article used," does not include any amounts that are paid for the hire or use of a natural gas business in transporting the gas subject to tax under this subsection if those amounts are subject to tax under RCW 35.21.870.
     (3) The tax imposed under this section does not apply to the use of natural or manufactured gas if the person who sold the gas to the consumer has paid a tax under RCW 35.21.870 with respect to the gas for which exemption is sought under this subsection.
     (4) There is a credit against the tax levied under this section in an amount equal to any tax paid by:
     (a) The person who sold the gas to the consumer when that tax is a gross receipts tax similar to that imposed pursuant to RCW 35.21.870 by another municipality or other unit of local government with respect to the gas for which a credit is sought under this subsection; or
     (b) The person consuming the gas upon which a use tax similar to the tax imposed by this section was paid to another municipality or other unit of local government with respect to the gas for which a credit is sought under this subsection.
     (5) The use tax imposed must be paid by the consumer. The administration and collection of the tax imposed is pursuant to RCW 82.14.050.
     (6) The tax authorized by this section does not apply to the use of natural gas, compressed natural gas, or liquefied natural gas, if the consumer uses the gas for transportation fuel as defined in section 9 of this act.

Sec. 16   RCW 35.21.870 and 1984 c 225 s 6 are each amended to read as follows:
     (1) No city or town may impose a tax on the privilege of conducting an electrical energy, natural gas, steam energy, or telephone business at a rate which exceeds six percent unless the rate is first approved by a majority of the voters of the city or town voting on such a proposition.
     (2)(a) If a city or town is imposing a rate of tax under subsection (1) of this section in excess of six percent on April 20, 1982, the city or town shall decrease the rate to a rate of six percent or less by reducing the rate each year on or before November 1st by ordinances to be effective on January 1st of the succeeding year, by an amount equal to one-tenth the difference between the tax rate on April 20, 1982, and six percent.
     (b) Nothing in this subsection prohibits a city or town from reducing its rates by amounts greater than the amounts required in this subsection.
     (3) Voter approved rate increases under subsection (1) of this section ((shall)) may not be included in the computations under this subsection.
     (4) No city or town may impose a tax on the privilege of conducting a natural gas business with respect to sales that are exempt from the tax imposed under chapter 82.16 RCW as provided in section 1 of this act at a rate higher than its business and occupation tax rate on the sale of tangible personal property or, if the city or town does not impose a business and occupation tax on the sale of tangible personal property, at a rate greater than .002.

Sec. 17   RCW 82.14.030 and 2008 c 86 s 101 are each amended to read as follows:
     (1) The governing body of any county or city, while not required by legislative mandate to do so, may, by resolution or ordinance for the purposes authorized by this chapter, impose a sales and use tax in accordance with the terms of this chapter. Such tax ((shall)) must be collected from those persons who are taxable by the state under chapters 82.08 and 82.12 RCW, upon the occurrence of any taxable event within the county or city as the case may be. ((Except as provided in RCW 82.14.230,)) This sales and use tax ((shall)) does not apply to natural or manufactured gas, except for natural gas that is used as a transportation fuel as defined in section 9 of this act, or where a tax imposed under the authority of RCW 82.14.230 or a local utility tax subject to RCW 35.21.870 applies. The rate of such tax imposed by a county ((shall be)) is five-tenths of one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax). The rate of such tax imposed by a city ((shall)) may not exceed five-tenths of one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax). However, in the event a county imposes a sales and use tax under this subsection, the rate of such tax imposed under this subsection by any city therein ((shall)) may not exceed four hundred and twenty-five one-thousandths of one percent.
     (2) In addition to the tax authorized in subsection (1) of this section, the governing body of any county or city may by resolution or ordinance impose an additional sales and use tax in accordance with the terms of this chapter. Such additional tax ((shall)) must be collected upon the same taxable events upon which the tax imposed under subsection (1) of this section is imposed. The rate of such additional tax imposed by a county ((shall be)) is up to five-tenths of one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax). The rate of such additional tax imposed by a city ((shall be)) is up to five-tenths of one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax). However, in the event a county imposes a sales and use tax under the authority of this subsection at a rate equal to or greater than the rate imposed under the authority of this subsection by a city within the county, the county ((shall)) must receive fifteen percent of the city tax. In the event that the county imposes a sales and use tax under the authority of this subsection at a rate which is less than the rate imposed under this subsection by a city within the county, the county shall receive that amount of revenues from the city tax equal to fifteen percent of the rate of tax imposed by the county under the authority of this subsection. The authority to impose a tax under this subsection is intended in part to compensate local government for any losses from the phase-out of the property tax on business inventories.

NEW SECTION.  Sec. 18   This act is not subject to RCW 82.32.805 and 82.32.808.

NEW SECTION.  Sec. 19   This act takes effect July 1, 2015.