FINAL BILL REPORT

SSB 5094

                                  C 285 L 87

BYSenate Committee on Ways & Means (originally sponsored by Senator Bottiger)

Taxing the labor rendered by speculative builders.

Senate Committee on Ways & Means

House Committe on Ways & Means/Revenue

SYNOPSIS AS ENACTED

BACKGROUND:

Department of Revenue administrative rules (WAC 458-20-170) define a "prime contractor" as a person engaged in the business of performing for consumers "the constructing, repairing, decorating or improving of new or existing buildings or other structures under, upon or above real property, either for the entire work or for a specific portion thereof."  Prime contractors are required to collect from consumers the retail sales tax measured against the full contract price.  This would include the value of labor and other services provided directly by the prime contractor or his employees.

The same rule defines a "speculative builder" as one who "constructs buildings for sale or rental upon real estate owned by him."  Although a speculative builder is subject to the retail sales tax on materials and supplies purchased by him and for the value of services provided by subcontractors, that portion of the final selling price representing the value of the labor and other services provided directly by the speculative builder or his employees is not.  The sale of the building to the ultimate owner is a real estate transaction which is taxable under the real estate excise and conveyance taxes, but not under the retail sales tax.

Some portion of the sales tax collected by a prime contractor may be avoided if the owner of real property conveys title to a builder and repurchases or otherwise regains title after a structure has been erected on it.

SUMMARY:

The definition of sale at retail or retail sale includes the charge for labor and services of a person performing construction, repair or improvement on a structure on property which is then reconveyed to the original owner.

VOTES ON FINAL PASSAGE:

      Senate    30    17

      House 95   0

EFFECTIVE:July 26, 1987