SENATE BILL REPORT

SB 5241

BYSenators McDermott and Gaspard; by request of Department of Revenue

Providing for the taxation of tangible personal property which is provided with an operator for a charge.

Senate Committee on Ways & Means

Senate Hearing Date(s):January 28, 1987

Majority Report:  Do pass.

      Signed by Senators McDermott, Chairman; Gaspard, Vice Chairman; Bauer, Kreidler, Moore, Owen, Rasmussen, Rinehart, Talmadge, Vognild, Williams, Wojahn.

Senate Staff:William Bafus (786-7437)

                  February 20, 1987

AS PASSED SENATE, FEBRUARY 20, 1987

BACKGROUND:

An August 1, 1986 decision of the Washington State Court of Appeals (Duncan Crane Service, Inc., v. Department of Revenue) invalidated Department of Revenue regulations providing that the purchase of tangible personal property for rental or lease to another with an operator, such as a crane, backhoe, bulldozer, etc., constituted an intervening use and that such purchases were subject to the retail sales tax.  The Department amended its rules in October 1986 in keeping with its position that existing statute denies the sales/use tax exemption in such cases.

SUMMARY:

Operation of tangible personal property for business purposes by the purchaser, including rental or leasing of the property with an operator represents an intervening use which subjects the purchase of the property to sales tax.  Purchase of property for rental or leasing to consumers without an operator is not subject to sales tax.

Revenue:    yes

Fiscal Note:      available

Senate Committee - Testified: Barney McClure, Department of Revenue; Ed Faker, Department of Revenue