AN ACT Relating to excise taxation; amending RCW 82.04.050, 82.04.060, 82.04.190, 82.08.100, 82.12.020, 82.14.020, 48.14.080, 82.04.4282, 82.04.460, 82.04.470, 82.04.480, 82.08.020, 82.08.080, 82.08.090, 82.12.0252, 82.12.0253, 82.12.0255, 82.12.0259, 82.12.035, 82.12.060, 82.04.390, 82.04.4297, 54.28.010, 82.60.050, and 82.62.040; reenacting and amending RCW 82.12.010; adding new sections to chapter 82.04 RCW; adding new sections to chapter 82.08 RCW; adding new sections to chapter 82.12 RCW; creating new sections; recodifying RCW 82.08.100; providing effective dates; and declaring an emergency.

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

PART 1

SALES AND USE TAX BASE EXPANSION

Sec. 101. Section 1, chapter 8, Laws of 1970 ex. sess. as last amended by section 1, chapter 231, Laws of 1986 and RCW 82.04.050 are each amended to read as follows:

(1) "Sale at retail" or "retail sale" means every sale of tangible personal property (including articles produced, fabricated, or imprinted) to all persons irrespective of the nature of their business and including, among others, without limiting the scope hereof, persons who install, repair, clean, alter, improve, construct, or decorate real or personal property of or for consumers other than a sale to a person who (a) purchases for the purpose of resale as tangible personal property in the regular course of business without intervening use by such person, or (b) installs, repairs, cleans, alters, imprints, improves, constructs, or decorates real or personal property of or for consumers, if such tangible personal property becomes an ingredient or component of such real or personal property without intervening use by such person, or (c) purchases for the purpose of consuming the property purchased in producing for sale a new article of tangible personal property or substance, of which such property becomes an ingredient or component or is a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale, or !se (d) purchases for the purpose of consuming the property purchased in producing ferrosilicon which is subsequently used in producing magnesium for sale, if the primary purpose of such property is to create a chemical reaction directly through contact with an ingredient of ferrosilicon, or (e) purchases for the purpose of providing the property to consumers as part of competitive telephone service, as defined in RCW 82.04.065. The term shall include every sale of tangible personal property which is used or consumed or to be used or consumed in the performance of any activity classified as a "sale at retail" or "retail sale" even though such property is resold or utilized as provided in (a), (b), (c), (d), or (e) above following such use. The term also means every sale of tangible personal property to persons engaged in any business which is taxable under RCW 82.04.280, subsections (2) and (7) and RCW 82.04.290.

(2) The term "sale at retail" or "retail sale" shall include the sale of or charge made for tangible personal property consumed and/or for labor and services rendered in respect to the following: (a) The installing, repairing, cleaning, altering, imprinting, or improving of tangible personal property of or for consumers, including charges made for the mere use of facilities in respect thereto, but excluding charges made for the use of coin operated laundry facilities when such facilities are situated in an apartment house, hotel, motel, rooming house, trailer camp or tourist camp for the exclusive use of the tenants thereof, and also excluding sales of laundry service to members by nonprofit associations composed exclusively of nonprofit hospitals, and excluding services rendered in respect to live animals, birds and insects; (b) the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, and shall also include the sale of services or charges made for the clearing of land and the moving of earth excepting the mere leveling of land used in commercial farming or agriculture; (c) the sale of or charge made for labor and services rendered in respect to the cleaning, fumigating, razing or moving of existing buildings or structures, but shall not include the charge made for janitorial services; and for purposes of this section the term "janitorial services" shall mean those cleaning and caretaking services ordinarily performed by commercial janitor service businesses including, but not limited to, wall and window washing, floor cleaning and waxing, and the cleaning in place of rugs, drapes and upholstery. The term "janitorial services" does not include painting, papering, repairing, furnace or septic tank cleaning, snow removal or sandblasting; (d) the sale of or charge made for labor and services rendered in respect to automobile towing and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16 RCW; (e) the sale of and charge made for the furnishing of lodging and all other services by a hotel, rooming house, tourist court, motel, trailer camp, and the granting of any similar license to use real property, as distinguished from the renting or leasing of real property, and it shall be presumed that the occupancy of real property for a continuous period of one month or more constitutes a rental or lease of real property and not a mere license to use or enjoy the same; (f) the sale of or charge made for tangible personal property, labor and services to persons taxable under (a), (b), (c), (d), and (e) above when such sales or charges are for property, labor and services which are used or consumed in whole or in part by such persons in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property, labor and services may be resold after such use or consumption. Nothing contained in this paragraph shall be construed to modify the first paragraph of this section and nothing contained in the first paragraph of this section shall be construed to modify this paragraph.

(3) The term "sale at retail" or "retail sale" shall include the sale of or charge made for personal business or professional services including amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities: (a) Amusement and recreation businesses including but not limited to golf, pool, billiards, skating, bowling, ski lifts and tows and others; (b) abstract, title insurance and escrow businesses; (c) credit bureau businesses; (d) automobile parking and storage garage businesses.

(4) The term shall also include the renting or leasing of tangible personal property to consumers.

(5) The term shall also include the providing of telephone service, as defined in RCW 82.04.065, to consumers.

(6) The term shall not include the sale of or charge made for labor and services rendered in respect to the building, repairing, or improving of any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind, nor shall it include sales of feed, seed, fertilizer, and spray materials to persons for the purpose of producing for sale any agricultural product whatsoever, including milk, eggs, wool, fur, meat, honey, or other substances obtained from animals, birds, or insects but only when such production and subsequent sale are exempt from tax under RCW 82.04.330, nor shall it include sales of chemical sprays or washes to persons for the purpose of post-harvest treatment of fruit for the prevention of scald, fungus, mold, or decay.

(7) The term shall not include the sale of or charge made for labor and services rendered in respect to the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing, or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation. Nor shall the term include the sale of services or charges made for the clearing of land and the moving of earth of or for the United States, any instrumentality thereof, or a county or city housing authority.

(8) The term shall include the sale of or charge made, including labor, fees or other service emoluments however designated, for services rendered to consumers by persons engaging in the following business activities:

(a) All activities included in S.I.C. group number 723 (beauty shops);

(b) All activities included in S.I.C. group number 724 (barber shops);

(c) All activities included in S.I.C. industry number 7299 (beauty spas, dating services, debt counseling, escort services, health clubs, massage parlors, steam baths, and other miscellaneous personal services);

(d) All activities included in S.I.C. group number 737 (computer and data processing services);

(e) All activities included in S.I.C. industry number 7392 (management, consulting, and public relations services); and

(f) All cablevision, closed circuit, and similar television service businesses.

(9) The term shall not include the sale of or charge made for services included in subsections (8) (d) or (e) of this section, if the services are rendered to radio communications service companies, as defined in RCW 80.04.010, by any of their affiliated interests, as defined in RCW 80.16.010.

NEW SECTION. Sec. 102. A new section is added to chapter 82.04 RCW to be codified between RCW 82.04.020 and 82.04.212 to read as follows:

(1) "Activity included in S.I.C." means the correct classification of each taxpayer's actual activities, regardless of how those activities may have been previously classified by the department; and

(2) "S.I.C." means the standard industrial classification published by the federal office of management and budget, including the 1977 supplement.

Sec. 103. Section 82.04.060, chapter 15, Laws of 1961 as amended by section 26, chapter 3, Laws of 1983 2nd ex. sess. and RCW 82.04.060 are each amended to read as follows:

"Sale at wholesale" or "wholesale sale" means any sale of tangible personal property((~~, or any sale of telephone service as defined in RCW 82.04.065,~~)) which is not a sale at retail and means any sale of or charge made for labor and services rendered for persons who are not consumers, ((~~in respect to real or personal property,~~)) if such sale or charge is expressly defined as a retail sale by RCW 82.04.050 when rendered to or for consumers: PROVIDED, That the term ((~~"real or personal property" as used in this section~~)) "sale at wholesale" or "wholesale sale" shall not include any sale of or charge made for services in respect to any natural products named in RCW 82.04.100.

Sec. 104. Section 82.04.190, chapter 15, Laws of 1961 as last amended by section 2, chapter 231, Laws of 1986 and RCW 82.04.190 are each amended to read as follows:

"Consumer" means the following:

(1) Any person who purchases, acquires, owns, holds, or uses any article of tangible personal property irrespective of the nature of the person's business and including, among others, without limiting the scope hereof, persons who install, repair, clean, alter, improve, construct, or decorate real or personal property of or for consumers other than for the purpose (a) of resale as tangible personal property in the regular course of business or (b) of incorporating such property as an ingredient or component of real or personal property when installing, repairing, cleaning, altering, imprinting, improving, constructing, or decorating such real or personal property of or for consumers or (c) of consuming such property in producing for sale a new article of tangible personal property or a new substance, of which such property becomes an ingredient or component or as a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale or (d) purchases for the purpose of consuming the property purchased in producing ferrosilicon which is subsequently used in producing magnesium for sale, if the primary purpose of such property is to create a chemical reaction directly through contact with an ingredient of ferrosilicon;

(2) Any person engaged in any business activity taxable under RCW 82.04.290 ((~~and any person who purchases, acquires, or uses any telephone service as defined in RCW 82.04.065, other than for resale in the regular course of business~~));

(3) Any person engaged in the business of contracting for the building, repairing or improving of any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state of Washington or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind as defined in RCW 82.04.280, in respect to tangible personal property when such person incorporates such property as an ingredient or component of such publicly owned street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle by installing, placing or spreading the property in or upon the right of way of such street, place, road, highway, easement, bridge, tunnel, or trestle or in or upon the site of such mass public transportation terminal or parking facility;

(4) Any person who is an owner, lessee or has the right of possession to or an easement in real property which is being constructed, repaired, decorated, improved, or otherwise altered by a person engaged in business, excluding only (a) municipal corporations or political subdivisions of the state in respect to labor and services rendered to their real property which is used or held for public road purposes, and (b) the United States, instrumentalities thereof, and county and city housing authorities created pursuant to chapter 35.82 RCW in respect to labor and services rendered to their real property. Nothing contained in this or any other subsection of this definition shall be construed to modify any other definition of "consumer";

(5) Any person who is an owner, lessee, or has the right of possession to personal property which is being constructed, repaired, improved, cleaned, imprinted, or otherwise altered by a person engaged in business;

(6) Any person engaged in the business of constructing, repairing, decorating, or improving new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation; also, any person engaged in the business of clearing land and moving earth of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW. Any such person shall be a consumer within the meaning of this subsection in respect to services used and tangible personal property incorporated into, installed in, or attached to such building or other structure by such person;

(7) Any person who purchases, acquires, or uses any service included within the definition of retail sale in RCW 82.04.050 (5) or (8), unless the person can demonstrate with regularly kept books and records, or by other methods approved by rules of the department, that the service was purchased for resale in the regular course of business without intervening use by the person.

NEW SECTION. Sec. 105. A new section is added to chapter 82.08 RCW to read as follows:

(1) The tax levied by RCW 82.08.020 shall not apply to the sale of services included within the definition of retail sale in RCW 82.04.050 (8)(d) or (8)(e), if the service is purchased for use outside this state. As used in this section, "use outside this state" includes use outside this state in whole or in part.

(2) Unless a seller has taken from the buyer an out-of-state use certificate signed by the buyer, or unless the nature of the transaction is clearly shown as a sale for use outside this state by the books and records of the taxpayer in such other manner as the department of revenue shall by rule provide, the burden of proving that a sale of a service was for use outside this state shall be upon the person who made the sale. Each out-of-state use certificate shall include the name and address of the buyer, the registration number (if any) of the buyer, the name and address of the buyer's purchasing agent (if any), and other information as required by rules of the department.

Sec. 106. Section 82.08.100, chapter 15, Laws of 1961 as last amended by section 37, chapter 35, Laws of 1982 1st ex. sess. and RCW 82.08.100 are each amended to read as follows:

(1) The department of revenue, by general regulation, shall provide that a taxpayer whose regular books of account are kept on a cash receipts basis may file returns based upon his or her cash receipts for each reporting period and pay the tax herein provided upon such basis in lieu of reporting and paying the tax on all sales made during such period. A taxpayer filing returns on a cash receipts basis is not required to pay such tax on debts which are deductible as worthless for federal income tax purposes. Absent regular books and records to substantiate the accounting method chosen, returns shall be reported in the same manner as reported for federal income tax purposes.

(2) The accounting method for taxes administered under this section shall be uniform for all excise taxes unless a combined method is first approved by the department.

(3) A taxpayer may convert its reporting method to a different method which has prior approval by the department if the conversion satisfies the requirement in the rules adopted by the department pertaining to adjustments necessary to account for all income. The department shall not withhold its approval unless the taxpayer cannot, for whatever reason, make the necessary adjustments to account for all income. The department may permit adjustments which cause an increase in the income to be amortized over a period not to exceed twelve consecutive months.

NEW SECTION. Sec. 107. RCW 82.08.100 , as amended by this act, is recodified as a new section in chapter 82.32 RCW.

Sec. 108. Section 82.12.010, chapter 15, Laws of 1961 as last amended by section 1, chapter 132, Laws of 1985 and by section 1, chapter 222, Laws of 1985 and RCW 82.12.010 are each reenacted and amended to read as follows:

For the purposes of this chapter:

(1) "Value of the article used" shall mean the consideration, whether money, credit, rights, or other property except trade-in property of like kind, expressed in terms of money, paid or given or contracted to be paid or given by the purchaser to the seller for the article of tangible personal property, the use of which is taxable under this chapter. The term includes, in addition to the consideration paid or given or contracted to be paid or given, the amount of any tariff or duty paid with respect to the importation of the article used. In case the article used is acquired by lease or by gift or is extracted, produced, or manufactured by the person using the same or is sold under conditions wherein the purchase price does not represent the true value thereof, the value of the article used shall be determined as nearly as possible according to the retail selling price at place of use of similar products of like quality and character under such rules and regulations as the department of revenue may prescribe.

In case the articles used are acquired by bailment, the value of the use of the articles so used shall be in an amount representing a reasonable rental for the use of the articles so bailed, determined as nearly as possible according to the value of such use at the places of use of similar products of like quality and character under such rules and regulations as the department of revenue may prescribe: PROVIDED, That in case any such articles of tangible personal property are used in respect to the construction, repairing, decorating, or improving of, and which become or are to become an ingredient or component of, new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing or attaching of any such articles therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, then the value of the use of such articles so used shall be determined according to the retail selling price of such articles, or in the absence of such a selling price, as nearly as possible according to the retail selling price at place of use of similar products of like quality and character or, in the absence of either of these selling price measures, such value may be determined upon a cost basis, in any event under such rules and regulations as the department of revenue may prescribe.

In the case of articles owned by a user engaged in business outside the state which are brought into the state for no more than ninety days in any period of three hundred sixty-five consecutive days and which are temporarily used for business purposes by the person in this state, the value of the article used shall be an amount representing a reasonable rental for the use of the articles, unless the person has paid tax under this chapter or chapter 82.08 RCW upon the full value of the article used, as defined in the first paragraph of this subsection.

In the case of articles manufactured or produced by the user and used in the manufacture or production of products sold or to be sold to the department of defense of the United States, the value of the articles used shall be determined according to the value of the ingredients of such articles.

In the case of an article manufactured or produced for purposes of serving as a prototype for the development of a new or improved product, the value of the article used shall be determined by: (a) The retail selling price of such new or improved product when first offered for sale; or (b) the value of materials incorporated into the prototype in cases in which the new or improved product is not offered for sale.

(2) "Value of the service used" shall mean the consideration, whether money, credit, rights, or other property, expressed in terms of money, paid or given or contracted to be paid or given by the purchaser to the seller for the service, the use of which is taxable under this chapter. If the service is received by gift or under conditions wherein the purchase price does not represent the true value of the service, the value of the services used shall be determined as nearly as possible according to the retail selling price at the place of use of similar services of like quality and character under rules prescribed by the department of revenue;

(3) "Use," "used," "using," or "put to use" shall have their ordinary meaning, and shall mean:

(a) With respect to personal property, the first act within this state by which the taxpayer takes or assumes dominion or control over the article of tangible personal property (as a consumer), and include installation, storage, withdrawal from storage, or any other act preparatory to subsequent actual use or consumption within this state; and

(b) With respect to a service, the first utilization in this state by the taxpayer of any part of the benefit afforded by the service;

(4) "Service" means a service of a type which is expressly defined as a retail sale by RCW 82.04.050 when rendered to or for consumers;

((~~(3)~~)) (5) "Taxpayer" and "purchaser" include all persons included within the meaning of the word "buyer" and the word "consumer" as defined in chapters 82.04 and 82.08 RCW;

((~~(4)~~)) (6) "Retailer" means every seller as defined in RCW 82.08.010 and every person engaged in the business of selling tangible personal property or services at retail and every person required to collect from purchasers the tax imposed under this chapter;

((~~(5)~~)) (7) The meaning ascribed to words and phrases in chapters 82.04 and 82.08 RCW, insofar as applicable, shall have full force and effect with respect to taxes imposed under the provisions of this chapter. "Consumer," in addition to the meaning ascribed to it in chapters 82.04 and 82.08 RCW insofar as applicable, shall also mean any person who distributes or displays, or causes to be distributed or displayed, any article of tangible personal property, except newspapers, the primary purpose of which is to promote the sale of products or services.

Sec. 109. Section 82.12.020, chapter 15, Laws of 1961 as last amended by section 7, chapter 7, Laws of 1983 and RCW 82.12.020 are each amended to read as follows:

(1) There is hereby levied and there shall be collected from every person in this state a tax or excise for the privilege of using within this state as a consumer any article of tangible personal property or service purchased at retail, or acquired by lease, gift, repossession, or bailment, or extracted or produced or manufactured by the person so using the same, or otherwise furnished to a person engaged in any business taxable under RCW 82.04.280, subsections (2) or (7).

(2) This tax will not apply with respect to the use of any article of tangible personal property purchased, extracted, produced or manufactured outside this state until the transportation of such article has finally ended or until such article has become commingled with the general mass of property in this state. This tax shall apply to the use of every article of tangible personal property, including property acquired at a casual or isolated sale, and including byproducts used by the manufacturer thereof, except as hereinafter provided, irrespective of whether the article or similar articles are manufactured or are available for purchase within this state.

(3) Except as provided in RCW 82.12.0252, payment by one purchaser or user of tangible personal property or service of the tax imposed by chapter 82.08 or 82.12 RCW shall not have the effect of exempting any other purchaser or user of the same property or service from the taxes imposed by such chapters.

(4) The tax shall 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 retail sales tax under RCW 82.08.020((~~, as now or hereafter amended, in the county in which the article is used~~)).

NEW SECTION. Sec. 110. A new section is added to chapter 82.12 RCW to read as follows:

(1) As used in this section, "financial organization" and "public utility" have the meanings given in RCW 82.56.010.

(2) Each taxpayer who uses all or any part of a service in this state shall allocate the full value of the service used to this state, unless apportionment is allowed under this section.

(3) Each taxpayer who uses a service included within the definition of retail sale in RCW 82.04.050 (8)(d) or (8)(e) both within this state and outside this state, other than a financial organization or public utility, shall apportion the value of the service used to this state by multiplying that value by a fraction. The numerator of the fraction is the taxpayer's property factor plus the taxpayer's payroll factor plus the taxpayer's sales factor. The denominator of the fraction is three. The taxpayer's factors shall be calculated as provided in RCW 82.56.010.

(4) Each financial organization and public utility which uses a service both within this state and outside this state shall apportion the value of services used to this state according to rules adopted by the department. The rules shall be consistent with this section, as far as the department deems practicable. In developing the rules, the department shall also give appropriate consideration to the rules of other states in which the sale or use of services are also taxable. (5) If the apportionment provisions of this section do not fairly represent the extent of the taxpayer's use of a service in this state, the taxpayer may petition for, or the department may require, in respect to all or any part of the taxpayer's use of services, if reasonable:

(a) Separate accounting;

(b) The exclusion of any one or more of the factors;

(c) The inclusion of one or more additional factors which will fairly represent the taxpayer's use of services in this state; or

(d) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's use of services.

Sec. 111. Section 3, chapter 94, Laws of 1970 ex. sess. as last amended by section 31, chapter 3, Laws of 1983 2nd ex. sess. and RCW 82.14.020 are each amended to read as follows:

For purposes of this chapter:

(1) A retail sale consisting solely of the sale of tangible personal property shall be deemed to have occurred at the retail outlet at or from which delivery is made to the consumer;

(2) A retail sale consisting essentially of the performance of ((~~personal business or professional~~)) services shall be deemed to have occurred at the place at which such services were primarily performed, except as provided in subsection (5) of this section;

(3) A retail sale consisting of the rental of tangible personal property shall be deemed to have occurred (a) in the case of a rental involving periodic rental payments, at the primary place of use by the lessee during the period covered by each payment, or (b) in all other cases, at the place of first use by the lessee;

(4) A retail sale within the scope of the second paragraph of RCW 82.04.050, and a retail sale of taxable personal property to be installed by the seller shall be deemed to have occurred at the place where the labor and services involved were primarily performed;

(5) A retail sale consisting of the providing to a consumer of telephone service, as defined in RCW 82.04.065, other than a sale of tangible personal property under subsection (1) of this section or a rental of tangible personal property under subsection (3) of this section, shall be deemed to have occurred at the situs of the telephone or other instrument through which the telephone service is rendered;

(6) "City" means a city or town;

(7) The meaning ascribed to words and phrases in chapters 82.04, 82.08 and 82.12 RCW, as now or hereafter amended, insofar as applicable, shall have full force and effect with respect to taxes imposed under authority of this chapter;

(8) "Taxable event" shall mean any retail sale, or any use of an article of tangible personal property or service, upon which a state tax is imposed pursuant to chapter 82.08 or 82.12 RCW, as they now exist or may hereafter be amended: PROVIDED, HOWEVER, That the term shall not include a retail sale taxable pursuant to RCW 82.08.150, as now or hereafter amended;

(9) "Treasurer or other legal depository" shall mean the treasurer or legal depository of a county or city.

Sec. 112. Section 21, chapter 190, Laws of 1949 and RCW 48.14.080 are each amended to read as follows:

As to insurers other than title insurers, the taxes imposed by this title shall be in lieu of all other taxes, except taxes on real and tangible personal property and excise taxes on the sale, purchase or use of such property and services as defined in RCW 82.04.050.

Sec. 113. Section 3, chapter 37, Laws of 1980 and RCW 82.04.4282 are each amended to read as follows:

In computing tax there may be deducted from the measure of tax amounts derived from bona fide initiation fees, dues, contributions, donations, tuition fees, charges made for operation of privately operated kindergartens, and endowment funds. This paragraph shall not be construed to exempt any person, association, or society from tax liability upon selling tangible personal property or services or upon providing facilities or services for which a special charge is made to members or others. If dues are in exchange for any significant amount of goods or services rendered by the recipient thereof to members without any additional charge to the member, or if the dues are graduated upon the amount of goods or services rendered, the value of such goods or services shall not be considered as a deduction hereunder.

Sec. 114. Section 82.04.460, chapter 15, Laws of 1961 as last amended by section 154, chapter 7, Laws of 1985 and RCW 82.04.460 are each amended to read as follows:

(1) Any person rendering services taxable under RCW 82.04.290 and maintaining places of business both within and without this state which contribute to the rendition of such services shall, for the purpose of computing tax liability under RCW 82.04.290, apportion to this state that portion of ((~~his~~)) the person's gross income which is derived from services rendered within this state. Where such apportionment cannot be accurately made by separate accounting methods, the taxpayer shall apportion to this state that proportion of ((~~his~~)) the taxpayer's total income which the cost of doing business within the state bears to the total cost of doing business both within and without the state.

(2) Notwithstanding the provision of subsection (1) of this section, persons doing business both within and without the state who receive gross income from service charges, as defined in RCW 63.14.010 (relating to amounts charged for granting the right or privilege to make deferred or installment payments) or who receive gross income from engaging in business as financial institutions within the scope of chapter 82.14A RCW (relating to city taxes on financial institutions) shall apportion or allocate gross income taxable under RCW 82.04.290 to this state pursuant to rules promulgated by the department consistent with uniform rules for apportionment or allocation developed by the states.

(3) The department shall by rule provide a method or methods of apportioning or allocating gross income derived from sales of ((~~telephone~~)) services taxed under ((~~this chapter~~)) RCW 82.04.250 or 82.04.270, if the gross proceeds of sales subject to tax under ((~~this chapter~~)) RCW 82.04.250 or 82.04.270 do not fairly represent the extent of the taxpayer's income attributable to this state. The rules shall be, so far as feasible, consistent with the methods of apportionment contained in this section and shall require the consideration of those facts, circumstances, and apportionment factors as will result in an equitable and constitutionally permissible division of the services.

Sec. 115. Section 82.04.470, chapter 15, Laws of 1961 as last amended by section 29, chapter 3, Laws of 1983 2nd ex. sess. and RCW 82.04.470 are each amended to read as follows:

Unless a seller has taken from the purchaser a resale certificate signed by, and bearing the name and address and registration number of the purchaser to the effect that the property or service was purchased for resale, or unless the nature of the transaction is clearly shown as a sale ((~~at wholesale~~)) for resale by the books and records of the taxpayer in such other manner as the department of revenue shall by regulation provide, the burden of proving that a sale of tangible personal property, or of ((~~telephone service as defined in RCW 82.04.065~~)) a service expressly defined as a retail sale by RCW 82.04.050 when rendered to or for consumers, was not a sale at retail shall be upon the person who made it.

Sec. 116. Section 82.04.480, chapter 15, Laws of 1961 as amended by section 44, chapter 278, Laws of 1975 1st ex. sess. and RCW 82.04.480 are each amended to read as follows:

Every consignee, bailee, factor, or auctioneer having either actual or constructive possession of tangible personal property, or having possession of the documents of title thereto, with power to sell such tangible personal property in his or its own name and actually so selling, and every agent with power to sell services in the agent's own name and actually so selling, shall be deemed the seller of such tangible personal property or services within the meaning of this chapter; and further, the consignor, bailor, principal, or owner shall be deemed a seller of such property or services to the consignee, bailee, factor, ((or)) auctioneer, or agent.

The burden shall be upon the taxpayer in every case to establish the fact that he is not engaged in the business of selling tangible personal property or services but is acting merely as broker or agent in promoting sales for a principal. Such claim will be allowed only when the taxpayer's accounting records are kept in such manner as the department of revenue shall by general regulation provide.

Sec. 117. Section 1, chapter 32, Laws of 1985 and RCW 82.08.020 are each amended to read as follows:

(1) There is levied and there shall be collected a tax on each retail sale in this state equal to six and five-tenths percent of the selling price.

(2) The tax imposed under this chapter shall apply to successive retail sales of the same property or services.

(3) The rate provided in this section applies to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

Sec. 118. Section 82.08.080, chapter 15, Laws of 1961 as last amended by section 2, chapter 36, Laws of 1986 and RCW 82.08.080 are each amended to read as follows:

The department of revenue may authorize a seller to pay the tax levied under this chapter upon retail sales of tangible personal property or services made under conditions of business such as to render impracticable the collection of the tax as a separate item and waive collection of the tax from the customer. Where sales are made by receipt of a coin or coins dropped into a receptacle that results in delivery of the merchandise in single purchases of smaller value than the minimum sale upon which a one cent tax may be collected from the purchaser, according to the schedule provided by the department under authority of RCW 82.08.060, and where the design of the sales device is such that multiple sales of items are not possible or cannot be detected so as practically to assess a tax, in such a case the selling price for the purposes of the tax imposed under RCW 82.08.020 shall be sixty percent of the gross receipts of the vending machine through which such sales are made. No such authority shall be granted except upon application to the department and unless the department, after hearing, finds that the conditions of the applicant's business are such as to render impracticable the collection of the tax in the manner otherwise provided. The department, by regulation, may provide that the applicant, under this section, furnish a proper bond sufficient to secure the payment of the tax.

Sec. 119. Section 82.08.090, chapter 15, Laws of 1961 as amended by section 49, chapter 278, Laws of 1975 1st ex. sess. and RCW 82.08.090 are each amended to read as follows:

In the case of installment sales and leases of personal property or services, the department of revenue, by regulation, may provide for the collection of taxes upon the installments of the purchase price, or amount of rental, as of the time the same fall due.

Sec. 120. Section 52, chapter 37, Laws of 1980 and RCW 82.12.0252 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of any article of tangible personal property or service purchased at retail or acquired by lease, gift or bailment if the sale thereof to, or the use thereof by, the present user or ((~~his~~)) the user's bailor or donor has already been subjected to the tax under chapter 82.08 or 82.12 RCW and such tax has been paid by the present user or by ((~~his~~)) the user's bailor or donor; or in respect to the use of property acquired by bailment and such tax has once been paid based on reasonable rental as determined by RCW 82.12.060 measured by the value of the article at time of first use multiplied by the tax rate imposed by chapter 82.08 or 82.12 RCW as of the time of first use; or in respect to the use of any article of tangible personal property acquired by bailment, if the property was acquired by a previous bailee from the same bailor for use in the same general activity and such original bailment was prior to June 9, 1961.

Sec. 121. Section 53, chapter 37, Laws of 1980 and RCW 82.12.0253 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of any article of tangible personal property or service the sale of which is specifically taxable under chapter 82.16 RCW.

Sec. 122. Section 55, chapter 37, Laws of 1980 and RCW 82.12.0255 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of any article of tangible personal property or any service which the state is prohibited from taxing under the Constitution of the state or under the Constitution or laws of the United States.

Sec. 123. Section 59, chapter 37, Laws of 1980 and RCW 82.12.0259 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of tangible personal property or services by corporations which have been incorporated under any act of the congress of the United States and whose principal purposes are to furnish volunteer aid to members of the armed forces of the United States and also to carry on a system of national and international relief and to apply the same in mitigating the sufferings caused by pestilence, famine, fire, flood, and other national calamities and to devise and carry on measures for preventing the same.

Sec. 124. Section 5, chapter 89, Laws of 1967 ex. sess. and RCW 82.12.035 are each amended to read as follows:

A credit shall be allowed against the taxes imposed by this chapter upon the use of tangible personal property or services in this state in the amount that the present user thereof or ((~~his~~)) the user's bailor or donor has paid a retail sales or use tax with respect to such property or services to any other state, political subdivision thereof, or the District of Columbia, prior to the use of such property or services in this state.

Sec. 125. Section 82.12.060, chapter 15, Laws of 1961 as last amended by section 54, chapter 278, Laws of 1975 1st ex. sess. and RCW 82.12.060 are each amended to read as follows:

(1) In the case of installment sales and leases of personal property or services, the department, by regulation, may provide for the collection of taxes upon the installments of the purchase price, or amount of rental, as of the time the same fall due.

(2) In the case of property acquired by bailment, the department, by regulation, may provide for payment of the tax due in installments based on the reasonable rental for the property as determined under RCW 82.12.010(1).

PART 2

ADDITIONAL B&O TAX

NEW SECTION. Sec. 201. A new section is added to chapter 82.04 RCW to read as follows:

There is levied and shall be collected from every person for the act or privilege of engaging in business activities, as a part of the tax imposed by the provisions of RCW 82.04.230, 82.04.240, 82.04.250, 82.04.255, 82.04.270, and 82.04.290, an additional tax equal to ten percent multiplied by the tax payable under the provisions of RCW 82.04.230, 82.04.240, 82.04.250, 82.04.255, 82.04.270, and 82.04.290.

To facilitate collection of this additional tax, the department of revenue is authorized to adjust the basic rates of persons to which this section applies in such manner as to reflect the amount to the nearest one-thousandth of one percent of the additional tax hereby imposed, adjusting ten-thousandths equal to or greater than five ten-thousandths to the greater thousandth.

PART 3

MISCELLANEOUS TAX PROVISIONS

Sec. 301. Section 82.04.390, chapter 15, Laws of 1961 and RCW 82.04.390 are each amended to read as follows:

This chapter shall not apply to gross proceeds derived from the sale of real estate. This section however, shall not be construed to allow a deduction of (1) amounts received as commissions from the sale of real estate, nor as fees, handling charges, discounts, interest or similar financial charges resulting from, or relating to, real estate transactions, nor (2) amounts derived from operating a storage warehouse, mini-storage warehouse, self-service storage facility, or other facility which leases, rents, or grants licenses to use storage space for any period of time.

Sec. 302. Section 17, chapter 37, Laws of 1980 and RCW 82.04.4297 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 amounts are not deductible under this section if the amounts are received as compensation for services rendered as part of employee benefits provided by the person paying the amount.

Sec. 303. Section 7, chapter 278, Laws of 1957 as last amended by section 1, chapter 366, Laws of 1977 ex. sess. and RCW 54.28.010 are each amended to read as follows:

As used in this chapter:

(1) "Operating property" means all of the property utilized by a public utility district in the operation of a plant or system for the generation, transmission, or distribution of electric energy for sale;

(2) "Taxing districts" means counties, cities, towns, school districts, and road districts;

(3) "Distributes to consumers" means the sale of electric energy to ultimate consumers thereof, and does not include sales of electric energy for resale by the purchaser: PROVIDED, That a purchaser not subject to taxation under chapter 82.16 RCW acquiring electric energy for resale shall be considered an ultimate consumer;

(4) "Wholesale value" means all costs of a public utility district associated with the generation and transmission of energy from its own generation and transmission system to the point or points of inter-connection with a distribution system owned and used by a district to distribute such energy to consumers, or in the event a distribution system owned by a district is not used to distribute such energy, then the term means the gross revenues derived by a district from the sale of such energy to consumers;

(5) "Thermal electric generating facility" means a steam-powered electrical energy producing facility utilizing nuclear or fossil fuels;

(6) "Placed in operation" means delivery of energy into a transmission or distribution system for use or sale in such a manner as to establish a value accruing to the power plant operator, except operation incidental to testing or startup adjustments;

(7) "Impacted area" for a thermal electric generating facility on a federal reservation means that area in the state lying within thirty-five statute miles of the most commonly used entrance of the federal reservation and which is south of the southern boundary of township fifteen north.

NEW SECTION. Sec. 304. A new section is added to chapter 82.04 RCW to read as follows:

This chapter does not apply to adult family homes which are licensed as such, or which are specifically exempt from licensing, under rules of the department of social and health services.

NEW SECTION. Sec. 305. A new section is added to chapter 82.08 RCW to read as follows:

The tax imposed by RCW 82.08.020 shall not apply to sales of materials and supplies directly used in the receiving, washing, sorting, and packing of fresh perishable horticultural products by any person entitled to the deduction under RCW 82.04.4287 either as an agent or an independent contractor.

NEW SECTION. Sec. 306. A new section is added to chapter 82.12 RCW to read as follows:

The tax imposed by RCW 82.12.020 shall not apply to the use of materials and supplies directly used in the receiving, washing, sorting, and packing of fresh perishable horticultural products by any person entitled to the deduction under RCW 82.04.4287 either as an agent or an independent contractor.

Sec. 307. Section 10, chapter 232, Laws of 1985 and RCW 82.60.050 are each amended to read as follows:

RCW 82.60.030 and 82.60.040 shall expire July 1, ((~~1991~~)) 1994.

Sec. 308. Section 22, chapter 116, Laws of 1986 and RCW 82.62.040 are each amended to read as follows:

RCW 82.62.020 and 82.62.030 shall expire July 1, ((~~1988~~)) 1991.

PART 4

CONSTRUCTION‑-EFFECTIVE DATE

NEW SECTION. Sec. 401. Part captions as used in this act shall constitute no part of the law.

NEW SECTION. Sec. 402. This act shall not be construed as affecting any existing right acquired or liability or obligation incurred under the sections amended or repealed in this act or under any rule, regulation, or order adopted under those sections, nor as affecting any proceeding instituted under those sections.

NEW SECTION. Sec. 403. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 404. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect June 1, 1987, except section 302 of this act shall take effect January 1, 1988.