AN ACT Relating to not-for-profit organizations that distribute nonfood necessities to needy persons; amending RCW 82.08.010, 69.80.010, 69.80.020, 69.80.030, 69.80.040, and 69.80.050; reenacting and amending RCW 82.12.010; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; and creating a new section.

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

NEW SECTION. Sec. 1. The purpose of this act is to facilitate the distribution of nonfood necessities to needy persons. The legislature finds that removing the sales and use tax from the purchase of these items, when purchased by distributing organizations, and limiting the liability of such organizations, will enable such organizations to better assist their clients.

Sec. 2. Section 82.08.010, chapter 15, Laws of 1961 as last amended by section 3, chapter 38, Laws of 1985 and RCW 82.08.010 are each amended to read as follows:

For the purposes of this chapter:

(1) "Selling price" means the consideration, whether money, credits, rights, or other property except trade-in property of like kind, expressed in the terms of money paid or delivered by a buyer to a seller without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes other than taxes imposed under this chapter if the seller advertises the price as including the tax or that the seller is paying the tax, or any other expenses whatsoever paid or accrued and without any deduction on account of losses; but shall not include the amount of cash discount actually taken by a buyer; and shall be subject to modification to the extent modification is provided for in RCW 82.08.080.

When tangible personal property is rented or leased under circumstances that the consideration paid does not represent a reasonable rental for the use of the articles so rented or leased, the "selling price" shall be 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 as the department of revenue may prescribe;

(2) "Seller" means every person, including the state and its departments and institutions, making sales at retail or retail sales to a buyer or consumer, whether as agent, broker, or principal, except "seller" does not mean the state and its departments and institutions when making sales to the state and its departments and institutions;

(3) "Buyer" and "consumer" include, without limiting the scope hereof, every individual, receiver, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, corporation, association, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise, municipal corporation, quasi municipal corporation, and also the state, its departments and institutions and all political subdivisions thereof, irrespective of the nature of the activities engaged in or functions performed, and also the United States or any instrumentality thereof;

(4) "Distributing organization" means a not-for-profit organization organized under chapter 24.03 or 24.12 RCW that distributes food free of charge to needy persons as defined by the distributing organization's eligibility requirements;

(5) "Nonfood necessities" means items of tangible personal property necessary for personal hygiene including soaps, shampoos, laundry detergents, toothpaste, toothbrushes, toilet tissue, and any other personal hygiene necessities purchased by, or donated to a distributing organization;

(6) The meaning attributed in chapter 82.04 RCW to the terms "tax year," "taxable year," "person," "company," "sale," "sale at retail," "retail sale," "sale at wholesale," "wholesale," "business," "engaging in business," "cash discount," "successor," "consumer," "in this state" and "within this state" shall apply equally to the provisions of this chapter.

NEW SECTION. Sec. 3. A new section is added to chapter 82.08 RCW to read as follows:

The tax levied by RCW 82.08.020 shall not apply to sales of nonfood necessities purchased by distributing organizations to be given away to needy persons. Distributing organizations shall prove entitlement to this tax exemption by presenting to vendors a certificate signed by, and bearing the name, address, state registration number, if any, and the federal employer identification number of the distributing organization. The department shall by rule provide a method for issuing such certificates to qualified distributing organizations.

Sec. 4. 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) "Use," "used," "using," or "put to use" shall have their ordinary meaning, and shall mean 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;

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

(5) "Distributing organization" means a not-for-profit organization organized under chapter 24.03 or 24.12 RCW that distributes food free of charge to needy persons as defined by the distributing organization's eligibility requirements;

(6) "Nonfood necessities" means items of tangible personal property necessary for personal hygiene including soaps, shampoos, laundry detergents, toothpaste, toothbrushes, toilet tissue, and any other personal hygiene necessities purchased by, or donated to a distributing organization;

(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.

NEW SECTION. Sec. 5. A new section is added to chapter 82.12 RCW to read as follows:

The provisions of this chapter shall not apply with respect to the use of nonfood necessities by a distributing organization. Nor shall this chapter apply with respect to the use of such items by an individual who receives such items from a distributing organization. Distributing organizations shall prove entitlement to this tax exemption by presenting to vendors a certificate signed by, and bearing the name, address, state registration number, if any, and the federal employer identification number of the distributing organization. The department shall by rule provide a method for issuing such certificates to qualified distributing organizations.

Sec. 6. Section 1, chapter 241, Laws of 1983 and RCW 69.80.010 are each amended to read as follows:

The purpose of this chapter is to promote the free distribution of food and nonfood necessities to needy persons, prevent waste of food products, and provide liability protection for persons and organizations donating or distributing such food products and nonfood necessities.

Sec. 7. Section 2, chapter 241, Laws of 1983 and RCW 69.80.020 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Distributing organization" means a charitable nonprofit organization under section 501(c) of the federal internal revenue code or a not-for-profit organization organized under chapter 24.03 or 24.12 RCW which distributes food free of charge and includes any nonprofit organization that distributes food free of charge to other nonprofit organizations or to the public.

(2) "Donor" means a person, corporation, association, or other organization which donates food to a distributing organization. "Donor" includes, but is not limited to, farmers, processors, distributors, wholesalers, and retailers of food. "Donor" also includes persons who harvest agricultural crops or perishable foods which have been donated by the owner to a distributing organization.

(3) "Food" means food products for human consumption as defined in RCW 69.04.008.

(4) "Nonfood necessities" means items of tangible personal property necessary for personal hygiene including soaps, shampoos, laundry detergents, toothpaste, toothbrushes, toilet tissue, and any other personal hygiene necessities purchased by, or donated to a distributing organization.

Sec. 8. Section 3, chapter 241, Laws of 1983 and RCW 69.80.030 are each amended to read as follows:

Donors and distributing organizations are not liable for civil damages or criminal penalties resulting from the nature, age, condition, or packaging of the donated food or nonfood necessities, including any liability under chapter 15.32 or 69.04 RCW, unless the donor or distributing organization acts with gross negligence or intentional misconduct.

Sec. 9. Section 4, chapter 241, Laws of 1983 and RCW 69.80.040 are each amended to read as follows:

The department of agriculture shall maintain an information and referral service for persons and organizations that have notified the department of their desire to participate in the food and nonfood necessity donation program under this chapter.

Sec. 10. Section 6, chapter 241, Laws of 1983 and RCW 69.80.050 are each amended to read as follows:

Appropriate state and local agencies are authorized to inspect donated food and nonfood items for wholesomeness and may establish procedures for the handling of food items.