AN ACT Relating to a dedicated revenue source for financing public school and higher education construction; amending RCW 82.08.0293 and 82.12.0293; adding a new section to chapter 82.32 RCW; creating a new section; and providing an effective date.

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

NEW SECTION. Sec. 1. There is a significant and growing backlog in public school construction projects. These projects have been approved by local communities, but state matching funds are not available. The state's higher education system also has a backlog of needed building renovation and construction projects. Therefore, the legislature finds it necessary to supplement the forest trust land revenues with an additional source of revenue to finance needed and approved educational facilities.

It is the intent of the legislature that the primary use of this additional source will go to public school construction projects.

It is further the legislature's intent that the department of revenue will work cooperatively with the retail industry in this state when developing the administrative rules necessary for the implementation of the new revenue source for education.

Sec. 2. Section 33, chapter 35, Laws of 1982 1st ex. sess. as last amended by section 1, chapter 103, Laws of 1988 and RCW 82.08.0293 are each amended to read as follows:

(1) (a) The tax levied by RCW 82.08.020 shall not apply to sales of food products for human consumption.

(b) "Food products" include cereals and cereal products other than those expressly excluded under (g) of this subsection, oleomargarine, meat and meat products including livestock sold for personal consumption, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, spices and salt, sugar and sugar products, coffee and coffee substitutes, tea, cocoa and cocoa products.

(c) "Food products" include milk and milk products((~~, milk shakes, malted milks, and any other similar type beverages which are composed at least in part of milk or a milk product and which require the use of milk or a milk product in their preparation~~)) other than those expressly excluded under (h) of this subsection.

(d) "Food products" include all fruit juices, vegetable juices, and other beverages except milk shakes, malted milks, bottled water, spirituous, malt or vinous liquors or carbonated beverages, whether liquid or frozen.

(e) "Food products" do not include medicines and preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts.

(f) "Food products" do not include candy and gum products. "Candy products" include, but are not limited to loose, bulk, and individually packaged confections that are commonly considered candy, including hard candy, caramel, chocolate candy, nuts and fruit coated in natural or artificial sweeteners, caramel-coated popcorn, licorice, jelly beans, breath mints, and cotton candy. Confections that are primarily sold for cooking purposes shall not be considered candy for the purposes of this section and are not subject to tax. Candy products do not include sweet bakery products, ice cream or other sweet dairy products, jams, jellies, preserves, honey, syrup, frosting, breakfast cereals, granola and other breakfast bars, dried fruit and preparations of fruit in a sugar or similar base, or candy and chocolate primarily intended for the preparation or decorating of baked goods. "Gum products" include all forms of chewing gum, whether sweetened with natural or artificial sweeteners. Gum products shall not include gum or other products alleged by the manufacturer to contain aspirin, laxative, anti-acidity, or other medicinal properties.

(g) "Food products" do not include fresh or frozen doughnuts, cakes, cupcakes, cookies, and pies, sold either packaged or in bulk.

(h) "Food products" do not include ice cream, ice cream bars, ice milk and ice milk products, or other products made from natural or artificial frozen dairy products, milk shakes, malted milk, and similar beverages made from natural or artificial frozen dairy products, frozen yogurt and frozen yogurt products, including beverages made with frozen yogurt, sherbet, popsicles and similar frozen drink bars, frozen fruit juice bars, frozen pudding, frozen gelatin, or any other similar frozen dessert that the general consuming public would consider to be an ice cream or similar product.

(2) The department of revenue, by rule, shall further identify food items, consistent with subsection (1) (b) through (h) of this section, which are not included within the definition of "food products" for purposes of sales tax exemption under this chapter.

(3) The exemption of "food products" provided for in subsection (1) of this section shall not apply: (a) When the food products are ordinarily sold for immediate consumption on or near a location at which parking facilities are provided primarily for the use of patrons in consuming the products purchased at the location, even though such products are sold on a "takeout" or "to go" order and are actually packaged or wrapped and taken from the premises of the retailer, or (b) when the food products are sold for consumption within a place, the entrance to which is subject to an admission charge, except for national and state parks and monuments, or (c) to a food product, when sold by the retail vendor, which by law must be handled on the vendor's premises by a person with a food and beverage service worker's permit under RCW 69.06.010, including but not be limited to sandwiches prepared or chicken cooked on the premises, deli trays, home-delivered pizzas or meals, and salad bars but excluding:

(i) Raw meat prepared by persons who slaughter animals, including fish and fowl, or dress or wrap slaughtered raw meat such as fish mongers, butchers, or meat wrappers;

(ii) Meat and cheese sliced and/or wrapped, in any quantity determined by the buyer, sold by vendors such as meat markets, delicatessens, and grocery stores;

(iii) Bakeries which only sell baked goods;

(iv) Combination bakery businesses, as prescribed by rule of the department, to the extent that sales of baked goods are separately accounted for and the baked goods claimed for exemption are not sold as part of meals or with beverages in unsealed containers; or

(v) Bulk food products sold from bins or barrels, including but not limited to flour, fruits, vegetables, sugar, salt, ((~~candy,~~)) chips, and cocoa.

((~~(3)~~)) (4) Notwithstanding anything in this section to the contrary, the exemption of "food products" provided in this section shall apply to ((~~food products~~)) all food items which are furnished, prepared, or served as meals:

(a) Under a state administered nutrition program for the aged as provided for in the Older Americans Act (P.L. 95-478 Title III) and RCW 74.38.040(6); or

(b) Which are provided to senior citizens, disabled persons, or low-income persons by a not-for-profit organization organized under chapter 24.03 or 24.12 RCW.

((~~(4)~~)) (5) Subsection (1) of this section notwithstanding, the retail sale of food products and all other food items excluded from the definition of "food products" under this section is subject to sales tax under RCW 82.08.020 if ((~~the food products are~~)) sold through a vending machine, and in this case the selling price for purposes of RCW 82.08.020 is ((~~fifty-seven~~)) seventy-five percent of the gross receipts.

This ((~~subsection~~)) special selling price does not apply to carbonated beverages or to hot prepared food products, ((~~other than food products~~)) which are heated after they have been dispensed from the vending machine.

For tax collected under this subsection, the requirements that the tax be collected from the buyer and that the amount of tax be stated as a separate item are waived.

Sec. 3. Section 34, chapter 35, Laws of 1982 1st ex. sess. as last amended by section 2, chapter 103, Laws of 1988 and RCW 82.12.0293 are each amended to read as follows:

(1) (a) The provisions of this chapter shall not apply in respect to the use of food products for human consumption.

(e) "Food products" do not include medicines and preparations in liquid, powdered, granular, tablet, capsule, lozenge, and pill form sold as dietary supplements or adjuncts.

(g) "Food products" do not include fresh or frozen doughnuts, cakes, cupcakes, cookies, and pies, sold either packaged or in bulk.

(i) Raw meat prepared by persons who slaughter animals, including fish and fowl, or dress or wrap slaughtered raw meat such as fish mongers, butchers, or meat wrappers;

(ii) Meat and cheese sliced and/or wrapped, in any quantity determined by the buyer, sold by vendors such as meat markets, delicatessens, and grocery stores;

(iii) Bakeries which only sell baked goods;

(v) Bulk food products sold from bins or barrels, including but not limited to flour, fruits, vegetables, sugar, salt, ((~~candy,~~)) chips, and cocoa.

(a) Under a state administered nutrition program for the aged as provided for in the Older Americans Act (P.L. 95-478 Title III) and RCW 74.38.040(6); or

(b) Which are provided to senior citizens, disabled persons, or low-income persons by a not-for-profit organization organized under chapter 24.03 or 24.12 RCW.

NEW SECTION. Sec. 4. A new section is added to chapter 82.32 RCW to read as follows:

(1) The intent of RCW 82.08.0293 and 82.12.0293 is to provide a dedicated revenue source for education construction purposes. Since it is not practical to determine precisely the revenues derived from the termination of tax exemptions for certain items excluded from the definition of food products under RCW 82.08.0293(1) (f), (g), and (h) and 82.12.0293(1) (f), (g), and (h), a fixed percentage of all sales and use taxes shall be dedicated in lieu thereof.

(2) On or before January 1 of each year, the department of revenue shall provide the legislature with an updated estimate of the percentage of sales and use tax revenues attributable to the termination of tax exemptions for certain items excluded from the definition of food products under RCW 82.08.0293(1) (f), (g), and (h) and 82.12.0293(1) (f), (g), and (h).

(3) The education construction account is created in the state treasury. One and one-tenth percent of all receipts from the taxes imposed in RCW 82.08.020 and 82.12.020 shall be deposited in the account. Expenditures from the account may be used only for the purpose of acquisition, construction, alteration, repair, or equipping of facilities for the common schools, community colleges, University of Washington, Washington State University, Central Washington University, Eastern Washington University, Western Washington University, and The Evergreen State College. The moneys in this account shall not be used for debt service payments nor shall they be used to incur state indebtedness.

NEW SECTION. Sec. 5. 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. 6. This act shall take effect July 1, 1990.