WSR 00-14-085



[ Filed July 5, 2000, 11:55 a.m. ]


This announcement of the repeal of these interpretive statements is being published in the Washington State Register pursuant to the requirements of RCW 34.05.230(4).

The Department of Revenue has repealed the following audit directives effective June 30, 2000.

AD 8113.1 Carbon Electrodes, this document was issued in 1986 to explain that the department had decided to not appeal a BTA decision ruling that carbon electrodes used in the production of steel were an ingredient and not subject to either the retail sales or use tax. The information provided in this document no longer serves a useful purpose, and can be misleading. As explained in WAC 458-20-113 Ingredients or components, chemicals used in processing new articles for sale, to be considered an ingredient or component part material must become an essential and intended ingredient or component of the finished product.

AD 8126.1 Diesel delivered in Washington to motor carriers for use outside Washington, this document is no longer needed. It was issued to explain that the department considered the 1983 revision to RCW 82.08.0255 was merely a clarification, and should be applied retroactively.

AD 8126.2 Motor Vehicle Fuel Tax Rates (Per Gallon), this document was last revised in 1991 and provides out-of-date and incorrect federal fuel tax rates. There is no longer a need for the department to provide this information via an interpretive or policy statement.

AD 8132.1 Service trucks used by car dealers and

AD 8132.2 Use tax on loaned vehicles, WAC 458-20-132 (Automobile dealers/demonstrator and executive vehicles) currently explains the tax-reporting requirements for service trucks and loaned vehicles used by car dealers.

AD 8146.4 Interest Income on Municipal Securities, this directive provides incorrect information. It explains that the B&O tax deduction allowed by RCW 82.04.4293 does not apply to interest received on obligations issued by entities such as school districts, preservation and development authorities, and similar entities because they are not municipal corporations. These instructions have been superseded by Determination No. 89-370, 8 WTD 111 (1989), which held that the term "municipal corporation" in RCW 82.04.4293 refers to a broader range of entities than just cities.

AD 8155.1 Software license agreements prior to August 7, 1995, WAC 458-20-155 currently addresses this issue, and the instructions as they apply to periods prior to August 7, 1985, are no longer needed.

AD 8164.1 Special business tax classification for insurance agents, this document explains that automobile dealers selling insurance are eligible for the special tax rate for insurance agents, brokers, and solicitors because they are required to be licensed under chapter 48.17 RCW. This document is no longer needed. As explained in WAC 458-20-164 Insurance agents, brokers and solicitors, every insurance agent, broker, or solicitor licensed under chapter 48.17 RCW is subject to the special insurance agent and broker B&O tax rate.

AD 8167.1 Tax liability of nursery schools, day care and preschools, this information is currently provided in WAC 458-20-167 Educational institutions, school districts, student organizations, and private schools.

AD 8170.1 Proper tax classification for concrete pumping, this document is out of date and no longer serves a useful purpose. It explains that the Thurston County Superior Court in Sunnen Crane Service, Inc. v. Department of Revenue, Cause No. 85-2-01075-0 found that crane-lifting operations directly related to construction are wholesale or retail activities. It then states that concrete pumping is to be similarly treated. The Sunnen Crane decision is an inappropriate basis upon which to determine the taxability of either crane lifting or concrete pumping. Chapter 25, Laws of 1993 sp. sess., amended RCW 82.04.050(4) to specifically include the "rental of equipment with operator" to the definition of retail sale. This document also fails to recognize the 1996 amendment of WAC 458-20-211 Leases or rentals of tangible personal property, bailments.

AD 8174.1 Use tax -- Trucks and trailers used in interstate commerce, this document is no longer needed. WAC 458-20-17401 Use tax liability for motor vehicles, trailers, and parts used by motor carriers operating in interstate or foreign commerce, currently explains that in the absence of a readily available fair market value, the department will accept a value based on depreciation schedules used by the Department of Licensing. In addition, the depreciation schedules provided in AD 8174.1 are out of date.

AD 8182.1 Warehouse Income prior to July 1, 1986, this document is no longer needed because the information not currently included in WAC 458-20-182 applies to periods beyond the statutory claim period.

AD 8187.1 Factoring tax from food vending machines, this information is currently provided in WAC 458-20-243 Food products.

AD 8211.2 Finance leases, this document explains the differences between "finance" and "true" leases, and provides a list of elements that generally exist in a finance lease. This issue is addressed in WAC 458-20-211 Leases or rentals of tangible personal property, bailments.

AD 8211.4 Lease or sale of irrigation circles, this document explains that the Washington Court of Appeals held that center pivot irrigation systems and appurtenances are realty when sold with the land. It also explains that the 1983 legislature provided a retail sales tax exemption under certain circumstances for the lease of irrigation equipment. There is no longer any need for this document. The court's decision in Western Ag. vs. Department of Revenue, 43 Wn. App. 167, 716 P.2d 310, regarding the taxation of center pivot irrigation systems is uniformly understood and applied by the department and agricultural industry. WAC 458-20-122 Sales of feed, seed, fertilizer, spray materials, and other tangible personal property for farm use currently addresses the retail sales tax exemption provided to leased irrigation equipment.

AD 8214.1 Boxes and packing materials, this information is provided in WAC 458-20-214 Cooperative marketing associations and independent dealers acting as agents of others with respect to the sale of fruit and produce and 458-20-115 Sales of packing materials and containers.

AD 8224.1 Proper classification of the mere cleaning of fish, this document provides incorrect tax-reporting information. It explains that the service and other activities B&O tax applies to the cleaning of fish. RCW 82.04.2403 provides that the cleaning of fish is a manufacturing activity, though exempt of B&O tax.

AD 8224.2 Tour operators, the information contained in this directive is incorrect. It explains that tour operators are generally taxable under the service classification. RCW 82.04.260 was amended in 1996 to impose the travel agency tax classification to tour operators.

AD 8227.1 Advertising income -- Cable television producers, this information is provided in WAC 458-20-227 Subscriber television services.

AD 8243.1 Litter tax reporting by fast food restaurants, this document explains that the provisions of ETB (now ETA) 445 applies to fast food establishments. It further states that in the absence of specific records, auditors should consult with the taxpayer to determine a reasonable percentage of food products that are subject to the litter tax. This document is no longer needed. The described application of ETA 445 and the practice of consulting with fast food retailers to determine the percentage of food and beverage sales subject to the litter tax are standard procedures for the department.

AD 8257.1 Extended Warranty, this document was issued to explain how the department would administer the change in tax-reporting responsibilities for extended warranties to implement the Thurston County Superior Court's decision in Sound Hyundai, Inc. v. State of Washington. WAC 458-20-257 currently provides accurate and complete tax-reporting instructions and AD 8257.1 is no longer needed.

Questions regarding the repeal of these directives may be directed to Alan R. Lynn, Legislation and Policy, P.O. Box 47467, Olympia, WA 98504-7467, phone (360) 570-6125, fax (360) 664-0693, Internet

Claire Hesselholt

Policy Counsel

Washington State Code Reviser's Office