BP BHEAD INT S [atlas:bill]

AN ACT Relating to sales tax exemption of farm machinery and equipment sold to nonresidents; adding a new section to chapter 82.08 RCW; prescribing penalties; and providing an effective date.

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

NEW SECTION. Sec. 1. A new section is added to chapter 82.08 RCW to read as follows:

(1) The definitions in this subsection apply throughout this section.

(a) "Agricultural product" is defined as provided in RCW 82.04.213.

(b) "Directly used in a farming operation" means the performance of a function reasonably necessary to the operation of the total farming business, including planting, growing, harvesting, and initial storage of agricultural products, and movement of agricultural products from the place of harvest to the place of initial storage.

(c) "Farm machinery and equipment" means machinery and equipment directly used in a farming operation, and includes tangible personal property that becomes an ingredient or component thereof, including repair parts, replacement parts, lubricants, hydraulic oil, and coolants.

(d) "Farm machinery and equipment" does not include:

(i) Hand tools;

(ii) Items used in a manner incidental to farming, such as maintenance and janitorial equipment and supplies;

(iii) Items used in any activities other than the actual farming operation, such as office equipment and supplies, and equipment and supplies used in selling or distributing activities; and

(iv) Items that become or are intended to become a component of any real property or any improvement or fixture thereto.

(2) The tax levied by RCW 82.08.020 does not apply to sales of machinery and equipment directly used in farming, if sold to nonresidents of this state for use outside this state and the purchaser (a) is a bona fide resident of a state, possession, or Province of Canada, other than the state of Washington, and such state, possession, or Province of Canada does not impose a retail sales tax or use tax of three percent or more on similar items of machinery or equipment or, if imposing such a tax, permits Washington residents exemption from otherwise taxable sales of similar machinery and equipment by reason of their residence, and (b) agrees, when requested, to grant the department of revenue access to such records and other forms of verification at his or her place of residence to assure that such purchases are not first used substantially in the state of Washington.

(3) Any person claiming exemption under this section must display proof of his or her current nonresident status. Acceptable proof of a nonresident person's status includes one piece of identification such as a valid driver's license from the jurisdiction in which the out-of-state residency is claimed or a valid identification card that has a photograph of the holder and is issued by the out-of-state jurisdiction. The identification must show the holder's residential address and have as one of its legal purposes the establishment of residency in that out-of-state jurisdiction.

(4) Nothing in this section requires the vendor to make tax exempt retail sales to nonresidents. A vendor may choose to make sales to nonresidents, collect the sales tax, and remit the amount of sales tax collected to the state as otherwise provided by law. If the vendor chooses to make a sale to a nonresident without collecting the sales tax, the vendor shall, in good faith, examine the proof of nonresidence, determine whether the proof is acceptable under this section, and maintain records for each nontaxable sale that show the type of proof accepted, including any identification numbers, if appropriate, and the expiration date, if any.

(5)(a) Any person making fraudulent statements, which includes the offer of fraudulent identification or fraudulently procured identification to a vendor, in order to purchase goods without paying retail sales tax is guilty of perjury. Any person making tax exempt purchases under this section by displaying proof of identification not his or her own, or counterfeit identification, with intent to violate the provisions of this section, is guilty of a misdemeanor and, in addition, shall be liable for the tax and subject to a penalty equal to the greater of one hundred dollars or the tax due on such purchases.

(b) Any vendor who makes sales without collecting the tax to a person who does not hold valid identification establishing out-of-state residency, and any vendor who fails to maintain records of sales to nonresidents as provided in this section, shall be personally liable for the amount of tax due. Any vendor who makes sales without collecting the retail sales tax under this section and who has actual knowledge that the purchaser's proof of identification establishing out-of-state residency is fraudulent is guilty of a misdemeanor and, in addition, shall be liable for the tax and subject to a penalty equal to the greater of one thousand dollars or the tax due on such sales. In addition, both the purchaser and the vendor shall be liable for any penalties and interest assessable under chapter 82.32 RCW.

NEW SECTION. Sec. 2. This act takes effect October 1, 1997.