AN
ACT Relating to the meaning of the phrase "services rendered in respect to
constructing" for purposes of the business and occupation and sales and
use taxes; adding a new section to chapter 82.04 RCW; and creating a new
section.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. (1)
The legislature finds that the taxation of "services rendered in respect
to constructing buildings or other structures" has generally included the
entire transaction for construction, including certain services provided
directly to the consumer or owner rather than the person engaged in the
performance of the constructing activity. Changes in business practices and
recent administrative and court decisions have confused the issue. It is the
intent of the legislature to clarify which services, if standing alone and not
part of the construction agreement, are taxed as retail or wholesale sales, and
which services will continue to be taxed as a service.
(2)
It is further the intent of the legislature to confirm that the entire price
for the construction of a building or other structure for a consumer or owner
continues to be a retail sale, even though some of the individual services
reflected in the price, if provided alone, would be taxed as services and not
as separate retail or wholesale sales.
(3)
Therefore, the intent of this act is to maintain the application of the law and
not to extend retail treatment to activities not previously treated as retail
activities. Services that are otherwise subject to tax as a service under RCW
82.04.290(2), including but not limited to engineering, architectural,
surveying, flagging, accounting, legal, consulting, or administrative services,
remain subject to tax as a service under RCW 82.04.290(2), if the person
responsible for the performance of those services is not also responsible for
the performance of the constructing, building, repairing, improving, or
decorating activities. Additionally, unless otherwise provided by law, a
person entering into an agreement to be responsible for the performance of services
otherwise subject to tax as a service under RCW 82.04.290(2), and subsequently
entering into a separate agreement to be responsible for the performance of
constructing, building, repairing, improving, or decorating activities, is
subject to tax as a service under RCW 82.04.290(2) with respect to the first
agreement, and is subject to tax under the appropriate section of chapter 82.04
RCW with respect to the second agreement, if at the time of the first agreement
there was no contemplation by the parties, as evidenced by the facts, that the
agreements would be awarded to the same person.
NEW
SECTION. Sec. 2. A
new section is added to chapter 82.04 RCW to read as follows:
(1)
As used in RCW 82.04.050, the term "services rendered in respect to"
means those services that are directly related to the constructing, building,
repairing, improving, and decorating of buildings or other structures and that
are performed by a person who is responsible for the performance of the constructing,
building, repairing, improving, or decorating activity. The term does not
include services such as engineering, architectural, surveying, flagging,
accounting, legal, consulting, or administrative services provided to the
consumer of, or person responsible for performing, the constructing, building,
repairing, improving, or decorating services. (2) A contract or agreement
under which a person is responsible for both services that would otherwise be
subject to tax as a service under RCW 82.04.290(2) and also constructing,
building, repairing, improving, or decorating activities that would otherwise
be subject to tax under another section of this chapter is subject to the tax
that applies to the predominant activity under the contract or agreement.
(3)
Unless otherwise provided by law, a contract or agreement under which a person
is responsible for activities that are subject to tax as a service under RCW
82.04.290(2), and a subsequent contract or agreement under which the same
person is responsible for constructing, building, repairing, improving, or
decorating activities subject to tax under another section of this chapter,
shall not be combined and taxed as a single activity if at the time of the
first contract or agreement it was not contemplated by the parties, as
evidenced by the facts, that the same person would be awarded both contracts.
(4)
As used in this section "responsible for the performance" means that
the person is obligated to perform the activities, either personally or through
a third party. A person who reviews work for a consumer, retailer, or
wholesaler but does not supervise or direct the work is not responsible for the
performance of the work. A person who is financially obligated for the work,
such as a bank, but who does not have control over the work itself is not
responsible for the performance of the work.
