AN
ACT Relating to granting the department of revenue the authority to issue
direct pay permits; amending RCW 82.12.010, 82.08.050, and 82.12.040; adding a
new section to chapter 82.32 RCW; creating new sections; and providing an
effective date.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. The
legislature finds that programs to allow buyers to remit sales and use tax,
rather than traditional collection and remittance by the seller of sales and
use tax, can assist in tax compliance, ease administrative burdens, and reduce
impacts on buyers and sellers. It is the intent of the legislature to grant
the department of revenue the authority to permit certain buyers direct payment
authority of tax in those instances where it can be shown, to the satisfaction
of the department, that direct payment does not burden sellers and does not
complicate administration for the department. Buyers authorized for direct
payment will remit tax directly to the department, and will pay use tax on
tangible personal property and sales tax on retail labor and/or services.
This
act does not affect the requirements to use a resale certificate nor does it
affect the business and occupation tax treatment of the seller.
NEW
SECTION. Sec. 2. A
new section is added to chapter 82.32 RCW to read as follows:
(1)
The director may grant a direct pay permit to a taxpayer who demonstrates, to
the satisfaction of the director, that the taxpayer meets the requirements of
this section. The direct pay permit allows the taxpayer to accrue and remit
directly to the department use tax on the acquisition of tangible personal
property or sales tax on the sale of or charges made for labor and/or services,
in accordance with all of the applicable provisions of this title. Any
taxpayer that uses a direct pay permit shall remit state and local sales or use
tax directly to the department. The agreement by the purchaser to remit tax
directly to the department, rather than pay sales or use tax to the seller,
relieves the seller of the obligation to collect sales or use tax and requires
the buyer to pay use tax on the tangible personal property and sales tax on the
sale of or charges made for labor and/or services.
(2)(a)
A taxpayer may apply for a permit under this section if the taxpayer (i) is
subject to mandatory use of electronic funds transfer under RCW 82.32.080; or
(ii) makes purchases subject to the taxes imposed under chapter 82.08 or 82.12
RCW in excess of ten million dollars per calendar year.
(b)
Application for a permit must be made in writing to the director in a form and
manner prescribed by the department. A taxpayer who transacts business in two
or more locations may submit one application to cover the multiple locations.
(c)
The director shall review a direct pay permit application in a timely manner
and shall notify the applicant, in writing, of the approval or denial of the
application. The department shall approve or deny an application based on the
applicant=s ability to comply with
local government use tax coding capabilities and responsibilities; requirements
for vendor notification; recordkeeping obligations; electronic data
capabilities; and tax reporting procedures. Additionally, an application may
be denied if the director determines that denial would be in the best interest
of collecting taxes due under this title. The department shall provide a
direct pay permit to an approved applicant with the notice of approval. The
direct pay permit shall clearly state that the holder is solely responsible for
the accrual and payment of the tax imposed under chapters 82.08 and 82.12 RCW
and that the seller is relieved of liability to collect tax imposed under
chapters 82.08 and 82.12 RCW on all sales to the direct pay permit holder. The
taxpayer may petition the director for reconsideration of a denial.
(d)
A taxpayer who uses a direct pay permit must continue to maintain records that
are necessary to a determination of the tax liability in accordance with this
title. A direct pay permit is not transferable and the use of a direct pay
permit may not be assigned to a third party.
(3)
Taxes for which the direct pay permit is used are due and payable on the tax
return for the reporting period in which the taxpayer (a) receives the tangible
personal property purchased or in which the labor and/or services are performed
or (b) receives an invoice for such property or such labor and/or services,
whichever period is earlier.
(4)
The holder of a direct pay permit shall furnish a copy of the direct pay permit
to each vendor with whom the taxpayer has opted to use a direct pay permit.
Sellers who make sales upon which the sales or use tax is not collected by
reason of the provisions of this section, in addition to existing requirements
under this title, shall maintain a copy of the direct pay permit and any such
records or information as the department may specify.
(5)
A direct pay permit is subject to revocation by the director at any time the
department determines that the taxpayer has violated any provision of this
section or that revocation would be in the best interests of collecting the
taxes due under this title. The notice of revocation must be in writing and is
effective either as of the end of the taxpayer's next normal reporting period
or a date deemed appropriate by the director and identified in the revocation
notice. The taxpayer may petition the director for reconsideration of a
revocation and reinstatement of the permit.
(6)
Any taxpayer who chooses to no longer use a direct pay permit or whose permit
is revoked by the department, shall return the permit to the department and
immediately make a good faith effort to notify all vendors to whom the permit
was given, advising them that the permit is no longer valid.
(7)
Except as provided in this subsection, the direct pay permit may be used for
any purchase of tangible personal property and any retail sale under RCW
82.04.050. The direct pay permit may not be used for:
(a)
Purchases of meals or beverages;
(b)
Purchases of motor vehicles, trailers, boats, airplanes, and other property
subject to requirements for title transactions by the department of licensing;
(c)
Purchases for which a resale certificate may be used;
(d)
Purchases that meet the definitions of RCW 82.04.050 (2) (e) and (f), (3) (a)
through (d), (f), and (g), and (5); or
(e)
Other activities subject to tax under chapter 82.08 or 82.12 RCW that the
department by rule designates, consistent with the purposes of this section, as
activities for which a direct pay permit is not appropriate and may not be
used.
Sec.
3. RCW
82.12.010 and 1994 c 93 s 1 are each amended to read as follows:
For
the purposes of this chapter:
(1)(a)
"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 as the department of
revenue may prescribe.
(b)
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 as the department of revenue may prescribe. 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 as the department of revenue may prescribe.
(c)
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 one hundred eighty 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 (a) of
this subsection.
(d)
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.
(e)
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: (i) The retail selling price of such new
or improved product when first offered for sale; or (ii) the value of materials
incorporated into the prototype in cases in which the new or improved product
is not offered for sale.
(f)
In the case of an article purchased with a direct pay permit under section 2 of
this act, the value of the article used shall be determined by the retail
selling price, as defined in RCW 82.08.010, of such article if but for the use
of the direct pay permit the transaction would have been subject to sales tax;
(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)
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.
Sec.
4. RCW
82.08.050 and 1993 sp.s. c 25 s 704 are each amended to read as follows:
The
tax hereby imposed shall be paid by the buyer to the seller, and each seller
shall collect from the buyer the full amount of the tax payable in respect to
each taxable sale in accordance with the schedule of collections adopted by the
department pursuant to the provisions of RCW 82.08.060. The tax required by
this chapter, to be collected by the seller, shall be deemed to be held in
trust by the seller until paid to the department, and any seller who
appropriates or converts the tax collected to his or her own use or to any use
other than the payment of the tax to the extent that the money required to be
collected is not available for payment on the due date as prescribed in this
chapter shall be guilty of a gross misdemeanor.
In
case any seller fails to collect the tax herein imposed or having collected the
tax, fails to pay it to the department in the manner prescribed by this
chapter, whether such failure is the result of his or her own acts or the
result of acts or conditions beyond his or her control, he or she shall,
nevertheless, be personally liable to the state for the amount of the tax,
unless the seller has taken from the buyer in good faith a properly executed
resale certificate under RCW 82.04.470 or a copy of a direct pay permit
issued under section 2 of this act.
The
amount of tax, until paid by the buyer to the seller or to the department,
shall constitute a debt from the buyer to the seller and any seller who fails
or refuses to collect the tax as required with intent to violate the provisions
of this chapter or to gain some advantage or benefit, either direct or
indirect, and any buyer who refuses to pay any tax due under this chapter shall
be guilty of a misdemeanor. The tax required by this chapter to be collected
by the seller shall be stated separately from the selling price in any sales
invoice or other instrument of sale. On all retail sales through vending
machines, the tax need not be stated separately from the selling price or
collected separately from the buyer. For purposes of determining the tax due
from the buyer to the seller and from the seller to the department it shall be
conclusively presumed that the selling price quoted in any price list, sales
document, contract or other agreement between the parties does not include the
tax imposed by this chapter, but if the seller advertises the price as
including the tax or that the seller is paying the tax, the advertised price
shall not be considered the selling price.
Where
a buyer has failed to pay to the seller the tax imposed by this chapter and the
seller has not paid the amount of the tax to the department, the department
may, in its discretion, proceed directly against the buyer for collection of
the tax, in which case a penalty of ten percent may be added to the amount of
the tax for failure of the buyer to pay the same to the seller, regardless of
when the tax may be collected by the department; and all of the provisions of
chapter 82.32 RCW, including those relative to interest and penalties, shall
apply in addition; and, for the sole purpose of applying the various provisions
of chapter 82.32 RCW, the twenty-fifth day of the month following the tax
period in which the purchase was made shall be considered as the due date of
the tax.
Sec.
5. RCW
82.12.040 and 1986 c 48 s 1 are each amended to read as follows:
(1)
Every person who maintains in this state a place of business or a stock of
goods, or engages in business activities within this state, shall obtain from
the department a certificate of registration, and shall, at the time of making
sales, or making transfers of either possession or title or both, of tangible
personal property for use in this state, collect from the purchasers or
transferees the tax imposed under this chapter. For the purposes of this
chapter, the phrase "maintains in this state a place of business"
shall include the solicitation of sales and/or taking of orders by sales agents
or traveling representatives. For the purposes of this chapter, "engages
in business activity within this state" includes every activity which is
sufficient under the Constitution of the United States for this state to
require collection of tax under this chapter. The department shall in rules
specify activities which constitute engaging in business activity within this
state, and shall keep the rules current with future court interpretations of
the Constitution of the United States.
(2)
Every person who engages in this state in the business of acting as an
independent selling agent for persons who do not hold a valid certificate of
registration, and who receives compensation by reason of sales of tangible
personal property of his principals made for use in this state, shall, at the
time such sales are made, collect from the purchasers the tax imposed under
this chapter, and for that purpose shall be deemed a retailer as defined in
this chapter.
(3)
The tax required to be collected by this chapter shall be deemed to be held in
trust by the retailer until paid to the department and any retailer who
appropriates or converts the tax collected to his own use or to any use other
than the payment of the tax provided herein to the extent that the money
required to be collected is not available for payment on the due date as
prescribed shall be guilty of a misdemeanor. In case any seller fails to collect
the tax herein imposed or having collected the tax, fails to pay the same to
the department in the manner prescribed, whether such failure is the result of
his own acts or the result of acts or conditions beyond his control, he shall
nevertheless, be personally liable to the state for the amount of such tax,
unless the seller has taken from the buyer in good faith a copy of a direct pay
permit issued under section 2 of this act.
(4)
Any retailer who refunds, remits, or rebates to a purchaser, or transferee,
either directly or indirectly, and by whatever means, all or any part of the
tax levied by this chapter shall be guilty of a misdemeanor.
NEW
SECTION. Sec. 6. The
code reviser shall place cross-reference sections to section 2 of this act in
chapters 82.08, 82.12, and 82.14 RCW.
NEW
SECTION. Sec. 7. This
act takes effect August 1, 2001.
