BILL REQ. #:  S-4679.5 

READ FIRST TIME 02/26/04.   

     AN ACT Relating to conforming Washington's tax structure to portions of the streamlined sales and use tax agreement not implemented by chapter 168, Laws of 2003; amending RCW 82.32.020, 82.32.030, and 82.14.060; amending 2003 c 168 s 902 (uncodified); reenacting and amending RCW 82.14.020 and 82.32.330; adding new sections to chapter 82.32 RCW; adding a new section to chapter 82.14 RCW; adding a new section to chapter 82.08 RCW; adding new sections to chapter 82.12 RCW; creating new sections; and providing a contingent effective date.

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

Sec. 101   RCW 82.32.020 and 2003 1st sp.s. c 13 s 16 are each amended to read as follows:
     For the purposes of this chapter:
     (1) The meaning attributed in chapters 82.01 through 82.27 RCW to the words and phrases "tax year," "taxable year," "person," "company," "gross proceeds of sales," "gross income of the business," "business," "engaging in business," "successor," "gross operating revenue," "gross income," "taxpayer," "retail sale," and "value of products" shall apply equally to the provisions of this chapter.
     (2) Unless the context requires otherwise, "agreement" means the streamlined sales and use tax agreement.
     (3) "Certified automated system" means software certified under the agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction.
     (4) "Certified service provider" means an agent certified under the agreement to perform all of the seller's sales and use tax functions, other than the seller's obligation to remit tax on its own purchases.
     (5)(a) "Member state" means a state that:
     (i) Has petitioned for membership in the agreement and submitted a certificate of compliance; and
     (ii) Prior to the effective date of the agreement, has been found to be in substantial compliance with the requirements of the agreement by an affirmative vote of three-fourths of the other petitioning states; or
     (iii) After the effective date of the agreement, has been found to be in compliance with the agreement by a three-fourths vote of the entire governing board of the agreement.
     (b) Membership under (a)(ii) of this subsection is effective on the first day of a calendar quarter at least sixty days after at least ten states comprising at least twenty percent of the total population, as determined by the 2000 federal census, of all states imposing a state sales tax have petitioned for membership and have been found in compliance with the agreement.
     (c) Membership under (a)(iii) of this subsection is effective on the state's proposed date of entry.
     (6) "Model 1 seller" means a seller that has selected a certified service provider as its agent to perform all the seller's sales and use tax functions, other than the seller's obligation to remit tax on its own purchases.
     (7) "Model 2 seller" means a seller that has selected a certified automated system to perform part of its sales and use tax functions, but retains responsibility for remitting the tax.
     (8) "Model 3 seller" means a seller that has sales in at least five member states, has total annual sales revenue of at least five hundred million dollars, has a proprietary system that calculates the amount of tax due each jurisdiction, and has entered into a performance agreement with the member states that establishes a tax performance standard for the seller. As used in this subsection, a seller includes an affiliated group of sellers using the same proprietary system.
     (9) "Source" means the location in which the sale or use, of tangible personal property or a service, subject to tax under chapter 82.08, 82.12, 82.14, or 82.14B RCW, is deemed to occur.
     (10) "Operational date" means the first day of the first calendar quarter that is at least six months after the first month that the state can lawfully require remote sellers to collect sales or use tax on retail sales made to Washington residents as determined by a court of competent jurisdiction, in a judgment not subject to review, or by other legal act as certified by the director of revenue.

NEW SECTION.  Sec. 201   A new section is added to chapter 82.32 RCW to read as follows:
     (1) A seller, by written agreement, may appoint a person to represent the seller as its agent. The seller's agent has authority to register the seller with the state. An agent may also be a certified service provider, with authority to perform all the seller's sales and use tax functions, except that the seller remains responsible for remitting the tax on its own purchases.
     (2) The seller or its agent must provide the state with a copy of the written agreement upon request.

Sec. 202   RCW 82.32.030 and 1996 c 111 s 2 are each amended to read as follows:
     (1) Except as provided in subsections (2) and (3) of this section, if any person engages in any business or performs any act upon which a tax is imposed by the preceding chapters, he or she shall, under such rules as the department of revenue shall prescribe, apply for and obtain from the department a registration certificate. Such registration certificate shall be personal and nontransferable and shall be valid as long as the taxpayer continues in business and pays the tax accrued to the state. In case business is transacted at two or more separate places by one taxpayer, a separate registration certificate for each place at which business is transacted with the public shall be required. Each certificate shall be numbered and shall show the name, residence, and place and character of business of the taxpayer and such other information as the department of revenue deems necessary and shall be posted in a conspicuous place at the place of business for which it is issued. Where a place of business of the taxpayer is changed, the taxpayer must return to the department the existing certificate, and a new certificate will be issued for the new place of business. No person required to be registered under this section shall engage in any business taxable hereunder without first being so registered. The department, by rule, may provide for the issuance of certificates of registration to temporary places of business.
     (2) Unless the person is a dealer as defined in RCW 9.41.010, registration under this section is not required if the following conditions are met:
     (a) A person's value of products, gross proceeds of sales, or gross income of the business, from all business activities taxable under chapter 82.04 RCW, is less than twelve thousand dollars per year;
     (b) The person's gross income of the business from all activities taxable under chapter 82.16 RCW is less than twelve thousand dollars per year;
     (c) The person is not required to collect or pay to the department of revenue any other tax or fee which the department is authorized to collect; and
     (d) The person is not otherwise required to obtain a license subject to the master application procedure provided in chapter 19.02 RCW.
     (3) Persons who agree to collect and remit sales and use tax to the department under the agreement and are not required to register under subsection (1) of this section may:
     (a) Register through an on-line system authorized under the agreement, if the person agrees to provide additional information to the department to complete the registration process; or
     (b) Register under subsection (1) of this section.

NEW SECTION.  Sec. 301   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The department shall adopt by rule monetary allowances for certified service providers, model 2 sellers, and model 3 sellers and other sellers that are not model 1 or model 2 sellers. The department may be guided by the provisions for monetary allowances adopted by the governing board of the agreement to determine the amount of the allowances and the conditions under which they are allowed. The monetary allowance must be reasonable and provide adequate incentive for certified service providers and sellers to collect and remit under the agreement.
     (2) For certified service providers, the monetary allowance may include a base rate that applies to taxable transactions processed by the certified service provider. Additionally, for a period not to exceed twenty-four months following a seller's registration under RCW 82.32.030(3), the monetary allowance may include a percentage of tax revenue generated by the seller.
     (3) For model 2 sellers, the monetary allowance may include a base rate or percentage of revenue generated by a seller registering under RCW 82.32.030(3), but shall not exceed a period of twenty-four months.
     (4) For model 3 sellers and all other sellers that are not model 1 sellers or model 2 sellers, the monetary allowance may include a percentage of tax revenue generated by a seller registering under RCW 82.32.030(3), but shall not exceed a period of twenty-four months.

NEW SECTION.  Sec. 302   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The department may adopt by rule vendor compensation for sellers collecting and remitting sales and use taxes. The vendor compensation may include a base rate or a percentage of tax revenue collected by the seller, and may vary by type of seller. The department may be guided by the findings of the cost of collection study performed under the agreement, by cost of collection studies performed by the department, and by vendor compensation provided by other states, to determine reasonable vendor compensation for sellers for the costs to collect and remit sales and use taxes.
     (2) A seller shall not be entitled to vendor compensation while the seller or its certified service provider, as defined in RCW 82.32.020, receives a monetary allowance under section 301 of this act.

NEW SECTION.  Sec. 401   A new section is added to chapter 82.32 RCW to read as follows:
     (1) No assessment for taxes imposed under chapters 82.08 and 82.12 RCW, or related penalties or interest, may be made by the department against a seller who:
     (a) Within four months of the effective date of this section, registers to collect and remit to the department the applicable taxes imposed under chapters 82.08 and 82.12 RCW on sales made to buyers in this state in accordance with the terms of the agreement, if the seller was not so registered in this state in the twelve-month period preceding the effective date of this section; and
     (b) Continues to be registered and continues to collect and remit to the department the applicable taxes imposed under chapters 82.08 and 82.12 RCW for a period of at least thirty-six months, absent the seller's fraud or intentional misrepresentation of a material fact.
     (2) The provisions of subsection (1) of this section preclude an assessment for taxes imposed under chapters 82.08 and 82.12 RCW for sales made to buyers during the period the seller was not registered in this state.
     (3) The provisions of this section do not apply to any seller with respect to:
     (a) Any matter or matters for which the seller, before registering to collect and remit the applicable taxes imposed under chapters 82.08 and 82.12 RCW, received notice from the department of the commencement of an audit and which audit is not yet finally resolved including any related administrative and judicial processes;
     (b) Taxes imposed under chapters 82.08 and 82.12 RCW and collected or remitted to the department by the seller; or
     (c) That seller's liability for taxes imposed under chapters 82.08 and 82.12 RCW in that seller's capacity as a buyer.
     (4) The periods of limitation for making an assessment or correction of an assessment prescribed in RCW 82.32.050(3) and 82.32.100(3) do not run during the thirty-six month period in subsection (1)(b) of this section.

NEW SECTION.  Sec. 501   A new section is added to chapter 82.32 RCW to read as follows:
     (1) This subsection applies to retail sales occurring before the operational date. Subsections (2) through (11) of this section apply to retail sales occurring on or after the operational date.
     (a) A retail sale consisting solely of the sale of tangible personal property shall be deemed to have occurred at the retail outlet at or from which delivery is made to the consumer.
     (b) A retail sale consisting essentially of the performance of personal, business, or professional services shall be deemed to have occurred at the place at which such services were primarily performed, except that for the performance of a tow truck service, as defined in RCW 46.55.010, the retail sale shall be deemed to have occurred at the place of business of the operator of the tow truck service.
     (c) A retail sale consisting of the rental of tangible personal property shall be deemed to have occurred (i) in the case of a rental involving periodic rental payments, at the place of primary use by the lessee during the period covered by each payment, or (ii) in all other cases, at the place of first use by the lessee.
     (d) A retail sale within the scope of RCW 82.04.050(2), and a retail sale of taxable personal property to be installed by the seller shall be deemed to have occurred at the place where the labor and services involved were primarily performed.
     (e)(i) A retail sale consisting of the providing to a consumer of telephone service, as defined in RCW 82.04.065, other than a sale of tangible personal property under (a) of this subsection or a rental of tangible personal property under (c) of this subsection or a sale of mobile telecommunications services, shall be deemed to have occurred at the situs of the telephone or other instrument through which the telephone service is rendered.
     (ii) A retail sale consisting of the providing of telecommunications services shall be sourced in accordance with RCW 82.32.520.
     (f) A retail sale of linen and uniform supply services is deemed to occur as provided in RCW 82.08.0202.
     (2) Except as provided in subsections (6), (7), (8), and (9) of this section, for purposes of collecting or paying sales or use taxes to the appropriate jurisdictions, all sales at retail shall be sourced in accordance with this subsection and subsections (3) through (5) of this section.
     (a) When tangible personal property or a service defined as a retail sale under RCW 82.04.050 is received by the purchaser at a business location of the seller, the sale is sourced to that business location.
     (b) When the tangible personal property or a service defined as a retail sale under RCW 82.04.050 is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser or the purchaser's donee, designated as such by the purchaser, occurs, including the location indicated by instructions for delivery to the purchaser or donee, known to the seller.
     (c) When (a) and (b) of this subsection do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller's business when use of this address does not constitute bad faith.
     (d) When (a), (b), and (c) of this subsection do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available, when use of this address does not constitute bad faith.
     (e) When (a), (b), (c), or (d) of this subsection do not apply, including the circumstance where the seller is without sufficient information to apply those provisions, then the location shall be determined by the address from which tangible personal property was shipped, from which the digital good or the computer software delivered electronically was first available for transmission by the seller, or from which the service defined as a retail sale under RCW 82.04.050 was provided, disregarding for these purposes any location that merely provided the digital transfer of the product sold.
     (3) The lease or rental of tangible personal property, other than property identified in subsection (4) or (5) of this section, shall be sourced as follows:
     (a) For a lease or rental that requires recurring periodic payments, the first periodic payment is sourced the same as a retail sale in accordance with subsection (2) of this section. Periodic payments made subsequent to the first payment are sourced to the primary property location for each period covered by the payment. The primary property location shall be as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. The property location shall not be altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and service calls.
     (b) For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with subsection (2) of this section.
     (c) This subsection does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.
     (4) The lease or rental of motor vehicles, trailers, semitrailers, or aircraft that do not qualify as transportation equipment shall be sourced as follows:
     (a) For a lease or rental that requires recurring periodic payments, each periodic payment is sourced to the primary property location. The primary property location shall be as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. This location shall not be altered by intermittent use at different locations.
     (b) For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with subsection (2) of this section.
     (c) This subsection does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.
     (5) The retail sale, including lease or rental, of transportation equipment shall be sourced the same as a retail sale in accordance with subsection (2) of this section.
     (6) A purchaser that is a business and is not a holder of a direct pay permit that knows at the time of purchase of a digital good, computer software delivered electronically, or a service that the digital good, computer software delivered electronically, or service will be concurrently available for use in more than one jurisdiction shall deliver to the seller in conjunction with its purchase a multiple points of use exemption form disclosing this fact.
     (a) Upon receipt of the multiple point of use exemption form, the seller is relieved of all obligation to collect, pay, or remit the applicable tax and the purchaser is obligated to collect, pay, or remit the applicable tax.
     (b) A purchaser delivering the multiple point of use exemption form, or a direct pay permit in lieu of a multiple point of use exemption form, may use any reasonable, but consistent and uniform, method of apportionment that is supported by the purchaser's business records as they exist at the time of the consummation of the sale.
     (c) The multiple point of use exemption form shall remain in effect for all future sales by the seller to the purchaser until it is revoked in writing.
     (7)(a) A purchaser of direct mail that is not a holder of a direct pay permit shall provide to the seller in conjunction with the purchase either a direct mail form or information that shows the jurisdictions to which the direct mail is delivered to recipients.
     (i) Upon receipt of the direct mail form, the seller is relieved of all obligations to collect, pay, or remit the applicable tax and the purchaser is obligated to pay or remit the applicable tax on a direct pay basis. A direct mail form shall remain in effect for all future sales of direct mail by the seller to the purchaser until it is revoked in writing.
     (ii) Upon receipt of information from the purchaser showing the jurisdictions to which the direct mail is delivered to recipients, the seller shall collect the tax according to the delivery information provided by the purchaser. In the absence of bad faith, the seller is relieved of any further obligation to collect tax on any transaction where the seller has collected tax pursuant to the delivery information provided by the purchaser.
     (b) If the purchaser of direct mail does not have a direct pay permit and does not provide the seller with either a direct mail form or delivery information as required by (a) of this subsection, the seller shall collect the tax according to subsection (2)(e) of this section. This subsection does not limit a purchaser's obligation for sales or use tax to any state to which the direct mail is delivered.
     (c) If a purchaser of direct mail provides the seller with documentation of direct pay authority, the purchaser is not required to provide a direct mail form or delivery information to the seller.
     (8) The following are sourced to the location at or from which delivery is made to the consumer:
     (a) A retail sale consisting of watercraft;
     (b) A retail sale consisting of a modular home, manufactured home, or mobile home;
     (c) A retail sale, excluding the lease and rental, consisting of a motor vehicle, trailer, semitrailer, or aircraft, that do not qualify as transportation equipment; and
     (d) Until January 1, 2006, a retail sale of tangible personal property made by a person engaged in the business of selling flowers. The rules for the sourcing retail sales and use taxes of flowers delivered with telegraphic instructions in WAC 458-20-158, as effective on July 1, 1970, shall remain in effect until January 1, 2006.
     (9) A retail sale consisting of the providing of telecommunications services shall be sourced in accordance with RCW 82.32.520.
     (10) The definitions in this subsection apply throughout this section.
     (a) "Delivered electronically" means delivered to the purchaser by means other than tangible storage media.
     (b) "Direct mail" means printed material delivered or distributed by United States mail or other delivery service to a mass audience or to addressees on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipients. "Direct mail" includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. "Direct mail" does not include multiple items of printed material delivered to a single address.
     (c) "Receive" and "receipt" means taking possession of tangible personal property, making first use of services, or taking possession or making first use of digital goods, whichever comes first. "Receive" and "receipt" do not include possession by a shipping company on behalf of the purchaser.
     (d) "Transportation equipment" means any of the following:
     (i) Locomotives and railcars that are used for the carriage of persons or property in interstate commerce;
     (ii) Trucks and truck-tractors with a gross vehicle weight rating of 10,001 pounds or greater, trailers, semitrailers, or passenger buses that are:
     (A) Registered through the international registration plan; and
     (B) Operated under authority of a carrier authorized and certificated by the United States department of transportation or another federal authority to engage in the carriage of persons or property in interstate commerce;
     (iii) Aircraft that are operated by air carriers authorized and certificated by the United States department of transportation or another federal or foreign authority to engage in the carriage of persons or property in interstate or foreign commerce;
     (iv) Containers designed for use on and component parts attached or secured on the items described in (d)(i) through (iii) of this subsection.
     (11) In those instances where there is no obligation on the part of a seller to collect or remit use tax, the use of tangible personal property or of a service, subject to use tax, is sourced to the place of first use. The definition of use in RCW 82.12.010 applies to this subsection.

Sec. 502   RCW 82.14.020 and 2003 c 168 s 503 and 2003 c 168 s 502 are each reenacted and amended to read as follows:
     For purposes of this chapter:
     (1) ((A retail sale consisting solely of the sale of tangible personal property shall be deemed to have occurred at the retail outlet at or from which delivery is made to the consumer;
     (2) A retail sale consisting essentially of the performance of personal, business, or professional services shall be deemed to have occurred at the place at which such services were primarily performed, except that for the performance of a tow truck service, as defined in RCW 46.55.010, the retail sale shall be deemed to have occurred at the place of business of the operator of the tow truck service;
     (3) A retail sale consisting of the rental of tangible personal property shall be deemed to have occurred (a) in the case of a rental involving periodic rental payments, at the place of primary use by the lessee during the period covered by each payment, or (b) in all other cases, at the place of first use by the lessee;
     (4) A retail sale within the scope of RCW 82.04.050(2), and a retail sale of taxable personal property to be installed by the seller shall be deemed to have occurred at the place where the labor and services involved were primarily performed;
     (5)(a) A retail sale consisting of the providing to a consumer of telephone service, as defined in RCW 82.04.065, other than a sale of tangible personal property under subsection (1) of this section or a rental of tangible personal property under subsection (3) of this section or a sale of mobile telecommunications services, shall be deemed to have occurred at the situs of the telephone or other instrument through which the telephone service is rendered;
     (b) A retail sale consisting of the providing of telecommunications services shall be sourced in accordance with RCW 82.32.520;
     (6) A retail sale of linen and uniform supply services is deemed to occur as provided in RCW 82.08.0202;
     (7))) "City" means a city or town;
     (((8))) (2) The meaning ascribed to words and phrases in chapters 82.04, 82.08 and 82.12 RCW, as now or hereafter amended, insofar as applicable, shall have full force and effect with respect to taxes imposed under authority of this chapter;
     (((9))) (3) "Taxable event" shall mean any retail sale, or any use, upon which a state tax is imposed pursuant to chapter 82.08 or 82.12 RCW, as they now exist or may hereafter be amended: PROVIDED, HOWEVER, That the term shall not include a retail sale taxable pursuant to RCW 82.08.150, as now or hereafter amended;
     (((10))) (4) "Treasurer or other legal depository" shall mean the treasurer or legal depository of a county or city.

NEW SECTION.  Sec. 503   A new section is added to chapter 82.14 RCW to read as follows:
     Sales and use taxes imposed under this chapter shall be sourced in accordance with section 501 of this act.

NEW SECTION.  Sec. 601   A new section is added to chapter 82.32 RCW to read as follows:
     (1) A fundamental precept of allowing the use of a certified service provider is to preserve the privacy of consumers by protecting their anonymity. With very limited exceptions, a certified service provider shall perform its tax calculation, remittance, and reporting functions without retaining the personally identifiable information of consumers.
     (2) The department of revenue shall provide public notification to consumers, including purchasers claiming exemption from tax, of its practices relating to the collection, use, and retention of personally identifiable information.
     (3) When personally identifiable information that has been collected and retained is no longer required to ensure the validity of exemptions from taxation by reason of the consumer's status or the intended use of the goods or services purchased, the information shall no longer be retained by the state of Washington.
     (4) When personally identifiable information regarding an individual is retained by or on behalf of the state of Washington, this state shall provide reasonable access for the individual to his or her own information and a right to correct any inaccurately recorded information.
     (5) If anyone other than a member state of the agreement, or other than a person authorized by Washington law or the agreement, seeks to discover personally identifiable information, the state of Washington shall make a reasonable and timely effort to notify the individual of the request.
     (6) The provisions of this section may be enforced by petitioning the superior court of Thurston county for injunctive relief.

NEW SECTION.  Sec. 701   A new section is added to chapter 82.32 RCW to read as follows:
     (1) The department of revenue shall complete a taxability matrix maintained by the member states of the agreement in downloadable format. The matrix contains terms defined in the agreement. The department of revenue shall provide notice of changes in the taxability of products or services listed in the matrix.
     (2) Sellers and certified service providers are relieved from liability to the state and to local jurisdictions for having charged or collected the incorrect amount of sales or use tax if the error resulted from reliance on erroneous information provided by the department of revenue in the taxability matrix.

NEW SECTION.  Sec. 801   A new section is added to chapter 82.08 RCW to read as follows:
     When computing the tax levied by RCW 82.08.020, if a shipment consists of taxable tangible personal property and nontaxable tangible personal property, and delivery charges are included in the sales price, the seller must collect and remit tax on the percentage of delivery charges allocated to the taxable tangible property, but does not have to collect and remit tax on the percentage allocated to exempt tangible personal property. The seller may use either of the following percentages to determine the taxable portion of the delivery charges:
     (1) A percentage based on the total sales price of the taxable tangible property compared to the total sales price of all tangible personal property in the shipment; or
     (2) A percentage based on the total weight of the taxable tangible personal property compared to the total weight of all tangible personal property in the shipment.

NEW SECTION.  Sec. 802   A new section is added to chapter 82.12 RCW to read as follows:
     When computing the tax levied by RCW 82.12.020, if a shipment consists of taxable tangible personal property and nontaxable tangible personal property, and delivery charges are included in the purchase price, the retailer must collect and remit tax on the percentage of delivery charges allocated to the taxable personal property, but does not have to collect and remit tax on the percentage allocated to exempt tangible personal property. The retailer may use either of the following percentages to determine the taxable portion of the delivery charges:
     (1) A percentage based on the total purchase price of the taxable personal property compared to the total purchase price of all tangible personal property in the shipment; or
     (2) A percentage based on the total weight of the taxable tangible personal property compared to the total weight of all tangible personal property in the shipment.

NEW SECTION.  Sec. 803   A new section is added to chapter 82.12 RCW to read as follows:
     When computing the tax levied by RCW 82.12.020, if a shipment consists of taxable tangible personal property and nontaxable tangible personal property, and delivery charges are included in the value of the article used, the consumer must remit tax on the percentage of delivery charges allocated to the taxable personal property, but does not have to remit tax on the percentage allocated to exempt tangible personal property. The consumer may use either of the following percentages to determine the taxable portion of the delivery charges:
     (1) A percentage based on the entire value of the taxable personal property compared to the total value of all tangible personal property in the shipment; or
     (2) A percentage based on the total weight of the taxable tangible personal property compared to the total weight of all tangible personal property in the shipment.

NEW SECTION.  Sec. 901   (1) The legislature finds and declares that:
     (a) Washington state's participation as a member state in the streamlined sales and use tax agreement benefits the state, all its local taxing jurisdictions, and its retailing industry by increasing state and local revenues, improving the state's business climate, and simplifying the state's tax structure;
     (b) Participation in the streamlined sales and use tax agreement requires the adoption of the agreement's sourcing provisions, which changes the location in which a retail sale of delivered tangible personal property occurs from the point of origin to the point of delivery;
     (c) The streamlined sales and use tax agreement's sourcing provisions will cause sales and use tax revenues to shift among local taxing jurisdictions and it is in the best interest of the state and all its subdivisions to mitigate the adverse effects of adopting the agreement's sourcing provision by redistributing on an ongoing basis sales and use tax revenues from local taxing jurisdictions that gain revenues to local taxing jurisdictions that lose revenues;
     (d) Revenue shifts among local taxing jurisdictions cannot be precisely determined without significantly increasing the administrative burden on the retail industry, which is contrary to the intent of the streamlined sales and use tax agreement. Therefore, the legislature recognizes that local taxing jurisdictions will not be completely, but only adequately, mitigated for revenue losses that result from this act.
     (2) The legislature intends that the formulae developed in section 902 of this act have the objective of mitigating, for each negatively affected local taxing jurisdiction, at least eighty percent of revenue losses that result from this act and that higher mitigation be pursued if it can be achieved without compounding revenue losses to other local taxing jurisdictions adversely impacted by this act.

Sec. 902   RCW 82.14.060 and 1991 c 207 s 3 are each amended to read as follows:
     (1) Except as provided in subsection (3) of this section, monthly the state treasurer shall make distribution from the local sales and use tax account to the counties, cities, transportation authorities, and public facilities districts the amount of tax collected on behalf of each taxing authority, less the deduction provided for in RCW 82.14.050. The state treasurer shall make the distribution under this section without appropriation.
     (2) In the event that any ordinance or resolution imposes a sales and use tax at a rate in excess of the applicable limits contained herein, such ordinance or resolution shall not be considered void in toto, but only with respect to that portion of the rate which is in excess of the applicable limits contained herein.
     (3) In order to mitigate potential sales and use tax revenue losses from the adoption of the streamlined sales and use tax agreement's sourcing provisions, the department of revenue, after the operational date, shall monthly, prior to the time distributions are made under subsection (1) of this section, advise the state treasurer to increase or decrease distributions to the counties, cities, and transportation authorities from the local sales and use tax account as provided in subsection (4) of this section. The treasurer shall revise the distributions accordingly.
     (4) Since it is not practical to determine precisely the amount of revenue shifted among local taxing authorities solely from section 501 of this act, the department of revenue shall determine the increase or decrease in distributions of taxes imposed under chapter 82.14 RCW based on formulae the department shall develop. The formulae shall be used to distribute taxes collected by selected retailers from the county, city, and transportation authority where the consumer receives delivery of the tangible personal property to the county, city, and transportation authority where the retail outlet is located, notwithstanding section 501 of this act. The department will evaluate and revise the formulae on an annual basis. In developing the formulae under this subsection (4), the department:
     (a) Shall include a sample of persons within select North American industry classifications who make retail sales of tangible personal property to consumers and that deliver such property from warehouses or other centralized distribution centers;
     (b) May also include in the sample the twenty largest persons who make and deliver retail sales of tangible personal property, as measured by volume of taxable retail sales of tangible personal property, within each county, city, or transportation authority adversely affected by this act; and
     (c) May exclude from the sample persons who make and deliver retail sales of tangible personal property when inclusion of that person would cause another county, city, or transportation authority to incur a larger loss of sales and use tax revenues from this act than it would otherwise incur absent the provisions of subsections (3) and (4) of this section.
     (5) No county, city, or transportation authority may receive increases in distributions that would exceed its actual loss in sales and use tax revenues resulting from this act.
     (6) The department shall consult with a representative of the association of Washington cities, a representative of the Washington state association of counties, a representative of the Washington state transit association, and counties, cities, and transportation authorities negatively impacted by this act to develop and revise the formulae in subsection (4) of this section. The rule-making provisions of chapter 34.05 RCW do not apply to this section.

NEW SECTION.  Sec. 903   A new section is added to chapter 82.32 RCW to read as follows:
     (1) For purposes of gathering the data to develop the formulae in RCW 82.14.060(4), the department of revenue after the operational date may require persons engaging within this state in the business of making sales at retail to report additional information on a form prescribed by the department, but no more than once every six months. The report is due within thirty days of the date that the form is transmitted to the taxpayer by the department of revenue.
     (2) If the additional information to be filed by a taxpayer is not received by the department of revenue by the due date, there shall be assessed a penalty of five hundred dollars if the taxpayer is required to report and remit sales tax on a quarterly or annual basis, or the greater of five hundred dollars or one percent of the sales tax reported on the taxpayer's return due the month the request for additional information is due if the taxpayer is required to report and remit the sales tax on a monthly basis.
     (3) If the additional information is received by the department of revenue by the due date, the taxpayer shall receive a credit against the tax due under chapter 82.04 RCW in the amount of five hundred dollars. In no case may a credit earned during one calendar year be carried over to be credited against taxes incurred in a subsequent calendar year. No refunds may be granted for credits under this section.
     (4) If the department of revenue finds that the failure of a taxpayer to provide the additional information required under this section by the due date was the result of circumstances beyond the control of the taxpayer, the department of revenue shall waive or cancel any penalties imposed under this section.
     (5) The penalties imposed under this section are in addition to any other penalties authorized by law.

Sec. 904   RCW 82.32.330 and 2000 c 173 s 1 and 2000 c 106 s 1 are each reenacted and amended to read as follows:
     (1) For purposes of this section:
     (a) "Disclose" means to make known to any person in any manner whatever a return or tax information;
     (b) "Return" means a tax or information return or claim for refund required by, or provided for or permitted under, the laws of this state which is filed with the department of revenue by, on behalf of, or with respect to a person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists that are supplemental to, or part of, the return so filed;
     (c) "Tax information" means (i) a taxpayer's identity, (ii) the nature, source, or amount of the taxpayer's income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability deficiencies, overassessments, or tax payments, whether taken from the taxpayer's books and records or any other source, (iii) whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, (iv) a part of a written determination that is not designated as a precedent and disclosed pursuant to RCW 82.32.410, or a background file document relating to a written determination, and (v) other data received by, recorded by, prepared by, furnished to, or collected by the department of revenue with respect to the determination of the existence, or possible existence, of liability, or the amount thereof, of a person under the laws of this state for a tax, penalty, interest, fine, forfeiture, or other imposition, or offense: PROVIDED, That data, material, or documents that do not disclose information related to a specific or identifiable taxpayer do not constitute tax information under this section. Except as provided by RCW 82.32.410, nothing in this chapter shall require any person possessing data, material, or documents made confidential and privileged by this section to delete information from such data, material, or documents so as to permit its disclosure;
     (d) "State agency" means every Washington state office, department, division, bureau, board, commission, or other state agency;
     (e) "Taxpayer identity" means the taxpayer's name, address, telephone number, registration number, or any combination thereof, or any other information disclosing the identity of the taxpayer; and
     (f) "Department" means the department of revenue or its officer, agent, employee, or representative.
     (2) Returns and tax information shall be confidential and privileged, and except as authorized by this section, neither the department of revenue nor any other person may disclose any return or tax information.
     (3) The foregoing, however, shall not prohibit the department of revenue from:
     (a) Disclosing such return or tax information in a civil or criminal judicial proceeding or an administrative proceeding:
     (i) In respect of any tax imposed under the laws of this state if the taxpayer or its officer or other person liable under Title 82 RCW is a party in the proceeding; or
     (ii) In which the taxpayer about whom such return or tax information is sought and another state agency are adverse parties in the proceeding;
     (b) Disclosing, subject to such requirements and conditions as the director shall prescribe by rules adopted pursuant to chapter 34.05 RCW, such return or tax information regarding a taxpayer to such taxpayer or to such person or persons as that taxpayer may designate in a request for, or consent to, such disclosure, or to any other person, at the taxpayer's request, to the extent necessary to comply with a request for information or assistance made by the taxpayer to such other person: PROVIDED, That tax information not received from the taxpayer shall not be so disclosed if the director determines that such disclosure would compromise any investigation or litigation by any federal, state, or local government agency in connection with the civil or criminal liability of the taxpayer or another person, or that such disclosure would identify a confidential informant, or that such disclosure is contrary to any agreement entered into by the department that provides for the reciprocal exchange of information with other government agencies which agreement requires confidentiality with respect to such information unless such information is required to be disclosed to the taxpayer by the order of any court;
     (c) Disclosing the name of a taxpayer with a deficiency greater than five thousand dollars and against whom a warrant under RCW 82.32.210 has been either issued or filed and remains outstanding for a period of at least ten working days. The department shall not be required to disclose any information under this subsection if a taxpayer: (i) Has been issued a tax assessment; (ii) has been issued a warrant that has not been filed; and (iii) has entered a deferred payment arrangement with the department of revenue and is making payments upon such deficiency that will fully satisfy the indebtedness within twelve months;
     (d) Disclosing the name of a taxpayer with a deficiency greater than five thousand dollars and against whom a warrant under RCW 82.32.210 has been filed with a court of record and remains outstanding;
     (e) Publishing statistics so classified as to prevent the identification of particular returns or reports or items thereof;
     (f) Disclosing such return or tax information, for official purposes only, to the governor or attorney general, or to any state agency, or to any committee or subcommittee of the legislature dealing with matters of taxation, revenue, trade, commerce, the control of industry or the professions;
     (g) Permitting the department of revenue's records to be audited and examined by the proper state officer, his or her agents and employees;
     (h) Disclosing any such return or tax information to a peace officer as defined in RCW 9A.04.110 or county prosecuting attorney, for official purposes. The disclosure may be made only in response to a search warrant, subpoena, or other court order, unless the disclosure is for the purpose of criminal tax enforcement. A peace officer or county prosecuting attorney who receives the return or tax information may disclose that return or tax information only for use in the investigation and a related court proceeding, or in the court proceeding for which the return or tax information originally was sought;
     (i) Disclosing any such return or tax information to the proper officer of the internal revenue service of the United States, the Canadian government or provincial governments of Canada, or to the proper officer of the tax department of any state or city or town or county, for official purposes, but only if the statutes of the United States, Canada or its provincial governments, or of such other state or city or town or county, as the case may be, grants substantially similar privileges to the proper officers of this state;
     (j) Disclosing any such return or tax information to the Department of Justice, the Bureau of Alcohol, Tobacco and Firearms of the Department of the Treasury, the Department of Defense, the United States Customs Service, the Coast Guard of the United States, and the United States Department of Transportation, or any authorized representative thereof, for official purposes;
     (k) Publishing or otherwise disclosing the text of a written determination designated by the director as a precedent pursuant to RCW 82.32.410;
     (l) Disclosing, in a manner that is not associated with other tax information, the taxpayer name, entity type, business address, mailing address, revenue tax registration numbers, North American industry classification system or standard industrial classification code of a taxpayer, and the dates of opening and closing of business. This subsection shall not be construed as giving authority to the department to give, sell, or provide access to any list of taxpayers for any commercial purpose;
     (m) Disclosing such return or tax information that is also maintained by another Washington state or local governmental agency as a public record available for inspection and copying under the provisions of chapter 42.17 RCW or is a document maintained by a court of record not otherwise prohibited from disclosure;
     (n) Disclosing such return or tax information to the United States department of agriculture for the limited purpose of investigating food stamp fraud by retailers;
     (o) Disclosing to a financial institution, escrow company, or title company, in connection with specific real property that is the subject of a real estate transaction, current amounts due the department for a filed tax warrant, judgment, or lien against the real property; ((or))
     (p) Disclosing to a person against whom the department has asserted liability as a successor under RCW 82.32.140 return or tax information pertaining to the specific business of the taxpayer to which the person has succeeded; or
     (q) Disclosing to a local jurisdiction which has contracted with the department for the administration of its sales and use taxes under RCW 82.14.050 tax information used to determine the increase or decrease in the distribution to that local jurisdiction under RCW 82.14.060.
     (4)(a) The department may disclose return or taxpayer information to a person under investigation or during any court or administrative proceeding against a person under investigation as provided in this subsection (4). The disclosure must be in connection with the department's official duties relating to an audit, collection activity, or a civil or criminal investigation. The disclosure may occur only when the person under investigation and the person in possession of data, materials, or documents are parties to the return or tax information to be disclosed. The department may disclose return or tax information such as invoices, contracts, bills, statements, resale or exemption certificates, or checks. However, the department may not disclose general ledgers, sales or cash receipt journals, check registers, accounts receivable/payable ledgers, general journals, financial statements, expert's workpapers, income tax returns, state tax returns, tax return workpapers, or other similar data, materials, or documents.
     (b) Before disclosure of any tax return or tax information under this subsection (4), the department shall, through written correspondence, inform the person in possession of the data, materials, or documents to be disclosed. The correspondence shall clearly identify the data, materials, or documents to be disclosed. The department may not disclose any tax return or tax information under this subsection (4) until the time period allowed in (c) of this subsection has expired or until the court has ruled on any challenge brought under (c) of this subsection.
     (c) The person in possession of the data, materials, or documents to be disclosed by the department has twenty days from the receipt of the written request required under (b) of this subsection to petition the superior court of the county in which the petitioner resides for injunctive relief. The court shall limit or deny the request of the department if the court determines that:
     (i) The data, materials, or documents sought for disclosure are cumulative or duplicative, or are obtainable from some other source that is more convenient, less burdensome, or less expensive;
     (ii) The production of the data, materials, or documents sought would be unduly burdensome or expensive, taking into account the needs of the department, the amount in controversy, limitations on the petitioner's resources, and the importance of the issues at stake; or
     (iii) The data, materials, or documents sought for disclosure contain trade secret information that, if disclosed, could harm the petitioner.
     (d) The department shall reimburse reasonable expenses for the production of data, materials, or documents incurred by the person in possession of the data, materials, or documents to be disclosed.
     (e) Requesting information under (b) of this subsection that may indicate that a taxpayer is under investigation does not constitute a disclosure of tax return or tax information under this section.
     (5) Any person acquiring knowledge of any return or tax information in the course of his or her employment with the department of revenue and any person acquiring knowledge of any return or tax information as provided under subsection (3)(f), (g), (h), (i), (j), ((or)) (n), or (q) of this section, who discloses any such return or tax information to another person not entitled to knowledge of such return or tax information under the provisions of this section, is guilty of a misdemeanor. If the person guilty of such violation is an officer or employee of the state, such person shall forfeit such office or employment and shall be incapable of holding any public office or employment in this state for a period of two years thereafter.

NEW SECTION.  Sec. 1001   Section 302 of this act takes effect when:
     (1) The United States congress grants individual states the authority to impose sales and use tax collection duties on remote sellers; or
     (2) It is determined by a court of competent jurisdiction, in a judgment not subject to review, that a state can impose sales and use tax collection duties on remote sellers.

Sec. 1002   2003 c 168 s 902 (uncodified) is amended to read as follows:
     (1) If a court of competent jurisdiction enters a final judgment on the merits that is based on federal or state law, is no longer subject to appeal, and substantially limits or impairs the essential elements of P.L. 106-252, 4 U.S.C. Secs. 116 through 126, or chapter 67, Laws of 2002, then chapter 67, Laws of 2002 is null and void in its entirety, except as provided in subsection (2) of this section.
     (2) ((If the contingency in subsection (1) of this section occurs, section 502, chapter 168, Laws of 2003 is null and void)) Subsection (1) of this section does not apply to section 7, chapter 67, Laws of 2002 on or after April 1, 2005.

NEW SECTION.  Sec. 1003   Part headings used in this act are not any part of the law.

NEW SECTION.  Sec. 1004   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.