BILL REQ. #:  H-1251.1 

Read first time 01/29/2007.   Referred to Committee on Transportation.

     AN ACT Relating to the administration of fuel taxes; amending RCW 82.36.010, 82.36.020, 82.36.025, 82.36.026, 82.36.031, 82.36.060, 82.36.080, 82.36.160, 82.36.180, 82.36.305, 82.36.370, 82.36.373, 82.38.030, 82.38.032, 82.38.035, 82.38.050, 82.38.070, 82.38.130, 82.38.140, and 82.38.180; adding a new section to chapter 82.36 RCW; repealing RCW 82.36.407 and 82.38.285; and declaring an emergency.

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

Sec. 1   RCW 82.36.010 and 2001 c 270 s 1 are each amended to read as follows:
     The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Blended fuel" means a mixture of motor vehicle fuel and another liquid, other than a de minimis amount of the liquid, that can be used as a fuel to propel a motor vehicle.
     (2) "Bond" means a bond duly executed with a corporate surety qualified under chapter 48.28 RCW, which bond is payable to the state of Washington conditioned upon faithful performance of all requirements of this chapter, including the payment of all taxes, penalties, and other obligations arising out of this chapter.
     (3) "Bulk transfer" means a transfer of motor vehicle fuel by pipeline or vessel.
     (4) "Bulk transfer-terminal system" means the motor vehicle fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Motor vehicle fuel in a refinery, pipeline, vessel, or terminal is in the bulk transfer-terminal system. Motor vehicle fuel in the fuel tank of an engine, motor vehicle, or in a railcar, trailer, truck, or other equipment suitable for ground transportation is not in the bulk transfer-terminal system.
     (5) (("Dealer" means a person engaged in the retail sale of motor vehicle fuel.
     (6))) "Department" means the department of licensing.
     (((7))) (6) "Director" means the director of licensing.
     (((8))) (7) "Evasion" or "evade" means to diminish or avoid the computation, assessment, or payment of authorized taxes or fees through:
     (a) A knowing: False statement; misrepresentation of fact; or other act of deception; or
     (b) An intentional: Omission; failure to file a return or report; or other act of deception.
     (((9))) (8) "Export" means to obtain motor vehicle fuel in this state for sales or distribution outside the state.
     (((10))) (9) "Highway" means every way or place open to the use of the public, as a matter of right, for the purpose of vehicular travel.
     (((11))) (10) "Import" means to bring motor vehicle fuel into this state by a means of conveyance other than the fuel supply tank of a motor vehicle.
     (11) "International fuel tax agreement licensee" means a motor vehicle fuel user operating qualified motor vehicles in interstate commerce and licensed by the department under the international fuel tax agreement.
     (12) "Licensee" means a person holding a motor vehicle fuel supplier, motor vehicle fuel importer, motor vehicle fuel exporter, motor vehicle fuel blender, motor vehicle fuel distributor, or international fuel tax agreement license issued under this chapter.
     (13) "Marine fuel dealer" means a person engaged in the retail sale of motor vehicle fuel whose place of business and/or sale outlet is located upon a navigable waterway.
     (14) "Motor vehicle fuel blender" means a person who produces blended motor fuel outside the bulk transfer-terminal system.
     (15) "Motor vehicle fuel distributor" means a person who acquires motor vehicle fuel from a supplier, distributor, or licensee for subsequent sale and distribution.
     (16) "Motor vehicle fuel exporter" means a person who purchases motor vehicle fuel in this state and directly exports the fuel by a means other than the bulk transfer-terminal system to a destination outside of the state. If the exporter of record is acting as an agent, the person for whom the agent is acting is the exporter. If there is no exporter of record, the owner of the motor fuel at the time of exportation is the exporter.
     (17) "Motor vehicle fuel importer" means a person who imports motor vehicle fuel into the state by a means other than the bulk transfer-terminal system. If the importer of record is acting as an agent, the person for whom the agent is acting is the importer. If there is no importer of record, the owner of the motor vehicle fuel at the time of importation is the importer.
     (18) "Motor vehicle fuel supplier" means a person who holds a federal certificate of registry that is issued under the internal revenue code and authorizes the person to enter into federal tax-free transactions on motor vehicle fuel in the bulk transfer-terminal system.
     (19) "Motor vehicle" means a self-propelled vehicle designed for operation upon land utilizing motor vehicle fuel as the means of propulsion.
     (20) "Motor vehicle fuel" means gasoline and any other inflammable gas or liquid, by whatsoever name the gasoline, gas, or liquid may be known or sold, the chief use of which is as fuel for the propulsion of motor vehicles or motorboats.
     (21) "Person" means a natural person, fiduciary, association, or corporation. The term "person" as applied to an association means and includes the partners or members thereof, and as applied to corporations, the officers thereof.
     (22) "Position holder" means a person who holds the inventory position in motor vehicle fuel, as reflected by the records of the terminal operator. A person holds the inventory position in motor vehicle fuel if the person has a contractual agreement with the terminal for the use of storage facilities and terminating services at a terminal with respect to motor vehicle fuel. "Position holder" includes a terminal operator that owns motor vehicle fuel in their terminal.
     (23) "Rack" means a mechanism for delivering motor vehicle fuel from a refinery or terminal into a truck, trailer, railcar, or other means of nonbulk transfer.
     (24) "Refiner" means a person who owns, operates, or otherwise controls a refinery.
     (25) "Removal" means a physical transfer of motor vehicle fuel other than by evaporation, loss, or destruction.
     (26) "Terminal" means a motor vehicle fuel storage and distribution facility that has been assigned a terminal control number by the internal revenue service, is supplied by pipeline or vessel, and from which reportable motor vehicle fuel is removed at a rack.
     (27) "Terminal operator" means a person who owns, operates, or otherwise controls a terminal.
     (28) "Two-party exchange" or "buy-sell agreement" means a transaction in which taxable motor vehicle fuel is transferred from one licensed supplier to another licensed supplier under an exchange or buy-sell agreement whereby the supplier that is the position holder agrees to deliver taxable motor vehicle fuel to the other supplier or the other supplier's customer at the rack of the terminal at which the delivering supplier is the position holder.

Sec. 2   RCW 82.36.020 and 2001 c 270 s 2 are each amended to read as follows:
     (1) There is hereby levied and imposed upon motor vehicle fuel ((users)) licensees a tax at the rate computed in the manner provided in RCW 82.36.025 on each gallon of motor vehicle fuel.
     (2) The tax imposed by subsection (1) of this section is imposed when any of the following occurs:
     (a) Motor vehicle fuel is removed in this state from a terminal if the motor vehicle fuel is removed at the rack unless the removal is to a licensed exporter for direct delivery to a destination outside of the state;
     (b) Motor vehicle fuel is removed in this state from a refinery if either of the following applies:
     (i) The removal is by bulk transfer and the refiner or the owner of the motor vehicle fuel immediately before the removal is not a licensee; or
     (ii) The removal is at the refinery rack unless the removal is to a licensed exporter for direct delivery to a destination outside of the state;
     (c) Motor vehicle fuel enters into this state ((for sale, consumption, use, or storage)) if either of the following applies:
     (i) The entry is by bulk transfer and the importer is not a licensee; or
     (ii) The entry is not by bulk transfer;
     (d) Motor vehicle fuel is sold or removed in this state to an unlicensed entity unless there was a prior taxable removal, entry, or sale of the motor vehicle fuel;
     (e) Blended motor vehicle fuel is removed or sold in this state by the blender of the fuel. The number of gallons of blended motor vehicle fuel subject to the tax is the difference between the total number of gallons of blended motor vehicle fuel removed or sold and the number of gallons of previously taxed motor vehicle fuel used to produce the blended motor vehicle fuel;
     (f) Motor vehicle fuel is sold by a licensed motor vehicle fuel supplier to a motor vehicle fuel distributor, motor vehicle fuel importer, ((or)) motor vehicle fuel blender, or international fuel tax agreement licensee and the motor vehicle fuel is not removed from the bulk transfer-terminal system.
     (3) The proceeds of the motor vehicle fuel excise tax shall be distributed as provided in RCW 46.68.090.

Sec. 3   RCW 82.36.025 and 2005 c 314 s 101 are each amended to read as follows:
     (1) A motor vehicle fuel tax rate of twenty-three cents per gallon ((applies to the sale, distribution, or use of)) on motor vehicle fuel shall be imposed on motor vehicle fuel licensees.
     (2) Beginning July 1, 2003, an additional and cumulative motor vehicle fuel tax rate of five cents per gallon ((applies to the sale, distribution, or use of)) on motor vehicle fuel shall be imposed on motor vehicle fuel licensees. This subsection (2) expires when the bonds issued for transportation 2003 projects are retired.
     (3) Beginning July 1, 2005, an additional and cumulative motor vehicle fuel tax rate of three cents per gallon ((applies to the sale, distribution, or use of)) on motor vehicle fuel shall be imposed on motor vehicle fuel licensees.
     (4) Beginning July 1, 2006, an additional and cumulative motor vehicle fuel tax rate of three cents per gallon ((applies to the sale, distribution, or use of)) on motor vehicle fuel shall be imposed on motor vehicle fuel licensees.
     (5) Beginning July 1, 2007, an additional and cumulative motor vehicle fuel tax rate of two cents per gallon ((applies to the sale, distribution, or use of)) on motor vehicle fuel shall be imposed on motor vehicle fuel licensees.
     (6) Beginning July 1, 2008, an additional and cumulative motor vehicle fuel tax rate of one and one-half cents per gallon ((applies to the sale, distribution, or use of)) on motor vehicle fuel shall be imposed on motor vehicle fuel licensees.

Sec. 4   RCW 82.36.026 and 2001 c 270 s 3 are each amended to read as follows:
     (1) A licensed supplier shall ((remit)) be liable for and pay tax to the department as provided in RCW 82.36.020. On a two-party exchange, or buy-sell agreement between two licensed suppliers, the receiving exchange partner or buyer ((who)) shall (([buyer shall] remit)) be liable for and pay the tax.
     (2) A licensed refiner shall ((remit)) be liable for and pay tax to the department on motor vehicle fuel removed from a refinery as provided in RCW 82.36.020(2)(b).
     (3) ((An)) A licensed importer shall ((remit)) be liable for and pay tax to the department on motor vehicle fuel imported into this state as provided in RCW 82.36.020(2)(c).
     (4) A licensed blender shall ((remit)) be liable for and pay tax to the department on the removal or sale of blended motor vehicle fuel as provided in RCW 82.36.020(2)(e).
     (5) Nothing in this chapter shall prohibit the licensee for payment of the tax under this chapter from including as a part of the selling price an amount equal to the tax.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.36 RCW to read as follows:
     International fuel tax agreement licensees, or persons operating motor vehicles under other reciprocity agreements entered into with the state of Washington, are liable for and must pay the tax under RCW 82.36.020 to the department on motor vehicle fuel used to operate motor vehicles on the highways of this state. This provision does not apply if the tax under RCW 82.36.020 has previously been imposed and paid by the international fuel tax agreement licensee or if the use of such fuel is exempt from the tax under this chapter.

Sec. 6   RCW 82.36.031 and 1998 c 176 s 11 are each amended to read as follows:
     For the purpose of determining the amount of liability for the tax imposed under this chapter, and to periodically update license information, each licensee, other than a motor vehicle fuel distributor and an international fuel tax agreement licensee, shall file monthly tax reports with the department, on a form prescribed by the department.
     A report shall be filed with the department. An international fuel tax agreement licensee shall file tax reports quarterly even though no motor vehicle fuel tax is due for the reporting period. Each tax report shall contain a declaration by the person making the same, to the effect that the statements contained therein are true and made under penalties of perjury, which declaration has the same force and effect as a verification of the report and is in lieu of the verification. The report shall show information as the department may require for the proper administration and enforcement of this chapter. Tax reports shall be filed on or before the twenty-fifth day of the next succeeding calendar month following the period to which the reports relate. If the final filing date falls on a Saturday, Sunday, or legal holiday the next secular or business day shall be the final filing date.
     The department, if it deems it necessary in order to ensure payment of the tax imposed under this chapter, or to facilitate the administration of this chapter, may require the filing of reports and tax remittances at shorter intervals than one month.

Sec. 7   RCW 82.36.060 and 2001 c 270 s 5 are each amended to read as follows:
     (1) An application for a license issued under this chapter shall be made to the department on forms to be furnished by the department and shall contain such information as the department deems necessary.
     (2) Every application for a license must contain the following information to the extent it applies to the applicant:
     (a) Proof as the department may require concerning the applicant's identity, including but not limited to his or her fingerprints or those of the officers of a corporation making the application;
     (b) The applicant's form and place of organization including proof that the individual, partnership, or corporation is licensed to do business in this state;
     (c) The qualification and business history of the applicant and any partner, officer, or director;
     (d) The applicant's financial condition or history including a bank reference and whether the applicant or any partner, officer, or director has ever been adjudged bankrupt or has an unsatisfied judgment in a federal or state court;
     (e) Whether the applicant has been adjudged guilty of a crime that directly relates to the business for which the license is sought and the time elapsed since the conviction is less than ten years, or has suffered a judgment within the preceding five years in a civil action involving fraud, misrepresentation, or conversion and in the case of a corporation or partnership, all directors, officers, or partners.
     (3) An applicant for a license as a motor vehicle fuel importer must list on the application each state, province, or country from which the applicant intends to import motor vehicle fuel and, if required by the state, province, or country listed, must be licensed or registered for motor vehicle fuel tax purposes in that state, province, or country.
     (4) An applicant for a license as a motor vehicle fuel exporter must list on the application each state, province, or country to which the exporter intends to export motor vehicle fuel received in this state by means of a transfer outside of the bulk transfer-terminal system and, if required by the state, province, or country listed, must be licensed or registered for motor vehicle fuel tax purposes in that state, province, or country.
     (5) An applicant for a license as a motor vehicle fuel supplier must have a federal certificate of registry that is issued under the internal revenue code and authorizes the applicant to enter into federal tax-free transactions on motor vehicle fuel in the terminal transfer system.
     (6) After receipt of an application for a license, the director may conduct an investigation to determine whether the facts set forth are true. The director shall require a fingerprint record check of the applicant through the Washington state patrol criminal identification system and the federal bureau of investigation before issuance of a license. The results of the background investigation including criminal history information may be released to authorized department personnel as the director deems necessary. The department shall charge a license holder or license applicant a fee of fifty dollars for each background investigation conducted.
     An applicant who makes a false statement of a material fact on the application may be prosecuted for false swearing as defined by RCW 9A.72.040.
     (7) Except as provided by subsection (8) of this section, before granting any license issued under this chapter, the department shall require applicant to file with the department, in such form as shall be prescribed by the department, a corporate surety bond duly executed by the applicant as principal, payable to the state and conditioned for faithful performance of all the requirements of this chapter, including the payment of all taxes, penalties, and other obligations arising out of this chapter. The total amount of the bond or bonds shall be fixed by the department and may be increased or reduced by the department at any time subject to the limitations herein provided. In fixing the total amount of the bond or bonds, the department shall require a bond or bonds equivalent in total amount to twice the estimated monthly excise tax determined in such manner as the department may deem proper. If at any time the estimated excise tax to become due during the succeeding month amounts to more than fifty percent of the established bond, the department shall require additional bonds or securities to maintain the marginal ratio herein specified or shall demand excise tax payments to be made weekly or semimonthly to meet the requirements hereof.
     The total amount of the bond or bonds required of any licensee shall never be less than five thousand dollars nor more than one hundred thousand dollars.
     No recoveries on any bond or the execution of any new bond shall invalidate any bond and no revocation of any license shall effect the validity of any bond but the total recoveries under any one bond shall not exceed the amount of the bond.
     In lieu of any such bond or bonds in total amount as herein fixed, a licensee may deposit with the state treasurer, under such terms and conditions as the department may prescribe, a like amount of lawful money of the United States or bonds or other obligations of the United States, the state, or any county of the state, of an actual market value not less than the amount so fixed by the department.
     Any surety on a bond furnished by a licensee as provided herein shall be released and discharged from any and all liability to the state accruing on such bond after the expiration of thirty days from the date upon which such surety has lodged with the department a written request to be released and discharged, but this provision shall not operate to relieve, release, or discharge the surety from any liability already accrued or which shall accrue before the expiration of the thirty day period. The department shall promptly, upon receiving any such request, notify the licensee who furnished the bond; and unless the licensee, on or before the expiration of the thirty day period, files a new bond, or makes a deposit in accordance with the requirements of this section, the department shall forthwith cancel the license. Whenever a new bond is furnished by a licensee, the department shall cancel the old bond as soon as the department and the attorney general are satisfied that all liability under the old bond has been fully discharged.
     The department may require a licensee to give a new or additional surety bond or to deposit additional securities of the character specified in this section if, in its opinion, the security of the surety bond theretofore filed by such licensee, or the market value of the properties deposited as security by the licensee, shall become impaired or inadequate; and upon the failure of the licensee to give such new or additional surety bond or to deposit additional securities within thirty days after being requested so to do by the department, the department shall forthwith cancel his or her license.
     (8) The department may waive the requirements of subsection (7) of this section for licensed distributors if, upon determination by the department, the licensed distributor has sufficient resources, assets, other financial instruments, or other means, to adequately make payments on the estimated monthly motor vehicle fuel tax payments, penalties, and interest arising out of this chapter. The department shall adopt rules to administer this subsection.
     (9) An application for an international fuel tax agreement license must be made to the department. The application must be filed upon a form prescribed by the department and contain such information as the department may require. The department shall charge a fee of ten dollars per set of international fuel tax agreement decals issued to each applicant or licensee. The department shall transmit the fee to the state treasurer for deposit in the motor vehicle fund.

Sec. 8   RCW 82.36.080 and 1998 c 176 s 20 are each amended to read as follows:
     (1) It shall be unlawful for any person to engage in business in this state as any of the following unless the person is the holder of an uncanceled license issued by the department authorizing the person to engage in that business:
     (a) Motor vehicle fuel supplier;
     (b) Motor vehicle fuel distributor;
     (c) Motor vehicle fuel exporter;
     (d) Motor vehicle fuel importer; ((or))
     (e) Motor vehicle fuel blender; or
     (f) International fuel tax agreement licensee.
     (2) A person engaged in more than one activity for which a license is required must have a separate license classification for each activity, but a motor vehicle fuel supplier is not required to obtain a separate license classification for any other activity for which a license is required.
     (3) If any person acts as a licensee without first securing the license required herein the excise tax shall be immediately due and payable on account of all motor vehicle fuel distributed or used by the person. The director shall proceed forthwith to determine from the best available sources, the amount of the tax, and the director shall immediately assess the tax in the amount found due, together with a penalty of one hundred percent of the tax, and shall make a certificate of such assessment and penalty. In any suit or proceeding to collect the tax or penalty, or both, such certificate shall be prima facie evidence that the person therein named is indebted to the state in the amount of the tax and penalty therein stated. Any tax or penalty so assessed may be collected in the manner prescribed in this chapter with reference to delinquency in payment of the tax or by an action at law, which the attorney general shall commence and prosecute to final determination at the request of the director. The foregoing remedies of the state shall be cumulative and no action taken pursuant to this section shall relieve any person from the penal provisions of this chapter.

Sec. 9   RCW 82.36.160 and 1998 c 176 s 27 are each amended to read as follows:
     Every licensee shall maintain in the office of his or her principal place of business in this state, for a period of five years, records of motor vehicle fuel received, sold, distributed, or used by the licensee, in such form as the director may prescribe, together with invoices, bills of lading, and other pertinent papers as may be required under the provisions of this chapter.
     ((Every dealer purchasing motor vehicle fuel taxable under this chapter for the purpose of resale, shall maintain within this state, for a period of two years a record of motor vehicle fuels received, the amount of tax paid to the licensee as part of the purchase price, together with delivery tickets, invoices, and bills of lading, and such other records as the director shall require.))

Sec. 10   RCW 82.36.180 and 1998 c 176 s 30 are each amended to read as follows:
     The director, or duly authorized agents, may make such examinations of the records, stocks, facilities, and equipment of any licensee, ((and service stations,)) and make such other investigations as deemed necessary in carrying out the provisions of this chapter. If such examinations or investigations disclose that any reports of licensees theretofore filed with the director pursuant to the requirements of this chapter have shown incorrectly the gallonage of motor vehicle fuel distributed or the tax ((accruing)) liability thereon, the director may make such changes in subsequent reports and payments of such licensees as deemed necessary to correct the errors disclosed.
     Every such licensee or such other person not maintaining records in this state so that an audit of such records may be made by the director or a duly authorized representative shall be required to make the necessary records available to the director upon request and at a designated office within this state; or, in lieu thereof, the director or a duly authorized representative shall proceed to any out-of-state office at which the records are prepared and maintained to make such examination.

Sec. 11   RCW 82.36.305 and 1965 ex.s. c 79 s 12 are each amended to read as follows:
     Any dealer who delivers motor vehicle fuel exclusively for marine use into the fuel tanks connected to the engine of any marine vessel (excluding any amphibious vehicle) owned or operated by the purchaser of the fuel, said dealer having paid the tax on such fuel levied or directed to be paid as provided in this chapter, ((either directly by the collection of such tax by the vendor from the dealer or)) indirectly by the adding of the amount of the tax to the price of such fuel, shall be entitled to and shall be refunded the amount of the tax so paid. The refund shall be applicable only if the person to whom the dealer sold the fuel holds a permit issued pursuant to the provisions of RCW 82.36.270 at the time of sale. Each invoice covering such sale shall have the statement, "Ex Washington Motor Vehicle Fuel Tax," clearly marked thereon.
     In addition to the claim to be filed under RCW 82.36.310 the dealer shall also file a certificate supporting such refund in such form and detail as the director may require. The certificate shall contain a statement signed by the purchaser of the fuel to the effect that the fuel so purchased will be used solely for marine use. The dealer may either file a separate certificate obtained from the purchaser for each delivery of fuel thereto or he may file one certificate covering all deliveries made to such purchaser during any given calendar month.

Sec. 12   RCW 82.36.370 and 1998 c 176 s 42 are each amended to read as follows:
     (1) A refund shall be made in the manner provided in this chapter or a credit given to a licensee allowing for the excise tax paid or accrued on all motor vehicle fuel which is lost or destroyed, while ((applicant shall be the owner thereof)) the licensee was the owner, through fire, lightning, flood, wind storm, or explosion.
     (2) A refund shall be made in the manner provided in this chapter or a credit given allowing for the excise tax paid or accrued on all motor vehicle fuel of five hundred gallons or more which is lost or destroyed, while applicant shall be the owner thereof, through leakage or other casualty except evaporation, shrinkage or unknown causes: PROVIDED, That the director shall be notified in writing as to the full circumstances surrounding such loss or destruction and the amount of the loss or destruction within thirty days from the day of discovery of such loss or destruction.
     (3) Recovery for such loss or destruction under either subsection (1) or (2) must be susceptible to positive proof thereby enabling the director to conduct such investigation and require such information as the director may deem necessary.
     In the event that the director is not satisfied that the fuel was lost or destroyed as claimed, wherefore required information or proof as required hereunder is not sufficient to substantiate the accuracy of the claim, the director may deem as sufficient cause the denial of all right relating to the refund or credit for the excise tax on motor vehicle fuel alleged to be lost or destroyed.

Sec. 13   RCW 82.36.373 and 1998 c 176 s 43 are each amended to read as follows:
     A motor vehicle supplier, motor vehicle fuel distributor, motor vehicle fuel importer, or motor vehicle fuel blender, under rules adopted by the department, is entitled to a refund of the tax paid on those sales of motor vehicle fuel for which no consideration has been received from or on behalf of ((the)) a purchaser licensee and that has been declared to be worthless accounts receivable. The amount of tax refunded must not exceed the amount of tax paid by the motor vehicle fuel distributor, motor vehicle fuel importer, or motor vehicle fuel blender under this chapter. If the motor vehicle fuel distributor, motor vehicle fuel importer, or motor vehicle fuel blender subsequently collects any amount from the account declared worthless, the amount collected shall be apportioned between the charges for the fuel and tax thereon. The motor vehicle fuel tax collected must be returned to the department.

Sec. 14   RCW 82.38.030 and 2005 c 314 s 102 are each amended to read as follows:
     (1) There is hereby levied and imposed upon special fuel ((users)) licensees a tax at the rate of twenty-three cents per gallon of special fuel, or each one hundred cubic feet of compressed natural gas, measured at standard pressure and temperature.
     (2) Beginning July 1, 2003, an additional and cumulative tax rate of five cents per gallon of special fuel, or each one hundred cubic feet of compressed natural gas, measured at standard pressure and temperature shall be imposed on special fuel ((users)) licensees. This subsection (2) expires when the bonds issued for transportation 2003 projects are retired.
     (3) Beginning July 1, 2005, an additional and cumulative tax rate of three cents per gallon of special fuel, or each one hundred cubic feet of compressed natural gas, measured at standard pressure and temperature shall be imposed on special fuel ((users)) licensees.
     (4) Beginning July 1, 2006, an additional and cumulative tax rate of three cents per gallon of special fuel, or each one hundred cubic feet of compressed natural gas, measured at standard pressure and temperature shall be imposed on special fuel ((users)) licensees.
     (5) Beginning July 1, 2007, an additional and cumulative tax rate of two cents per gallon of special fuel, or each one hundred cubic feet of compressed natural gas, measured at standard pressure and temperature shall be imposed on special fuel ((users)) licensees.
     (6) Beginning July 1, 2008, an additional and cumulative tax rate of one and one-half cents per gallon of special fuel, or each one hundred cubic feet of compressed natural gas, measured at standard pressure and temperature shall be imposed on special fuel ((users)) licensees.
     (7) Taxes are imposed when:
     (a) Special fuel is removed in this state from a terminal if the special fuel is removed at the rack unless the removal is to a licensed exporter for direct delivery to a destination outside of the state, or the removal is to a special fuel distributor for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;
     (b) Special fuel is removed in this state from a refinery if either of the following applies:
     (i) The removal is by bulk transfer and the refiner or the owner of the special fuel immediately before the removal is not a licensee; or
     (ii) The removal is at the refinery rack unless the removal is to a licensed exporter for direct delivery to a destination outside of the state, or the removal is to a special fuel distributor for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320;
     (c) Special fuel enters into this state ((for sale, consumption, use, or storage)), unless the fuel enters this state for direct delivery to an international fuel tax agreement licensee under RCW 82.38.320, if either of the following applies:
     (i) The entry is by bulk transfer and the importer is not a licensee; or
     (ii) The entry is not by bulk transfer;
     (d) Special fuel is sold or removed in this state to an unlicensed entity unless there was a prior taxable removal, entry, or sale of the special fuel;
     (e) Blended special fuel is removed or sold in this state by the blender of the fuel. The number of gallons of blended special fuel subject to tax is the difference between the total number of gallons of blended special fuel removed or sold and the number of gallons of previously taxed special fuel used to produce the blended special fuel;
     (f) Dyed special fuel is used on a highway, as authorized by the internal revenue code, unless the use is exempt from the special fuel tax;
     (g) Dyed special fuel is held for sale, sold, used, or is intended to be used in violation of this chapter;
     (h) Special fuel purchased by an international fuel tax agreement licensee under RCW 82.38.320 is used on a highway; and
     (i) Special fuel is sold by a licensed special fuel supplier to a special fuel distributor, special fuel importer, or special fuel blender and the special fuel is not removed from the bulk transfer-terminal system.
     (8) The tax imposed by this chapter, if required to be collected by the licensee, is held in trust by the licensee until paid to the department, and a licensee 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 is guilty of a felony, or gross misdemeanor in accordance with the theft and anticipatory provisions of Title 9A RCW. A person, partnership, corporation, or corporate officer who fails to collect the tax imposed by this section, or who has collected the tax and fails to pay it to the department in the manner prescribed by this chapter, is personally liable to the state for the amount of the tax.

Sec. 15   RCW 82.38.032 and 1998 c 176 s 52 are each amended to read as follows:
     The tax under RCW 82.38.030, if not previously imposed and paid, must be paid over to the department by special fuel ((users)) licensees and persons ((licensed under the international fuel tax agreement or)) operating motor vehicles under other fuel tax reciprocity agreements entered into with the state of Washington, on the use of special fuel to operate motor vehicles on the highways of this state, unless the use is exempt from the tax under this chapter.

Sec. 16   RCW 82.38.035 and 2005 c 314 s 107 are each amended to read as follows:
     (1) A licensed supplier shall ((remit)) be liable for and pay tax on special fuel to the department as provided in RCW 82.38.030(7)(a). On a two-party exchange, or buy-sell agreement between two licensed suppliers, the receiving exchange partner or buyer shall ((remit)) be liable for and pay the tax.
     (2) A licensed refiner shall ((remit)) be liable for and pay tax to the department on special fuel removed from a refinery as provided in RCW 82.38.030(7)(b).
     (3) ((An)) A licensed importer shall ((remit)) be liable for and pay tax to the department on special fuel imported into this state as provided in RCW 82.38.030(7)(c).
     (4) A licensed blender shall ((remit)) be liable for and pay tax to the department on the removal or sale of blended special fuel as provided in RCW 82.38.030(7)(e).
     (5) A licensed dyed special fuel user shall ((remit)) be liable for and pay tax to the department on the use of dyed special fuel as provided in RCW 82.38.030(7)(f).
     (6) Nothing in this chapter prohibits the licensee liable for payment of the tax under this chapter from including as a part of the selling price an amount equal to such tax.

Sec. 17   RCW 82.38.050 and 1990 c 250 s 82 are each amended to read as follows:
     ((Except as otherwise provided in this chapter, every special fuel user shall be liable for the tax on special fuel used in motor vehicles leased to the user for thirty days or more and operated on the highways of this state to the same extent and in the same manner as special fuel used in his own motor vehicles and operated on the highways of this state: PROVIDED, That)) A lessor who is engaged regularly in the business of leasing or renting for compensation motor vehicles and equipment he owns without drivers to carriers or other lessees for interstate operation, may be deemed to be the special fuel user when he supplies or pays for the special fuel consumed in such vehicles, and such lessor may be issued a international fuel tax agreement license ((as a special fuel user)) when application and bond have been properly filed with and approved by the department for such license. Any lessee may exclude motor vehicles of which he or she is the lessee from reports and liabilities pursuant to this chapter, but only if the motor vehicles in question have been leased from a lessor holding a valid ((special fuel user's)) international fuel tax a agreement license.
     ((Every such lessor shall file with the application for a special fuel user's license one copy of the lease form or service contract the lessor enters into with the various lessees of the lessor's motor vehicles.)) When the ((special fuel user's)) license has been secured, such lessor shall make and assign to each motor vehicle leased for interstate operation a photocopy of such license to be carried in the cab compartment of the motor vehicle and on which shall be typed or printed on the back the unit or motor number of the motor vehicle to which it is assigned and the name of the lessee. Such lessor shall be responsible for the proper use of such photocopy of the license issued and its return to the lessor with the motor vehicle to which it is assigned.
     The lessor shall be responsible for fuel tax licensing and reporting, as required by this chapter, on the operation of all motor vehicles leased to others for less than thirty days.

Sec. 18   RCW 82.38.070 and 1998 c 176 s 58 are each amended to read as follows:
     A special fuel supplier is entitled to a credit of the tax paid over to the department on those sales of special fuel for which the supplier has received no consideration from or on behalf of the purchaser licensee. The amount of the tax credit shall not exceed the amount of tax imposed by this chapter on such sales. If a credit has been granted under this section, any amounts collected for application against the accounts on which such a credit is based shall be reported on a subsequent return filed after such collection, and the amount of credit received by the supplier based upon the collected amount shall be returned to the department. In the event the credit has not been paid, the amount of the credit requested by the supplier shall be adjusted by the department to reflect the decrease in the amount on which the claim is based.

Sec. 19   RCW 82.38.130 and 1998 c 176 s 65 are each amended to read as follows:
     The department may revoke the license of any licensee for any of the grounds constituting cause for denial of a license set forth in RCW 82.38.120 or for other reasonable cause. Before revoking such license the department shall notify the licensee to show cause within twenty days of the date of the notice why the license should not be revoked: PROVIDED, That at any time prior to and pending such hearing the department may, in the exercise of reasonable discretion, suspend such license.
     The department shall cancel any special fuel license immediately upon surrender thereof by the holder.
     Any surety on a bond furnished by a licensee as provided in this chapter shall be released and discharged from any and all liability to the state accruing on such bond after the expiration of forty-five days from the date which such surety shall have lodged with the department a written request to be released and discharged, but this provision shall not operate to relieve, release, or discharge the surety from any liability already accrued or which shall accrue before the expiration of the forty-five day period. The department shall promptly, upon receiving any such request, notify the licensee who furnished the bond, and unless the licensee, on or before the expiration of the forty-five day period, files a new bond, in accordance with this section, the department ((forthwith)) shall cancel the ((special fuel dealer's or special fuel user's)) license.
     The department may require a new or additional surety bond of the character specified in RCW 82.38.020(3) if, in its opinion, the security of the surety bond therefor filed by such licensee, shall become impaired or inadequate. Upon failure of the licensee to give such new or additional surety bond within forty-five days after being requested to do so by the department, or after he or she shall fail or refuse to file reports and remit or pay taxes at the intervals fixed by the department, the department forthwith shall cancel his or her license.

Sec. 20   RCW 82.38.140 and 1998 c 176 s 66 are each amended to read as follows:
     (1) Every licensee and every person importing, manufacturing, refining, ((dealing in,)) transporting, blending, or storing special fuel in this state shall keep for a period of not less than five years open to inspection at all times during the business hours of the day to the department or its authorized representatives, a complete record of all special fuel purchased or received and all of such products sold, delivered, or used by them. Such records shall show:
     (a) The date of each receipt;
     (b) The name and address of the person from whom purchased or received;
     (c) The number of gallons received at each place of business or place of storage in the state of Washington;
     (d) The date of each sale or delivery;
     (e) The number of gallons sold, delivered, or used for taxable purposes;
     (f) The number of gallons sold, delivered, or used for any purpose not subject to the tax imposed in this chapter;
     (g) The name, address, and special fuel license number of the purchaser if the special fuel tax is not collected on the sale or delivery;
     (h) The inventories of special fuel on hand at each place of business at the end of each month.
     (2)(a) All international fuel tax agreement licensees and dyed special fuel users authorized to use dyed special fuel on highway in vehicles licensed for highway operation shall maintain detailed mileage records on an individual vehicle basis.
     (b) Such operating records shall show both on-highway and off-highway usage of special fuel on a daily basis for each vehicle.
     (c) In the absence of operating records that show both on-highway and off-highway usage of special fuel on a daily basis for each vehicle, fuel consumption must be computed under RCW 82.38.060.
     (3) The department may require a person other than a licensee engaged in the business of selling, purchasing, distributing, storing, transporting, or delivering special fuel to submit periodic reports to the department regarding the disposition of the fuel. The reports must be on forms prescribed by the department and must contain such information as the department may require.
     (4) Every person operating any conveyance for the purpose of hauling, transporting, or delivering special fuel in bulk shall have and possess during the entire time the person is hauling special fuel, an invoice, bill of sale, or other statement showing the name, address, and license number of the seller or consigner, the destination, name, and address of the purchaser or consignee, license number, if applicable, and the number of gallons. The person hauling such special fuel shall at the request of any law enforcement officer or authorized representative of the department, or other person authorized by law to inquire into, or investigate those types of matters, produce for inspection such invoice, bill of sale, or other statement and shall permit such official to inspect and gauge the contents of the vehicle.

Sec. 21   RCW 82.38.180 and 1998 c 176 s 71 are each amended to read as follows:
     Any person who has purchased special fuel on which tax has been paid ((a special fuel tax either directly or to the vendor from whom it was purchased)) may file a claim with the department for a refund of the tax ((so paid and shall be reimbursed and repaid the amount of)) for:
     (1) ((Any)) Taxes previously paid on special fuel used for purposes other than for the propulsion of motor vehicles upon the public highways in this state.
     (2) ((Any)) Taxes previously paid on special fuel exported for use outside of this state. Special fuel carried from this state in the fuel tank of a motor vehicle is deemed to be exported from this state. Special fuel distributed to a federally recognized Indian tribal reservation located within the state of Washington is not considered exported outside this state.
     (3) ((Any)) Tax, penalty, or interest erroneously or illegally collected or paid.
     (4) ((Any)) Taxes previously paid on all special fuel which is lost or destroyed, while applicant shall be the owner thereof, through fire, lightning, flood, wind storm, or explosion.
     (5) ((Any)) Taxes previously paid on all special fuel of five hundred gallons or more which is lost or destroyed while applicant shall be the owner thereof, through leakage or other casualty except evaporation, shrinkage, or unknown causes.
     (6) ((Any)) Taxes previously paid on special fuel that is inadvertently mixed with dyed special fuel.
     Recovery for such loss or destruction under either subsection (4), (5), or (6) of this section must be susceptible to positive proof thereby enabling the department to conduct such investigation and require such information as ((they)) it may deem necessary. In the event that the department is not satisfied that the fuel was lost, destroyed, or contaminated as claimed because information or proof as required hereunder is not sufficient to substantiate the accuracy of the claim, ((they)) it may deem such as sufficient cause to deny all right relating to the refund or credit for the excise tax paid on special fuel alleged to be lost or destroyed.
     No refund or claim for credit shall be approved by the department unless the gallons of special fuel claimed as nontaxable satisfy the conditions specifically set forth in this section and the nontaxable event or use occurred during the period covered by the refund claim. Refunds or claims for credit ((by sellers or users of special fuel)) shall not be allowed for anticipated nontaxable use or events.

NEW SECTION.  Sec. 22   The following acts or parts of acts are each repealed:
     (1) RCW 82.36.407 (Tax liability of user -- Payment -- Exceptions) and 1998 c 176 s 48; and
     (2) RCW 82.38.285 (Tax liability of user -- Exceptions) and 1998 c 176 s 81.

NEW SECTION.  Sec. 23   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.

NEW SECTION.  Sec. 24   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.