BILL REQ. #:  H-5614.1 

READ FIRST TIME 02/12/08.   

     AN ACT Relating to providing partial state sales and use tax exemptions in respect to the purchase or use of server equipment comprising only the server chassis and all computer hardware and software contained within the server chassis, where the server equipment replaces existing server equipment in certain buildings constructed or refurbished to house servers and located in a rural county as defined in RCW 82.14.370(5); amending RCW 81.104.170; reenacting and amending RCW 82.32.590 and 82.32.600; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.14 RCW; adding a new section to chapter 82.32 RCW; and providing an effective date.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.08 RCW to read as follows:
     (1) A partial exemption from the tax imposed by RCW 82.08.020 in the form of a remittance is provided for sales to qualifying businesses of replacement server equipment to be installed, without intervening use, in an eligible computer data center, and to charges made for labor and services rendered in respect to installing such replacement server equipment. The exemption provided in this section applies only to the state portion of the sales tax.
     (2)(a) A qualifying business claiming an exemption under this section must first pay the tax imposed by RCW 82.08.020 on sales eligible for exemption under this section and may then apply to the department for remittance of fifty percent of the tax paid.
     (b) A qualifying business claiming the exemption must submit an application for remittance to the department, not more often than once per calendar quarter, in a form and manner as required by the department. The application must include the amount of exemption claimed, the purchases for which the exemption is claimed, and such other information that the department determines is necessary to determine eligibility for the exemption. A qualifying business claiming the exemption under this section must keep and preserve adequate records establishing the qualifying business's eligibility for the exemption. Pending or approved applications are subject to audit verification by the department.
     (c) The department must, on a quarterly basis, remit exempted amounts to qualifying businesses that submitted applications during the previous quarter that were approved, in whole or part, by the department.
     (3) A qualifying business claiming an exemption under this section must complete the annual survey described in section 5 of this act.
     (4) For purposes of this section:
     (a) "Computer data center" means a facility comprised of one or more buildings constructed or refurbished specifically, and used primarily, to house servers, where the facility has the following characteristics: (i) Uninterruptible power supplies, generator backup power, or both; (ii) sophisticated fire suppression and prevention systems; and (iii) enhanced physical security, such as: (A) Restricted access to the facility to selected personnel; (B) permanent security guards; video camera surveillance; or an electronic system requiring passcodes, keycards, or biometric scans, such as hand scans and retinal or fingerprint recognition; or (C) security features similar to those in (a)(iii)(A) and (B) of this subsection (4).
     (b) "Electronic data storage and data management services" include, but are not limited to: Providing data storage and backup services, providing computer processing power, and hosting enterprise software applications. The term also includes hosting web sites that provide free or subscription services such as e-mail, web browsing and searching, media applications, and other related online services.
     (c) "Eligible computer data center" means a computer data center with at least twenty thousand square feet of floor space dedicated to housing working servers and located in a rural county as defined in RCW 82.14.370(5).
     (d) "Qualifying business" means a business entity that exists for the primary purpose of engaging in commercial activity for profit.
     For purposes of this definition, "business entity" means a corporation, other than a municipal, quasi-municipal, and public or other corporation created by the state or federal government, tribal government, municipality, or political subdivision of the state; association; limited liability company; partnership, including general partnership, limited partnership, and limited liability partnership; or other legal entity. Consistent with this definition, "business entity" does not include the state or federal government or any of their departments, agencies, and institutions; tribal governments; and political subdivisions of this state.
     (e) "Replacement server equipment" means server equipment that replaces existing server equipment located at the eligible data center in which the replacement server equipment will be installed.
     (f)(i) "Server" includes blade or rack-mount servers and means a computer that is used in a computer data center solely to provide electronic data storage and data management services for internal use by the owner or lessee of the computer data center, for clients of the owner or lessee of the computer data center, or both.
     (ii) "Server" does not include personal computers.
     (g) "Server equipment" means the server chassis and all computer hardware and software contained within the server chassis. Consistent with this definition, "server equipment" does not include the racks upon which the server chassis is installed, cables, and computer peripherals such as keyboards, monitors, printers, mice, and other devices that work outside of the computer.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.12 RCW to read as follows:
     (1) A partial exemption from the tax imposed by RCW 82.12.020 in the form of a remittance is provided for the use by qualifying businesses of replacement server equipment to be installed, without intervening use, in an eligible computer data center, and to the use of labor and services rendered in respect to installing such replacement server equipment. The exemption provided in this section applies only to the state portion of the use tax.
     (2)(a) A qualifying business claiming an exemption under this section must first pay the tax imposed by RCW 82.12.020 on the use of property and services eligible for exemption under this section and may then apply to the department for remittance of fifty percent of the tax paid.
     (b) A qualifying business claiming the exemption must submit an application for remittance to the department, not more often than once per calendar quarter, in a form and manner as required by the department. The application must include the amount of exemption claimed, the acquisitions for which the exemption is claimed, and such other information that the department determines is necessary to determine eligibility for the exemption. A qualifying business claiming the exemption under this section must keep and preserve adequate records establishing the qualifying business's eligibility for the exemption. Pending or approved applications are subject to audit verification by the department.
     (c) The department must, on a quarterly basis, remit exempted amounts to qualifying businesses that submitted applications during the previous quarter that were approved, in whole or part, by the department.
     (3) The definitions in section 1 of this act apply to this section.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.14 RCW to read as follows:
     The exemptions in sections 1 and 2 of this act are for the state portion of the sales and use tax only and do not extend to the taxes authorized in this chapter.

Sec. 4   RCW 81.104.170 and 1997 c 450 s 5 are each amended to read as follows:
     Cities that operate transit systems, county transportation authorities, metropolitan municipal corporations, public transportation benefit areas, and regional transit authorities may submit an authorizing proposition to the voters and, if approved by a majority of persons voting, fix and impose a sales and use tax in accordance with the terms of this chapter, solely for the purpose of providing high capacity transportation service.
     The tax authorized pursuant to this section shall be in addition to the tax authorized by RCW 82.14.030 and shall be collected from those persons who are taxable by the state pursuant to chapters 82.08 and 82.12 RCW upon the occurrence of any taxable event within the taxing district. The maximum rate of such tax shall be approved by the voters and shall not exceed one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax). The maximum rate of such tax that may be imposed shall not exceed nine-tenths of one percent in any county that imposes a tax under RCW 82.14.340, or within a regional transit authority if any county within the authority imposes a tax under RCW 82.14.340. The exemptions in RCW 82.08.820 ((and)), 82.12.820, and sections 1 and 2 of this act are for the state portion of the sales and use tax and do not extend to the tax authorized in this section.

NEW SECTION.  Sec. 5   A new section is added to chapter 82.32 RCW to read as follows:
     (1)(a) The legislature finds that accountability and effectiveness are important aspects of setting tax policy. In order to make policy choices regarding the best use of limited state resources the legislature needs information on how a tax incentive is used.
     (b) Qualifying businesses claiming an exemption under section 1 or 2 of this act must complete an annual survey. The survey is due by March 31st of the year following the calendar year in which a sales or use tax exemption under section 1 or 2 of this act is first claimed and the seven succeeding calendar years. The survey must include the amount of sales and use tax exempted. The survey must also include the following information for employment positions in Washington:
     (i) The number of total employment positions;
     (ii) Full-time, part-time, and temporary employment positions as a percent of total employment;
     (iii) The number of employment positions according to the following wage bands: Less than thirty thousand dollars; thirty thousand dollars or greater, but less than sixty thousand dollars; and sixty thousand dollars or greater. A wage band containing fewer than three individuals may be combined with another wage band; and
     (iv) The number of employment positions that have employer-provided medical, dental, and retirement benefits, by each of the wage bands.
     (c) The department may request additional information necessary to measure the results of the deferral program, to be submitted at the same time as the survey.
     (d) All information collected under this subsection, except the amount of the tax exemption taken, is deemed taxpayer information under RCW 82.32.330 and is not disclosable. Information on the amount of the tax exemption taken is not subject to the confidentiality provisions of RCW 82.32.330 and may be disclosed to the public upon request.
     (2) If a qualifying business fails to complete the annual survey required under subsection (1)(b) of this section by the date due, an amount equal to all previously exempted state sales and use taxes is immediately due and payable. Interest and penalties for taxes due and payable under this subsection are prospective only. The due date for determining interest and penalties on taxes payable under this subsection is April 1st of the year in which the qualifying business fails to complete the annual survey.
     (3) The joint legislative audit and review committee must use the information to study the sales and use tax exemptions authorized in this act. The committee must report to the legislature by December 1, 2012, and December 1, 2015. The reports must measure the effect of the program on job creation, the number of jobs created for Washington residents in rural counties, company growth, the diversification of the state's economy in rural counties, growth in high technology investment in rural counties, the movement of high technology firms operations into the state, and such other factors as the department selects.

Sec. 6   RCW 82.32.590 and 2006 c 354 s 17, 2006 c 300 s 10, 2006 c 177 s 8, 2006 c 112 s 7, and 2006 c 84 s 7 are each reenacted and amended to read as follows:
     (1) If the department finds that the failure of a taxpayer to file an annual survey or annual report under RCW 82.04.4452, 82.32.5351, 82.32.650, 82.32.635, 82.32.640, 82.32.630, 82.32.610, section 5 of this act, or 82.74.040 by the due date was the result of circumstances beyond the control of the taxpayer, the department shall extend the time for filing the survey or report. Such extension shall be for a period of thirty days from the date the department issues its written notification to the taxpayer that it qualifies for an extension under this section. The department may grant additional extensions as it deems proper.
     (2) In making a determination whether the failure of a taxpayer to file an annual survey or annual report by the due date was the result of circumstances beyond the control of the taxpayer, the department shall be guided by rules adopted by the department for the waiver or cancellation of penalties when the underpayment or untimely payment of any tax was due to circumstances beyond the control of the taxpayer.

Sec. 7   RCW 82.32.600 and 2007 c 54 s 23 and 2007 c 54 s 22 are each reenacted and amended to read as follows:
     (1) Persons required to file annual surveys or annual reports under RCW 82.04.4452 or 82.32.5351, 82.32.610, 82.32.630, 82.32.635, 82.32.640, section 5 of this act, or 82.74.040 must electronically file with the department all surveys, reports, returns, and any other forms or information the department requires in an electronic format as provided or approved by the department. As used in this section, "returns" has the same meaning as "return" in RCW 82.32.050.
     (2) Any survey, report, return, or any other form or information required to be filed in an electronic format under subsection (1) of this section is not filed until received by the department in an electronic format.
     (3) The department may waive the electronic filing requirement in subsection (1) of this section for good cause shown.

NEW SECTION.  Sec. 8   This act takes effect July 1, 2008.