BILL REQ. #:  Z-0971.1 

Read first time 01/28/08.   Referred to Committee on Finance.

     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; 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; 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) 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 (3).
     (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   This act takes effect July 1, 2008.