BILL REQ. #:  H-4206.3 

     AN ACT Relating to ensuring municipal business and occupation tax uniformity and fairness; amending RCW 35.102.040; and creating new sections.

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

NEW SECTION.  Sec. 1   On January 1, 2008, legislation became effective, which provided municipal business and occupation tax uniformity and fairness. This legislation had been enacted five years earlier in House Bill No. 2030 (chapter 79, Laws of 2003). The primary objectives of the 2003 legislation were to make the existing municipal tax system less complex and more fair through uniformity. However, as the law has recently become effective, certain jurisdictions have enacted local legislation specifically designed for the purpose of avoiding the 2003 legislative intent. For example, certain local governments have adopted ordinances imposing business square footage taxes. Such local ordinances hurt the business community by unnecessarily increasing the local tax complexity and placing unfair tax burdens on certain business activities, which directly contradicts the 2003 legislation.
     Therefore, the legislature finds that it is of the utmost importance to enact new legislation, which further clarifies that local governments cannot sidestep the intentions of the legislature. Municipal business and occupation tax fairness and uniformity are vital to a healthy business community throughout the state. For these reasons, local governments should not be allowed to develop new taxing systems that are the same in principal as the old taxing systems, which the legislature worked so diligently to eliminate in 2003. The 2003 act specifically required the development of a model ordinance for business and occupation taxes in order to achieve the goals of that legislation. This legislature finds that the model ordinance, which is required to be adopted by local governments, must prohibit the imposition of business square footage taxes to ensure tax fairness and uniformity are accomplished.

Sec. 2   RCW 35.102.040 and 2006 c 301 s 7 are each amended to read as follows:
     (1)(a) The cities, working through the association of Washington cities, shall form a model ordinance development committee made up of a representative sampling of cities that as of July 27, 2003, impose a business and occupation tax. This committee shall work through the association of Washington cities to adopt a model ordinance on municipal gross receipts business and occupation tax. The model ordinance and subsequent amendments shall be adopted using a process that includes opportunity for substantial input from business stakeholders and other members of the public. Input shall be solicited from statewide business associations and from local chambers of commerce and downtown business associations in cities that levy a business and occupation tax.
     (b) The municipal research council shall contract to post the model ordinance on an internet web site and to make paper copies available for inspection upon request. The department of revenue and the department of licensing shall post copies of or links to the model ordinance on their internet web sites. Additionally, a city that imposes a business and occupation tax must make copies of its ordinance available for inspection and copying as provided in chapter 42.56 RCW.
     (c) The definitions and tax classifications in the model ordinance may not be amended more frequently than once every four years, however the model ordinance may be amended at any time to comply with changes in state law. Any amendment to a mandatory provision of the model ordinance must be adopted with the same effective date by all cities.
     (2) A city that imposes a business and occupation tax must adopt the mandatory provisions of the model ordinance. The following provisions are mandatory:
     (a) A system of credits that meets the requirements of RCW 35.102.060 and a form for such use;
     (b) A uniform, minimum small business tax threshold of at least the equivalent of twenty thousand dollars in gross income annually. A city may elect to deviate from this requirement by creating a higher threshold or exemption but it shall not deviate lower than the level required in this subsection. If a city has a small business threshold or exemption in excess of that provided in this subsection as of January 1, 2003, and chooses to deviate below the threshold or exemption level that was in place as of January 1, 2003, the city must notify all businesses licensed to do business within the city at least one hundred twenty days prior to the potential implementation of a lower threshold or exemption amount;
     (c) Tax reporting frequencies that meet the requirements of RCW 35.102.070;
     (d) Penalty and interest provisions that meet the requirements of RCW 35.102.080 and 35.102.090;
     (e) Claim periods that meet the requirements of RCW 35.102.100;
     (f) Refund provisions that meet the requirements of RCW 35.102.110; and
     (g) Definitions, which at a minimum, must include the definitions enumerated in RCW 35.102.030 and 35.102.120. The definitions in chapter 82.04 RCW shall be used as the baseline for all definitions in the model ordinance, and any deviation in the model ordinance from these definitions must be described by a comment in the model ordinance.
     (3) Except for the deduction required by RCW 35.102.160 and the system of credits developed to address multiple taxation under subsection (2)(a) of this section, a city may adopt its own provisions for tax exemptions, tax credits, and tax deductions.
     (4) A city with a population of more than five hundred thousand persons may not adopt an ordinance that places a substantially equivalent tax burden on the taxpayer, such as a square footage tax that imposes a business and occupation tax that contradicts the legislative intent of promoting uniformity and fairness among municipal business and occupation taxes.
     (5) Any city that adopts an ordinance that deviates from the nonmandatory provisions of the model ordinance shall make a description of such differences available to the public, in written and electronic form.

NEW SECTION.  Sec. 3   This act applies retroactively, as well as prospectively.