BILL REQ. #:  S-0370.5 

Read first time 01/29/2007.   Referred to Committee on Water, Energy & Telecommunications.

     AN ACT Relating to exempting alternative fuel from taxation; amending RCW 82.38.080, 82.38.020, and 82.38.130; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; and providing an expiration date.

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

Sec. 1   RCW 82.38.080 and 1998 c 176 s 60 are each amended to read as follows:
     (1) There is exempted from the tax imposed by this chapter, the use of fuel for:
     (a) Street and highway construction and maintenance purposes in motor vehicles owned and operated by the state of Washington, or any county or municipality;
     (b) Publicly owned fire fighting equipment;
     (c) Special mobile equipment as defined in RCW 46.04.552;
     (d) Power pumping units or other power take-off equipment of any motor vehicle which is accurately measured by metering devices that have been specifically approved by the department or which is established by any of the following formulae:
     (i) Pumping propane, or fuel or heating oils or milk picked up from a farm or dairy farm storage tank by a power take-off unit on a delivery truck, at a rate determined by the department: PROVIDED, That claimant when presenting his or her claim to the department in accordance with this chapter, shall provide to the claim, invoices of propane, or fuel or heating oil delivered, or such other appropriate information as may be required by the department to substantiate his or her claim;
     (ii) Operating a power take-off unit on a cement mixer truck or a load compactor on a garbage truck at the rate of twenty-five percent of the total gallons of fuel used in such a truck; or
     (iii) The department is authorized to establish by rule additional formulae for determining fuel usage when operating other types of equipment by means of power take-off units when direct measurement of the fuel used is not feasible. The department is also authorized to adopt rules regarding the usage of on board computers for the production of records required by this chapter;
     (e) Motor vehicles owned and operated by the United States government;
     (f) Heating purposes;
     (g) Moving a motor vehicle on a public highway between two pieces of private property when said moving is incidental to the primary use of the motor vehicle;
     (h) Transportation services for persons with special transportation needs by a private, nonprofit transportation provider regulated under chapter 81.66 RCW;
     (i) Vehicle refrigeration units, mixing units, or other equipment powered by separate motors from separate fuel tanks; and
     (j) The operation of a motor vehicle as a part of or incidental to logging operations upon a highway under federal jurisdiction within the boundaries of a federal area if the federal government requires a fee for the privilege of operating the motor vehicle upon the highway, the proceeds of which are reserved for constructing or maintaining roads in the federal area, or requires maintenance or construction work to be performed on the highway for the privilege of operating the motor vehicle on the highway.
     (2) There is exempted from the tax imposed by this chapter the removal or entry of special fuel under the following circumstances and conditions:
     (a) If it is the removal from a terminal or refinery of, or the entry or sale of, a special fuel if all of the following apply:
     (i) The person otherwise liable for the tax is a licensee other than a dyed special fuel user or international fuel tax agreement licensee;
     (ii) For a removal from a terminal, the terminal is a licensed terminal; and
     (iii) The special fuel satisfies the dyeing and marking requirements of this chapter;
     (b) If it is an entry or removal from a terminal or refinery of taxable special fuel transferred to a refinery or terminal and the persons involved, including the terminal operator, are licensed; and
     (c)(i) If it is a special fuel that, under contract of sale, is shipped to a point outside this state by a supplier by means of any of the following:
     (A) Facilities operated by the supplier;
     (B) Delivery by the supplier to a carrier, customs broker, or forwarding agent, whether hired by the purchaser or not, for shipment to the out-of-state point;
     (C) Delivery by the supplier to a vessel clearing from port of this state for a port outside this state and actually exported from this state in the vessel.
     (ii) For purposes of this subsection (2)(c):
     (A) "Carrier" means a person or firm engaged in the business of transporting for compensation property owned by other persons, and includes both common and contract carriers; and
     (B) "Forwarding agent" means a person or firm engaged in the business of preparing property for shipment or arranging for its shipment.
     (3) Notwithstanding any provision of law to the contrary, every urban passenger transportation system and carriers as defined by chapters 81.68 and 81.70 RCW shall be exempt from the provisions of this chapter requiring the payment of special fuel taxes. For the purposes of this section "urban passenger transportation system" means every transportation system, publicly or privately owned, having as its principal source of revenue the income from transporting persons for compensation by means of motor vehicles and/or trackless trolleys, each having a seating capacity for over fifteen persons over prescribed routes in such a manner that the routes of such motor vehicles and/or trackless trolleys, either alone or in conjunction with routes of other such motor vehicles and/or trackless trolleys subject to routing by the same transportation system, shall not extend for a distance exceeding twenty-five road miles beyond the corporate limits of the county in which the original starting points of such motor vehicles are located: PROVIDED, That no refunds or credits shall be granted on special fuel used by any urban transportation vehicle or vehicle operated pursuant to chapters 81.68 and 81.70 RCW on any trip where any portion of said trip is more than twenty-five road miles beyond the corporate limits of the county in which said trip originated.
     (4) Blenders and special fuel suppliers are exempted from the tax imposed by this chapter, if the alternative fuel is produced in Washington state and the feed stock from which the alternative fuel is produced is grown in Washington state.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.08 RCW to read as follows:
     The tax levied by RCW 82.08.020 does not apply to sales of alternative fuel, as defined in RCW 82.38.020, if the fuel is exempt from the special fuel tax under RCW 82.38.080.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.12 RCW to read as follows:
     This chapter does not apply to the use of alternative fuel, as defined in RCW 82.38.020, if the fuel is exempt from the special fuel tax under RCW 82.38.080.

Sec. 4   RCW 82.38.020 and 2002 c 183 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) "Alternative fuel" means alcohol fuel, biodiesel fuel, or biodiesel feedstock, as those terms are defined in RCW 82.29A.135.
     (2) "Blended special fuel" means a mixture of undyed diesel 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))) (3) "Blender" means a person who produces blended special fuel outside the bulk transfer-terminal system.
     (((3))) (4) "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.
     (((4))) (5) "Bulk transfer-terminal system" means the special fuel distribution system consisting of refineries, pipelines, vessels, and terminals. Special fuel in a refinery, pipeline, vessel, or terminal is in the bulk transfer-terminal system. Special 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))) (6) "Bulk transfer" means a transfer of special fuel by pipeline or vessel.
     (((6))) (7) "Bulk storage" means the placing of special fuel into a receptacle other than the fuel supply tank of a motor vehicle.
     (((7))) (8) "Department" means the department of licensing.
     (((8))) (9) "Dyed special fuel user" means a person authorized by the internal revenue code to operate a motor vehicle on the highway using dyed special fuel, in which the use is not exempt from the special fuel tax.
     (((9))) (10) "Evasion" or "evade" means to diminish or avoid the computation, assessment, or payment of authorized taxes or fees through:
     (a) A knowing: False statement; omission; misrepresentation of fact; or other act of deception;
     (b) An intentional: Failure to file a return or report; or other act of deception; or
     (c) The unlawful use of dyed special fuel.
     (((10))) (11) "Export" means to obtain special fuel in this state for sales or distribution outside the state.
     (((11))) (12) "Highway" means every way or place open to the use of the public, as a matter of right, for the purpose of vehicular travel.
     (((12))) (13) "Import" means to bring special fuel into this state by a means of conveyance other than the fuel supply tank of a motor vehicle.
     (((13))) (14) "International fuel tax agreement licensee" means a special fuel user operating qualified motor vehicles in interstate commerce and licensed by the department under the international fuel tax agreement.
     (((14))) (15) "Lessor" means a person: (a) Whose principal business is the bona fide leasing or renting of motor vehicles without drivers for compensation to the general public; and (b) who maintains established places of business and whose lease or rental contracts require the motor vehicles to be returned to the established places of business.
     (((15))) (16) "Licensee" means a person holding a license issued under this chapter.
     (((16))) (17) "Motor vehicle" means a self-propelled vehicle designed for operation upon land utilizing special fuel as the means of propulsion.
     (((17))) (18) "Natural gas" means naturally occurring mixtures of hydrocarbon gases and vapors consisting principally of methane, whether in gaseous or liquid form.
     (((18))) (19) "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.
     (((19))) (20) "Position holder" means a person who holds the inventory position in special fuel, as reflected by the records of the terminal operator. A person holds the inventory position in special 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 special fuel. "Position holder" includes a terminal operator that owns special fuel in their terminal.
     (((20))) (21) "Rack" means a mechanism for delivering special fuel from a refinery or terminal into a truck, trailer, railcar, or other means of nonbulk transfer.
     (((21))) (22) "Refiner" means a person who owns, operates, or otherwise controls a refinery.
     (((22))) (23) "Removal" means a physical transfer of special fuel other than by evaporation, loss, or destruction.
     (((23))) (24) "Special fuel" means and includes all combustible gases and liquids suitable for the generation of power for propulsion of motor vehicles, except that it does not include motor vehicle fuel as defined in chapter 82.36 RCW, nor does it include dyed special fuel as defined by federal regulations, unless the use is in violation of this chapter. If a person holds for sale, sells, purchases, or uses any dyed special fuel in violation of this chapter, all dyed special fuel held for sale, sold, purchased, stored, or used by that person is considered special fuel, and the person is subject to all presumptions, reporting, and recordkeeping requirements and other obligations which apply to special fuel, along with payment of any applicable taxes, penalties, or interest for illegal use.
     (((24))) (25) "Special fuel distributor" means a person who acquires special fuel from a supplier, distributor, or licensee for subsequent sale and distribution.
     (((25))) (26) "Special fuel exporter" means a person who purchases special 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.
     (((26))) (27) "Special fuel importer" means a person who imports special 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 special fuel at the time of importation is the importer.
     (((27))) (28) "Special fuel supplier" means a person who holds a federal certificate issued under the internal revenue code and authorizes the person to tax-free transactions on special fuel in the bulk transfer-terminal system.
     (((28))) (29) "Special fuel user" means a person engaged in uses of special fuel that are not specifically exempted from the special fuel tax imposed under this chapter.
     (((29))) (30) "Terminal" means a special 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 special fuel is removed at a rack.
     (((30))) (31) "Terminal operator" means a person who owns, operates, or otherwise controls a terminal.
     (((31))) (32) "Two-party exchange" or "buy-sell agreement" means a transaction in which taxable special 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 special 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. 5   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))) (4) 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.

NEW SECTION.  Sec. 6   Section 1 of this act expires June 30, 2015.