BILL REQ. #:  S-2347.2 

READ FIRST TIME 02/28/07.   

     AN ACT Relating to creating a business and occupation tax credit against state and federal payroll taxes paid by restaurateurs on employee tips; and adding a new section to chapter 82.04 RCW.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 82.04 RCW to read as follows:
     (1) Subject to the limitations in this section, a credit is allowed against the tax imposed under this chapter for the total amount of contributions or taxes paid by the employer to any state of Washington or federal taxing authority on account of tip income of employees of the employer that are includable in wages for the purposes of RCW 50.04.320(3) including, but not limited to: Contributions paid by the employer under chapter 50.24 RCW, amounts paid to the United States treasury on account of the employer's federal insurance contributions act tax obligations, or amounts paid to the United States treasury on account of the employer's federal unemployment tax act tax obligations.
     (2) The credit or credits provided for by this section may be claimed against taxes due for the calendar year in which the employer pays contributions, federal insurance contributions act tax obligations, or federal unemployment tax act tax obligations.
     (3) Fifty percent of the dollar amount of any credit for which the employer is eligible and has actually taken under this section must be utilized for one or more of the following in the same calendar year as the credit against such taxes was actually taken:
     (a) Health care benefits for the employer's employees;
     (b) Additional wages for any of the employer's nontip earning employees; or
     (c) Other increased employee benefits such as, but not limited to, employee meals and paid sick leave.
     (4) An employer who takes a credit under this section must report annually to the department, in the form and manner prescribed by the department, information providing an itemized listing of the dollar amounts utilized under subsection (3)(a) through (c) of this section.
     (5) The amount of the credit claimed for a reporting period may not exceed the tax otherwise due under this chapter for that reporting period.
     (6) Refunds may not be given in place of credits and credits may not be carried over to subsequent calendar years or carried backward to previous calendar years.
     (7) For the purposes of this section, the following definitions apply:
     (a) "Contributions" are defined as provided in RCW 50.04.070.
     (b) "Federal insurance contributions act tax obligation" means the tax imposed under 26 U.S.C. Sec. 3111 of the federal internal revenue code.
     (c) "Federal unemployment tax act tax obligation" means the tax imposed under 26 U.S.C. Sec. 3301 of the federal internal revenue code.
     (d) "Employer" means any "employer" as defined under RCW 50.04.080 that operates a restaurant, as defined in this subsection.
     (e) "Restaurant" means any business establishment where, in consideration of payment, either food or beverages, or both, without lodgings, is regularly furnished to the public, and some or all of the establishment's employees regularly and customarily receive tips from patrons of the establishment, but not including drug stores and soda fountains.