BILL REQ. #: H-4933.3
| State of Washington | 61st Legislature | 2010 Regular Session |
Read first time 02/04/10. Referred to Committee on Finance.
AN ACT Relating to increasing state revenues to preserve funding for education, public safety, health care, and safety net services for elderly, disabled, and vulnerable people by preventing abusive tax avoidance transactions, narrowing or eliminating certain tax preferences, and providing equitable tax treatment; amending RCW 82.04.220, 82.04.2907, 82.04.460, 82.32.090, 82.12.020, 82.45.033, 82.45.070, 82.45.080, 82.45.100, 82.45.220, 43.07.390, 82.04.4292, 82.04.423, 82.04.4266, 82.04.250, 82.04.250, 82.04.298, 82.04.334, 82.04.4463, 82.08.806, 82.32.545, 82.32.550, 82.32.630, 82.32.632, 82.45.195, 35.102.150, 48.14.080, 82.48.010, 82.48.020, 82.48.030, 82.48.070, 82.48.080, 82.48.110, 82.16.050, 82.12.0254, 82.45.010, 82.45.080, and 82.32.145; reenacting and amending RCW 82.04.260, 82.04.261, 82.04.440, 82.04.360, and 82.45.010; adding new sections to chapter 82.04 RCW; adding new sections to chapter 82.32 RCW; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding a new section to chapter 82.48 RCW; adding a new section to chapter 82.16 RCW; creating new sections; repealing RCW 82.08.0273, 82.04.062, 82.08.890, 82.12.890, and 82.04.44525; providing effective dates; providing an expiration date; and declaring an emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 101 (1) The legislature finds that out-of-state businesses that do not have a physical presence in Washington
earn significant income from Washington residents from providing
services or collecting royalties on the use of intangible property in
this state. The legislature further finds that these businesses
receive significant benefits and opportunities provided by the state,
such as: Laws providing protection of business interests or regulating
consumer credit; access to courts and judicial process to enforce
business rights, including debt collection and intellectual property
rights; an orderly and regulated marketplace; and police and fire
protection and a transportation system benefiting in-state agents and
other representatives of out-of-state businesses. Therefore, the
legislature intends to extend the state's business and occupation tax
to these companies to ensure that they pay their fair share of the cost
of services that this state renders and the infrastructure it provides.
(2)(a) The legislature also finds that the current cost
apportionment method in RCW 82.04.460(1) for apportioning most service
income has been difficult for both taxpayers and the department to
apply due in large part (i) to the difficulty in assigning certain
costs of doing business inside or outside of this state, and (ii) to
its dissimilarity with the apportionment methods used in other states
for their business activity taxes.
(b) The legislature further finds that there is a trend among
states to adopt a single factor apportionment formula based on sales.
The legislature recognizes that adoption of a sales factor only
apportionment method has the advantages of simplifying apportionment
and making Washington a more attractive place for businesses to expand
their property and payroll. For these reasons, the legislature adopts
single factor sales apportionment for purposes of apportioning royalty
income and certain service income.
(c) Nothing in this act may be construed, however, to authorize
apportionment of the gross income or value of products taxable under
the following business and occupation tax classifications: Retailing,
wholesaling, manufacturing, processing for hire, extracting, extracting
for hire, printing, government contracting, public road construction,
the classifications in RCW 82.04.280 (2), (4), (6), and (7), and any
other activity not specifically included in the definition of
apportionable activities in RCW 82.04.460.
Sec. 102 RCW 82.04.220 and 1961 c 15 s 82.04.220 are each amended
to read as follows:
(1) There is levied and ((shall be)) collected from every person
that has substantial nexus with this state a tax for the act or
privilege of engaging in business activities. ((Such)) The tax ((shall
be)) is measured by the application of rates against value of products,
gross proceeds of sales, or gross income of the business, as the case
may be.
(2) A person who has substantial nexus with this state in any tax
year will be deemed to have substantial nexus with this state for the
following four tax years.
NEW SECTION. Sec. 103 A new section is added to chapter 82.04
RCW to read as follows:
"Engaging within this state" and "engaging within the state," when
used in connection with any apportionable activity as defined in RCW
82.04.460, means that a person generates gross income of the business
from sources within this state, such as customers or intangible
property located in this state, regardless of whether the person is
physically present in this state.
NEW SECTION. Sec. 104 A new section is added to chapter 82.04
RCW to read as follows:
(1) A person engaging in business is deemed to have substantial
nexus with this state if the person is:
(a) An individual and is a resident or domiciliary of this state;
(b) A business entity and is organized or commercially domiciled in
this state; or
(c) A nonresident individual or a business entity that is organized
or commercially domiciled outside this state, and in any tax year the
person has:
(i) More than fifty thousand dollars of property in this state;
(ii) More than fifty thousand dollars of payroll in this state;
(iii) More than five hundred thousand dollars of receipts from this
state; or
(iv) At least twenty-five percent of the person's total property,
total payroll, or total receipts in this state.
(2)(a) Property counting toward the thresholds in subsection
(1)(c)(i) and (iv) of this section is the average value of the
taxpayer's property, including intangible property, owned or rented and
used in this state during the tax year.
(b)(i) Property owned by the taxpayer, other than loans and credit
card receivables owned by the taxpayer, is valued at its original cost
basis. Loans and credit card receivables owned by the taxpayer are
valued at their outstanding principal balance, without regard to any
reserve for bad debts. However, if a loan or credit card receivable is
charged off in whole or in part for federal income tax purposes, the
portion of the loan or credit card receivable charged off is deducted
from the outstanding principal balance.
(ii) Property rented by the taxpayer is valued at eight times the
net annual rental rate. For purposes of this subsection, "net annual
rental rate" means the annual rental rate paid by the taxpayer less any
annual rental rate received by the taxpayer from subrentals.
(c) The average value of property must be determined by averaging
the values at the beginning and ending of the tax year; but the
department may require the averaging of monthly values during the tax
year if reasonably required to properly reflect the average value of
the taxpayer's property.
(d)(i) For purposes of this subsection (2), loans and credit card
receivables are deemed owned and used in this state as follows:
(A) Loans secured by real property, personal property, or both real
and personal property, are deemed owned and used in the state if the
real property or personal property securing the loan is located within
this state. If the property securing the loan is located both within
this state and one or more other states, the loan is deemed owned and
used in this state if more than fifty percent of the fair market value
of the real or personal property is located within this state. If more
than fifty percent of the fair market value of the real or personal
property is not located within any one state, then the loan is deemed
owned and used in this state if the borrower is located in this state.
The determination of whether the real or personal property securing a
loan is located within this state must be made, as of the time the
original agreement was made, and any and all subsequent substitutions
of collateral must be disregarded.
(B) Loans not secured by real or personal property are deemed owned
and used in this state if the borrower is located in this state.
(C) Credit card receivables are deemed owned and used in this state
if the billing address of the cardholder is in this state.
(ii) The definitions in section 106 of this act apply to this
subsection.
(e) Notwithstanding anything else to the contrary in this
subsection, property counting toward the thresholds in subsection
(1)(c)(i) and (iv) of this section does not include a person's
ownership of, or rights in, computer software as defined in RCW
82.04.215, including computer software used in providing a digital
automated service; master copies of software; and digital goods and
digital codes residing on servers located in this state.
(3)(a) Payroll counting toward the thresholds in subsection
(1)(c)(ii) and (iv) of this section is the total amount paid by the
taxpayer for compensation in this state during the tax year plus
nonemployee compensation paid to representative third parties in this
state. Nonemployee compensation paid to representative third parties
includes the gross amount paid to nonemployees who represent the
taxpayer in interactions with the taxpayer's clients and includes sales
commissions.
(b) Compensation is paid in this state if the compensation is
properly reportable to this state for unemployment compensation tax
purposes, regardless of whether the compensation was actually reported
to this state.
(c) Nonemployee compensation is paid in this state if the service
performed by the representative third party occurs entirely or
primarily within this state.
(d) For purposes of this subsection, "compensation" means wages,
salaries, commissions, and any other form of remuneration paid to
employees and defined as gross income under 26 U.S.C. Sec. 61 of the
federal internal revenue code of 1986, as existing on July 1, 2010.
(4) Receipts counting toward the thresholds in subsection
(1)(c)(iii) and (iv) of this section are those amounts included in the
numerator of the receipts factor under sections 105 and 106 of this
act.
(5)(a) Each December, the department must review the cumulative
percentage change in the consumer price index. The department must
adjust the thresholds in subsection (1)(c)(i) through (iii) of this
section if the consumer price index has changed by five percent or more
since the later of July 1, 2010, or the date that the thresholds were
last adjusted under this subsection. For purposes of determining the
cumulative percentage change in the consumer price index, the
department must compare the consumer price index available as of
December 1st of the current year with the consumer price index as of
the later of July 1, 2010, or the date that the thresholds were last
adjusted under this subsection. The thresholds must be adjusted to
reflect that cumulative percentage change in the consumer price index.
The adjusted thresholds must be rounded to the nearest one thousand
dollars. Any adjustment will apply to tax periods that begin after the
adjustment is made.
(b) As used in this subsection, "consumer price index" means the
consumer price index for all urban consumers (CPI-U) available from the
bureau of labor statistics of the United States department of labor.
(6) Notwithstanding anything to the contrary in this section, a
person is not subject to taxes imposed under this chapter on any
activity not included in the definition of apportionable activities in
RCW 82.04.460, unless the person has a physical presence in this state,
which need only be demonstrably more than a slightest presence. For
purposes of this subsection, a person is physically present in this
state if the person has property or employees in this state or the
person, either directly or through an agent or other representative,
engages in activities in this state that are significantly associated
with the person's ability to establish or maintain a market for its
products in this state.
NEW SECTION. Sec. 105 A new section is added to chapter 82.04
RCW to read as follows:
(1) The apportionable income of a person within the scope of RCW
82.04.460(1) is apportioned to Washington by multiplying its
apportionable income by the receipts factor. Persons who are subject
to tax under more than one of the tax classifications enumerated in RCW
82.04.460(3)(a) (i) through (ix) must calculate a separate receipts
factor for each tax classification that the person is taxable under.
(2) For purposes of subsection (1) of this section, the receipts
factor is a fraction and is calculated as provided in subsections (3)
and (4) of this section and section 106 of this act.
(3)(a) The numerator of the receipts factor is the total gross
income of the business of the taxpayer attributable to this state
during the tax year from engaging in an apportionable activity. The
denominator of the receipts factor is the total gross income of the
business of the taxpayer from engaging in an apportionable activity
everywhere in the world during the tax year.
(b) Except as otherwise provided in this section, for purposes of
computing the receipts factor, gross income of the business generated
from each apportionable activity is attributable to the state:
(i) Where the customer received the benefit of the taxpayer's
service or, in the case of gross income from royalties, where the
customer used the taxpayer's intangible property.
(ii) If the customer received the benefit of the service or used
the intangible property in more than one state, gross income of the
business must be attributed to the state in which the benefit of the
service was primarily received or in which the intangible property was
primarily used.
(iii) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i) or (ii) of this subsection (3),
gross income of the business must be attributed to the state from which
the customer ordered the service or, in the case of royalties, the
office of the customer from which the royalty agreement with the
taxpayer was negotiated.
(iv) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), or (iii) of this
subsection (3), gross income of the business must be attributed to the
state to which the billing statements or invoices are sent to the
customer by the taxpayer.
(v) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), (iii), or (iv) of this
subsection (3), gross income of the business must be attributed to the
state from which the customer sends payment to the taxpayer.
(vi) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), (iii), (iv), or (v) of
this subsection (3), gross income of the business must be attributed to
the state where the customer is located as indicated by the customer's
address: (A) Shown in the taxpayer's business records maintained in
the regular course of business; or (B) obtained during consummation of
the sale or the negotiation of the contract for services or for the use
of the taxpayer's intangible property, including any address of a
customer's payment instrument when readily available to the taxpayer
and no other address is available.
(vii) If the taxpayer is unable to attribute gross income of the
business under the provisions of (b)(i), (ii), (iii), (iv), (v), or
(vi) of this subsection (3), gross income of the business must be
attributed to the commercial domicile of the taxpayer.
(viii) For purposes of this subsection (3)(b), "customer" means a
person or entity to whom the taxpayer makes a sale or renders services
or from whom the taxpayer otherwise receives gross income of the
business. "Customer" includes anyone who pays royalties or charges in
the nature of royalties for the use of the taxpayer's intangible
property.
(c) Gross income of the business from engaging in an apportionable
activity must be excluded from the denominator of the receipts factor
if, in respect to such activity, at least some of the activity is
performed in this state, and the gross income is attributable under (b)
of this subsection (3) to a state in which the taxpayer is not taxable.
For purposes of this subsection (3)(c), "not taxable" means that the
taxpayer is not subject to a business activities tax by that state,
except that a taxpayer is taxable in a state in which it would be
deemed to have substantial nexus with that state under the standards in
section 104(1) of this act regardless of whether that state imposes
such a tax. "Business activities tax" means a tax measured by the
amount of, or economic results of, business activity conducted in a
state. The term includes taxes measured in whole or in part on net
income or gross income or receipts. "Business activities tax" does not
include a sales tax, use tax, or a similar transaction tax, imposed on
the sale or acquisition of goods or services, whether or not
denominated a gross receipts tax or a tax imposed on the privilege of
doing business.
(d) This subsection (3) does not apply to financial institutions
with respect to apportionable income taxable under RCW 82.04.290.
Financial institutions must calculate the receipts factor as provided
in section 106 of this act and subsection (4) of this section with
respect to apportionable income taxable under RCW 82.04.290. For
purposes of this subsection, "financial institution" has the same
meaning as in section 106 of this act.
(4) A taxpayer may calculate the receipts factor for the current
tax year based on the most recent calendar year for which information
is available for the full calendar year. If a taxpayer does not
calculate the receipts factor for the current tax year based on
previous calendar year information as authorized in this subsection,
the business must use current year information to calculate the
receipts factor for the current tax year. In either case, a taxpayer
must correct the reporting for the current tax year when complete
information is available to calculate the receipts factor for that
year, but not later than October 31st of the following tax year.
Interest will apply to any additional tax due on a corrected tax
return. Interest must be assessed at the rate provided for delinquent
excise taxes under chapter 82.32 RCW, retroactively to the date the
original return was due, and will accrue until the additional taxes are
paid. Penalties as provided in RCW 82.32.090 will apply to any such
additional tax due only if the current tax year reporting is not
corrected and the additional tax is not paid by October 31st of the
following tax year. Interest as provided in RCW 82.32.060 will apply
to any tax paid in excess of that properly due on a return as a result
of a taxpayer using previous calendar year data or incomplete current-year data to calculate the receipts factor.
(5) Unless the context clearly requires otherwise, the definitions
in this subsection apply throughout this section.
(a) "Apportionable activities" and "apportionable income" have the
same meaning as in RCW 82.04.460.
(b) "State" has the same meaning as in section 106 of this act.
NEW SECTION. Sec. 106 A new section is added to chapter 82.04
RCW to read as follows:
(1) A financial institution must, for purposes of apportioning
gross income of the business taxable under RCW 82.04.290 using the
apportionment method provided in section 105(1) of this act, calculate
the receipts factor as provided in this section and section 105(4) of
this act. Financial institutions that are subject to tax under any
other tax classification enumerated in RCW 82.04.460(3)(a) (i) through
(v) and (vii) through (ix) must calculate a separate receipts factor,
as provided in section 105 of this act, for each of the other tax
classifications that the financial institution is taxable under.
(2)(a)(i) The numerator of the receipts factor includes gross
income from interest, fees, and penalties on loans secured by real
property, personal property, or both real and personal property, if the
real or personal property is located within this state. If the
property securing the loan is located both within this state and one or
more other states, the income described in this subsection (2)(a)(i) is
included in the numerator of the receipts factor if more than fifty
percent of the fair market value of the real or personal property is
located within this state. If more than fifty percent of the fair
market value of the real or personal property is not located within any
one state, then the income described in this subsection (2)(a)(i) is
included in the numerator of the receipts factor if the borrower is
located in this state.
(ii) The denominator of the receipts factor includes gross income
from interest, fees, and penalties on loans secured by real property,
personal property, or both real and personal property, wherever the
property is located.
(iii) The determination of whether the real or personal property
securing a loan is located within this state must be made as of the
time the original agreement was made and any and all subsequent
substitutions of collateral must be disregarded.
(b) The numerator of the receipts factor includes gross income from
interest, fees, and penalties on loans not secured by real or personal
property if the borrower is located in this state. The denominator of
the receipts factor includes gross income from interest, fees, and
penalties on loans that are not secured by real or personal property,
regardless of where the borrower is located.
(c) The receipts factor includes gross income from net gains, which
may not be less than zero, on the sale of loans. Net gains on the sale
of loans includes income recorded under the coupon stripping rules of
26 U.S.C. Sec. 1286 of the federal internal revenue code of 1986, as
existing on July 1, 2010.
(i) The amount of net gains, which may not be less than zero, on
the sale of loans secured by real property, personal property, or both
real and personal property, included in the numerator of the receipts
factor is determined by multiplying such net gains by a fraction. The
numerator of the fraction is the amount included in the numerator of
the receipts factor under (a) of this subsection (2). The denominator
of the fraction is the amount included in the denominator of the
receipts factor under (a) of this subsection (2).
(ii) The amount of net gains, which may not be less than zero, from
the sale of loans not secured by real or personal property included in
the numerator of the receipts factor is determined by multiplying such
net gains by a fraction. The numerator of the fraction is the amount
included in the numerator of the receipts factor under (b) of this
subsection (2). The denominator of the fraction is the amount included
in the denominator of the receipts factor under (b) of this subsection
(2).
(iii) The denominator of the receipts factor includes gross income
from net gains, which may not be less than zero, on all sales of loans.
(d) Loan servicing fees are included in the receipts factor as
provided in (d)(i) and (ii) of this subsection (2).
(i)(A)(I) The numerator of the receipts factor includes gross
income from loan servicing fees derived from loans secured by real
property, personal property, or both real and personal property,
multiplied by a fraction. The numerator of the fraction is the amount
included in the numerator of the receipts factor under (a) of this
subsection (2). The denominator of the fraction is the amount included
in the denominator of the receipts factor under (a) of this subsection
(2).
(II) The denominator of the receipts factor includes gross income
from all loan servicing fees derived from loans secured by real
property, personal property, or both real and personal property.
(B)(I) The numerator of the receipts factor includes gross income
from loan servicing fees derived from loans not secured by real or
personal property multiplied by a fraction. The numerator of the
fraction is the amount included in the numerator of the receipts factor
under (b) of this subsection (2). The denominator of the fraction is
the amount included in the denominator of the receipts factor under (b)
of this subsection (2).
(II) The denominator of the receipts factor includes gross income
from all loan servicing fees derived from loans not secured by real or
personal property.
(ii) If the financial institution receives loan servicing fees for
servicing either the secured or the unsecured loans of another, the
numerator of the receipts factor includes such fees if the borrower is
located in this state. The denominator of the receipts factor includes
all such fees.
(e)(i) Interest, dividends, net gains (which may not be less than
zero), and other income from investment assets and activities and from
trading assets and activities, as provided in this subsection (2)(e),
are included in the receipts factor. Investment assets and activities
and trading assets and activities include but are not limited to:
Investment securities; trading account assets; federal funds;
securities purchased and sold under agreements to resell or repurchase;
options; futures contracts; forward contracts; notional principal
contracts such as swaps; equities; and foreign currency transactions.
(ii) The numerator of the receipts factor includes gross income
from interest, dividends, net gains (which may not be less than zero),
and other receipts from investment assets and activities and from
trading assets and activities described in (e)(i) of this subsection
(2) that are attributable to this state. The denominator of the
receipts factor includes all such gross income wherever earned.
(A) The amount of interest, dividends, net gains (which may not be
less than zero), and other income from investment assets and activities
in the investment account to be attributed to this state and included
in the numerator of the receipts factor is determined by multiplying
all such income from such assets and activities by a fraction. The
numerator of the fraction is the average value of such assets that are
properly assigned to a regular place of business of the financial
institution within this state. The denominator of the fraction is the
average value of all such assets.
(B)(I) The amount of interest from federal funds sold and purchased
and from securities purchased under resale agreements and securities
sold under repurchase agreements attributable to this state and
included in the numerator of the receipts factor is determined by
multiplying the amount described in (e)(ii)(B)(II) of this subsection
(2) from such funds and such securities by a fraction. The numerator
of the fraction is the average value of federal funds sold and
securities purchased under agreements to resell that are properly
assigned to a regular place of business of the financial institution
within this state. The denominator of the fraction is the average
value of all such funds and such securities.
(II) The amount used for purposes of making the calculation in
(e)(ii)(B)(I) of this subsection (2) is the amount by which interest
from federal funds sold and securities purchased under resale
agreements exceeds interest expense on federal funds purchased and
securities sold under repurchase agreements.
(C)(I) The amount of interest, dividends, gains and other income
from trading assets and activities, including but not limited to assets
and activities in the matched book, in the arbitrage book, and foreign
currency transactions, but excluding amounts described in (e)(ii)(A) or
(B) of this subsection (2), attributable to this state and included in
the numerator of the receipts factor is determined by multiplying the
amount described in (e)(ii)(C)(II) of this subsection (2) by a
fraction. The numerator of the fraction is the average value of such
trading assets that are properly assigned to a regular place of
business of the financial institution within this state. The
denominator of the fraction is the average value of all such assets.
(II) The amount used for purposes of making the calculation in
(e)(ii)(C)(I) of this subsection (2) is the amount by which interest,
dividends, gains and other receipts from trading assets and activities,
including but not limited to assets and activities in the matched book,
in the arbitrage book, and foreign currency transactions, exceed
amounts paid in lieu of interest, amounts paid in lieu of dividends,
and losses from such assets and activities.
(D) For purposes of this subsection (2)(e)(ii), average value must
be determined using the rules for determining the average value of
property set forth in section 104(2) of this act.
(iii) In lieu of using the method set forth in (e)(ii) of this
subsection (2), the financial institution may elect, or the department
may require, in order to fairly represent the business activity of the
financial institution in this state, the use of the method set forth in
this subsection (2)(e)(iii).
(A) The amount of interest, dividends, net gains (which may not be
less than zero), and other income from investment assets and activities
in the investment account to be attributed to this state and included
in the numerator of the receipts factor is determined by multiplying
all such income from such assets and activities by a fraction. The
numerator of the fraction is the gross income from such assets and
activities that are properly assigned to a regular place of business of
the financial institution within this state. The denominator of the
fraction is the gross income from all such assets and activities.
(B) The amount of interest from federal funds sold and purchased
and from securities purchased under resale agreements and securities
sold under repurchase agreements attributable to this state and
included in the numerator of the receipts factor is determined by
multiplying the amount described in (e)(ii)(B)(II) of this subsection
(2) from such funds and such securities by a fraction. The numerator
of the fraction is the gross income from such funds and such securities
that are properly assigned to a regular place of business of the
financial institution within this state. The denominator of the
fraction is the gross income from all such funds and such securities.
(C) The amount of interest, dividends, gains and other receipts
from trading assets and activities, including but not limited to assets
and activities in the matched book, in the arbitrage book, and foreign
currency transactions, but excluding amounts described in (e)(ii)(A) or
(B) of this subsection (2), attributable to this state and included in
the numerator of the receipts factor is determined by multiplying the
amount described in (e)(ii)(C)(II) of this subsection (2) by a
fraction. The numerator of the fraction is the gross income from such
trading assets and activities that are properly assigned to a regular
place of business of the financial institution within this state. The
denominator of the fraction is the gross income from all such assets
and activities.
(iv) If the financial institution elects or is required by the
department to use the method set forth in (e)(iii) of this subsection
(2), it must use this method for subsequent tax returns unless the
financial institution receives prior permission from the department to
use, or the department requires, a different method.
(v) The financial institution has the burden of proving that an
investment asset or activity or trading asset or activity was properly
assigned to a regular place of business outside of this state by
demonstrating that the day-to-day decisions regarding the asset or
activity occurred at a regular place of business outside this state.
If the day-to-day decisions regarding an investment asset or activity
or trading asset or activity occur at more than one regular place of
business and one such regular place of business is in this state and
one such regular place of business is outside this state, such asset or
activity is considered to be located at the regular place of business
of the financial institution where the investment or trading policies
or guidelines with respect to the asset or activity are established.
Such policies and guidelines are presumed, subject to rebuttal by
preponderance of the evidence, to be established at the commercial
domicile of the financial institution.
(f) The numerator of the receipts factor includes gross income from
interest, fees, and penalties on credit card receivables, and gross
income from fees charged to cardholders, such as annual fees, if the
billing address of the cardholder is in this state. The denominator of
the receipts factor includes gross income from interest, fees, and
penalties on all credit card receivables, and gross income from fees
charged to all cardholders, such as annual fees.
(g)(i) The numerator of the receipts factor includes gross income
from net gains, which may not be less than zero, from the sale of
credit card receivables multiplied by a fraction. The numerator of the
fraction is the amount included in the numerator of the receipts factor
under (f) of this subsection (2). The denominator of the fraction is
the amount included in the denominator of the receipts factor under (f)
of this subsection (2).
(ii) The denominator of the receipts factor includes gross income
from net gains, which may not be less than zero, from all sales of
credit card receivables.
(h)(i) The numerator of the receipts factor includes gross income
from all credit card issuer's reimbursement fees multiplied by a
fraction. The numerator of the fraction is the amount included in the
numerator of the receipts factor under (f) of this subsection (2). The
denominator of the fraction is the amount included in the denominator
of the receipts factor under (f) of this subsection (2).
(ii) The denominator of the receipts factor includes gross income
from all credit card issuer's reimbursement fees.
(i) The numerator of the receipts factor includes gross income from
merchant discounts if the commercial domicile of the merchant is in
this state. The denominator of the receipts factor includes gross
income from all merchant discounts. For purposes of this subsection
(2)(i), gross income must be computed net of any cardholder charge
backs but may not be reduced by any interchange transaction fees or by
any issuer's reimbursement fees paid to another for charges made by its
cardholders.
(j) Apportionable income that would be attributable under this
subsection (2) to a state in which the financial institution is not
taxable must be excluded from the denominator of the receipts factor if
at least some of the activity that generated the income is performed in
this state, and the gross income is attributable under this subsection
(2) to a state in which the taxpayer is not taxable. For purposes of
this subsection (2)(j), "not taxable" has the same meaning as in
section 105 of this act.
(k)(i) The numerator of the receipts factor includes apportionable
income taxable under RCW 82.04.290 and not otherwise included in the
receipts factor under this subsection (2) if the activity producing the
apportionable income is performed in this state. If the activity is
performed both inside and outside this state, the numerator of the
receipts factor includes apportionable income taxable under RCW
82.04.290 and not otherwise included in the receipts factor under this
subsection (2) if a greater proportion of the activity producing the
apportionable income is performed in this state based on cost of
performance.
(ii) The denominator of the receipts factor includes apportionable
income taxable under RCW 82.04.290 from activities performed
everywhere, where the apportionable income taxable under RCW 82.04.290
is not otherwise included in the receipts factor under this subsection
(2).
(3) Except as otherwise provided in subsection (4) of this section,
the definitions in the multistate tax commission's recommended formula
for the apportionment and allocation of net income of financial
institutions, adopted November 17, 1994, as existing on the effective
date of this section, apply to this section.
(4) Unless the context clearly requires otherwise, the definitions
in this subsection apply throughout this section.
(a) "Apportionable income" has the same meaning as in RCW
82.04.460.
(b) "Credit card" means a card or device existing for the purpose
of obtaining money, property, labor, or services on credit.
(c) "Financial institution" has the same meaning as in WAC 458-20-14601. However, the department may not make any substantive changes to
the definition of "financial institution" in WAC 458-20-14601 unless
the changes implement a legislative amendment to this definition of
financial institution.
(d) "State" means a state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or possession
of the United States, or any foreign country or political subdivision
of a foreign country.
Sec. 107 RCW 82.04.2907 and 2009 c 535 s 407 are each amended to
read as follows:
(1) Upon every person engaging within this state in the business of
receiving income from royalties ((or charges in the nature of royalties
for the granting of intangible rights, such as copyrights, licenses,
patents, or franchise fees)), the amount of tax with respect to
((such)) the business ((shall be)) is equal to the gross income from
royalties ((or charges in the nature of royalties from the business))
multiplied by the rate of 0.484 percent.
(2) For the purposes of this section, "gross income from royalties"
means compensation for the use of intangible property, ((such as))
including charges in the nature of royalties, regardless of where the
intangible property will be used. For purposes of this subsection,
"intangible property" includes copyrights, patents, licenses,
franchises, trademarks, trade names, and similar items. ((It)) "Gross
income from royalties" does not include compensation for any natural
resource, the licensing of prewritten computer software to the end
user, or the licensing ((or use)) of digital goods, digital codes, or
digital automated services to the end user as defined in RCW
82.04.190(11).
Sec. 108 RCW 82.04.460 and 2004 c 174 s 6 are each amended to
read as follows:
(1) Except as otherwise provided in this section, any person
((rendering services)) earning apportionable income taxable under ((RCW
82.04.290 or 82.04.2908)) this chapter and ((maintaining places of
business both within and without this state which contribute to the
rendition of such services shall)) also taxable in another state, must,
for the purpose of computing tax liability under ((RCW 82.04.290 or
82.04.2908)) this chapter, apportion to this state, in accordance with
section 105 of this act, that portion of the person's ((gross))
apportionable income ((which is)) derived from ((services rendered))
business activities performed within this state. ((Where such
apportionment cannot be accurately made by separate accounting methods,
the taxpayer shall apportion to this state that proportion of the
taxpayer's total income which the cost of doing business within the
state bears to the total cost of doing business both within and without
the state.))
(2) ((Notwithstanding the provision of subsection (1) of this
section, persons doing business both within and without the state who
receive gross income from service charges, as defined in RCW 63.14.010
(relating to amounts charged for granting the right or privilege to
make deferred or installment payments) or who receive gross income from
engaging in business as financial institutions within the scope of
chapter 82.14A RCW (relating to city taxes on financial institutions)
shall apportion or allocate gross income taxable under RCW 82.04.290 to
this state pursuant to rules promulgated by the department consistent
with uniform rules for apportionment or allocation developed by the
states.)) The department ((
(3)shall)) may by rule provide a method or
methods of apportioning or allocating gross income derived from sales
of telecommunications service and competitive telephone service((s))
taxed under this chapter, if the gross proceeds of sales subject to tax
under this chapter do not fairly represent the extent of the taxpayer's
income attributable to this state. ((The rules shall be, so far as
feasible, consistent with the methods of apportionment contained in
this section and shall require the consideration of those facts,
circumstances, and apportionment factors as will result in an equitable
and constitutionally permissible division of the services.)) The rule
must provide for an equitable and constitutionally permissible division
of the tax base.
(3) For purposes of this section, the following definitions apply
unless the context clearly requires otherwise:
(a) "Apportionable income" means gross income of the business
generated from engaging in apportionable activities, including income
received from apportionable activities performed outside this state if
the income would be taxable under this chapter if received from
activities in this state, less the exemptions and deductions allowable
under this chapter. For purposes of this subsection, "apportionable
activities" means only those activities taxed under:
(i) RCW 82.04.255;
(ii) RCW 82.04.260 (3), (5), (6), (7), (8), (9), (10), and (13);
(iii) RCW 82.04.280(5);
(iv) RCW 82.04.285;
(v) RCW 82.04.286;
(vi) RCW 82.04.290;
(vii) RCW 82.04.2907;
(viii) RCW 82.04.2908; and
(ix) RCW 82.04.260(14), 82.04.263, and 82.04.280(1), but only to
the extent of any activity that would be taxable under any of the
provisions enumerated under (a)(i) through (viii) of this subsection
(3) if the tax classifications in RCW 82.04.260(14), 82.04.263, and
82.04.280(1) did not exist.
(b)(i) "Taxable in another state" means that the taxpayer is
subject to a business activities tax by another state on its income
received from engaging in apportionable activities; or the taxpayer is
not subject to a business activities tax by another state on its income
received from engaging in apportionable activities, but any other state
has jurisdiction to subject the taxpayer to a business activities tax
on such income under the substantial nexus standards in section 104(1)
of this act.
(ii) For purposes of this subsection (3)(b):
(A) "Business activities tax" has the same meaning as in section
105 of this act; and
(B) "State" has the same meaning as in section 106 of this act.
NEW SECTION. Sec. 201 A new section is added to chapter 82.32
RCW to read as follows:
(1) The department must disregard, for tax purposes, abusive tax
avoidance transactions. In disregarding an abusive tax avoidance
transaction, the department may:
(a) Recharacterize the nature of income, such as recharacterizing
dividends received from a related entity as income received for
providing services to that entity;
(b) Disregard the form of a corporate or other entity, even when
legal formalities have been observed, when the form of entity is used
as part of an abusive tax avoidance transaction;
(c) Treat the tax effects of the transaction, plan, or arrangement
according to its underlying substance rather than its form;
(d) Treat a series of formally separate steps as a single
transaction; and
(e) Take any other reasonable steps necessary to deny the tax
benefit that would otherwise arise as a result of the abusive tax
avoidance transaction.
(2) For purposes of this section, "abusive tax avoidance
transaction" means the avoidance of any tax collected by the department
under the provisions of this chapter by means of a transaction, plan,
or arrangement that lacks economic substance.
(3)(a) A transaction, plan, or arrangement will be considered as
having economic substance only if:
(i) The transaction, plan, or arrangement changes in a meaningful
way, apart from its tax effects, the taxpayer's economic position;
(ii) The taxpayer has a substantial nontax purpose for entering
into the transaction, plan, or arrangement; and
(iii) The transaction, plan, or arrangement is an objectively
reasonable means of accomplishing the substantial nontax purpose.
(b) A transaction, plan, or arrangement that carries some risk of
loss and profit potential may nevertheless be found to lack economic
substance if the economic risks and profit potential are so
insignificant when compared to the tax benefits that a reasonable
person would conclude that the taxpayer would not have engaged in the
transaction, plan, or arrangement absent its tax effects.
(c) An objective of achieving favorable financial accounting
benefits arising from tax savings is not deemed to be a substantial
nontax purpose for entering into a transaction, plan, or arrangement.
(d)(i) Except as provided in (d)(ii) of this subsection (3) the
burden is on the department to establish that a transaction, plan, or
arrangement lacks economic substance.
(ii) If the taxpayer fails to produce records requested by the
department that are relevant in determining whether a transaction,
plan, or arrangement has economic substance, the burden is on the
taxpayer to establish that the transaction, plan, or arrangement has
economic substance.
(4) The provisions of this section are cumulative and nonexclusive
and do not affect any other remedies provided to the department under
statutory or common law.
(5) The department must by rule, and as resources allow, provide
guidance on what it considers to be an abusive tax avoidance
transaction. The adoption of a rule as required under this subsection
is not a condition precedent for the department to use the authority
provided in this section to disregard abusive tax avoidance
transactions. The rule adopted under this section must include
examples of abusive tax avoidance transactions.
NEW SECTION. Sec. 202 A new section is added to chapter 82.32
RCW to read as follows:
(1)(a) The department may not use section 201 of this act to
disregard any transaction, plan, or arrangement initiated before July
1, 2010, if, in respect to such transaction, plan, or arrangement, the
taxpayer had reported its tax liability in conformance with either
specific written instructions provided by the department to the
taxpayer, a determination published under the authority of RCW
82.32.410, or other document published by the department.
(b) This section does not apply if the transaction, plan, or
arrangement engaged in by the taxpayer differs materially from the
transaction, plan, or arrangement that was addressed in the specific
written instructions, published determination, or other published
document.
(2) For purposes of this section, "specific written instructions"
means tax reporting instructions provided to a taxpayer and which
specifically identifies the taxpayer to whom the instructions apply.
Specific written instructions may be provided as part of an audit, tax
assessment, determination, closing agreement, or in response to a
binding ruling request.
Sec. 203 RCW 82.32.090 and 2006 c 256 s 6 are each amended to
read as follows:
(1) If payment of any tax due on a return to be filed by a taxpayer
is not received by the department of revenue by the due date, there
((shall be)) is assessed a penalty of five percent of the amount of the
tax; and if the tax is not received on or before the last day of the
month following the due date, there ((shall be)) is assessed a total
penalty of fifteen percent of the amount of the tax under this
subsection; and if the tax is not received on or before the last day of
the second month following the due date, there ((shall be)) is assessed
a total penalty of twenty-five percent of the amount of the tax under
this subsection. No penalty so added shall be less than five dollars.
(2) If the department of revenue determines that any tax has been
substantially underpaid, there ((shall be)) is assessed a penalty of
five percent of the amount of the tax determined by the department to
be due. If payment of any tax determined by the department to be due
is not received by the department by the due date specified in the
notice, or any extension thereof, there ((shall be)) is assessed a
total penalty of fifteen percent of the amount of the tax under this
subsection; and if payment of any tax determined by the department to
be due is not received on or before the thirtieth day following the due
date specified in the notice of tax due, or any extension thereof,
there ((shall be)) is assessed a total penalty of twenty-five percent
of the amount of the tax under this subsection. No penalty so added
((shall)) may be less than five dollars. As used in this section,
"substantially underpaid" means that the taxpayer has paid less than
eighty percent of the amount of tax determined by the department to be
due for all of the types of taxes included in, and for the entire
period of time covered by, the department's examination, and the amount
of underpayment is at least one thousand dollars.
(3) If a warrant ((be)) is issued by the department ((of revenue))
for the collection of taxes, increases, and penalties, there ((shall
be)) is added thereto a penalty of ten percent of the amount of the
tax, but not less than ten dollars.
(4) If the department finds that a person has engaged in any
business or performed any act upon which a tax is imposed under this
title and that person has not obtained from the department a
registration certificate as required by RCW 82.32.030, the department
((shall)) must impose a penalty of five percent of the amount of tax
due from that person for the period that the person was not registered
as required by RCW 82.32.030. The department ((shall)) may not impose
the penalty under this subsection (4) if a person who has engaged in
business taxable under this title without first having registered as
required by RCW 82.32.030, prior to any notification by the department
of the need to register, obtains a registration certificate from the
department.
(5) If the department finds that all or any part of a deficiency
resulted from the disregard of specific written instructions as to
reporting or tax liabilities, the department ((shall)) must add a
penalty of ten percent of the amount of the additional tax found due
because of the failure to follow the instructions. A taxpayer
disregards specific written instructions when the department ((of
revenue)) has informed the taxpayer in writing of the taxpayer's tax
obligations and the taxpayer fails to act in accordance with those
instructions unless the department has not issued final instructions
because the matter is under appeal pursuant to this chapter or
departmental regulations. The department ((shall)) may not assess the
penalty under this section upon any taxpayer who has made a good faith
effort to comply with the specific written instructions provided by the
department to that taxpayer. Specific written instructions may be
given as a part of a tax assessment, audit, determination, or closing
agreement, provided that such specific written instructions ((shall))
apply only to the taxpayer addressed or referenced on such documents.
Any specific written instructions by the department ((of revenue
shall)) must be clearly identified as such and ((shall)) must inform
the taxpayer that failure to follow the instructions may subject the
taxpayer to the penalties imposed by this subsection.
(6) If the department finds that all or any part of a deficiency
resulted from engaging in an abusive tax avoidance transaction, as
defined in section 201 of this act, the department must assess a
penalty of thirty-five percent of the additional tax found to be due as
a result of engaging in the abusive tax avoidance transaction. The
penalty provided in this subsection may be assessed together with any
other applicable penalties provided in this section on the same tax
found to be due, except for the evasion penalty provided in subsection
(7) of this section. The department may not assess the penalty under
this subsection if, before the department discovers the taxpayer's use
of an abusive tax avoidance transaction, the taxpayer discloses its
participation in the abusive tax avoidance transaction to the
department.
(7) If the department finds that all or any part of the deficiency
resulted from an intent to evade the tax payable ((hereunder)), a
further penalty of fifty percent of the additional tax found to be due
((shall)) must be added.
(((7))) (8) The penalties imposed under subsections (1) through (4)
of this section can each be imposed on the same tax found to be due.
This subsection does not prohibit or restrict the application of other
penalties authorized by law.
(((8))) (9) The department ((of revenue)) may not impose both the
evasion penalty and the penalty for disregarding specific written
instructions or the penalty provided in subsection (6) of this section
on the same tax found to be due.
(((9))) (10) For the purposes of this section, "return" means any
document a person is required by the state of Washington to file to
satisfy or establish a tax or fee obligation that is administered or
collected by the department ((of revenue)), and that has a statutorily
defined due date.
NEW SECTION. Sec. 204 (1) The legislature finds that this
state's tax policy with respect to the taxation of transactions between
affiliated entities and the income derived from such transactions
(intercompany transactions) has motivated some taxpayers to engage in
transactions designed solely or primarily to minimize the tax effects
of intercompany transactions. The legislature further finds that some
intercompany transactions result from taxpayers that are required to
establish affiliated entities to comply with regulatory mandates and
that transactions between such affiliates effectively increases the tax
burden in this state on the affiliated group of entities.
(2) Therefore, as existing resources allow, the department of
revenue is directed to conduct a review of the state's tax policy with
respect to the taxation of intercompany transactions. The review must
include the impacts of such transactions under the state's business and
occupation tax and state and local sales and use taxes. The department
may include other taxes in the review as it deems appropriate.
(3) In conducting the review, the department must examine how this
state's tax policy compares to the tax policy of other states with
respect to the taxation of intercompany transactions. The department's
review must include an analysis of potential alternatives to the
current policy of taxing intercompany transactions, including their
estimated revenue impacts if practicable.
(4) In conducting this review, the department may seek input from
members of the business community and others as it deems appropriate.
(5) The department must report its findings to the fiscal
committees of the house of representatives and senate by December 1,
2010. However, if the department has not completed its review by
December 1, 2010, the department must provide the fiscal committees of
the legislature with a brief status report by December 1, 2010, and the
final report by December 1, 2011.
Sec. 205 RCW 82.12.020 and 2009 c 535 s 305 are each amended to
read as follows:
(1) There is ((hereby)) levied and ((there shall be)) collected
from every person in this state a tax or excise for the privilege of
using within this state as a consumer any:
(a) Article of tangible personal property ((purchased at retail,
or)) acquired by ((lease, gift, repossession, or bailment, or extracted
or produced or manufactured by the person so using the same, or
otherwise furnished to a person engaged in any business taxable under
RCW 82.04.280 (2) or (7))) the user in any manner, including tangible
personal property acquired at a casual or isolated sale, and including
by-products used by the manufacturer thereof, except as otherwise
provided in this chapter, irrespective of whether the article or
similar articles are manufactured or are available for purchase within
this state;
(b) Prewritten computer software, regardless of the method of
delivery, but excluding prewritten computer software that is either
provided free of charge or is provided for temporary use in viewing
information, or both;
(c) Services defined as a retail sale in RCW 82.04.050 (2) (a) or
(g), (3)(a), or (6)(b), excluding services defined as a retail sale in
RCW 82.04.050(6)(b) that are provided free of charge;
(d) Extended warranty; or
(e)(i) Digital good, digital code, or digital automated service,
including the use of any services provided by a seller exclusively in
connection with digital goods, digital codes, or digital automated
services, whether or not a separate charge is made for such services.
(ii) With respect to the use of digital goods, digital automated
services, and digital codes acquired by purchase, the tax imposed in
this subsection (1)(e) applies in respect to:
(A) Sales in which the seller has granted the purchaser the right
of permanent use;
(B) Sales in which the seller has granted the purchaser a right of
use that is less than permanent;
(C) Sales in which the purchaser is not obligated to make continued
payment as a condition of the sale; and
(D) Sales in which the purchaser is obligated to make continued
payment as a condition of the sale.
(iii) With respect to digital goods, digital automated services,
and digital codes acquired other than by purchase, the tax imposed in
this subsection (1)(e) applies regardless of whether or not the
consumer has a right of permanent use or is obligated to make continued
payment as a condition of use.
(2) The provisions of this chapter do not apply in respect to the
use of any article of tangible personal property, extended warranty,
digital good, digital code, digital automated service, or service
taxable under RCW 82.04.050 (2) (a) or (g), (3)(a), or (6)(b), if the
sale to, or the use by, the present user or the present user's bailor
or donor has already been subjected to the tax under chapter 82.08 RCW
or this chapter and the tax has been paid by the present user or by the
present user's bailor or donor.
(3)(a) Except as provided in this section, payment of the tax
imposed by this chapter or chapter 82.08 RCW by one purchaser or user
of tangible personal property, extended warranty, digital good, digital
code, digital automated service, or other service does not have the
effect of exempting any other purchaser or user of the same property,
extended warranty, digital good, digital code, digital automated
service, or other service from the taxes imposed by such chapters.
(b) The tax imposed by this chapter does not apply:
(i) If the sale to, or the use by, the present user or his or her
bailor or donor has already been subjected to the tax under chapter
82.08 RCW or this chapter and the tax has been paid by the present user
or by his or her bailor or donor;
(ii) In respect to the use of any article of tangible personal
property acquired by bailment and the tax has once been paid based on
reasonable rental as determined by RCW 82.12.060 measured by the value
of the article at time of first use multiplied by the tax rate imposed
by chapter 82.08 RCW or this chapter as of the time of first use;
(iii) In respect to the use of any article of tangible personal
property acquired by bailment, if the property was acquired by a
previous bailee from the same bailor for use in the same general
activity and the original bailment was prior to June 9, 1961; or
(iv) To the use of digital goods or digital automated services,
which were obtained through the use of a digital code, if the sale of
the digital code to, or the use of the digital code by, the present
user or the present user's bailor or donor has already been subjected
to the tax under chapter 82.08 RCW or this chapter and the tax has been
paid by the present user or by the present user's bailor or donor.
(4)(a) Except as provided in (b) of this subsection (4), the tax is
levied and must be collected in an amount equal to the value of the
article used, value of the digital good or digital code used, value of
the extended warranty used, or value of the service used by the
taxpayer, multiplied by the applicable rates in effect for the retail
sales tax under RCW 82.08.020.
(b) In the case of a seller required to collect use tax from the
purchaser, the tax must be collected in an amount equal to the purchase
price multiplied by the applicable rate in effect for the retail sales
tax under RCW 82.08.020.
(5) For purposes of the tax imposed in this section, "person"
includes anyone within the definition of "buyer," "purchaser," and
"consumer" in RCW 82.08.010.
Sec. 206 RCW 82.45.010 and 2008 c 116 s 3 and 2008 c 6 s 701 are
each reenacted and amended to read as follows:
(1) As used in this chapter, the term "sale" ((shall have)) has its
ordinary meaning and ((shall)) includes any conveyance, grant,
assignment, quitclaim, or transfer of the ownership of or title to real
property, including standing timber, or any estate or interest therein
for a valuable consideration, and any contract for such conveyance,
grant, assignment, quitclaim, or transfer, and any lease with an option
to purchase real property, including standing timber, or any estate or
interest therein or other contract under which possession of the
property is given to the purchaser, or any other person at the
purchaser's direction, and title to the property is retained by the
vendor as security for the payment of the purchase price. The term
also includes the grant, assignment, quitclaim, sale, or transfer of
improvements constructed upon leased land.
(2)(a) The term "sale" also includes the transfer or acquisition
within any twelve-month period of a controlling interest in any entity
with an interest in real property located in this state for a valuable
consideration.
(b) For the sole purpose of determining whether, pursuant to the
exercise of an option, a controlling interest was transferred or
acquired within a twelve-month period, the date that the option
agreement was executed is the date on which the transfer or acquisition
of the controlling interest is deemed to occur. For all other purposes
under this chapter, the date upon which the option is exercised is the
date of the transfer or acquisition of the controlling interest.
(c) For purposes of this subsection, all acquisitions of persons
acting in concert ((shall)) must be aggregated for purposes of
determining whether a transfer or acquisition of a controlling interest
has taken place. The department ((of revenue shall)) must adopt
standards by rule to determine when persons are acting in concert. In
adopting a rule for this purpose, the department ((shall)) must
consider the following:
(((a))) (i) Persons ((shall)) must be treated as acting in concert
when they have a relationship with each other such that one person
influences or controls the actions of another through common ownership;
and
(((b))) (ii) When persons are not commonly owned or controlled,
they ((shall)) must be treated as acting in concert only when the unity
with which the purchasers have negotiated and will consummate the
transfer of ownership interests supports a finding that they are acting
as a single entity. If the acquisitions are completely independent,
with each purchaser buying without regard to the identity of the other
purchasers, then the acquisitions ((shall be)) are considered separate
acquisitions.
(3) The term "sale" ((shall)) does not include:
(a) A transfer by gift, devise, or inheritance.
(b) A transfer of any leasehold interest other than of the type
mentioned above.
(c) A cancellation or forfeiture of a vendee's interest in a
contract for the sale of real property, whether or not such contract
contains a forfeiture clause, or deed in lieu of foreclosure of a
mortgage.
(d) The partition of property by tenants in common by agreement or
as the result of a court decree.
(e) The assignment of property or interest in property from one
spouse or one domestic partner to the other spouse or other domestic
partner in accordance with the terms of a decree of dissolution of
marriage or state registered domestic partnership or in fulfillment of
a property settlement agreement.
(f) The assignment or other transfer of a vendor's interest in a
contract for the sale of real property, even though accompanied by a
conveyance of the vendor's interest in the real property involved.
(g) Transfers by appropriation or decree in condemnation
proceedings brought by the United States, the state or any political
subdivision thereof, or a municipal corporation.
(h) A mortgage or other transfer of an interest in real property
merely to secure a debt, or the assignment thereof.
(i) Any transfer or conveyance made pursuant to a deed of trust or
an order of sale by the court in any mortgage, deed of trust, or lien
foreclosure proceeding or upon execution of a judgment, or deed in lieu
of foreclosure to satisfy a mortgage or deed of trust.
(j) A conveyance to the federal housing administration or veterans
administration by an authorized mortgagee made pursuant to a contract
of insurance or guaranty with the federal housing administration or
veterans administration.
(k) A transfer in compliance with the terms of any lease or
contract upon which the tax as imposed by this chapter has been paid or
where the lease or contract was entered into prior to the date this tax
was first imposed.
(l) The sale of any grave or lot in an established cemetery.
(m) A sale by the United States, this state or any political
subdivision thereof, or a municipal corporation of this state.
(n) A sale to a regional transit authority or public corporation
under RCW 81.112.320 under a sale/leaseback agreement under RCW
81.112.300.
(o) A transfer of real property, however effected, if it consists
of a mere change in identity or form of ownership of an entity where
there is no change in the beneficial ownership. These include
transfers to a corporation or partnership which is wholly owned by the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner((: PROVIDED, That)). However, if thereafter such transferee
corporation or partnership voluntarily transfers such real property, or
such transferor, spouse or domestic partner, or children of the
transferor or the transferor's spouse or domestic partner voluntarily
transfer stock in the transferee corporation or interest in the
transferee partnership capital, as the case may be, to other than
(((1))) (i) the transferor and/or the transferor's spouse or domestic
partner or children of the transferor or the transferor's spouse or
domestic partner, (((2))) (ii) a trust having the transferor and/or the
transferor's spouse or domestic partner or children of the transferor
or the transferor's spouse or domestic partner as the only
beneficiaries at the time of the transfer to the trust, or (((3)))
(iii) a corporation or partnership wholly owned by the original
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner, within three years of the original transfer to which this
exemption applies, and the tax on the subsequent transfer has not been
paid within sixty days of becoming due, excise taxes ((shall)) become
due and payable on the original transfer as otherwise provided by law.
(p)(i) A transfer that for federal income tax purposes does not
involve the recognition of gain or loss for entity formation,
liquidation or dissolution, and reorganization, including but not
limited to nonrecognition of gain or loss because of application of
((section)) 26 U.S.C. Sec. 332, 337, 351, 368(a)(1), 721, or 731 of the
internal revenue code of 1986, as amended.
(ii) However, the transfer described in (p)(i) of this subsection
cannot be preceded or followed within a twelve-month period by another
transfer or series of transfers, that, when combined with the otherwise
exempt transfer or transfers described in (p)(i) of this subsection,
results in the transfer of a controlling interest in the entity for
valuable consideration, and in which one or more persons previously
holding a controlling interest in the entity receive cash or property
in exchange for any interest the person or persons acting in concert
hold in the entity. This subsection (3)(p)(ii) does not apply to that
part of the transfer involving property received that is the real
property interest that the person or persons originally contributed to
the entity or when one or more persons who did not contribute real
property or belong to the entity at a time when real property was
purchased receive cash or personal property in exchange for that person
or persons' interest in the entity. The real estate excise tax under
this subsection (3)(p)(ii) is imposed upon the person or persons who
previously held a controlling interest in the entity.
(q) A qualified sale of a manufactured/mobile home community, as
defined in RCW 59.20.030, that takes place on or after June 12, 2008,
but before December 31, 2018.
Sec. 207 RCW 82.45.033 and 1993 sp.s. c 25 s 505 are each amended
to read as follows:
(1) As used in this chapter, the term "controlling interest" has
the following meaning:
(((1))) (a) In the case of a corporation, either fifty percent or
more of the total combined voting power of all classes of stock of the
corporation entitled to vote, or fifty percent of the capital, profits,
or beneficial interest in the voting stock of the corporation; and
(((2))) (b) In the case of a partnership, association, trust, or
other entity, fifty percent or more of the capital, profits, or
beneficial interest in such partnership, association, trust, or other
entity.
(2) The department may, at the department's option, enforce the
obligation of the seller under this chapter as provided in this
subsection (2):
(a) In the transfer or acquisition of a controlling interest as
defined in subsection (1)(a) of this section, either against the
corporation in which a controlling interest is transferred or acquired,
against the person or persons who acquired the controlling interest in
the corporation or, when the corporation is not a publicly traded
company, against the person or persons who transferred the controlling
interest in the corporation; and
(b) In the transfer or acquisition of a controlling interest as
defined in subsection (1)(b) of this section, either against the entity
in which a controlling interest is transferred or acquired or against
the person or persons who transferred or acquired the controlling
interest in the entity.
Sec. 208 RCW 82.45.070 and 1969 ex.s. c 223 s 28A.45.070 are each
amended to read as follows:
The tax ((herein)) provided for in this chapter and any interest or
penalties thereon ((shall be)) is a specific lien upon each ((piece))
parcel of real property located in this state that is either sold or
that is owned by an entity in which a controlling interest has been
transferred or acquired. The lien attaches from the time of sale until
the tax ((shall have been)) is paid, which lien may be enforced in the
manner prescribed for the foreclosure of mortgages.
Sec. 209 RCW 82.45.080 and 1980 c 154 s 3 are each amended to
read as follows:
(1) The tax levied under this chapter ((shall be)) is the
obligation of the seller and the department ((of revenue)) may, at the
department's option, enforce the obligation through an action of debt
against the seller or the department may proceed in the manner
prescribed for the foreclosure of mortgages ((and resort to)). The
department's use of one course of enforcement ((shall)) is not ((be))
an election not to pursue the other.
(2) For purposes of this section and notwithstanding any other
provisions of law, the seller is the parent corporation of a wholly
owned subsidiary, when such subsidiary is the transferor to a third-party transferee and the subsidiary is dissolved before paying the tax
imposed under this chapter.
Sec. 210 RCW 82.45.100 and 2007 c 111 s 112 are each amended to
read as follows:
(1) Payment of the tax imposed under this chapter is due and
payable immediately at the time of sale, and if not paid within one
month thereafter ((shall)) will bear interest from the time of sale
until the date of payment.
(a) Interest imposed before January 1, 1999, ((shall be)) is
computed at the rate of one percent per month.
(b) Interest imposed after December 31, 1998, ((shall be)) is
computed on a monthly basis at the rate as computed under RCW
82.32.050(2). The rate so computed ((shall)) must be adjusted on the
first day of January of each year for use in computing interest for
that calendar year. The department ((of revenue shall)) must provide
written notification to the county treasurers of the variable rate on
or before December 1st of the year preceding the calendar year in which
the rate applies.
(2) In addition to the interest described in subsection (1) of this
section, if the payment of any tax is not received by the county
treasurer or the department of revenue, as the case may be, within one
month of the date due, there ((shall be)) is assessed a penalty of five
percent of the amount of the tax; if the tax is not received within two
months of the date due, there ((shall)) will be assessed a total
penalty of ten percent of the amount of the tax; and if the tax is not
received within three months of the date due, there ((shall)) will be
assessed a total penalty of twenty percent of the amount of the tax.
The payment of the penalty described in this subsection ((shall be)) is
collectible from the seller only, and RCW 82.45.070 does not apply to
the penalties described in this subsection.
(3) If the tax imposed under this chapter is not received by the
due date, the transferee ((shall be)) is personally liable for the tax,
along with any interest as provided in subsection (1) of this section,
unless((:)) an instrument evidencing the sale is recorded in the official
real property records of the county in which the property conveyed is
located((
(a); or)).
(b) Either the transferor or transferee notifies the department of
revenue in writing of the occurrence of the sale within thirty days
following the date of the sale
(4) If upon examination of any affidavits or from other information
obtained by the department or its agents it appears that all or a
portion of the tax is unpaid, the department ((shall)) must assess
against the taxpayer the additional amount found to be due plus
interest and penalties as provided in subsections (1) and (2) of this
section. The department ((shall)) must notify the taxpayer by mail, or
electronically as provided in RCW 82.32.135, of the additional amount
and the same ((shall)) becomes due and ((shall)) must be paid within
thirty days from the date of the notice, or within such further time as
the department may provide.
(5) No assessment or refund may be made by the department more than
four years after the date of sale except upon a showing of:
(a) Fraud or misrepresentation of a material fact by the taxpayer;
(b) A failure by the taxpayer to record documentation of a sale or
otherwise report the sale to the county treasurer; or
(c) A failure of the transferor or transferee to report the sale
under RCW 82.45.090(2).
(6) Penalties collected on taxes due under this chapter under
subsection (2) of this section and RCW 82.32.090 (2) through (7)
((shall)) must be deposited in the housing trust fund as described in
chapter 43.185 RCW.
Sec. 211 RCW 82.45.220 and 2005 c 326 s 3 are each amended to
read as follows:
(1) An organization that fails to report a transfer of the
controlling interest in the organization under RCW 43.07.390 to the
secretary of state and is later determined to be subject to real estate
excise taxes due to the transfer, ((shall be)) is subject to the
provisions of RCW 82.45.100 as well as the evasion penalty in RCW
82.32.090(((6))) (7).
(2) Subsection (1) of this section also applies to the failure to
report to the secretary of state the granting of an option to acquire
an interest in the organization if the exercise of the option would
result in a sale as defined in RCW 82.45.010(2).
Sec. 212 RCW 43.07.390 and 2005 c 326 s 2 are each amended to
read as follows:
(1)(a) The secretary of state ((shall)) must adopt rules requiring
any entity that is required to file an annual report with the secretary
of state, including entities under Titles 23, 23B, 24, and 25 RCW, to
disclose: (i) Any transfer ((in)) of the controlling interest ((of))
in the entity ((and any interest in real property)); and (ii) the
granting of any option to acquire an interest in the entity if the
exercise of the option would result in a sale as defined in RCW
82.45.010(2).
(b) The disclosure requirement in this subsection only applies to
entities owning an interest in real property located in this state.
(2) This information ((shall)) must be made available to the
department of revenue upon request for the purposes of tracking the
transfer of the controlling interest in entities owning real property
and to determine when the real estate excise tax is applicable in such
cases.
(3) For the purposes of this section, "controlling interest" has
the same meaning as provided in RCW 82.45.033.
Sec. 301 RCW 82.04.4292 and 1980 c 37 s 12 are each amended to
read as follows:
(1) In computing tax there may be deducted from the measure of tax
by those engaged in banking, loan, security or other financial
businesses, amounts derived from interest received on investments or
loans primarily secured by first mortgages or trust deeds on
nontransient residential properties.
(2) The total amount a person may deduct under this section for any
calendar year may not exceed thirty-five million dollars.
NEW SECTION. Sec. 401 RCW 82.08.0273 (Exemptions -- Sales to
nonresidents of tangible personal property, digital goods, and digital
codes for use outside the state -- Proof of nonresident status--Penalties) and 2009 c 535 s 512, 2007 c 135 s 2, 2003 c 53 s 399, 1993
c 444 s 1, 1988 c 96 s 1, 1982 1st ex.s. c 5 s 1, & 1980 c 37 s 39 are
each repealed.
NEW SECTION. Sec. 501 (1) A business and occupation tax
exemption is provided in RCW 82.04.423 for certain out-of-state sellers
that sell consumer products exclusively to or through a direct seller's
representative. The intent of the legislature in enacting this
exemption was to provide a narrow exemption for out-of-state businesses
engaged in direct sales of consumer products, typically accomplished
through in-home parties or door-to-door selling.
(2) In Dot Foods, Inc. v. Dep't of Revenue, Docket No. 81022-2
(September 10, 2009), the Washington supreme court held that the
exemption in RCW 82.04.423 applied to a taxpayer: (a) That sold
nonconsumer products through its representative in addition to consumer
products; and (b) whose consumer products were ultimately sold at
retail in permanent retail establishments.
(3) The legislature finds that most out-of-state businesses selling
consumer products in this state will either be eligible for the
exemption under RCW 82.04.423 or could easily restructure their
business operations to qualify for the exemption. As a result, the
legislature expects that the broadened interpretation of the direct
sellers' exemption will lead to large and devastating revenue losses.
This comes at a time when the state's existing budget is facing a two
billion six hundred million dollar shortfall, which could grow, while
at the same time the demand for state and state-funded services is also
growing. Moreover, the legislature further finds that RCW 82.04.423
provides preferential tax treatment for out-of-state businesses over
their in-state competitors and now creates a strong incentive for in-state businesses to move their operations outside Washington.
(4) Therefore, the legislature finds that it is necessary to
reaffirm the legislature's intent in establishing the direct sellers'
exemption and prevent the loss of revenues resulting from the expanded
interpretation of the exemption by amending RCW 82.04.423 retroactively
to conform the exemption to the original intent of the legislature and
by prospectively ending the direct sellers' exemption effective July 1,
2010. The legislature recognizes that the department of revenue has
asked the Washington supreme court to reconsider its decision in Dot
Foods. As a result, if the Dot Foods decision is not final on the
effective date of section 502 of this act, it is the legislature's
intent that the amendments in section 502 of this act be considered
clarifying in nature.
Sec. 502 RCW 82.04.423 and 1983 1st ex.s. c 66 s 5 are each
amended to read as follows:
(1) Prior to April 1, 2010, this chapter ((shall)) does not apply
to any person in respect to gross income derived from the business of
making sales at wholesale or retail if such person:
(a) Does not own or lease real property within this state; and
(b) Does not regularly maintain a stock of tangible personal
property in this state for sale in the ordinary course of business; and
(c) Is not a corporation incorporated under the laws of this state;
and
(d) Makes sales in this state exclusively to or through a direct
seller's representative.
(2) For purposes of this section, the term "direct seller's
representative" means a person who buys only consumer products on a
buy-sell basis or a deposit-commission basis for resale, by the buyer
or any other person, in the home or otherwise than in a permanent
retail establishment, or who sells at retail, or solicits the sale at
retail of, only consumer products in the home or otherwise than in a
permanent retail establishment; and
(a) Substantially all of the remuneration paid to such person,
whether or not paid in cash, for the performance of services described
in this subsection is directly related to sales or other output,
including the performance of services, rather than the number of hours
worked; and
(b) The services performed by the person are performed pursuant to
a written contract between such person and the person for whom the
services are performed and such contract provides that the person will
not be treated as an employee with respect to such purposes for federal
tax purposes.
(3) Nothing in this section ((shall)) may be construed to imply
that a person exempt from tax under this section was engaged in a
business activity taxable under this chapter prior to ((the enactment
of this section)) August 23, 1983.
NEW SECTION. Sec. 601 (1)(a) In 1967, the legislature amended
RCW 82.04.260 in chapter 149, Laws of 1967 ex. sess. to authorize a
preferential business and occupation tax rate for slaughtering,
breaking, and/or processing perishable meat products and/or selling the
same at wholesale. The legislature finds that RCW 82.04.260(4) was
interpreted by the state supreme court on January 13, 2005, in Agrilink
Foods, Inc. v. Department of Revenue, 153 Wn.2d 392 (2005). The
supreme court held that the preferential business and occupation tax
rate on the slaughtering, breaking, and/or processing of perishable
meat products applied to the processing of perishable meat products
into nonperishable finished products, such as canned food.
(b) The legislature intends to narrow the exemption provided for
slaughtering, breaking, and/or processing perishable meat products
and/or selling such products at wholesale by requiring that the end
product be a perishable meat product; a nonperishable meat product that
is comprised primarily of animal carcass by weight or volume, other
than a canned meat product; or a meat by-product.
(2)(a) A business and occupation tax exemption is provided for (i)
manufacturing by canning, preserving, freezing, processing, or
dehydrating fresh fruits or vegetables, and (ii) selling such products
at wholesale by the manufacturer to purchasers who transport the goods
out of state in the ordinary course of business. This exemption
expires July 1, 2012, and is replaced by a preferential business and
occupation tax rate.
(b) The legislature finds that the rationale of the Agrilink
decision, if applied to these tax preferences, could result in
preferential tax treatment for any processed food product that
contained any fresh fruit or vegetable as an ingredient, however small
the amount.
(c) The legislature intends to narrow the tax preference provided
to fruit and vegetable manufacturers by requiring that the end product
be comprised either (i) exclusively of fruits and/or vegetables, or
(ii) of any combination of fruits, vegetables, and certain other
substances that, cumulatively, may not exceed the amount of fruits and
vegetables contained in the product measured by weight or volume.
NEW SECTION. Sec. 602 A new section is added to chapter 82.04
RCW to read as follows:
(1) Upon every person engaging within this state in the business of
manufacturing:
(a) Perishable meat products, by slaughtering, breaking, or
processing, if the finished product is a perishable meat product; as to
such persons the tax imposed is equal to the value of the perishable
meat products manufactured, or, in the case of a processor for hire,
the gross income of the business, multiplied by the rate of 0.138
percent;
(b) Meat products, by dehydration, curing, smoking, or any
combination of these activities, if the finished meat products are not
canned; as to such persons the tax imposed is equal to the value of the
meat products manufactured, or, in the case of a processor for hire,
the gross income of the business, multiplied by the rate of 0.138
percent;
(c) Hides, tallow, meat meal, and other similar meat by-products,
if such products are derived in part from animals and manufactured in
a rendering plant licensed under chapter 16.68 RCW; as to such persons
the tax imposed is equal to the value of the products manufactured, or,
in the case of a processor for hire, the gross income of the business,
multiplied by the rate of 0.138 percent.
(2) Upon every person engaging within this state in the business of
selling at wholesale:
(a) Perishable meat products; as to such persons the tax imposed is
equal to the gross proceeds derived from such sales multiplied by the
rate of 0.138 percent;
(b) Meat products that have been manufactured by the seller by
dehydration, curing, smoking, or any combination of such activities, if
the finished meat products are not canned; as to such persons the tax
imposed is equal to the gross proceeds derived from such sales
multiplied by the rate of 0.138 percent;
(c) Hides, tallow, meat meal, and other similar meat by-products,
if such products are derived in part from animals and manufactured by
the seller in a rendering plant; as to such persons the tax imposed is
equal to the gross proceeds derived from such sales multiplied by the
rate of 0.138 percent.
(3) The definitions in this subsection apply throughout this
section unless the context clearly requires otherwise.
(a) "Animal" means all members of the animal kingdom except humans,
fish, and insects.
(b) "Carcass" means all or any parts, including viscera, of a
slaughtered animal.
(c) "Fish" means any water-breathing animal, including shellfish.
(d) "Hide" means any unprocessed animal pelt or skin.
(e)(i) "Meat products" means:
(A) Products comprised exclusively of animal carcass; and
(B) Except as provided in (e)(ii) of this subsection (3), products,
such as jerky, sausage, and other cured meat products, that are
comprised primarily of animal carcass by weight or volume and may also
contain water; nitrates; nitrites; acids; binders and extenders;
natural or synthetic casings; colorings; flavorings such as soy sauce,
liquid smoke, seasonings, citric acid, sugar, molasses, corn syrup, and
vinegar; and similar substances.
(ii) "Meat products" does not include products containing any
cereal grains or cereal-grain products, dairy products, legumes and
legume products, fruit or vegetable products as defined in RCW
82.04.260, and similar ingredients, unless the ingredient is used as a
flavoring. For purposes of this subsection, "flavoring" means a
substance that contains the flavoring constituents derived from a
spice, fruit or fruit juice, vegetable or vegetable juice, edible
yeast, herb, bark, bud, root, leaf, or any other edible substance of
plant origin, whose primary function in food is flavoring or seasoning
rather than nutritional, and which may legally appear as "natural
flavor," "flavor," or "flavorings" in the ingredient statement on the
label of the meat product.
(iii) "Meat products" includes only products that are intended for
human consumption as food or animal consumption as feed.
(f) "Perishable" means having a high risk of spoilage within thirty
days of manufacture without any refrigeration or freezing.
(g) "Rendering plant" means any place of business or location where
dead animals or any part or portion thereof, or packing house refuse,
are processed for the purpose of obtaining the hide, skin, grease
residue, or any other by-product whatsoever.
Sec. 603 RCW 82.04.4266 and 2006 c 354 s 3 are each amended to
read as follows:
(1) This chapter ((shall)) does not apply to the value of products
or the gross proceeds of sales derived from:
(a) Manufacturing fruit((s)) or vegetable((s)) products by canning,
preserving, freezing, processing, or dehydrating fresh fruits or
vegetables; or
(b) Selling at wholesale fruit((s)) or vegetable((s)) products
manufactured by the seller by canning, preserving, freezing,
processing, or dehydrating fresh fruits or vegetables and sold to
purchasers who transport in the ordinary course of business the goods
out of this state. A person taking an exemption under this subsection
(1)(b) must keep and preserve records for the period required by RCW
82.32.070 establishing that the goods were transported by the purchaser
in the ordinary course of business out of this state.
(2)(a) "Fruit or vegetable products" means:
(i) Products comprised exclusively of fruits, vegetables, or both;
and
(ii) Products comprised of fruits, vegetables, or both, and which
may also contain water, sugar, salt, seasonings, preservatives,
binders, stabilizers, flavorings, yeast, and similar substances.
However, the amount of all ingredients contained in the product, other
than fruits, vegetables, and water, may not exceed the amount of fruits
and vegetables contained in the product measured by weight or volume.
(b) "Fruit or vegetable products" includes only products that are
intended for human consumption as food or animal consumption as feed.
(3) This section expires July 1, 2012.
Sec. 604 RCW 82.04.260 and 2009 c 479 s 64, 2009 c 461 s 1, and
2009 c 162 s 34 are each reenacted and amended to read as follows:
(1) Upon every person engaging within this state in the business of
manufacturing:
(a) Wheat into flour, barley into pearl barley, soybeans into
soybean oil, canola into canola oil, canola meal, or canola by-products, or sunflower seeds into sunflower oil; as to such persons the
amount of tax with respect to such business ((shall be)) is equal to
the value of the flour, pearl barley, oil, canola meal, or canola by-product manufactured, multiplied by the rate of 0.138 percent;
(b) Beginning July 1, 2012, seafood products that remain in a raw,
raw frozen, or raw salted state at the completion of the manufacturing
by that person; or selling manufactured seafood products that remain in
a raw, raw frozen, or raw salted state at the completion of the
manufacturing, to purchasers who transport in the ordinary course of
business the goods out of this state; as to such persons the amount of
tax with respect to such business ((shall be)) is equal to the value of
the products manufactured or the gross proceeds derived from such
sales, multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing
that the goods were transported by the purchaser in the ordinary course
of business out of this state;
(c) Beginning July 1, 2012, dairy products that as of September 20,
2001, are identified in 21 C.F.R., chapter 1, parts 131, 133, and 135,
including by-products from the manufacturing of the dairy products such
as whey and casein; or selling the same to purchasers who transport in
the ordinary course of business the goods out of state; as to such
persons the tax imposed ((shall be)) is equal to the value of the
products manufactured or the gross proceeds derived from such sales
multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing
that the goods were transported by the purchaser in the ordinary course
of business out of this state;
(d)(i) Beginning July 1, 2012, fruit((s)) or vegetable((s))
products by canning, preserving, freezing, processing, or dehydrating
fresh fruits or vegetables, or selling at wholesale fruit((s)) or
vegetable((s)) products manufactured by the seller by canning,
preserving, freezing, processing, or dehydrating fresh fruits or
vegetables and sold to purchasers who transport in the ordinary course
of business the goods out of this state; as to such persons the amount
of tax with respect to such business ((shall be)) is equal to the value
of the products manufactured or the gross proceeds derived from such
sales multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing
that the goods were transported by the purchaser in the ordinary course
of business out of this state;
(ii) For purposes of this subsection, "fruit or vegetable products"
means:
(A) Products comprised exclusively of fruits, vegetables, or both;
or
(B) Products comprised of fruits, vegetables, or both, and which
may also contain water, sugar, salt, seasonings, preservatives,
binders, stabilizers, flavorings, yeast, and similar substances.
However, the amount of all ingredients contained in the product, other
than fruits, vegetables, and water, may not exceed the amount of fruits
and vegetables contained in the product measured by weight or volume;
(iii) "Fruit and vegetable products" includes only products that
are intended for human consumption as food or animal consumption as
feed;
(e) Until July 1, 2009, alcohol fuel, biodiesel fuel, or biodiesel
feedstock, as those terms are defined in RCW 82.29A.135; as to such
persons the amount of tax with respect to the business ((shall be)) is
equal to the value of alcohol fuel, biodiesel fuel, or biodiesel
feedstock manufactured, multiplied by the rate of 0.138 percent; and
(f) Alcohol fuel or wood biomass fuel, as those terms are defined
in RCW 82.29A.135; as to such persons the amount of tax with respect to
the business ((shall be)) is equal to the value of alcohol fuel or wood
biomass fuel manufactured, multiplied by the rate of 0.138 percent.
(2) Upon every person engaging within this state in the business of
splitting or processing dried peas; as to such persons the amount of
tax with respect to such business ((shall be)) is equal to the value of
the peas split or processed, multiplied by the rate of 0.138 percent.
(3) Upon every nonprofit corporation and nonprofit association
engaging within this state in research and development, as to such
corporations and associations, the amount of tax with respect to such
activities ((shall be)) is equal to the gross income derived from such
activities multiplied by the rate of 0.484 percent.
(4) ((Upon every person engaging within this state in the business
of slaughtering, breaking and/or processing perishable meat products
and/or selling the same at wholesale only and not at retail; as to such
persons the tax imposed shall be equal to the gross proceeds derived
from such sales multiplied by the rate of 0.138 percent.)) Upon every person engaging within this state in the business
of acting as a travel agent or tour operator; as to such persons the
amount of the tax with respect to such activities ((
(5)shall be)) is equal
to the gross income derived from such activities multiplied by the rate
of 0.275 percent.
(((6))) (5) Upon every person engaging within this state in
business as an international steamship agent, international customs
house broker, international freight forwarder, vessel and/or cargo
charter broker in foreign commerce, and/or international air cargo
agent; as to such persons the amount of the tax with respect to only
international activities ((shall be)) is equal to the gross income
derived from such activities multiplied by the rate of 0.275 percent.
(((7))) (6) Upon every person engaging within this state in the
business of stevedoring and associated activities pertinent to the
movement of goods and commodities in waterborne interstate or foreign
commerce; as to such persons the amount of tax with respect to such
business ((shall be)) is equal to the gross proceeds derived from such
activities multiplied by the rate of 0.275 percent. Persons subject to
taxation under this subsection ((shall be)) are exempt from payment of
taxes imposed by chapter 82.16 RCW for that portion of their business
subject to taxation under this subsection. Stevedoring and associated
activities pertinent to the conduct of goods and commodities in
waterborne interstate or foreign commerce are defined as all activities
of a labor, service or transportation nature whereby cargo may be
loaded or unloaded to or from vessels or barges, passing over, onto or
under a wharf, pier, or similar structure; cargo may be moved to a
warehouse or similar holding or storage yard or area to await further
movement in import or export or may move to a consolidation freight
station and be stuffed, unstuffed, containerized, separated or
otherwise segregated or aggregated for delivery or loaded on any mode
of transportation for delivery to its consignee. Specific activities
included in this definition are: Wharfage, handling, loading,
unloading, moving of cargo to a convenient place of delivery to the
consignee or a convenient place for further movement to export mode;
documentation services in connection with the receipt, delivery,
checking, care, custody and control of cargo required in the transfer
of cargo; imported automobile handling prior to delivery to consignee;
terminal stevedoring and incidental vessel services, including but not
limited to plugging and unplugging refrigerator service to containers,
trailers, and other refrigerated cargo receptacles, and securing ship
hatch covers.
(((8))) (7)(a) Upon every person engaging within this state in the
business of disposing of low-level waste, as defined in RCW 43.145.010;
as to such persons the amount of the tax with respect to such business
((shall be)) is equal to the gross income of the business, excluding
any fees imposed under chapter 43.200 RCW, multiplied by the rate of
3.3 percent.
(b) If the gross income of the taxpayer is attributable to
activities both within and without this state, the gross income
attributable to this state ((shall)) must be determined in accordance
with the methods of apportionment required under RCW 82.04.460.
(((9))) (8) Upon every person engaging within this state as an
insurance producer or title insurance agent licensed under chapter
48.17 RCW or a surplus line broker licensed under chapter 48.15 RCW; as
to such persons, the amount of the tax with respect to such licensed
activities ((shall be)) is equal to the gross income of such business
multiplied by the rate of 0.484 percent.
(((10))) (9) Upon every person engaging within this state in
business as a hospital, as defined in chapter 70.41 RCW, that is
operated as a nonprofit corporation or by the state or any of its
political subdivisions, as to such persons, the amount of tax with
respect to such activities ((shall be)) is equal to the gross income of
the business multiplied by the rate of 0.75 percent through June 30,
1995, and 1.5 percent thereafter.
(((11))) (10)(a) Beginning October 1, 2005, upon every person
engaging within this state in the business of manufacturing commercial
airplanes, or components of such airplanes, or making sales, at retail
or wholesale, of commercial airplanes or components of such airplanes,
manufactured by the seller, as to such persons the amount of tax with
respect to such business ((shall)), in the case of manufacturers,
((be)) is equal to the value of the product manufactured and the gross
proceeds of sales of the product manufactured, or in the case of
processors for hire, ((be)) is equal to the gross income of the
business, multiplied by the rate of:
(i) 0.4235 percent from October 1, 2005, through ((the later of))
June 30, 2007; and
(ii) 0.2904 percent beginning July 1, 2007.
(b) Beginning July 1, 2008, upon every person who is not eligible
to report under the provisions of (a) of this subsection (((11))) (10)
and is engaging within this state in the business of manufacturing
tooling specifically designed for use in manufacturing commercial
airplanes or components of such airplanes, or making sales, at retail
or wholesale, of such tooling manufactured by the seller, as to such
persons the amount of tax with respect to such business ((shall)), in
the case of manufacturers, ((be)) is equal to the value of the product
manufactured and the gross proceeds of sales of the product
manufactured, or in the case of processors for hire, ((be)) is equal to
the gross income of the business, multiplied by the rate of 0.2904
percent.
(c) For the purposes of this subsection (((11))) (10), "commercial
airplane" and "component" have the same meanings as provided in RCW
82.32.550.
(d) In addition to all other requirements under this title, a
person eligible for the tax rate under this subsection (((11))) (10)
must report as required under RCW 82.32.545.
(e) This subsection (((11))) (10) does not apply on and after July
1, 2024.
(((12))) (11)(a) Until July 1, 2024, upon every person engaging
within this state in the business of extracting timber or extracting
for hire timber; as to such persons the amount of tax with respect to
the business ((shall)), in the case of extractors, ((be)) is equal to
the value of products, including by-products, extracted, or in the case
of extractors for hire, ((be)) is equal to the gross income of the
business, multiplied by the rate of 0.4235 percent from July 1, 2006,
through June 30, 2007, and 0.2904 percent from July 1, 2007, through
June 30, 2024.
(b) Until July 1, 2024, upon every person engaging within this
state in the business of manufacturing or processing for hire: (i)
Timber into timber products or wood products; or (ii) timber products
into other timber products or wood products; as to such persons the
amount of the tax with respect to the business ((shall)), in the case
of manufacturers, ((be)) is equal to the value of products, including
by-products, manufactured, or in the case of processors for hire,
((be)) is equal to the gross income of the business, multiplied by the
rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and
0.2904 percent from July 1, 2007, through June 30, 2024.
(c) Until July 1, 2024, upon every person engaging within this
state in the business of selling at wholesale: (i) Timber extracted by
that person; (ii) timber products manufactured by that person from
timber or other timber products; or (iii) wood products manufactured by
that person from timber or timber products; as to such persons the
amount of the tax with respect to the business ((shall be)) is equal to
the gross proceeds of sales of the timber, timber products, or wood
products multiplied by the rate of 0.4235 percent from July 1, 2006,
through June 30, 2007, and 0.2904 percent from July 1, 2007, through
June 30, 2024.
(d) Until July 1, 2024, upon every person engaging within this
state in the business of selling standing timber; as to such persons
the amount of the tax with respect to the business ((shall be)) is
equal to the gross income of the business multiplied by the rate of
0.2904 percent. For purposes of this subsection (((12))) (11)(d),
"selling standing timber" means the sale of timber apart from the land,
where the buyer is required to sever the timber within thirty months
from the date of the original contract, regardless of the method of
payment for the timber and whether title to the timber transfers
before, upon, or after severance.
(e) For purposes of this subsection, the following definitions
apply:
(i) "Biocomposite surface products" means surface material products
containing, by weight or volume, more than fifty percent recycled paper
and that also use nonpetroleum-based phenolic resin as a bonding agent.
(ii) "Paper and paper products" means products made of interwoven
cellulosic fibers held together largely by hydrogen bonding. "Paper
and paper products" includes newsprint; office, printing, fine, and
pressure-sensitive papers; paper napkins, towels, and toilet tissue;
kraft bag, construction, and other kraft industrial papers; paperboard,
liquid packaging containers, containerboard, corrugated, and solid-fiber containers including linerboard and corrugated medium; and
related types of cellulosic products containing primarily, by weight or
volume, cellulosic materials. "Paper and paper products" does not
include books, newspapers, magazines, periodicals, and other printed
publications, advertising materials, calendars, and similar types of
printed materials.
(iii) "Recycled paper" means paper and paper products having fifty
percent or more of their fiber content that comes from postconsumer
waste. For purposes of this subsection (((12))) (11)(e)(iii),
"postconsumer waste" means a finished material that would normally be
disposed of as solid waste, having completed its life cycle as a
consumer item.
(iv) "Timber" means forest trees, standing or down, on privately or
publicly owned land. "Timber" does not include Christmas trees that
are cultivated by agricultural methods or short-rotation hardwoods as
defined in RCW 84.33.035.
(v) "Timber products" means:
(A) Logs, wood chips, sawdust, wood waste, and similar products
obtained wholly from the processing of timber, short-rotation hardwoods
as defined in RCW 84.33.035, or both;
(B) Pulp, including market pulp and pulp derived from recovered
paper or paper products; and
(C) Recycled paper, but only when used in the manufacture of
biocomposite surface products.
(vi) "Wood products" means paper and paper products; dimensional
lumber; engineered wood products such as particleboard, oriented strand
board, medium density fiberboard, and plywood; wood doors; wood
windows; and biocomposite surface products.
(((13))) (12) Upon every person engaging within this state in
inspecting, testing, labeling, and storing canned salmon owned by
another person, as to such persons, the amount of tax with respect to
such activities ((shall be)) is equal to the gross income derived from
such activities multiplied by the rate of 0.484 percent.
(((14))) (13) Upon every person engaging within this state in the
business of printing a newspaper, publishing a newspaper, or both, the
amount of tax on such business is equal to the gross income of the
business multiplied by the rate of 0.2904 percent.
Sec. 605 RCW 82.04.250 and 2008 c 81 s 5 are each amended to read
as follows:
(1) Upon every person engaging within this state in the business of
making sales at retail, except persons taxable as retailers under other
provisions of this chapter, as to such persons, the amount of tax with
respect to such business ((shall be)) is equal to the gross proceeds of
sales of the business, multiplied by the rate of 0.471 percent.
(2) Upon every person engaging within this state in the business of
making sales at retail that are exempt from the tax imposed under
chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or
82.08.0263, except persons taxable under RCW 82.04.260(((11))) (10) or
subsection (3) of this section, as to such persons, the amount of tax
with respect to such business ((shall be)) is equal to the gross
proceeds of sales of the business, multiplied by the rate of 0.484
percent.
(3) Upon every person classified by the federal aviation
administration as a federal aviation regulation part 145 certificated
repair station and that is engaging within this state in the business
of making sales at retail that are exempt from the tax imposed under
chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or
82.08.0263, as to such persons, the amount of tax with respect to such
business ((shall be)) is equal to the gross proceeds of sales of the
business, multiplied by the rate of .2904 percent.
Sec. 606 RCW 82.04.250 and 2007 c 54 s 5 are each amended to read
as follows:
(1) Upon every person engaging within this state in the business of
making sales at retail, except persons taxable as retailers under other
provisions of this chapter, as to such persons, the amount of tax with
respect to such business ((shall be)) is equal to the gross proceeds of
sales of the business, multiplied by the rate of 0.471 percent.
(2) Upon every person engaging within this state in the business of
making sales at retail that are exempt from the tax imposed under
chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or
82.08.0263, except persons taxable under RCW 82.04.260(((11))) (10), as
to such persons, the amount of tax with respect to such business
((shall be)) is equal to the gross proceeds of sales of the business,
multiplied by the rate of 0.484 percent.
Sec. 607 RCW 82.04.261 and 2007 c 54 s 7 and 2007 c 48 s 4 are
each reenacted and amended to read as follows:
(1) In addition to the taxes imposed under RCW 82.04.260(((12)))
(11), a surcharge is imposed on those persons who are subject to any of
the taxes imposed under RCW 82.04.260(((12))) (11). Except as
otherwise provided in this section, the surcharge is equal to 0.052
percent. The surcharge is added to the rates provided in RCW
82.04.260(((12))) (11) (a), (b), (c), and (d). The surcharge and this
section expire July 1, 2024.
(2) All receipts from the surcharge imposed under this section
((shall)) must be deposited into the forest and fish support account
created in RCW 76.09.405.
(3)(a) The surcharge imposed under this section ((shall be)) is
suspended if:
(i) Receipts from the surcharge total at least eight million
dollars during any fiscal biennium; or
(ii) The office of financial management certifies to the department
that the federal government has appropriated at least two million
dollars for participation in forest and fish report-related activities
by federally recognized Indian tribes located within the geographical
boundaries of the state of Washington for any federal fiscal year.
(b)(i) The suspension of the surcharge under (a)(i) of this
subsection (3) ((shall)) takes effect on the first day of the calendar
month that is at least thirty days after the end of the month during
which the department determines that receipts from the surcharge total
at least eight million dollars during the fiscal biennium. The
surcharge ((shall be)) is imposed again at the beginning of the
following fiscal biennium.
(ii) The suspension of the surcharge under (a)(ii) of this
subsection (3) ((shall)) takes effect on the later of the first day of
October of any federal fiscal year for which the federal government
appropriates at least two million dollars for participation in forest
and fish report-related activities by federally recognized Indian
tribes located within the geographical boundaries of the state of
Washington, or the first day of a calendar month that is at least
thirty days following the date that the office of financial management
makes a certification to the department under subsection (5) of this
section. The surcharge ((shall be)) is imposed again on the first day
of the following July.
(4)(a) If, by October 1st of any federal fiscal year, the office of
financial management certifies to the department that the federal
government has appropriated funds for participation in forest and fish
report-related activities by federally recognized Indian tribes located
within the geographical boundaries of the state of Washington but the
amount of the appropriation is less than two million dollars, the
department ((shall)) must adjust the surcharge in accordance with this
subsection.
(b) The department ((shall)) must adjust the surcharge by an amount
that the department estimates will cause the amount of funds deposited
into the forest and fish support account for the state fiscal year that
begins July 1st and that includes the beginning of the federal fiscal
year for which the federal appropriation is made, to be reduced by
twice the amount of the federal appropriation for participation in
forest and fish report-related activities by federally recognized
Indian tribes located within the geographical boundaries of the state
of Washington.
(c) Any adjustment in the surcharge ((shall)) takes effect at the
beginning of a calendar month that is at least thirty days after the
date that the office of financial management makes the certification
under subsection (5) of this section.
(d) The surcharge ((shall be)) is imposed again at the rate
provided in subsection (1) of this section on the first day of the
following state fiscal year unless the surcharge is suspended under
subsection (3) of this section or adjusted for that fiscal year under
this subsection.
(e) Adjustments of the amount of the surcharge by the department
are final and ((shall)) may not be used to challenge the validity of
the surcharge imposed under this section.
(f) The department ((shall)) must provide timely notice to affected
taxpayers of the suspension of the surcharge or an adjustment of the
surcharge.
(5) The office of financial management ((shall)) must make the
certification to the department as to the status of federal
appropriations for tribal participation in forest and fish report-related activities.
Sec. 608 RCW 82.04.298 and 2008 c 49 s 1 are each amended to read
as follows:
(1) The amount of tax with respect to a qualified grocery
distribution cooperative's sales of groceries or related goods for
resale, excluding items subject to tax under ((RCW 82.04.260(4)))
section 602 of this act, to customer-owners of the grocery distribution
cooperative is equal to the gross proceeds of sales of the grocery
distribution cooperative multiplied by the rate of one and one-half
percent.
(2) A qualified grocery distribution cooperative is allowed a
deduction from the gross proceeds of sales of groceries or related
goods for resale, excluding items subject to tax under ((RCW
82.04.260(4))) section 602 of this act, to customer-owners of the
grocery distribution cooperative that is equal to the portion of the
gross proceeds of sales for resale that represents the actual cost of
the merchandise sold by the grocery distribution cooperative to
customer-owners.
(3) The definitions in this subsection apply throughout this
section unless the context clearly requires otherwise.
(a) "Grocery distribution cooperative" means an entity that sells
groceries and related items to customer-owners of the grocery
distribution cooperative and has customer-owners, in the aggregate, who
own a majority of the outstanding ownership interests of the grocery
distribution cooperative or of the entity controlling the grocery
distribution cooperative. "Grocery distribution cooperative" includes
an entity that controls a grocery distribution cooperative.
(b) "Qualified grocery distribution cooperative" means:
(i) A grocery distribution cooperative that has been determined by
a court of record of the state of Washington to be not engaged in
wholesaling or making sales at wholesale, within the meaning of RCW
82.04.270 or any similar provision of a municipal ordinance that
imposes a tax on gross receipts, gross proceeds of sales, or gross
income, with respect to purchases made by customer-owners, and
subsequently changes its form of doing business to make sales at
wholesale of groceries or related items to its customer-owners; or
(ii) A grocery distribution cooperative that has acquired
substantially all of the assets of a grocery distribution cooperative
described in (b)(i) of this subsection.
(c) "Customer-owner" means a person who has an ownership interest
in a grocery distribution cooperative and purchases groceries and
related items at wholesale from that grocery distribution cooperative.
(d) "Controlling" means holding fifty percent or more of the voting
interests of an entity and having at least equal power to direct or
cause the direction of the management and policies of the entity,
whether through the ownership of voting securities, by contract, or
otherwise.
Sec. 609 RCW 82.04.334 and 2007 c 48 s 3 are each amended to read
as follows:
This chapter does not apply to any sale of standing timber excluded
from the definition of "sale" in RCW 82.45.010(3). The definitions in
RCW 82.04.260(((12))) (11) apply to this section.
Sec. 610 RCW 82.04.440 and 2006 c 300 s 8 and 2006 c 84 s 6 are
each reenacted and amended to read as follows:
(1) Every person engaged in activities that are subject to tax
under two or more provisions of RCW 82.04.230 through 82.04.298,
inclusive, ((shall be)) is taxable under each provision applicable to
those activities.
(2) Persons taxable under RCW 82.04.2909(2), 82.04.250, 82.04.270,
82.04.294(2), or 82.04.260 (1) (b), (c), (((4),)) or (d), (10), or
(11), or (((12))) section 602(2) of this act with respect to selling
products in this state, including those persons who are also taxable
under RCW 82.04.261, ((shall be)) are allowed a credit against those
taxes for any (a) manufacturing taxes paid with respect to the
manufacturing of products so sold in this state, and/or (b) extracting
taxes paid with respect to the extracting of products so sold in this
state or ingredients of products so sold in this state. Extracting
taxes taken as credit under subsection (3) of this section may also be
taken under this subsection, if otherwise allowable under this
subsection. The amount of the credit ((shall)) may not exceed the tax
liability arising under this chapter with respect to the sale of those
products.
(3) Persons taxable as manufacturers under RCW 82.04.240 or
82.04.260 (1)(b) or (((12))) (11), including those persons who are also
taxable under RCW 82.04.261, ((shall be)) are allowed a credit against
those taxes for any extracting taxes paid with respect to extracting
the ingredients of the products so manufactured in this state. The
amount of the credit ((shall)) may not exceed the tax liability arising
under this chapter with respect to the manufacturing of those products.
(4) Persons taxable under RCW 82.04.230, 82.04.240, 82.04.2909(1),
82.04.294(1), 82.04.2404, or 82.04.260 (1), (2), (((4),)) (10), or
(11), or (((12))) section 602(1) of this act, including those persons
who are also taxable under RCW 82.04.261, with respect to extracting or
manufacturing products in this state ((shall be)) are allowed a credit
against those taxes for any (i) gross receipts taxes paid to another
state with respect to the sales of the products so extracted or
manufactured in this state, (ii) manufacturing taxes paid with respect
to the manufacturing of products using ingredients so extracted in this
state, or (iii) manufacturing taxes paid with respect to manufacturing
activities completed in another state for products so manufactured in
this state. The amount of the credit ((shall)) may not exceed the tax
liability arising under this chapter with respect to the extraction or
manufacturing of those products.
(5) For the purpose of this section:
(a) "Gross receipts tax" means a tax:
(i) Which is imposed on or measured by the gross volume of
business, in terms of gross receipts or in other terms, and in the
determination of which the deductions allowed would not constitute the
tax an income tax or value added tax; and
(ii) Which is also not, pursuant to law or custom, separately
stated from the sales price.
(b) "State" means (i) the state of Washington, (ii) a state of the
United States other than Washington, or any political subdivision of
such other state, (iii) the District of Columbia, and (iv) any foreign
country or political subdivision thereof.
(c) "Manufacturing tax" means a gross receipts tax imposed on the
act or privilege of engaging in business as a manufacturer, and
includes (i) the taxes imposed in RCW 82.04.240, 82.04.2404,
82.04.2909(1), 82.04.260 (1), (2), (((4),)) (10), and (11), ((and
(12))) section 602(1) of this act, and 82.04.294(1); (ii) the tax
imposed under RCW 82.04.261 on persons who are engaged in business as
a manufacturer; and (iii) similar gross receipts taxes paid to other
states.
(d) "Extracting tax" means a gross receipts tax imposed on the act
or privilege of engaging in business as an extractor, and includes (i)
the tax imposed on extractors in RCW 82.04.230 and 82.04.260(((12)))
(11); (ii) the tax imposed under RCW 82.04.261 on persons who are
engaged in business as an extractor; and (iii) similar gross receipts
taxes paid to other states.
(e) "Business", "manufacturer", "extractor", and other terms used
in this section have the meanings given in RCW 82.04.020 through
82.04.212, notwithstanding the use of those terms in the context of
describing taxes imposed by other states.
Sec. 611 RCW 82.04.4463 and 2008 c 81 s 8 are each amended to
read as follows:
(1) In computing the tax imposed under this chapter, a credit is
allowed for property taxes and leasehold excise taxes paid during the
calendar year.
(2) The credit is equal to:
(a)(i)(A) Property taxes paid on buildings, and land upon which the
buildings are located, constructed after December 1, 2003, and used
exclusively in manufacturing commercial airplanes or components of such
airplanes; and
(B) Leasehold excise taxes paid with respect to buildings
constructed after January 1, 2006, the land upon which the buildings
are located, or both, if the buildings are used exclusively in
manufacturing commercial airplanes or components of such airplanes; and
(C) Property taxes or leasehold excise taxes paid on, or with
respect to, buildings constructed after June 30, 2008, the land upon
which the buildings are located, or both, and used exclusively for
aerospace product development or in providing aerospace services, by
persons not within the scope of (a)(i)(A) and (B) of this subsection
(2) and are: (I) Engaged in manufacturing tooling specifically
designed for use in manufacturing commercial airplanes or their
components; or (II) taxable under RCW 82.04.290(3) or 82.04.250(3); or
(ii) Property taxes attributable to an increase in assessed value
due to the renovation or expansion, after: (A) December 1, 2003, of a
building used exclusively in manufacturing commercial airplanes or
components of such airplanes; and (B) June 30, 2008, of buildings used
exclusively for aerospace product development or in providing aerospace
services, by persons not within the scope of (a)(ii)(A) of this
subsection (2) and are: (I) Engaged in manufacturing tooling
specifically designed for use in manufacturing commercial airplanes or
their components; or (II) taxable under RCW 82.04.290(3) or
82.04.250(3); and
(b) An amount equal to:
(i)(A) Property taxes paid, by persons taxable under RCW
82.04.260(((11))) (10)(a), on machinery and equipment exempt under RCW
82.08.02565 or 82.12.02565 and acquired after December 1, 2003;
(B) Property taxes paid, by persons taxable under RCW
82.04.260(((11))) (10)(b), on machinery and equipment exempt under RCW
82.08.02565 or 82.12.02565 and acquired after June 30, 2008; or
(C) Property taxes paid, by persons taxable under RCW
((82.04.0250(3) [82.04.250(3)])) 82.04.250(3) or 82.04.290(3), on
computer hardware, computer peripherals, and software exempt under RCW
82.08.975 or 82.12.975 and acquired after June 30, 2008.
(ii) For purposes of determining the amount eligible for credit
under (i)(A) and (B) of this subsection (2)(b), the amount of property
taxes paid is multiplied by a fraction.
(((I))) (A) The numerator of the fraction is the total taxable
amount subject to the tax imposed under RCW 82.04.260(((11))) (10) (a)
or (b) on the applicable business activities of manufacturing
commercial airplanes, components of such airplanes, or tooling
specifically designed for use in the manufacturing of commercial
airplanes or components of such airplanes.
(((II))) (B) The denominator of the fraction is the total taxable
amount subject to the tax imposed under all manufacturing
classifications in chapter 82.04 RCW.
(((III))) (C) For purposes of both the numerator and denominator of
the fraction, the total taxable amount refers to the total taxable
amount required to be reported on the person's returns for the calendar
year before the calendar year in which the credit under this section is
earned. The department may provide for an alternative method for
calculating the numerator in cases where the tax rate provided in RCW
82.04.260(((11))) (10) for manufacturing was not in effect during the
full calendar year before the calendar year in which the credit under
this section is earned.
(((IV))) (D) No credit is available under (b)(i)(A) or (B) of this
subsection (2) if either the numerator or the denominator of the
fraction is zero. If the fraction is greater than or equal to nine-tenths, then the fraction is rounded to one.
(((V))) (E) As used in (((III))) (b)(ii)(C) of this subsection
(2)(((b)(ii)(C))), "returns" means the tax returns for which the tax
imposed under this chapter is reported to the department.
(3) The definitions in this subsection apply throughout this
section, unless the context clearly indicates otherwise.
(a) "Aerospace product development" has the same meaning as
provided in RCW 82.04.4461.
(b) "Aerospace services" has the same meaning given in RCW
82.08.975.
(c) "Commercial airplane" and "component" have the same meanings as
provided in RCW 82.32.550.
(4) A credit earned during one calendar year may be carried over to
be credited against taxes incurred in a subsequent calendar year, but
may not be carried over a second year. No refunds may be granted for
credits under this section.
(5) In addition to all other requirements under this title, a
person taking the credit under this section must report as required
under RCW 82.32.545.
(6) This section expires July 1, 2024.
Sec. 612 RCW 82.08.806 and 2009 c 461 s 5 are each amended to
read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to sales, to a
printer or publisher, of computer equipment, including repair parts and
replacement parts for such equipment, when the computer equipment is
used primarily in the printing or publishing of any printed material,
or to sales of or charges made for labor and services rendered in
respect to installing, repairing, cleaning, altering, or improving the
computer equipment. This exemption applies only to computer equipment
not otherwise exempt under RCW 82.08.02565.
(2) A person taking the exemption under this section must keep
records necessary for the department to verify eligibility under this
section. This exemption is available only when the purchaser provides
the seller with an exemption certificate in a form and manner
prescribed by the department. The seller ((shall)) must retain a copy
of the certificate for the seller's files.
(3) The definitions in this subsection (3) apply throughout this
section, unless the context clearly requires otherwise.
(a) "Computer" has the same meaning as in RCW 82.04.215.
(b) "Computer equipment" means a computer and the associated
physical components that constitute a computer system, including
monitors, keyboards, printers, modems, scanners, pointing devices, and
other computer peripheral equipment, cables, servers, and routers.
"Computer equipment" also includes digital cameras and computer
software.
(c) "Computer software" has the same meaning as in RCW 82.04.215.
(d) "Primarily" means greater than fifty percent as measured by
time.
(e) "Printer or publisher" means a person, as defined in RCW
82.04.030, who is subject to tax under RCW 82.04.260(((14))) (13) or
82.04.280(1).
(4) "Computer equipment" does not include computer equipment that
is used primarily for administrative purposes including but not limited
to payroll processing, accounting, customer service, telemarketing, and
collection. If computer equipment is used simultaneously for
administrative and nonadministrative purposes, the administrative use
((shall)) must be disregarded during the period of simultaneous use for
purposes of determining whether the computer equipment is used
primarily for administrative purposes.
Sec. 613 RCW 82.32.545 and 2008 c 81 s 10 are each amended to
read as follows:
(1) 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.
(2)(a) A person who reports taxes under RCW 82.04.260(((11))) (10),
82.04.250(3), or 82.04.290(3), or who claims an exemption or credit
under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and
82.04.4463 ((shall)) must make an annual report to the department
detailing employment, wages, and employer-provided health and
retirement benefits for employment positions in Washington. However,
persons engaged in manufacturing commercial airplanes or components of
such airplanes may report employment, wage, and benefit information per
job at the manufacturing site. The report ((shall)) may not include
names of employees. The report ((shall)) must also detail employment
by the total number of full-time, part-time, and temporary positions.
The first report filed under this subsection ((shall)) must include
employment, wage, and benefit information for the twelve-month period
immediately before first use of a preferential tax rate under RCW
82.04.260(((11))) (10), 82.04.250(3), or 82.04.290(3), or tax exemption
or credit under RCW 82.04.4461, 82.08.980, 82.12.980, 82.29A.137,
84.36.655, and 82.04.4463, unless a survey covering this twelve-month
period was filed as required by a statute repealed by chapter 81, Laws
of 2008. The report is due by March 31st following any year in which
a preferential tax rate under RCW 82.04.260(((11))) (10), 82.04.250(3),
or 82.04.290(3), is used, or tax exemption or credit under RCW
82.04.4461, 82.08.980, 82.12.980, 82.29A.137, 84.36.655, and 82.04.4463
is taken. This information is not subject to the confidentiality
provisions of RCW 82.32.330 and may be disclosed to the public upon
request.
(b) If a person fails to submit an annual report under (a) of this
subsection by the due date of the report, the department ((shall)) must
declare the amount of taxes exempted or credited, or reduced in the
case of the preferential business and occupation tax rate, for that
year to be immediately due and payable. Excise taxes payable under
this subsection are subject to interest but not penalties, as provided
under this chapter. This information is not subject to the
confidentiality provisions of RCW 82.32.330 and may be disclosed to the
public upon request.
(3) By November 1, 2010, and by November 1, 2023, the fiscal
committees of the house of representatives and the senate, in
consultation with the department, ((shall)) must report to the
legislature on the effectiveness of chapter 1, Laws of 2003 2nd sp.
sess., chapter 177, Laws of 2006, and chapter 81, Laws of 2008 in
regard to keeping Washington competitive. The report ((shall)) must
measure the effect of these laws on job retention, net jobs created for
Washington residents, company growth, diversification of the state's
economy, cluster dynamics, and other factors as the committees select.
The reports ((shall)) must include a discussion of principles to apply
in evaluating whether the legislature should reenact any or all of the
tax preferences in chapter 1, Laws of 2003 2nd sp. sess., chapter 177,
Laws of 2006, and chapter 81, Laws of 2008.
Sec. 614 RCW 82.32.550 and 2008 c 81 s 12 are each amended to
read as follows:
(1)(((a) Chapter 1, Laws of 2003 2nd sp. sess. takes effect on the
first day of the month in which the governor and a manufacturer of
commercial airplanes sign a memorandum of agreement regarding an
affirmative final decision to site a significant commercial airplane
final assembly facility in Washington state. The department shall
provide notice of the effective date of chapter 1, Laws of 2003 2nd sp.
sess. to affected taxpayers, the legislature, and others as deemed
appropriate by the department.)) "Commercial airplane" has its ordinary meaning, which is an
airplane certified by the federal aviation administration for
transporting persons or property, and any military derivative of such
an airplane.
(b) Chapter 1, Laws of 2003 2nd sp. sess. is contingent upon the
siting of a significant commercial airplane final assembly facility in
the state of Washington. If a memorandum of agreement under subsection
(1) of this section is not signed by June 30, 2005, chapter 1, Laws of
2003 2nd sp. sess. is null and void.
(c)(i) The rate in RCW 82.04.260(11)(a)(ii) takes effect July 1,
2007.
(ii) If on December 31, 2007, final assembly of a superefficient
airplane has not begun in Washington state, the department shall
provide notice of such to affected taxpayers, the legislature, and
others as deemed appropriate by the department.
(2) The definitions in this subsection apply throughout this
section.
(a)
(((b))) (2) "Component" means a part or system certified by the
federal aviation administration for installation or assembly into a
commercial airplane.
(((c) "Final assembly of a superefficient airplane" means the
activity of assembling an airplane from components parts necessary for
its mechanical operation such that the finished commercial airplane is
ready to deliver to the ultimate consumer.)) (3) "Superefficient airplane" means a twin aisle airplane
that carries between two hundred and three hundred fifty passengers,
with a range of more than seven thousand two hundred nautical miles, a
cruising speed of approximately mach .85, and that uses fifteen to
twenty percent less fuel than other similar airplanes on the market.
(d) "Significant commercial airplane final assembly facility" means
a location with the capacity to produce at least thirty-six
superefficient airplanes a year.
(e) "Siting" means a final decision by a manufacturer to locate a
significant commercial airplane final assembly facility in Washington
state.
(f)
Sec. 615 RCW 82.32.630 and 2007 c 48 s 6 are each amended to read
as follows:
(1) 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.
(2)(a) A person who reports taxes under RCW 82.04.260(((12) shall))
(11) must file a complete annual survey with the department. The
survey is due by March 31st following any year in which a person
reports taxes under RCW 82.04.260(((12))) (11). The department may
extend the due date for timely filing of annual surveys under this
section as provided in RCW 82.32.590. The survey ((shall)) must
include the amount of tax reduced under the preferential rate in RCW
82.04.260(((12))) (11). The survey ((shall)) 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.
(b) The first survey filed under this subsection ((shall)) must
include employment, wage, and benefit information for the twelve-month
period immediately before first use of a preferential tax rate under
RCW 82.04.260(((12))) (11).
(c) As part of the annual survey, the department may request
additional information, including the amount of investment in equipment
used in the activities taxable under the preferential rate in RCW
82.04.260(((12))) (11), necessary to measure the results of, or
determine eligibility for, the preferential tax rate in RCW
82.04.260(((12))) (11).
(d) All information collected under this section, except the amount
of the tax reduced under the preferential rate in RCW 82.04.260(((12)))
(11), is deemed taxpayer information under RCW 82.32.330. Information
on the amount of tax reduced is not subject to the confidentiality
provisions of RCW 82.32.330 and may be disclosed to the public upon
request, except as provided in (e) of this subsection. If the amount
of the tax reduced as reported on the survey is different than the
amount actually reduced based on the taxpayer's excise tax returns or
otherwise allowed by the department, the amount actually reduced may be
disclosed.
(e) Persons for whom the actual amount of the tax reduction is less
than ten thousand dollars during the period covered by the survey may
request the department to treat the amount of the tax reduction as
confidential under RCW 82.32.330.
(f) Small harvesters as defined in RCW 84.33.035 are not required
to file the annual survey under this section.
(3) If a person fails to submit a complete annual survey under
subsection (2) of this section by the due date or any extension under
RCW 82.32.590, the department shall declare the amount of taxes reduced
under the preferential rate in RCW 82.04.260(((12))) (11) for the
period covered by the survey to be immediately due and payable. The
department ((shall)) must assess interest, but not penalties, on the
taxes. Interest ((shall)) must be assessed at the rate provided for
delinquent excise taxes under this chapter, retroactively to the date
the reduced taxes were due, and ((shall)) will accrue until the amount
of the reduced taxes is repaid.
(4) The department ((shall)) must use the information from the
annual survey required under subsection (2) of this section to prepare
summary descriptive statistics by category. The department ((shall))
must report these statistics to the legislature each year by September
1st. The requirement to prepare and report summary descriptive
statistics ((shall)) ceases after September 1, 2025.
(5) By November 1, 2011, and November 1, 2023, the fiscal
committees of the house of representatives and the senate, in
consultation with the department, ((shall)) must report to the
legislature on the effectiveness of the preferential tax rate provided
in RCW 82.04.260(((12))) (11). The report shall measure the effect of
the preferential tax rate provided in RCW 82.04.260(((12))) (11) on job
retention, net jobs created for Washington residents, company growth,
and other factors as the committees select. The report ((shall)) must
include a discussion of principles to apply in evaluating whether the
legislature should continue the preferential tax rate provided in RCW
82.04.260(((12))) (11).
Sec. 616 RCW 82.32.632 and 2009 c 461 s 6 are each amended to
read as follows:
(1)(a) Every person claiming the preferential rate provided in RCW
82.04.260(((14))) (13) must file a complete annual report with the
department. The report is due by March 31st of the year following any
calendar year in which a person is eligible to claim the preferential
rate provided in RCW 82.04.260(((14))) (13). The department may extend
the due date for timely filing of annual reports under this section as
provided in RCW 82.32.590.
(b) The report must include information detailing employment,
wages, and employer-provided health and retirement benefits for
employment positions in Washington for the year that the preferential
rate was claimed. The report must not include names of employees. The
report must also detail employment by the total number of full-time,
part-time, and temporary positions for the year that the tax preference
was claimed.
(c) If a person filing a report under this section did not file a
report with the department in the previous calendar year, the report
filed under this section must also include employment, wage, and
benefit information for the calendar year immediately preceding the
calendar year for which the preferential rate provided in RCW
82.04.260(((14))) (13) was claimed.
(2) As part of the annual report, the department may request
additional information necessary to measure the results of, or
determine eligibility for, the preferential rate provided in RCW
82.04.260(((14))) (13).
(3) Other than information requested under subsection (2) of this
section, the information contained in an annual report filed under this
section is not subject to the confidentiality provisions of RCW
82.32.330 and may be disclosed to the public upon request.
(4) Except as otherwise provided by law, if a person claims the
preferential rate provided in RCW 82.04.260(((14))) (13) but fails to
submit a report by the due date or any extension under RCW 82.32.590,
the department must declare the amount of the tax preference claimed
for the previous calendar year to be immediately due and payable. The
department must assess interest, but not penalties, on the amounts due
under this subsection. The interest must be assessed at the rate
provided for delinquent taxes under this chapter, retroactively to the
date the tax preference was claimed, and accrues until the taxes for
which the tax preference was claimed are repaid. Amounts due under
this subsection are not subject to the confidentiality provisions of
RCW 82.32.330 and may be disclosed to the public upon request.
(5) By November 1, 2014, and November 1, 2016, the fiscal
committees of the house of representatives and the senate, in
consultation with the department, must report to the legislature on the
effectiveness of the preferential rate provided in RCW
82.04.260(((14))) (13). The report must measure the effect of the
preferential rate provided in RCW 82.04.260(((14))) (13) on job
retention, net jobs created for Washington residents, industry growth,
and other factors as the committees select. The report must include a
discussion of principles to apply in evaluating whether the legislature
should continue the preferential rate provided in RCW 82.04.260(((14)))
(13).
Sec. 617 RCW 82.45.195 and 2007 c 48 s 7 are each amended to read
as follows:
A sale of standing timber is exempt from tax under this chapter if
the gross income from such sale is taxable under RCW 82.04.260(((12)))
(11)(d).
Sec. 618 RCW 35.102.150 and 2009 c 461 s 4 are each amended to
read as follows:
Notwithstanding RCW 35.102.130, a city that imposes a business and
occupation tax must allocate a person's gross income from the
activities of printing, and of publishing newspapers, periodicals, or
magazines, to the principal place in this state from which the
taxpayer's business is directed or managed. As used in this section,
the activities of printing, and of publishing newspapers, periodicals,
or magazines are those activities to which the tax rates in RCW
82.04.260(((14))) (13) and 82.04.280(1) apply.
Sec. 619 RCW 48.14.080 and 2009 c 535 s 1102 are each amended to
read as follows:
(1) As to insurers, other than title insurers and taxpayers under
RCW 48.14.0201, the taxes imposed by this title ((shall be)) are in
lieu of all other taxes, except as otherwise provided in this section.
(2) Subsection (1) of this section does not apply with respect to:
(a) Taxes on real and tangible personal property;
(b) Excise taxes on the sale, purchase, use, or possession of (i)
real property; (ii) tangible personal property; (iii) extended
warranties; (iv) services, including digital automated services as
defined in RCW 82.04.192; and (v) digital goods and digital codes as
those terms are defined in RCW 82.04.192; and
(c) The tax imposed in RCW 82.04.260(((10))) (9), regarding public
and nonprofit hospitals.
(3) For the purposes of this section, the term "taxes" includes
taxes imposed by the state or any county, city, town, municipal
corporation, quasi-municipal corporation, or other political
subdivision.
NEW SECTION. Sec. 701 RCW 82.04.062 ("Sale at wholesale," "sale
at retail" excludes sale of precious metal bullion and monetized
bullion -- Computation of tax) and 1985 c 471 s 5 are each repealed.
NEW SECTION. Sec. 702 The repeal in section 701 of this act does
not affect any existing right acquired or liability or obligation
incurred under the statute repealed or under any rule or order adopted
under that statute nor does it affect any proceeding instituted under
the repealed statute.
NEW SECTION. Sec. 703 A new section is added to chapter 82.08
RCW to read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to the sale of
precious metal bullion or monetized bullion.
(2) The definitions in this subsection apply to this section.
(a) "Precious metal bullion" means any precious metal that has been
put through a process of smelting or refining, including, but not
limited to, gold, silver, platinum, rhodium, and palladium, and which
is in such state or condition that its value depends upon its contents
and not upon its form.
(b) "Monetized bullion" means coins or other forms of money
manufactured from gold, silver, or other metals and used as a medium of
exchange under the laws of this state, the United States, or any
foreign nation, but does not include coins or money sold to be
manufactured into jewelry or works of art.
NEW SECTION. Sec. 704 A new section is added to chapter 82.12
RCW to read as follows:
(1) The provisions of this chapter do not apply with respect to the
use of precious metal bullion or monetized bullion.
(2) The definitions in section 703 of this act apply to this
section.
NEW SECTION. Sec. 801 The following acts or parts of acts are
each repealed:
(1) RCW 82.08.890 (Exemptions -- Qualifying livestock nutrient
management equipment and facilities) and 2009 c 469 s 601, 2006 c 151
s 2, & 2001 2nd sp.s. c 18 s 2; and
(2) RCW 82.12.890 (Exemptions -- Livestock nutrient management
equipment and facilities) and 2009 c 469 s 602, 2006 c 151 s 3, 2003 c
5 s 15, & 2001 2nd sp.s. c 18 s 3.
NEW SECTION. Sec. 901 (1) In adopting the state's business and
occupation tax, the legislature intended to tax virtually all business
activities carried on within the state. See Simpson Inv. Co. v. Dep't
of Revenue, 141 Wn.2d 139, 149 (2000). The legislature recognizes that
the business and occupation tax applies to all activities engaged in
with the object of gain, benefit, or advantage to the taxpayer or to
another person or class, directly or indirectly, unless a specific
exemption applies.
(2) One of the major business and occupation tax exemptions is
provided in RCW 82.04.360 for income earned as an employee or servant
as distinguished from income earned as an independent contractor. The
legislature's intent in providing this exemption was to exempt employee
wages from the business and occupation tax but not to exempt income
earned as an independent contractor.
(3) The legislature finds that corporate directors are not
employees or servants of the corporation whose board they serve on and
therefore are not entitled to a business and occupation tax exemption
under RCW 82.04.360. The legislature further finds that there are no
business and occupation tax exemptions for compensation received for
serving as a member of a corporation's board of directors.
(4) The legislature also finds that there is a widespread
misunderstanding among corporate directors that the business and
occupation tax does not apply to the compensation they receive for
serving as a director of a corporation. It is the legislature's
expectation that the department of revenue will take appropriate
measures to ensure that corporate directors understand and comply with
their business and occupation tax obligations with respect to their
director compensation. However, because of the widespread
misunderstanding by corporate directors of their liability for business
and occupation tax on director compensation, the legislature finds that
it is appropriate in this unique situation to provide limited relief
against the retroactive assessment of business and occupation taxes on
corporate director compensation.
(5) The legislature also reaffirms its intent that all income of
all independent contractors is subject to business and occupation tax
unless specifically exempt under the Constitution or laws of this state
or the United States.
Sec. 902 RCW 82.04.360 and 1991 c 324 s 19 and 1991 c 275 s 2 are
each reenacted and amended to read as follows:
(1) This chapter ((shall)) does not apply to any person in respect
to his or her employment in the capacity of an employee or servant as
distinguished from that of an independent contractor. For the purposes
of this section, the definition of employee shall include those persons
that are defined in section 3121(d)(3)(B) of the federal internal
revenue code of 1986, as amended through January 1, 1991.
(2) ((A booth renter, as defined by RCW 18.16.020, is an
independent contractor for purposes of this chapter.)) Until July 1,
2010, this chapter does not apply to amounts received by an individual
from a corporation as compensation for serving as a member of that
corporation's board of directors. Beginning July 1, 2010, such amounts
are taxable under RCW 82.04.290(2).
NEW SECTION. Sec. 903 The sole reason for deleting the language
in RCW 82.04.360(2) is because RCW 18.16.020 no longer defines the term
"booth renter." This should not be construed as a substantive change
in the law.
NEW SECTION. Sec. 904 In accordance with Article VIII, section
5 of the state Constitution, sections 902 and 1505 of this act do not
authorize refunds of business and occupation tax validly collected
before July 1, 2010, on amounts received by an individual from a
corporation as compensation for serving as a member of that
corporation's board of directors.
Sec. 1001 RCW 82.48.010 and 1995 c 318 s 4 are each amended to
read as follows:
For the purposes of this chapter, unless otherwise required by the
context:
(1) "Department" means the department of transportation.
(2) "Aircraft" means any weight-carrying device or structure for
navigation of the air which is designed to be supported by the air;
(((2))) (3) "Secretary" means the secretary of transportation;
(((3))) (4) "Person" includes a firm, partnership, limited
liability company, or corporation((;)).
(4) "Small multi-engine fixed wing" means any piston-driven multi-engine fixed wing aircraft with a maximum gross weight as listed by the
manufacturer of less than seventy-five hundred pounds; and
(5) "Large multi-engine fixed wing" means any piston-driven multi-engine fixed wing aircraft with a maximum gross weight as listed by the
manufacturer of seventy-five hundred pounds or more
Sec. 1002 RCW 82.48.020 and 2000 c 229 s 4 are each amended to
read as follows:
(1) ((An annual excise tax is hereby imposed for the privilege of
using any aircraft in the state. A current certificate of air
worthiness with a current inspection date from the appropriate federal
agency and/or the purchase of aviation fuel shall constitute the
necessary evidence of aircraft use or intended use. The tax shall)) An
annual excise tax is imposed for the privilege of using any aircraft in
the state. The amount of the tax is five-tenths of one percent of the
taxable value of the aircraft, as determined under section 1003 of this
act.
(2) The tax imposed under this section must be collected annually
or under a staggered collection schedule as required by the secretary
by rule. ((No additional tax shall be imposed under this chapter upon
any aircraft upon the transfer of ownership thereof, if the tax imposed
by this chapter with respect to such aircraft has already been paid for
the year in which transfer of ownership occurs. A violation of this
subsection is a misdemeanor punishable as provided under chapter 9A.20
RCW.)) (3) Persons who are required to register aircraft under
chapter 47.68 RCW and who register aircraft in another state or foreign
country and avoid the ((
(2)Washington)) aircraft excise tax imposed under
this section are liable for ((such)) the unpaid excise tax. A
violation of this subsection is a gross misdemeanor.
(4) The department of revenue may, under chapter 82.32 RCW, assess
and collect the unpaid excise tax imposed under ((chapter 82.32 RCW))
this section, including the penalties and interest provided in chapter
82.32 RCW.
(((3))) (5) Except as provided under subsection((s (1) and (2)))
(3) of this section, a violation of this chapter is a misdemeanor
punishable as provided in chapter 9A.20 RCW.
NEW SECTION. Sec. 1003 A new section is added to chapter 82.48
RCW to read as follows:
The department must prepare at least once each year a depreciation
schedule for use in the determination of fair market value for the
purposes of this chapter. The schedule must be based upon information
available to the department pertaining to the current fair market value
of aircraft. The fair market value of an aircraft for the purposes of
this chapter must be based on the most recent purchase price
depreciated according to the year of the most recent purchase of the
aircraft. The most recent purchase price is the consideration, whether
money, credit, rights, or other property expressed in terms of money,
paid or given or contracted to be paid or given by the purchaser to the
seller for the aircraft.
Sec. 1004 RCW 82.48.030 and 1983 2nd ex.s. c 3 s 22 are each
amended to read as follows:
(1) ((The amount of the tax imposed by this chapter for each
calendar year shall be as follows:
Sec. 1005 RCW 82.48.070 and 1987 c 220 s 7 are each amended to
read as follows:
The secretary ((shall)) must give a receipt to each person paying
((the)) excise tax under this chapter.
Sec. 1006 RCW 82.48.080 and 1995 c 170 s 2 are each amended to
read as follows:
The secretary ((shall)) must regularly pay to the state treasurer
the excise taxes collected under this chapter((, which shall be
credited by the state treasurer as follows: Ninety percent to the
general fund and ten percent to the aeronautics account in the
transportation fund for administrative expenses)) for deposit into the
general fund.
Sec. 1007 RCW 82.48.110 and 1967 ex.s. c 9 s 6 are each amended
to read as follows:
((The first tax to be collected under this chapter shall be for the
calendar year 1968.)) (1) No aircraft with respect to which the excise
tax imposed by this chapter is payable ((shall)) may be listed and
assessed for ad valorem taxation so long as this chapter remains in
effect((, and any such assessment heretofore made except under
authority of section 13, chapter 49, Laws of 1949 and section
82.48.110, chapter 15, Laws of 1961 is hereby directed to be canceled:
PROVIDED, That)).
(2) Any aircraft, whether or not subject to the provisions of this
chapter, with respect to which the excise tax imposed by this chapter
will not be paid or has not been paid for any year ((shall)) must be
listed and assessed for ad valorem taxation in that year, and the ad
valorem tax liability resulting from such listing and assessment
((shall)) must be collected in the same manner as though this chapter
had not been passed((: PROVIDED FURTHER, That this chapter shall not
be construed to affect any ad valorem tax based upon assessed
valuations made in 1948 and/or any preceding year for taxes payable in
1949 or any preceding year, which ad valorem tax liability tax for any
such years shall remain payable and collectible in the same manner as
though this chapter had not been passed)).
NEW SECTION. Sec. 1101 (1) The legislature finds that at the
time the revenue act of 1935 was enacted, the United States supreme
court interpreted the commerce clause of the United States Constitution
as barring a direct tax on gross receipts from interstate
transportation. As a result, the tax commission's rules to implement
the revenue act recognized explicitly that the state could not tax the
income derived from the transportation of goods across the state's
boundaries. The legislature finds that the department of revenue, as
successor to the tax commission, has maintained this exemption to this
day in a department rule, WAC 458-20-193D.
(2) The legislature recognizes that the commerce clause no longer
bars states from taxing the privilege of engaging in an interstate
business. The legislature further recognizes that under the United
States supreme court's current commerce clause jurisprudence, a state
tax affecting interstate commerce will be sustained as long as it is
applied to an activity with a substantial nexus with the taxing state,
is fairly apportioned, does not discriminate against interstate
commerce, and is fairly related to services provided by the state. See
Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977).
(3) The legislature finds that the department of revenue has
maintained the tax-exempt treatment of interstate transportation for
appropriate reasons, including:
(a) The litigation risk in administratively eliminating the tax
exemption for interstate transportation;
(b) The lack of any statutory provisions for apportioning the
income of interstate transportation businesses. A legislative
determination to end the exemption has the benefit of allowing the
legislature to prescribe a specific methodology for apportioning the
income of interstate transportation businesses; and
(c) Because the transportation of persons or property across the
state's boundaries has been treated as exempt from the state's public
utility tax for nearly seventy-five years, the expectation of continued
exemption has been established over the years in the transportation
industry. Therefore, the legislature believes that, as the elected
representatives of the people, it is appropriate under these unique
circumstances for the legislature to have an opportunity to determine
the state's tax policy in regards to the public utility taxation of
interstate transportation before the department of revenue takes action
on its own.
(4) Therefore, by this act, the legislature intends to establish a
policy of taxing interstate transportation on an apportioned basis
effective July 1, 2010. However, to prevent the retroactive assessment
of public utility tax on interstate transportation on an apportioned
basis for periods prior to July 1, 2010, this act provides a statutory
deduction for income received from interstate transportation for
periods before July 1, 2010. This act also revises a use tax exemption
for motor carriers so that it is consistent with similar exemptions
provided to other interstate transportation businesses.
(5) Nothing in this act may be construed as requiring the
department of revenue to receive approval from the legislature before
changing a long-standing interpretation of the tax laws it administers.
Sec. 1102 RCW 82.16.050 and 2007 c 330 s 1 are each amended to
read as follows:
In computing tax there may be deducted from the gross income the
following items:
(1) Amounts derived by municipally owned or operated public service
businesses, directly from taxes levied for the support or maintenance
thereof. This subsection may not be construed to exempt service
charges which are spread on the property tax rolls and collected as
taxes;
(2) Amounts derived from the sale of commodities to persons in the
same public service business as the seller, for resale as such within
this state. This deduction is allowed only with respect to water
distribution, gas distribution or other public service businesses which
furnish water, gas or any other commodity in the performance of public
service businesses;
(3) Amounts actually paid by a taxpayer to another person taxable
under this chapter as the latter's portion of the consideration due for
services furnished jointly by both, if the total amount has been
credited to and appears in the gross income reported for tax by the
former;
(4) The amount of cash discount actually taken by the purchaser or
customer;
(5) The amount of bad debts, as that term is used in 26 U.S.C. Sec.
166 of the federal internal revenue code, as amended ((or renumbered))
as of January 1, 2003, on which tax was previously paid under this
chapter;
(6) Amounts derived from business which the state is prohibited
from taxing under the Constitution of this state or the Constitution or
laws of the United States;
(7) Amounts derived from the distribution of water through an
irrigation system, for irrigation purposes;
(8) Until July 1, 2010, amounts derived from the transportation of
commodities from points of origin in this state to final destination
outside this state, or from points of origin outside this state to
final destination in this state, with respect to which the carrier
grants to the shipper the privilege of stopping the shipment in transit
at some point in this state for the purpose of storing, manufacturing,
milling, or other processing, and thereafter forwards the same
commodity, or its equivalent, in the same or converted form, under a
through freight rate from point of origin to final destination;
(9) Amounts derived from the transportation of commodities from
points of origin in the state to an export elevator, wharf, dock or
ship side on tidewater or its navigable tributaries to be forwarded,
without intervening transportation, by vessel, in their original form,
to interstate or foreign destinations. No deduction is allowed under
this subsection when the point of origin and the point of delivery to
the export elevator, wharf, dock, or ship side are located within the
corporate limits of the same city or town;
(10) Amounts derived from the transportation of agricultural
commodities, not including manufactured substances or articles, from
points of origin in the state to interim storage facilities in this
state for transshipment, without intervening transportation, to an
export elevator, wharf, dock, or ship side on tidewater or its
navigable tributaries to be forwarded, without intervening
transportation, by vessel, in their original form, to interstate or
foreign destinations. If agricultural commodities are transshipped
from interim storage facilities in this state to storage facilities at
a port on tidewater or its navigable tributaries, the same agricultural
commodity dealer must operate both the interim storage facilities and
the storage facilities at the port.
(a) The deduction under this subsection is available only when the
person claiming the deduction obtains a certificate from the
agricultural commodity dealer operating the interim storage facilities,
in a form and manner prescribed by the department, certifying that:
(i) More than ninety-six percent of all of the type of agricultural
commodity delivered by the person claiming the deduction under this
subsection and delivered by all other persons to the dealer's interim
storage facilities during the preceding calendar year was shipped by
vessel in original form to interstate or foreign destinations; and
(ii) Any of the agricultural commodity that is transshipped to
ports on tidewater or its navigable tributaries will be received at
storage facilities operated by the same agricultural commodity dealer
and will be shipped from such facilities, without intervening
transportation, by vessel, in their original form, to interstate or
foreign destinations.
(b) As used in this subsection, "agricultural commodity" has the
same meaning as agricultural product in RCW 82.04.213;
(11) Amounts derived from the production, sale, or transfer of
electrical energy for resale within or outside the state or for
consumption outside the state;
(12) Amounts derived from the distribution of water by a nonprofit
water association and used for capital improvements by that nonprofit
water association;
(13) Amounts paid by a sewerage collection business taxable under
RCW 82.16.020(1)(a) to a person taxable under chapter 82.04 RCW for the
treatment or disposal of sewage;
(14) Amounts derived from fees or charges imposed on persons for
transit services provided by a public transportation agency. For the
purposes of this subsection, "public transportation agency" means a
municipality, as defined in RCW 35.58.272, and urban public
transportation systems, as defined in RCW 47.04.082. Public
transportation agencies ((shall)) must spend an amount equal to the
reduction in tax provided by this tax deduction solely to adjust routes
to improve access for citizens using food banks and senior citizen
services or to extend or add new routes to assist low-income citizens
and seniors;
(15) Until July 1, 2010, amounts received from interstate
transportation. For purposes of this subsection, "interstate
transportation" means transporting persons or property between states
or between a state and a foreign country. "State" means a state of the
United States, the District of Columbia, the Commonwealth of Puerto
Rico, and any territory or possession of the United States.
NEW SECTION. Sec. 1103 A new section is added to chapter 82.16
RCW to read as follows:
(1) Persons taxable both within and without this state on the
business of transporting persons or property for hire must apportion to
this state that portion of gross income as provided in this section.
(2)(a) Except as otherwise provided in this section, gross income
must be apportioned to this state based on the ratio that revenue miles
of the person in this state during the tax period bear to the revenue
miles of the person everywhere during the tax period.
(b)(i) If both property and passengers are transported, a person
must determine the portion of gross income apportioned to this state by
first computing separate percentages as provided in (a) of this
subsection for property transported and for passengers transported.
(ii) Then separately divide gross income for each activity by the
total gross income from transporting persons and property for hire.
(iii) Then multiply the percentage for property transported as
determined under (a) of this subsection by the percentage of gross
income from transporting property as determined under (b)(ii) of this
subsection, and multiply the percentage for persons transported as
determined under (a) of this subsection by the percentage of gross
income from transporting persons as determined under (b)(ii) of this
subsection.
(iv) Then sum the results of both calculations in (b)(iii) of this
subsection and use this percentage to determine the portion of gross
income apportioned to this state from transporting persons and property
for hire.
(3) For persons that transport gas, oil, petroleum products, or
other products by pipeline, gross income must be apportioned to this
state based on the ratio that the total number of traffic units in this
state during the tax period bear to the total number of traffic units
everywhere during the tax period.
(4) For purposes of this section, the following definitions apply:
(a) "Revenue mile" means the transportation of one net ton of
property or one passenger, for the distance of one mile.
(b)(i) "Traffic unit" means the movement of one unit of product for
a distance of one mile.
(ii) For purposes of this subsection (4)(b), "one unit" means one
barrel consisting of forty-two United States gallons, except that for
natural gas and manufactured gas, "one unit" means one thousand cubic
feet of gas.
Sec. 1104 RCW 82.12.0254 and 2009 c 503 s 2 are each amended to
read as follows:
(1) The provisions of this chapter do not apply in respect to the
use of:
(a) Any airplane used primarily in (i) conducting interstate or
foreign commerce or (ii) providing intrastate air transportation by a
commuter air carrier as defined in RCW 82.08.0262;
(b) Any locomotive, railroad car, or watercraft used primarily in
conducting interstate or foreign commerce by transporting therein or
therewith property and persons for hire or used primarily in commercial
deep sea fishing operations outside the territorial waters of the
state;
(c) Tangible personal property that becomes a component part of any
such airplane, locomotive, railroad car, or watercraft in the course of
repairing, cleaning, altering, or improving the same; and
(d) Labor and services rendered in respect to such repairing,
cleaning, altering, or improving.
(2) The provisions of this chapter do not apply in respect to the
use by a nonresident of this state of any motor vehicle or trailer used
exclusively in transporting persons or property across the boundaries
of this state and in intrastate operations incidental thereto when such
motor vehicle or trailer is registered and licensed in a foreign state
and in respect to the use by a nonresident of this state of any motor
vehicle or trailer so registered and licensed and used within this
state for a period not exceeding fifteen consecutive days under such
rules as the department must adopt. However, under circumstances
determined to be justifiable by the department a second fifteen day
period may be authorized consecutive with the first fifteen day period;
and for the purposes of this exemption the term "nonresident" as used
herein includes a user who has one or more places of business in this
state as well as in one or more other states, but the exemption for
nonresidents applies only to those vehicles which are most frequently
dispatched, garaged, serviced, maintained, and operated from the user's
place of business in another state.
(3) The provisions of this chapter do not apply in respect to the
use of:
(a) Any motor vehicle or trailer, whether owned by the holder of a
carrier permit issued by the interstate commerce commission or its
successor agency ((of any motor vehicle or trailer whether owned by))
or leased with or without driver to the permit holder and used ((in
substantial part)) in the normal and ordinary course of the user's
business primarily for transporting therein persons or property for
hire across the boundaries of this state; ((and in respect to the use
of))
(b) Any motor vehicle or trailer while being operated under the
authority of a one-transit permit issued by the director of licensing
pursuant to RCW 46.16.160 and moving upon the highways from the point
of delivery in this state to a point outside this state; ((and in
respect to the use of))
(c) Tangible personal property ((which)) that becomes a component
part of any motor vehicle or trailer ((used by the holder of a carrier
permit issued by the interstate commerce commission or its successor
agency authorizing transportation by motor vehicle across the
boundaries of this state whether such motor vehicle or trailer is owned
by or leased with or without driver to the permit holder)) that is
exempt under (a) of this subsection, in the course of repairing,
cleaning, altering, or improving the same; ((also the use of)) and
(d) Labor and services rendered in respect to such repairing,
cleaning, altering, or improving any motor vehicle or trailer that is
exempt under (a) of this subsection.
Sec. 1201 RCW 82.45.010 and 2010 c ... s 207 (section 207 of this
act) are each amended to read as follows:
(1) As used in this chapter, the term "sale" has its ordinary
meaning and includes any conveyance, grant, assignment, quitclaim, or
transfer of the ownership of or title to real property, including
standing timber, or any estate or interest therein for a valuable
consideration, and any contract for such conveyance, grant, assignment,
quitclaim, or transfer, and any lease with an option to purchase real
property, including standing timber, or any estate or interest therein
or other contract under which possession of the property is given to
the purchaser, or any other person at the purchaser's direction, and
title to the property is retained by the vendor as security for the
payment of the purchase price. The term also includes the grant,
assignment, quitclaim, sale, or transfer of improvements constructed
upon leased land.
(2)(a) The term "sale" also includes the transfer or acquisition
within any twelve-month period of a controlling interest in any entity
with an interest in real property located in this state for a valuable
consideration.
(b) For the sole purpose of determining whether, pursuant to the
exercise of an option, a controlling interest was transferred or
acquired within a twelve-month period, the date that the option
agreement was executed is the date on which the transfer or acquisition
of the controlling interest is deemed to occur. For all other purposes
under this chapter, the date upon which the option is exercised is the
date of the transfer or acquisition of the controlling interest.
(c) For purposes of this subsection, all acquisitions of persons
acting in concert must be aggregated for purposes of determining
whether a transfer or acquisition of a controlling interest has taken
place. The department must adopt standards by rule to determine when
persons are acting in concert. In adopting a rule for this purpose,
the department must consider the following:
(i) Persons must be treated as acting in concert when they have a
relationship with each other such that one person influences or
controls the actions of another through common ownership; and
(ii) When persons are not commonly owned or controlled, they must
be treated as acting in concert only when the unity with which the
purchasers have negotiated and will consummate the transfer of
ownership interests supports a finding that they are acting as a single
entity. If the acquisitions are completely independent, with each
purchaser buying without regard to the identity of the other
purchasers, then the acquisitions are considered separate acquisitions.
(3) The term "sale" does not include:
(a) A transfer by gift, devise, or inheritance.
(b) A transfer of any leasehold interest other than of the type
mentioned above.
(c) A cancellation or forfeiture of a vendee's interest in a
contract for the sale of real property, whether or not such contract
contains a forfeiture clause, or deed in lieu of foreclosure of a
mortgage.
(d) The partition of property by tenants in common by agreement or
as the result of a court decree.
(e) The assignment of property or interest in property from one
spouse or one domestic partner to the other spouse or other domestic
partner in accordance with the terms of a decree of dissolution of
marriage or state registered domestic partnership or in fulfillment of
a property settlement agreement.
(f) The assignment or other transfer of a vendor's interest in a
contract for the sale of real property, even though accompanied by a
conveyance of the vendor's interest in the real property involved.
(g) Transfers by appropriation or decree in condemnation
proceedings brought by the United States, the state or any political
subdivision thereof, or a municipal corporation.
(h) A mortgage or other transfer of an interest in real property
merely to secure a debt, or the assignment thereof.
(i) ((Any)) A transfer or conveyance made (i) to the beneficiary of
a deed of trust pursuant to a trustee's sale in the nonjudicial
foreclosure of a deed of trust ((or)); (ii) to the mortgagee,
beneficiary of the deed of trust, or lienholder pursuant to an order of
sale by the court in the judicial foreclosure of any mortgage, deed of
trust, or lien ((foreclosure proceeding or upon execution of a
judgment, or)); (iii) to the mortgagee by the mortgagor or to the
beneficiary of a deed of trust by the grantor pursuant to deed in lieu
of foreclosure to satisfy a mortgage or deed of trust; or (iv) to the
judgment creditor pursuant to a writ of execution to enforce a
judgment.
(j) A conveyance to the federal housing administration or veterans
administration by an authorized mortgagee made pursuant to a contract
of insurance or guaranty with the federal housing administration or
veterans administration.
(k) A transfer in compliance with the terms of any lease or
contract upon which the tax as imposed by this chapter has been paid or
where the lease or contract was entered into prior to the date this tax
was first imposed.
(l) The sale of any grave or lot in an established cemetery.
(m) A sale by the United States, this state or any political
subdivision thereof, or a municipal corporation of this state.
(n) A sale to a regional transit authority or public corporation
under RCW 81.112.320 under a sale/leaseback agreement under RCW
81.112.300.
(o) A transfer of real property, however effected, if it consists
of a mere change in identity or form of ownership of an entity where
there is no change in the beneficial ownership. These include
transfers to a corporation or partnership which is wholly owned by the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner. However, if thereafter such transferee corporation or
partnership voluntarily transfers such real property, or such
transferor, spouse or domestic partner, or children of the transferor
or the transferor's spouse or domestic partner voluntarily transfer
stock in the transferee corporation or interest in the transferee
partnership capital, as the case may be, to other than (i) the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner, (ii) a trust having the transferor and/or the transferor's
spouse or domestic partner or children of the transferor or the
transferor's spouse or domestic partner as the only beneficiaries at
the time of the transfer to the trust, or (iii) a corporation or
partnership wholly owned by the original transferor and/or the
transferor's spouse or domestic partner or children of the transferor
or the transferor's spouse or domestic partner, within three years of
the original transfer to which this exemption applies, and the tax on
the subsequent transfer has not been paid within sixty days of becoming
due, excise taxes become due and payable on the original transfer as
otherwise provided by law.
(p)(i) A transfer that for federal income tax purposes does not
involve the recognition of gain or loss for entity formation,
liquidation or dissolution, and reorganization, including but not
limited to nonrecognition of gain or loss because of application of 26
U.S.C. Sec. 332, 337, 351, 368(a)(1), 721, or 731 of the internal
revenue code of 1986, as amended.
(ii) However, the transfer described in (p)(i) of this subsection
cannot be preceded or followed within a twelve-month period by another
transfer or series of transfers, that, when combined with the otherwise
exempt transfer or transfers described in (p)(i) of this subsection,
results in the transfer of a controlling interest in the entity for
valuable consideration, and in which one or more persons previously
holding a controlling interest in the entity receive cash or property
in exchange for any interest the person or persons acting in concert
hold in the entity. This subsection (3)(p)(ii) does not apply to that
part of the transfer involving property received that is the real
property interest that the person or persons originally contributed to
the entity or when one or more persons who did not contribute real
property or belong to the entity at a time when real property was
purchased receive cash or personal property in exchange for that person
or persons' interest in the entity. The real estate excise tax under
this subsection (3)(p)(ii) is imposed upon the person or persons who
previously held a controlling interest in the entity.
(q) A qualified sale of a manufactured/mobile home community, as
defined in RCW 59.20.030, that takes place on or after June 12, 2008,
but before December 31, 2018.
Sec. 1202 RCW 82.45.080 and 1980 c 154 s 3 are each amended to
read as follows:
(1) The tax levied under this chapter ((shall be)) is the
obligation of the seller and the department ((of revenue)) may, at the
department's option, enforce the obligation through an action of debt
against the seller or the department may proceed in the manner
prescribed for the foreclosure of mortgages ((and resort to)). The
department's use of one course of enforcement ((shall)) is not ((be))
an election not to pursue the other.
(2) For purposes of this section and notwithstanding any other
provisions of law, in a sale involving a judicial or nonjudicial
foreclosure or enforcement of a judgment, the seller is the:
(a) Beneficiary of a deed of trust in any transfer or conveyance to
any party other than such beneficiary pursuant to a trustee's sale in
the nonjudicial foreclosure of the deed of trust;
(b) Mortgagee, beneficiary of a deed of trust, or lienholder in any
transfer or conveyance to any party other than such mortgagee,
beneficiary, or lienholder pursuant to an order of sale by the court in
the judicial foreclosure of any mortgage, deed of trust, or lien; and
(c) Judgment creditor in any transfer or conveyance to any party
other than such creditor pursuant to a writ of execution to enforce a
judgment.
Sec. 1301 RCW 82.32.145 and 1995 c 318 s 2 are each amended to
read as follows:
(1) ((Upon termination, dissolution, or abandonment of a corporate
or limited liability company business, any officer, member, manager, or
other person having control or supervision of retail sales tax funds
collected and held in trust under RCW 82.08.050, or who is charged with
the responsibility for the filing of returns or the payment of retail
sales tax funds collected and held in trust under RCW 82.08.050, shall
be personally liable for any unpaid taxes and interest and penalties on
those taxes, if such officer or other person wilfully fails to pay or
to cause to be paid any taxes due from the corporation pursuant to
chapter 82.08 RCW. For the purposes of this section, any retail sales
taxes that have been paid but not collected shall be deductible from
the retail sales taxes collected but not paid.)) Whenever the department has issued a
warrant under RCW 82.32.210 for the collection of unpaid taxes from a
limited liability business entity and that business entity has been
terminated, dissolved, or abandoned, or is insolvent, the department
may pursue collection of the entity's unpaid taxes, including penalties
and interest on those taxes, against any or all of the responsible
individuals. For purposes of this subsection, "insolvent" means the
condition that results when the sum of the entity's debts exceeds the
fair market value of its assets. The department may presume that an
entity is insolvent if the entity refuses to disclose to the department
the nature of its assets and liabilities.
For purposes of this subsection "wilfully fails to pay or to cause
to be paid" means that the failure was the result of an intentional,
conscious, and voluntary course of action.
(2) The officer, member or manager, or other person shall be liable
only for taxes collected which
(2) Personal liability under this section may be imposed for state
and local sales and use taxes, state business and occupation taxes, and
any other state and local taxes collected by the department in respect
to which the provisions of this chapter apply, regardless of whether
the tax is denominated a tax, fee, charge, or some other term.
(3)(a) For a responsible individual who is the current or a former
chief executive or chief financial officer, liability under this
section applies regardless of fault or whether the individual was or
should have been aware of the unpaid tax liability of the limited
liability business entity.
(b) For any other responsible individual, liability under this
section applies only if he or she willfully fails to pay or to cause to
be paid to the department the taxes due from the limited liability
business entity.
(4)(a) Except as provided in this subsection (4)(a), a responsible
individual who is the current or a former chief executive or chief
financial officer is liable under this section only for tax liability
accrued during the period that he or she was the chief executive or
chief financial officer. However, if the responsible individual had
the responsibility or duty to remit payment of the limited liability
business entity's taxes to the department during any period of time
that the person was not the chief executive or chief financial officer,
that individual is also liable for tax liability that became due during
the period that he or she had the duty to remit payment of the limited
liability business entity's taxes to the department but was not the
chief executive or chief financial officer.
(b) All other responsible individuals are liable under this section
only for tax liability that became due during the period he or she had
the ((control, supervision,)) responsibility((,)) or duty to ((act for
the corporation described in subsection (1) of this section, plus
interest and penalties on those taxes.)) remit payment of the limited liability business entity's
taxes to the department.
(3)
(5) Persons ((liable under)) described in subsection (((1))) (3)(b)
of this section are exempt from liability under this section in
situations where nonpayment of the ((retail sales tax funds held in
trust)) limited liability business entity's taxes is due to reasons
beyond their control as determined by the department by rule.
(((4))) (6) Any person having been issued a notice of assessment
under this section is entitled to the appeal procedures under RCW
82.32.160, 82.32.170, 82.32.180, 82.32.190, and 82.32.200.
(((5) This section applies only in situations where the department
has determined that there is no reasonable means of collecting the
retail sales tax funds held in trust directly from the corporation.)) (7) This section does not relieve the ((
(6)corporation or))
limited liability ((company)) business entity of ((other tax
liabilities)) its tax liability or otherwise impair other tax
collection remedies afforded by law.
(((7))) (8) Collection authority and procedures prescribed in this
chapter apply to collections under this section.
(9) The definitions in this subsection apply throughout this
section unless the context clearly requires otherwise.
(a) "Chief executive" means: The president of a corporation; or
for other entities or organizations other than corporations or if the
corporation does not have a president as one of its officers, the
highest ranking executive manager or administrator in charge of the
management of the company or organization.
(b) "Chief financial officer" means: The treasurer of a
corporation; or for entities or organizations other than corporations
or if a corporation does not have a treasurer as one of its officers,
the highest senior manager who is responsible for overseeing the
financial activities of the entire company or organization.
(c) "Limited liability business entity" means a type of business
entity that generally shields its owners from personal liability for
the debts, obligations, and liabilities of the entity, or a business
entity that is managed or owned in whole or in part by an entity that
generally shields its owners from personal liability for the debts,
obligations, and liabilities of the entity. Limited liability business
entities include corporations, limited liability companies, limited
liability partnerships, trusts, general partnerships and joint ventures
in which one or more of the partners or parties are also limited
liability business entities, and limited partnerships in which one or
more of the general partners are also limited liability business
entities.
(d) "Manager" has the same meaning as in RCW 25.15.005.
(e) "Member" has the same meaning as in RCW 25.15.005, except that
the term only includes members of member-managed limited liability
companies.
(f) "Officer" means any officer or assistant officer of a
corporation, including the president, vice-president, secretary, and
treasurer.
(g)(i) "Responsible individual" includes any current or former
officer, manager, member, partner, or trustee of a limited liability
business entity with an unpaid tax warrant issued by the department.
(ii) "Responsible individual" also includes any current or former
employee or other individual, but only if the individual had the
responsibility or duty to remit payment of the limited liability
business entity's unpaid tax liability reflected in a tax warrant
issued by the department.
(iii) Whenever any taxpayer has one or more limited liability
business entities as a member, manager, or partner, "responsible
individual" also includes any current and former officers, members, or
managers of the limited liability business entity or entities or of any
other limited liability business entity involved directly in the
management of the taxpayer. For purposes of this subsection
(9)(g)(iii), "taxpayer" means a limited liability business entity with
an unpaid tax warrant issued against it by the department.
(h) "Willfully fails to pay or to cause to be paid" means that the
failure was the result of an intentional, conscious, and voluntary
course of action.
NEW SECTION. Sec. 1401 RCW 82.04.44525 (Credit -- New employment
for international service activities in eligible areas -- Designation of
census tracts for eligibility -- Records -- Tax due upon ineligibility--Interest assessment -- Information from employment security department)
and 2009 c 535 s 1104, 2008 c 81 s 9, & 1998 c 313 s 2 are each
repealed.
NEW SECTION. Sec. 1501 (1) Except as provided in subsection (2)
of this section, if any provision of sections 101 through 108 of this
act or its application to any person or circumstance is held invalid,
the remainder of sections 101 through 108 of this act or the
application of the provision to other persons or circumstances is not
affected.
(2) If a court of competent jurisdiction, in a final judgment not
subject to appeal, adjudges any provision of section 104(1)(c) of this
act unconstitutional or otherwise invalid, sections 101 through 108 of
this act are null and void in their entirety.
NEW SECTION. Sec. 1502 Sections 101 through 108 of this act
apply with respect to gross income of the business, as defined in RCW
82.04.080, including gross income from royalties as defined in RCW
82.04.2907, generated on and after July 1, 2010. For purposes of
calculating the thresholds in section 104(1)(c) of this act for the
2010 tax year, property, payroll, and receipts are based on the entire
2010 tax year.
NEW SECTION. Sec. 1503 Sections 201 through 213 of this act must
be construed liberally to effectuate the legislature's intent to ensure
that all businesses and individuals pay their fair share of taxes.
NEW SECTION. Sec. 1504 (1) Except as provided in subsection (2)
of this section, section 201 of this act applies to tax periods
beginning January 1, 2006.
(2) Section 201 of this act does not apply to any tax periods
ending before July 1, 2010, that were included in a completed field
audit conducted by the department.
NEW SECTION. Sec. 1505 Sections 502, 902, and 1102 of this act
apply both retroactively and prospectively.
NEW SECTION. Sec. 1506 Section 502 of this act does not affect
any final judgments, not subject to appeal, entered by a court of
competent jurisdiction before the effective date of this section.
NEW SECTION. Sec. 1507 Sections 1201 and 1202 of this act apply
to transfers or conveyances as described in RCW 82.45.010(3)(i)
occurring on and after April 1, 2010.
NEW SECTION. Sec. 1508 If any provision of this act or its
application to any person or circumstance is held invalid, the
remainder of the act or the application of the provision to other
persons or circumstances is not affected.
NEW SECTION. Sec. 1509 Sections 501, 502, and 1505 of this act
are necessary for the immediate preservation of the public peace,
health, or safety, or support of the state government and its existing
public institutions, and take effect immediately.
NEW SECTION. Sec. 1510 Except for sections 501, 502, 606, and
1505 of this act, this act is necessary for the immediate preservation
of the public peace, health, or safety, or support of the state
government and its existing public institutions, and takes effect April
1, 2010.
NEW SECTION. Sec. 1511 Section 605 of this act expires July 1,
2011.
NEW SECTION. Sec. 1512 Section 606 of this act takes effect July
1, 2011.