BILL REQ. #:  S-0396.2 

Read first time 01/21/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to the taxation and permitting of vessels in Washington; amending RCW 82.08.0266, 82.08.02665, 82.08.700, 82.12.700, 88.02.570, 88.02.610, 88.02.620, 88.02.640, and 82.49.020; adding a new section to chapter 82.08 RCW; adding new sections to chapter 82.12 RCW; adding a new section to chapter 82.14 RCW; adding new sections to chapter 88.02 RCW; creating a new section; and providing an effective date.

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

NEW SECTION.  Sec. 1   (1) Washington state has some of the most desirable cruising waters in the world for pleasure boaters and especially large yachts. It is beneficial to employment and the economy to encourage boaters to call Washington their home port. A larger yacht will contribute significant revenue to the local community in which it is moored. Job losses in the marine industry have been significant because pleasure boaters have moved their vessels out of the state to other states and countries. The state also loses out by losing the associated sales and use tax revenue from the purchase of these vessels.
     (2) The legislature finds that passage of this act will save jobs and increase employment as Washington once again becomes a destination for boaters.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.08 RCW to read as follows:
     (1) The tax imposed in RCW 82.08.020 applies only up to three hundred thousand dollars of the selling price of a vessel. Except as provided in subsection (2) of this section, any amount above three hundred thousand dollars is not subject to the tax imposed in RCW 82.08.020.
     (2) A buyer claiming a partial exemption under subsection (1) of this section for the purchase of a watercraft is liable for the additional tax imposed under RCW 82.08.020 on that portion of the selling price of the watercraft that exceeds three hundred thousand dollars, if the watercraft is used in a manner inconsistent with the definition of vessel in this section. The buyer must pay the additional tax due under this subsection (2), along with any applicable penalties and interest under chapter 82.32 RCW, directly to the department. For purposes of the tax imposed under this subsection, the limitation period on assessments in RCW 82.32.050 begins to run from the date that the watercraft is first used in a manner inconsistent with the definition of vessel in this section.
     (3) For the purposes of this section, "vessel" means every privately owned watercraft used or capable of being used as a means of transportation on the water, other than a seaplane, and that is used solely for personal purposes and is not required to be listed and assessed as provided in RCW 84.40.065.

Sec. 3   RCW 82.08.0266 and 1999 c 358 s 5 are each amended to read as follows:
     The tax levied by RCW 82.08.020 ((shall)) does not apply to sales to nonresidents of this state ((for use outside of this state)) of watercraft requiring coast guard registration or registration by the state of principal use according to the Federal Boating Act of 1958, even though delivery be made within this state, but only when:
     (1)(a) The watercraft will not be used within this state for more than forty-five days; and
     (((2))) (b) An appropriate exemption certificate supported by identification ascertaining residence as required by the department of revenue and signed by the purchaser or ((his)) the purchaser's agent establishing the fact that the purchaser is a nonresident and that the watercraft is for use outside of this state, a copy of which ((shall be retained by the dealer)) the dealer must retain; or
     (2) The buyer has purchased a nonresident/visitor annual permit as provided in section 10 of this act for the vessel. Sellers making tax exempt sales under this subsection must retain a copy of the buyer's nonresident/visitor annual permit.

Sec. 4   RCW 82.08.02665 and 1999 c 358 s 6 are each amended to read as follows:
     The tax levied by RCW 82.08.020 does not apply to sales of vessels to residents of foreign countries ((for use outside of this state, even though delivery is made within this state)), but only if:
     (1)(a) The vessel will not be used within this state for more than forty-five days; and
     (((2))) (b) An appropriate exemption certificate supported by identification as required by the department of revenue and signed by the purchaser or the purchaser's agent establishes the fact that the purchaser is a resident of a foreign country and that the vessel is for use outside of this state. A copy of the exemption certificate is to be retained by the dealer; or
     (2) The buyer has purchased a nonresident/visitor annual permit as provided in section 10 of this act for the vessel. Sellers making tax exempt sales under this subsection must retain a copy of the buyer's nonresident/visitor annual permit.
     (3)(a) As used in this section, except as otherwise provided in (b) of this subsection, "vessel" means every watercraft used or capable of being used as a means of transportation on the water, other than a seaplane.
     (b) For purposes of the exemption provided in subsection (2) of this section, "vessel" has the same meaning as in section 2 of this act.

Sec. 5   RCW 82.08.700 and 2010 c 106 s 219 are each amended to read as follows:
     (1) Except as otherwise provided in subsection (2) of this section, the tax levied by RCW 82.08.020 does not apply to sales to nonresident individuals of vessels thirty feet or longer if an individual purchasing a vessel purchases and displays a valid use permit.
     (2) The exemption provided in this section does not apply to the sale of a vessel, as defined in section 2 of this act, if the selling price exceeds three hundred thousand dollars.
     (3)(a) An individual claiming exemption from retail sales tax under this section must display proof of his or her current nonresident status at the time of purchase.
     (b) Acceptable proof of a nonresident individual's status includes one piece of identification such as a valid driver's license from the jurisdiction in which the out-of-state residency is claimed or a valid identification card that has a photograph of the holder and is issued by the out-of-state jurisdiction. Identification under this subsection (((2))) (3)(b) must show the holder's residential address and have as one of its legal purposes the establishment of residency in that out-of-state jurisdiction.
     (((3))) (4) Nothing in this section requires the vessel dealer to make tax exempt retail sales to nonresidents. A dealer may choose to make sales to nonresidents, collect the sales tax, and remit the amount of sales tax collected to the state as otherwise provided by law. If the dealer chooses to make a sale to a nonresident without collecting the sales tax, the vendor must examine the proof of nonresidence, determine whether the proof is acceptable under subsection (((2))) (3)(b) of this section, and maintain records for each nontaxable sale that shows the type of proof accepted, including any identification numbers where appropriate, and the expiration date, if any.
     (((4))) (5) A vessel dealer ((shall)) must issue a use permit to a buyer if the dealer is satisfied that the buyer is a nonresident. The use permit must be in a form and manner required by the department and must include an affidavit, signed by the purchaser, declaring that the vessel will be used in a manner consistent with this section. The fee for the issuance of a use permit is five hundred dollars for vessels fifty feet in length or less and eight hundred dollars for vessels greater than fifty feet in length. Funds collected under this section and RCW 82.12.700 must be reported on the dealer's excise tax return and remitted to the department in accordance with RCW 82.32.045. The department must transmit the fees to the state treasurer to be deposited in the state general fund. The use permit must be displayed on the vessel and is valid for twelve consecutive months from the date of issuance. A use permit is not renewable. A purchaser at the time of purchase must make an irrevocable election to take the exemption authorized in this section or the exemption in either RCW 82.08.0266 or 82.08.02665. A vessel dealer must maintain a copy of the use permit for the dealer's records. Vessel dealers must provide copies of use permits issued by the dealer under this section and RCW 82.12.700 to the department on a quarterly basis.
     (((5))) (6) A nonresident who claims an exemption under this section and who uses a vessel in this state after his or her use permit for that vessel has expired is liable for the tax imposed under RCW 82.08.020 on the original selling price of the vessel and must pay the tax directly to the department. Interest at the rate provided in RCW 82.32.050 applies to amounts due under this subsection, retroactively to the date the vessel was purchased, and accrues until the full amount of tax due is paid to the department.
     (((6))) (7) Any vessel dealer who makes sales without collecting the tax to a person who does not hold valid identification establishing out-of-state residency, and any dealer who fails to maintain records of sales to nonresidents as provided in this section, is personally liable for the amount of tax due.
     (((7))) (8) Chapter 82.32 RCW applies to the administration of the fee imposed in this section and RCW 82.12.700.
     (((8))) (9) A vessel dealer that issues use permits under this section and RCW 82.12.700 must file with the department all returns in an electronic format as provided or approved by the department. As used in this subsection, "returns" has the same meaning as "return" in RCW 82.32.050.
     (a) Any return required to be filed in an electronic format under this subsection is not filed until received by the department in an electronic format provided or approved by the department.
     (b) The electronic filing requirement in this subsection ends when a vessel dealer no longer issues use permits, and the dealer has electronically filed all of its returns reporting the fees collected under this section and RCW 82.12.700.
     (c) The department may waive the electronic filing requirement in this subsection for good cause shown.

NEW SECTION.  Sec. 6   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The tax imposed in RCW 82.12.020 applies only up to three hundred thousand dollars of the value of the vessel used. Except as provided in subsection (2) of this section, the value of a vessel that is above three hundred thousand dollars is not subject to the tax imposed in RCW 82.12.020.
     (2) A taxpayer claiming a partial exemption under subsection (1) of this section for the use of a watercraft is liable for the additional tax imposed under RCW 82.12.020 on that portion of the value of the watercraft used that exceeds three hundred thousand dollars, including any applicable penalties and interest under chapter 82.32 RCW, if the watercraft is used in a manner inconsistent with the definition of vessel in this section. This subsection does not apply to a taxpayer with respect to the use of a watercraft, if the taxpayer is subject to the additional tax due in section 2(2) of this act with respect to the watercraft. For purposes of the tax imposed under this subsection, the limitation period on assessments in RCW 82.32.050 begins to run from the date that the watercraft is first used in a manner inconsistent with the definition of vessel in this section.
     (3) For the purposes of this section, "vessel" has the same meaning as in section 2 of this act.

NEW SECTION.  Sec. 7   A new section is added to chapter 82.12 RCW to read as follows:
     (1) The tax imposed under RCW 82.12.020 does not apply to the use of a vessel, as defined in section 2 of this act, so long as:
     (a) The vessel is used solely for the personal use of the owner; and
     (b) The owner has a valid nonresident/visitor annual permit under section 10 of this act for the vessel. The nonresident/visitor annual permit must be obtained within sixty days of the first use of the vessel on Washington waters or of the first use of the vessel on Washington waters after the expiration of the previous nonresident/visitor annual permit obtained for the vessel.
     (2) If a taxpayer becomes ineligible for the exemption in subsection (1) of this section, the limitation period on assessments in RCW 82.32.050 begins to run from the date that either of the conditions in subsection (1)(a) or (b) of this section are not met.

Sec. 8   RCW 82.12.700 and 2007 c 22 s 2 are each amended to read as follows:
     (1) Except as otherwise provided in subsection (2) of this section, the provisions of this chapter do not apply in respect to the use of a vessel thirty feet or longer if a nonresident individual:
     (a) Purchased the vessel from a vessel dealer in accordance with RCW 82.08.700;
     (b) Purchased the vessel in the state from a person other than a vessel dealer, but the nonresident individual purchases and displays a valid use permit from a vessel dealer under this section within fourteen days of the date that the vessel is purchased in this state; or
     (c) Acquired the vessel outside the state, but purchases and displays a valid use permit from a vessel dealer under this section within fourteen days of the date that the vessel is first brought into this state.
     (2) The exemption provided in subsection (1) of this section does not apply to the use of a vessel, as defined in section 2 of this act, if the value of the vessel used exceeds three hundred thousand dollars.
     (3) Any vessel dealer that makes tax exempt sales under RCW 82.08.700 ((shall)) must issue use permits under this section. A vessel dealer shall issue a use permit under this section if the dealer is satisfied that the individual purchasing the permit is a nonresident. The use permit is valid for twelve consecutive months from the date of issuance. A use permit is not renewable, and an individual may only purchase one use permit for a particular vessel. A person who has been issued a use permit under RCW 82.08.700 for a particular vessel may not purchase a use permit under this section for the same vessel after the use permit issued under RCW 82.08.700 expires. All other requirements and conditions, not inconsistent with the provisions of this section, relating to use permits in RCW 82.08.700, apply to use permits under this section. A person may not claim an exemption under RCW 82.12.0251(1) within twenty-four months after a use permit, issued under this section or RCW 82.08.700, for the same vessel, has expired.
     (((3))) (4)(a) Except as provided in (b) of this subsection, a nonresident who claims an exemption under this section and who uses a vessel in this state after his or her use permit for that vessel has expired is liable for the tax imposed under RCW 82.12.020 based on the value of the vessel at the time that the vessel was either purchased in this state under circumstances in which the exemption under RCW 82.08.700 did not apply or was first brought into this state, as the case may be. Interest at the rate provided in RCW 82.32.050 applies to amounts due under this subsection, retroactively to the date that the vessel was purchased in this state or first brought into the state, and accrues until the full amount of tax due is paid to the department.
     (b) A nonresident individual who is exempt under both this section and RCW 82.08.700 and who uses a vessel in this state after his or her use permit for that vessel expires is liable for tax and interest as provided in RCW 82.08.700(((5))) (6).
     (((4))) (5) Any vessel dealer that issues a use permit to an individual who does not hold valid identification establishing out-of-state residency, and any dealer that fails to maintain records for each use permit issued that shows the type of proof accepted, including any identification numbers where appropriate, and the expiration date, if any, is personally liable for the amount of tax due.

NEW SECTION.  Sec. 9   A new section is added to chapter 82.14 RCW to read as follows:
     (1) For purposes of a local sales tax imposed under the authority of this chapter, RCW 81.104.170, or any other provision of law on the sale of a vessel, the tax applies in the same manner as in section 2 of this act.
     (2) For purposes of a local use tax imposed under the authority of this chapter, RCW 81.104.170, or any other provision of law on the use of a vessel, the tax applies in the same manner as in section 6 of this act.
     (3) For the purposes of this section, "vessel" has the same meaning as in section 2 of this act.

NEW SECTION.  Sec. 10   A new section is added to chapter 88.02 RCW to read as follows:
     (1) Except as otherwise provided in subsection (2) of this section, a vessel owner may purchase a nonresident/visitor annual permit if the vessel:
     (a) Is currently registered or numbered under the provisions of RCW 88.02.570; and
     (b) Will be used on Washington state waters solely for the personal use of the owner for no longer than twelve consecutive months.
     (2) Solely for the purposes of this section, "vessel" means the same as provided in section 2 of this act.
     (3) A nonresident/visitor annual permit may be obtained from the department, county auditor, or other agent or subagent appointed by the director. The nonresident/visitor annual permit:
     (a) Must show the date the vessel first came into Washington state; and
     (b) Is valid for one year.
     (4) The department, county auditor, or other agent or subagent appointed by the director must collect the fee required in RCW 88.02.640(1)(m) when issuing a nonresident/visitor annual permit. The fee must be calculated by using the same methods used to calculate the tax under chapter 82.49 RCW.
     (5) A nonresident/visitor annual permit is not required under this section if the vessel is used in conducting temporary business activity within Washington state.
     (6) The department must adopt rules to implement this section, including rules on issuing and displaying the nonresident/visitor annual permit.

Sec. 11   RCW 88.02.570 and 2010 c 161 s 1018 are each amended to read as follows:
     Vessel registration is required under this chapter except for the following:
     (1) A military vessel owned by the United States government;
     (2) A public vessel owned by the United States government, unless the vessel is a type used for recreation;
     (3) A vessel clearly identified as being:
     (a) Owned by a state, county, or city; and
     (b) Used primarily for governmental purposes;
     (4)(a) Except as otherwise provided in (b) of this subsection (4), a vessel either (((a))) (i) registered or numbered under the laws of a country other than the United States or (((b))) (ii) having a valid United States customs service cruising license issued pursuant to 19 C.F.R. Sec. 4.94. Either vessel is exempt from registration only for the first sixty days of use on Washington state waters. On or before the sixty-first day of use on Washington state waters, any vessel in the state under this subsection must obtain a vessel visitor permit as required under RCW 88.02.610;
     (b) A vessel, as defined in section 2 of this act, for which the owner is issued a nonresident/visitor annual permit under section 10 of this act and registered under RCW 88.02.550;
     (5)(a) A vessel that is currently registered or numbered under the laws of the state of principal operation or that has been issued a valid number under federal law. However, either vessel must be registered in Washington state if the state of principal operation changes to Washington state by the sixty-first day after the vessel arrives in Washington state;
     (b) A vessel, as defined in section 2 of this act, for which the owner is issued a nonresident/visitor annual permit under section 10 of this act and registered under RCW 88.02.550;
     (6)(a) A vessel owned by a nonresident if:
     (((a))) (i) The vessel is located upon the waters of this state exclusively for repairs, alteration, or reconstruction, or any testing related to these services;
     (((b))) (ii) An employee of the facility providing these services is on board the vessel during any testing; and
     (((c))) (iii) The nonresident files an affidavit with the department of revenue by the sixty-first day verifying that the vessel is located upon the waters of this state for these services.
     (b) The nonresident ((shall)) must continue to file an affidavit every sixty days thereafter, as long as the vessel is located upon the waters of this state exclusively for repairs, alteration, reconstruction, or testing;
     (7) A vessel equipped with propulsion machinery of less than ten horsepower that:
     (a) Is owned by the owner of a vessel for which a valid vessel number has been issued;
     (b) Displays the number of that numbered vessel followed by the suffix "1" in the manner prescribed by the department; and
     (c) Is used as a tender for direct transportation between the numbered vessel and the shore and for no other purpose;
     (8) A vessel under sixteen feet in overall length that has no propulsion machinery of any type or that is not used on waters subject to the jurisdiction of the United States or on the high seas beyond the territorial seas for vessels owned in the United States and are powered by propulsion machinery of ten or less horsepower;
     (9) A vessel with no propulsion machinery of any type for which the primary mode of propulsion is human power;
     (10) A vessel primarily engaged in commerce that has or is required to have a valid marine document as a vessel of the United States. A commercial vessel that the department of revenue determines has the external appearance of a vessel that would otherwise be required to register under this chapter, must display decals issued annually by the department of revenue that indicate the vessel's exempt status;
     (11) A vessel primarily engaged in commerce that is owned by a resident of a country other than the United States;
     (12)(a) A vessel owned by a nonresident natural person brought into the state for use or enjoyment while temporarily within the state for not more than six months in any continuous twelve-month period that (((a))) (i) is currently registered or numbered under the laws of the state of principal use or (((b))) (ii) has been issued a valid number under federal law. This type of vessel is exempt from registration only for the first sixty days of use on Washington state waters. On or before the sixty-first day of use on Washington state waters, any vessel under this subsection must obtain a nonresident vessel permit as required under RCW 88.02.620;
     (b) A vessel, as defined in section 2 of this act, for which the owner is issued a nonresident/visitor annual permit under section 10 of this act and registered under RCW 88.02.550;
     (13) A vessel used in this state by a nonresident individual possessing a valid use permit issued under RCW 82.08.700 or 82.12.700; and
     (14) A vessel held for sale by any licensed dealer.

NEW SECTION.  Sec. 12   A new section is added to chapter 88.02 RCW to read as follows:
     (1) A marina that leases permanent moorage to vessels must require the following information from the lessee as a condition of leasing moorage space:
     (a) The name of the legal owner of the vessel;
     (b) A local contact person, if different than the owner;
     (c) The owner's address and telephone number;
     (d) The vessel's hull identification number;
     (e) The vessel's coast guard registration (if applicable);
     (f) The vessel's home port;
     (g) The date on which the moorage lease began; and
     (h) The vessel's country or state of registration and registration number.
     (2) A marina must maintain records of the information required under subsection (1) of this section for at least two years. The marina must permit any authorized agent of the department or the department of revenue to inspect these records upon request.
     (3) A marina that leases permanent moorage to vessels must require proof of vessel registration or a written statement of intent to register a vessel as a condition of leasing moorage space. If the applicant's vessel is not registered in this state, the marina must inform the moorage applicant of the state law requiring vessel registration and direct the moorage applicant to the appropriate vessel registration forms. After being informed by the marina of the registration requirements, it is the moorage applicant's responsibility to register the vessel.

Sec. 13   RCW 88.02.610 and 2010 c 161 s 1026 are each amended to read as follows:
     (1) Except as otherwise provided in subsection (2) of this section, a vessel owner ((shall)) must apply for a vessel visitor permit if the vessel is:
     (a) Currently registered or numbered under the laws of a country other than the United States or has a valid United States customs service cruising license issued under 19 C.F.R. Sec. 4.94; and
     (b) Being used on Washington state waters for the personal use of the owner for more than sixty days.
     (2) The vessel visitor permit provided in this section does not apply to a vessel as defined in section 2 of this act.
     (3) A vessel visitor permit:
     (a) May be obtained from the department, county auditor or other agent, or subagent appointed by the director;
     (b) Must show the date the vessel first came into Washington state; and
     (c) Is valid as long as the vessel remains currently registered or numbered under the laws of a country other than the United States or the United States customs service cruising license remains valid.
     (((3))) (4) The department, county auditor or other agent, or subagent appointed by the director ((shall)) must collect the fee required in RCW 88.02.640(1)(l) when issuing a vessel visitor permit.
     (((4))) (5) The department ((shall)) must adopt rules to implement this section, including rules on issuing and displaying the vessel visitor permit.

Sec. 14   RCW 88.02.620 and 2010 c 161 s 1027 are each amended to read as follows:
     (1) Except as otherwise provided in subsection (2) of this section, a vessel owner who is a nonresident natural person ((shall)) must apply for a nonresident vessel permit on or before the sixty-first day of use in Washington state if the vessel:
     (a) Is currently registered or numbered under the laws of the state of principal operation or has been issued a valid number under federal law; and
     (b) Has been brought into Washington state for personal use for not more than six months in any continuous twelve-month period.
     (2) The nonresident vessel permit provided in this section does not apply to a vessel as defined in section 2 of this act.
     (3) A nonresident vessel permit:
     (a) May be obtained from the department, county auditor or other agent, or subagent appointed by the director;
     (b) Must show the date the vessel first came into Washington state; and
     (c) Is valid for two months.
     (((3))) (4) The department, county auditor or other agent, or subagent appointed by the director ((shall)) must collect the fee required in RCW 88.02.640(1)(g) when issuing nonresident vessel permits.
     (((4))) (5) A nonresident vessel permit is not required under this section if the vessel is used in conducting temporary business activity within Washington state.
     (((5))) (6) The department ((shall)) must adopt rules to implement this section, including rules on issuing and displaying the nonresident vessel permit.

Sec. 15   RCW 88.02.640 and 2010 c 161 s 1028 are each amended to read as follows:
     (1) In addition to any other fees and taxes required by law, the department, county auditor or other agent, or subagent appointed by the director ((shall)) must charge the following vessel fees:

Sec. 16   RCW 82.49.020 and 1984 c 250 s 1 are each amended to read as follows:
     The following are exempt from the tax imposed under this chapter:
     (1) Vessels exempt from the registration requirements of chapter 88.02 RCW, except as provided in subsection (7) of this section;
     (2) Vessels used exclusively for commercial fishing purposes;
     (3) Vessels under sixteen feet in overall length;
     (4) Vessels owned and operated by the United States, a state of the United States, or any municipality or political subdivision thereof;
     (5) Vessels owned by a nonprofit organization or association engaged in character building of boys and girls under eighteen years of age and solely used for such purposes, as determined by the department for the purposes of RCW 84.36.030; ((and))
     (6) Vessels owned and held for sale by a dealer, but not rented on a regular commercial basis; and
     (7) Vessels, as defined in section 2 of this act, for which the nonresident owner has purchased a nonresident/visitor annual permit as provided in section 10 of this act.

NEW SECTION.  Sec. 17   This act takes effect August 1, 2011.