BILL REQ. #:  S-0912.1 

Read first time 02/16/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to terminating certain tax preferences to provide funding for maintaining basic health program enrollment; amending RCW 82.04.4292, 82.48.010, 82.48.020, 82.48.030, 82.48.070, 82.48.080, 82.48.110, 47.68.230, 82.48.090, 82.12.020, and 82.12.035; reenacting and amending RCW 82.04.050 and 82.12.010; adding a new section to chapter 82.48 RCW; adding a new section to chapter 82.04 RCW; creating a new section; repealing RCW 82.08.811 and 82.12.811; providing an effective date; and declaring an emergency.

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

NEW SECTION.  Sec. 101   The legislature finds that there is a need to provide funding to maintain enrollment in the state basic health plan in order to ensure access to affordable, quality health care services for Washington residents who lack other means of acquiring or maintaining such health care coverage. The legislature further finds that certain tax preferences are obsolete and inefficient and that such tax preferences should be ended and the funding therefrom should be used to provide funding to maintain enrollment in the state basic health plan. Therefore, it is the legislature's intent that the funds saved by the termination of the tax preferences in this act be used for the purpose of the basic health plan.

Sec. 201   RCW 82.04.4292 and 2010 1st sp.s. c 23 s 301 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, interest received on investments or loans primarily secured by first mortgages or trust deeds on nontransient residential properties.
     (2) Interest deductible under this section includes the portion of fees charged to borrowers, including points and loan origination fees, that is recognized over the life of the loan as an adjustment to yield in the taxpayer's books and records according to generally accepted accounting principles.
     (3) Subsections (1) and (2) of this section notwithstanding, the following is a nonexclusive list of items that are not deductible under this section:
     (a) Fees for specific services such as: Document preparation fees; finder fees; brokerage fees; title examination fees; fees for credit checks; notary fees; loan application fees; interest lock-in fees if the loan is not made; servicing fees; and similar fees or amounts;
     (b) Fees received in consideration for an agreement to make funds available for a specific period of time at specified terms, commonly referred to as commitment fees;
     (c) Any other fees, or portion of a fee, that is not recognized over the life of the loan as an adjustment to yield in the taxpayer's books and records according to generally accepted accounting principles;
     (d) Gains on the sale of valuable rights such as service release premiums, which are amounts received when servicing rights are sold; and
     (e) Gains on the sale of loans, except deferred loan origination fees and points deductible under subsection (2) of this section, are not to be considered part of the proceeds of sale of the loan.
     (4) Notwithstanding subsection (3) of this section, in computing tax there may be deducted from the measure of tax by those engaged in banking, loan, security, or other financial businesses, amounts received for servicing loans primarily secured by first mortgages or trust deeds on nontransient residential properties, including such loans that secure mortgage-backed or mortgage-related securities, but only if:
     (a)(i) The loans were originated by the person claiming a deduction under this subsection (4) and that person either sold the loans on the secondary market or securitized the loans and sold the securities on the secondary market; or
     (ii)(A) The person claiming a deduction under this subsection (4) acquired the loans from the person that originated the loans through a merger or acquisition of substantially all of the assets of the person who originated the loans, or the person claiming a deduction under this subsection (4) is affiliated with the person that originated the loans. For purposes of this subsection, "affiliated" means under common control. "Control" means the possession, directly or indirectly, of more than fifty percent of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise; and
     (B) Either the person who originated the loans or the person claiming a deduction under this subsection (4) sold the loans on the secondary market or securitized the loans and sold the securities on the secondary market; and
     (b) The amounts received for servicing the loans are determined by a percentage of the interest paid by the borrower and are only received if the borrower makes interest payments.
     (5) The total amount a person may deduct under this section for any calendar year may not exceed one hundred million dollars.

Sec. 301   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 licensing.
     (2) "Aircraft" means any weight-carrying device or structure for navigation of the air which is designed to be supported by the air;
     (((2) "Secretary" means the secretary of transportation;))
     (3) "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. 302   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)) constitutes the necessary evidence of aircraft use or intended use. ((The tax shall)) The amount of the tax is five-tenths of one percent of the taxable value of the aircraft, as determined under section 303 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)) department 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.
     (2))) (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 ((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. 303   A new section is added to chapter 82.48 RCW to read as follows:
     (1)(a) Except as otherwise provided in this section, taxable value is based on the most recent purchase price of the aircraft, depreciated according to the year of the most recent purchase of the aircraft. For purposes of this subsection, "purchase price" means 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.
     (b) For aircraft for which the most recent purchase price was not indicative of the fair market value of the aircraft at the time of purchase, the department may appraise the aircraft. If the department appraises the aircraft, the taxable value is based on the department's appraisal of fair market value of the aircraft at the time of the most recent purchase, depreciated according to the year of the most recent purchase of the aircraft.
     (c) For aircraft acquired other than by purchase, including aircraft manufactured, constructed, or assembled by the owner, the department must appraise the aircraft before registration. In such cases, the taxable value is the fair market value at the time of the department's appraisal. For subsequent years, taxable value is based on the department's appraisal of fair market value of the aircraft, depreciated according to the year that the owner acquired the aircraft or, in the case of aircraft manufactured, constructed, or assembled by the owner, the year that the aircraft became operational.
     (2)(a) An appraisal conducted by the department:
     (i) Need not include a physical inspection of the aircraft; and
     (ii) May be based on any guidebook, report, or compendium of recognized standing in the aviation industry and information provided to the department by the owner of the aircraft.
     (b) Any aircraft owner disputing the department's appraised value under this section may petition for a conference with the department as provided under RCW 82.32.160 or for reduction of the tax due as provided under RCW 82.32.170.
     (3)(a) The department must prepare a depreciation schedule for use in the determination of the taxable 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.
     (b) The department must recommend a depreciation schedule to the fiscal committees of the senate and house of representatives by December 31, 2011, for enactment in law during the 2012 legislative session for use in the determination of taxable value for taxes due under this chapter during calendar year 2013 and subsequent calendar years.
     (4) The department may adopt any rules necessary to implement this section, including any rules necessary to provide a reasonable method or methods to determine the fair market value of an aircraft.
     (5) For purposes of this section, "department" means the department of revenue.

Sec. 304   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. 305   RCW 82.48.070 and 1987 c 220 s 7 are each amended to read as follows:
     The ((secretary shall)) department must give a receipt to each person paying ((the)) excise tax under this chapter.

Sec. 306   RCW 82.48.080 and 1995 c 170 s 2 are each amended to read as follows:
     The ((secretary shall)) department 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. 307   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)).

Sec. 308   RCW 47.68.230 and 2005 c 341 s 1 are each amended to read as follows:
     (1) It ((shall be)) is unlawful for any person to operate or cause or authorize to be operated any civil aircraft within this state unless such aircraft has an appropriate effective certificate, permit, or license issued by the United States, if such certificate, permit, or license is required by the United States, and a current registration certificate issued by the ((secretary of transportation)) department of licensing, if registration of the aircraft with the department of ((transportation)) licensing is required by this chapter. It ((shall be)) is unlawful for any person to engage in aeronautics as an airman or airwoman in the state unless the person has an appropriate effective airman or airwoman certificate, permit, rating, or license issued by the United States authorizing him or her to engage in the particular class of aeronautics in which he or she is engaged, if such certificate, permit, rating, or license is required by the United States.
     (2) Where a certificate, permit, rating, or license is required for an airman or airwoman by the United States, it ((shall)) must be kept in his or her personal possession when he or she is operating within the state. Where a certificate, permit, or license is required by the United States or by this chapter for an aircraft, it ((shall)) must be carried in the aircraft at all times while the aircraft is operating in the state and ((shall)) must be conspicuously posted in the aircraft where it may be readily seen by passengers or inspectors. Such certificates ((shall)) must be presented for inspection upon the demand of any peace officer, or any other officer of the state or of a municipality or member, official, or employee of the department of transportation authorized pursuant to this chapter to enforce the aeronautics laws, or any official, manager, or person in charge of any airport, or upon the reasonable request of any person.

Sec. 309   RCW 82.48.090 and 1992 c 154 s 2 are each amended to read as follows:
     In case a claim is made by any person that the person has paid an erroneously excessive amount of excise tax under this chapter, the person may apply to the department of ((transportation)) licensing for a refund of the claimed excessive amount together with interest at the rate specified in RCW 82.32.060. The department of ((transportation shall)) licensing must review such application, and if it determines that an excess amount of tax has actually been paid by the taxpayer, such excess amount and interest at the rate specified in RCW 82.32.060 ((shall)) must be refunded to the taxpayer by means of a voucher approved by the department of ((transportation)) licensing and by the issuance of a state warrant drawn upon and payable from such funds as the legislature may provide for that purpose. No refund ((shall)) may be allowed, however, unless application for the refund is filed with the department of ((transportation)) licensing within ninety days after the claimed excessive excise tax was paid and the amount of the overpayment exceeds five dollars.

Sec. 401   RCW 82.04.050 and 2010 c 112 s 14, 2010 c 111 s 201, and 2010 c 106 s 202 are each reenacted and amended to read as follows:
     (1)(a) "Sale at retail" or "retail sale" means every sale of tangible personal property (including articles produced, fabricated, or imprinted) to all persons irrespective of the nature of their business and including, among others, without limiting the scope hereof, persons who install, repair, clean, alter, improve, construct, or decorate real or personal property of or for consumers other than a sale to a person who:
     (i) Purchases for the purpose of resale as tangible personal property in the regular course of business without intervening use by such person, but a purchase for the purpose of resale by a regional transit authority under RCW 81.112.300 is not a sale for resale; or
     (ii) Installs, repairs, cleans, alters, imprints, improves, constructs, or decorates real or personal property of or for consumers, if such tangible personal property becomes an ingredient or component of such real or personal property without intervening use by such person; or
     (iii) Purchases for the purpose of consuming the property purchased in producing for sale as a new article of tangible personal property or substance, of which such property becomes an ingredient or component or is a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale; or
     (iv) Purchases for the purpose of consuming the property purchased in producing ferrosilicon which is subsequently used in producing magnesium for sale, if the primary purpose of such property is to create a chemical reaction directly through contact with an ingredient of ferrosilicon; or
     (v) Purchases for the purpose of providing the property to consumers as part of competitive telephone service, as defined in RCW 82.04.065; or
     (vi) Purchases for the purpose of satisfying the person's obligations under an extended warranty as defined in subsection (7) of this section, if such tangible personal property replaces or becomes an ingredient or component of property covered by the extended warranty without intervening use by such person.
     (b) The term includes every sale of tangible personal property that is used or consumed or to be used or consumed in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property is resold or used as provided in (a)(i) through (vi) of this subsection following such use.
     (c) The term also means every sale of tangible personal property to persons engaged in any business that is taxable under RCW 82.04.280 (1), (2), and (7), 82.04.290, and 82.04.2908.
     (2) The term "sale at retail" or "retail sale" includes the sale of or charge made for tangible personal property consumed and/or for labor and services rendered in respect to the following:
     (a) The installing, repairing, cleaning, altering, imprinting, or improving of tangible personal property of or for consumers, including charges made for the mere use of facilities in respect thereto, but excluding charges made for the use of self-service laundry facilities, and also excluding sales of laundry service to nonprofit health care facilities, and excluding services rendered in respect to live animals, birds and insects;
     (b) The constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, and also includes the sale of services or charges made for the clearing of land and the moving of earth excepting the mere leveling of land used in commercial farming or agriculture;
     (c) The constructing, repairing, or improving of any structure upon, above, or under any real property owned by an owner who conveys the property by title, possession, or any other means to the person performing such construction, repair, or improvement for the purpose of performing such construction, repair, or improvement and the property is then reconveyed by title, possession, or any other means to the original owner;
     (d) The cleaning, fumigating, razing, or moving of existing buildings or structures, but does not include the charge made for janitorial services; and for purposes of this section the term "janitorial services" means those cleaning and caretaking services ordinarily performed by commercial janitor service businesses including, but not limited to, wall and window washing, floor cleaning and waxing, and the cleaning in place of rugs, drapes and upholstery. The term "janitorial services" does not include painting, papering, repairing, furnace or septic tank cleaning, snow removal or sandblasting;
     (e) Automobile towing and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16 RCW;
     (f) The furnishing of lodging and all other services by a hotel, rooming house, tourist court, motel, trailer camp, and the granting of any similar license to use real property, as distinguished from the renting or leasing of real property, and it is presumed that the occupancy of real property for a continuous period of one month or more constitutes a rental or lease of real property and not a mere license to use or enjoy the same. For the purposes of this subsection, it is presumed that the sale of and charge made for the furnishing of lodging for a continuous period of one month or more to a person is a rental or lease of real property and not a mere license to enjoy the same;
     (g) The installing, repairing, altering, or improving of digital goods for consumers;
     (h) Persons taxable under (a), (b), (c), (d), (e), (f), and (g) of this subsection when such sales or charges are for property, labor and services which are used or consumed in whole or in part by such persons in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property, labor and services may be resold after such use or consumption. Nothing contained in this subsection may be construed to modify subsection (1) of this section and nothing contained in subsection (1) of this section may be construed to modify this subsection.
     (3) The term "sale at retail" or "retail sale" includes the sale of or charge made for personal, business, or professional services including amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities:
     (a) Amusement and recreation services including but not limited to golf, pool, billiards, skating, bowling, ski lifts and tows, day trips for sightseeing purposes, and others, when provided to consumers;
     (b) Abstract, title insurance, and escrow services;
     (c) Credit bureau services;
     (d) Automobile parking and storage garage services;
     (e) Landscape maintenance and horticultural services but excluding (i) horticultural services provided to farmers and (ii) pruning, trimming, repairing, removing, and clearing of trees and brush near electric transmission or distribution lines or equipment, if performed by or at the direction of an electric utility;
     (f) Service charges associated with tickets to professional sporting events; ((and))
     (g) The following personal services: Physical fitness services, tanning salon services, tattoo parlor services, steam bath services, turkish bath services, escort services, and dating services; and
     (h) Cosmetic medical services.
     (4)(a) The term also includes the renting or leasing of tangible personal property to consumers.
     (b) The term does not include the renting or leasing of tangible personal property where the lease or rental is for the purpose of sublease or subrent.
     (5) The term also includes the providing of "competitive telephone service," "telecommunications service," or "ancillary services," as those terms are defined in RCW 82.04.065, to consumers.
     (6)(a) The term also includes the sale of prewritten computer software to a consumer, regardless of the method of delivery to the end user. For purposes of this subsection (6)(a), the sale of prewritten computer software includes the sale of or charge made for a key or an enabling or activation code, where the key or code is required to activate prewritten computer software and put the software into use. There is no separate sale of the key or code from the prewritten computer software, regardless of how the sale may be characterized by the vendor or by the purchaser.
     The term "retail sale" does not include the sale of or charge made for:
     (i) Custom software; or
     (ii) The customization of prewritten computer software.
     (b)(i) The term also includes the charge made to consumers for the right to access and use prewritten computer software, where possession of the software is maintained by the seller or a third party, regardless of whether the charge for the service is on a per use, per user, per license, subscription, or some other basis.
     (ii)(A) The service described in (b)(i) of this subsection (6) includes the right to access and use prewritten computer software to perform data processing.
     (B) For purposes of this subsection (6)(b)(ii), "data processing" means the systematic performance of operations on data to extract the required information in an appropriate form or to convert the data to usable information. Data processing includes check processing, image processing, form processing, survey processing, payroll processing, claim processing, and similar activities.
     (7) The term also includes the sale of or charge made for an extended warranty to a consumer. For purposes of this subsection, "extended warranty" means an agreement for a specified duration to perform the replacement or repair of tangible personal property at no additional charge or a reduced charge for tangible personal property, labor, or both, or to provide indemnification for the replacement or repair of tangible personal property, based on the occurrence of specified events. The term "extended warranty" does not include an agreement, otherwise meeting the definition of extended warranty in this subsection, if no separate charge is made for the agreement and the value of the agreement is included in the sales price of the tangible personal property covered by the agreement. For purposes of this subsection, "sales price" has the same meaning as in RCW 82.08.010.
     (8)(a) The term also includes the following sales to consumers of digital goods, digital codes, and digital automated services:
     (i) Sales in which the seller has granted the purchaser the right of permanent use;
     (ii) Sales in which the seller has granted the purchaser a right of use that is less than permanent;
     (iii) Sales in which the purchaser is not obligated to make continued payment as a condition of the sale; and
     (iv) Sales in which the purchaser is obligated to make continued payment as a condition of the sale.
     (b) A retail sale of digital goods, digital codes, or digital automated services under this subsection (8) includes any services provided by the seller exclusively in connection with the digital goods, digital codes, or digital automated services, whether or not a separate charge is made for such services.
     (c) For purposes of this subsection, "permanent" means perpetual or for an indefinite or unspecified length of time. A right of permanent use is presumed to have been granted unless the agreement between the seller and the purchaser specifies or the circumstances surrounding the transaction suggest or indicate that the right to use terminates on the occurrence of a condition subsequent.
     (9) The term also includes the charge made for providing tangible personal property along with an operator for a fixed or indeterminate period of time. A consideration of this is that the operator is necessary for the tangible personal property to perform as designed. For the purpose of this subsection (9), an operator must do more than maintain, inspect, or set up the tangible personal property.
     (10) The term does not include the sale of or charge made for labor and services rendered in respect to the building, repairing, or improving of any street, place, road, highway, easement, right-of-way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind.
     (11) The term also does not include sales of chemical sprays or washes to persons for the purpose of postharvest treatment of fruit for the prevention of scald, fungus, mold, or decay, nor does it include sales of feed, seed, seedlings, fertilizer, agents for enhanced pollination including insects such as bees, and spray materials to: (a) Persons who participate in the federal conservation reserve program, the environmental quality incentives program, the wetlands reserve program, and the wildlife habitat incentives program, or their successors administered by the United States department of agriculture; (b) farmers for the purpose of producing for sale any agricultural product; and (c) farmers acting under cooperative habitat development or access contracts with an organization exempt from federal income tax under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code or the Washington state department of fish and wildlife to produce or improve wildlife habitat on land that the farmer owns or leases.
     (12) The term does not include the sale of or charge made for labor and services rendered in respect to the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing, or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation. Nor does the term include the sale of services or charges made for the clearing of land and the moving of earth of or for the United States, any instrumentality thereof, or a county or city housing authority. Nor does the term include the sale of services or charges made for cleaning up for the United States, or its instrumentalities, radioactive waste and other by-products of weapons production and nuclear research and development.
     (13) The term does not include the sale of or charge made for labor, services, or tangible personal property pursuant to agreements providing maintenance services for bus, rail, or rail fixed guideway equipment when a regional transit authority is the recipient of the labor, services, or tangible personal property, and a transit agency, as defined in RCW 81.104.015, performs the labor or services.
     (14) The term does not include the sale for resale of any service described in this section if the sale would otherwise constitute a "sale at retail" and "retail sale" under this section.

NEW SECTION.  Sec. 402   A new section is added to chapter 82.04 RCW to read as follows:
     (1) "Cosmetic medical service" means any medical procedure performed on an individual by a person licensed or regulated in a health profession as described in RCW 18.120.020, and any services directly related to the performance of the medical procedure, that is directed at improving the individual's appearance and that is not medically necessary to promote the proper function of the body or prevent or treat physical illness or disease. "Cosmetic medical service" includes, but is not limited to, cosmetic surgery, hair transplants, cosmetic injections, cosmetic soft tissue fillers, dermabrasion and chemical peel, laser hair removal, laser skin resurfacing, laser treatment of leg veins, sclerotherapy, and cosmetic dentistry. Any medical procedure performed on abnormal structures caused by or related to congenital defects, developmental abnormalities, trauma, infection, tumors, or disease, including procedures to improve function or give a more normal appearance, is medically necessary. Services covered by the individual's medical or dental insurance or that are deductible by the individual as medical expenses for purposes of federal income tax are presumed to be medically necessary services.
     (2) "Cosmetic surgery" means the surgical reshaping of normal structures on the body to improve the body image, self-esteem, or appearance of an individual.
     (3) "Services directly related to the performance of the medical procedure" include occupancy at medical facilities and services provided by an anesthesiologist, surgeon, or other licensed or regulated health professional described in RCW 18.120.020. Services required for or directly related to cosmetic medical services do not include evaluation and referral by a primary care physician or consultation or treatment by a counselor, psychologist, or psychiatrist.
     (4) An individual claiming that a medical procedure, otherwise meeting the definition of cosmetic medical service in this section, is not a cosmetic medical service must complete and provide to the seller an affidavit in a form and manner prescribed by the department documenting that the procedure is medically necessary to promote the proper function of the body or prevent or treat physical illness or disease. The seller must retain a copy of the affidavit for the seller's files.

Sec. 403   RCW 82.12.020 and 2010 1st sp.s. c 23 s 206 are each amended to read as follows:
     (1) There is levied and 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 acquired by 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 (h), 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 (h), 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. 404   RCW 82.12.010 and 2010 c 127 s 4 are each reenacted and amended to read as follows:
     For the purposes of this chapter:
     (1) The meaning ascribed to words and phrases in chapters 82.04 and 82.08 RCW, insofar as applicable, has full force and effect with respect to taxes imposed under the provisions of this chapter. "Consumer," in addition to the meaning ascribed to it in chapters 82.04 and 82.08 RCW insofar as applicable, also means any person who distributes or displays, or causes to be distributed or displayed, any article of tangible personal property, except newspapers, the primary purpose of which is to promote the sale of products or services. With respect to property distributed to persons within this state by a consumer as defined in this subsection (1), the use of the property is deemed to be by such consumer.
     (2) "Extended warranty" has the same meaning as in RCW 82.04.050(7).
     (3) "Purchase price" means the same as sales price as defined in RCW 82.08.010.
     (4)(a)(i) Except as provided in (a)(ii) of this subsection (4), "retailer" means every seller as defined in RCW 82.08.010 and every person engaged in the business of selling tangible personal property at retail and every person required to collect from purchasers the tax imposed under this chapter.
     (ii) "Retailer" does not include a professional employer organization when a covered employee coemployed with the client under the terms of a professional employer agreement engages in activities that constitute a sale of tangible personal property, extended warranty, digital good, digital code, or a sale of any digital automated service or service defined as a retail sale in RCW 82.04.050 (2)(a) or (g), (3)(a), or (6)(b) that is subject to the tax imposed by this chapter. In such cases, the client, and not the professional employer organization, is deemed to be the retailer and is responsible for collecting and remitting the tax imposed by this chapter.
     (b) For the purposes of (a) of this subsection, the terms "client," "covered employee," "professional employer agreement," and "professional employer organization" have the same meanings as in RCW 82.04.540.
     (5) "Taxpayer" and "purchaser" include all persons included within the meaning of the word "buyer" and the word "consumer" as defined in chapters 82.04 and 82.08 RCW.
     (6) "Use," "used," "using," or "put to use" have their ordinary meaning, and mean:
     (a) With respect to tangible personal property, except for natural gas and manufactured gas, the first act within this state by which the taxpayer takes or assumes dominion or control over the article of tangible personal property (as a consumer), and include installation, storage, withdrawal from storage, distribution, or any other act preparatory to subsequent actual use or consumption within this state;
     (b) With respect to a service defined in RCW 82.04.050(2)(a), the first act within this state after the service has been performed by which the taxpayer takes or assumes dominion or control over the article of tangible personal property upon which the service was performed (as a consumer), and includes installation, storage, withdrawal from storage, distribution, or any other act preparatory to subsequent actual use or consumption of the article within this state;
     (c) With respect to an extended warranty, the first act within this state after the extended warranty has been acquired by which the taxpayer takes or assumes dominion or control over the article of tangible personal property to which the extended warranty applies, and includes installation, storage, withdrawal from storage, distribution, or any other act preparatory to subsequent actual use or consumption of the article within this state;
     (d) With respect to a digital good or digital code, the first act within this state by which the taxpayer, as a consumer, views, accesses, downloads, possesses, stores, opens, manipulates, or otherwise uses or enjoys the digital good or digital code;
     (e) With respect to a digital automated service, the first act within this state by which the taxpayer, as a consumer, uses, enjoys, or otherwise receives the benefit of the service;
     (f) With respect to a service defined as a retail sale in RCW 82.04.050(6)(b), the first act within this state by which the taxpayer, as a consumer, accesses the prewritten computer software;
     (g) With respect to a service defined as a retail sale in RCW 82.04.050(2)(g), the first act within this state after the service has been performed by which the taxpayer, as a consumer, views, accesses, downloads, possesses, stores, opens, manipulates, or otherwise uses or enjoys the digital good upon which the service was performed; ((and))
     (h) With respect to natural gas or manufactured gas, the use of which is taxable under RCW 82.12.022, including gas that is also taxable under the authority of RCW 82.14.230, the first act within this state by which the taxpayer consumes the gas by burning the gas or storing the gas in the taxpayer's own facilities for later consumption by the taxpayer; and
     (i) With respect to a service described in RCW 82.04.050(3)(h), the first presence within this state by the taxpayer after the service has been performed upon that taxpayer.
     (7)(a) "Value of the article used" is the purchase price for the article of tangible personal property, the use of which is taxable under this chapter. The term also includes, in addition to the purchase price, the amount of any tariff or duty paid with respect to the importation of the article used. In case the article used is acquired by lease or by gift or is extracted, produced, or manufactured by the person using the same or is sold under conditions wherein the purchase price does not represent the true value thereof, the value of the article used is determined as nearly as possible according to the retail selling price at place of use of similar products of like quality and character under such rules as the department may prescribe.
     (b) In case the articles used are acquired by bailment, the value of the use of the articles so used must be in an amount representing a reasonable rental for the use of the articles so bailed, determined as nearly as possible according to the value of such use at the places of use of similar products of like quality and character under such rules as the department of revenue may prescribe. In case any such articles of tangible personal property are used in respect to the construction, repairing, decorating, or improving of, and which become or are to become an ingredient or component of, new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing or attaching of any such articles therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, then the value of the use of such articles so used is determined according to the retail selling price of such articles, or in the absence of such a selling price, as nearly as possible according to the retail selling price at place of use of similar products of like quality and character or, in the absence of either of these selling price measures, such value may be determined upon a cost basis, in any event under such rules as the department of revenue may prescribe.
     (c) In the case of articles owned by a user engaged in business outside the state which are brought into the state for no more than one hundred eighty days in any period of three hundred sixty-five consecutive days and which are temporarily used for business purposes by the person in this state, the value of the article used must be an amount representing a reasonable rental for the use of the articles, unless the person has paid tax under this chapter or chapter 82.08 RCW upon the full value of the article used, as defined in (a) of this subsection.
     (d) In the case of articles manufactured or produced by the user and used in the manufacture or production of products sold or to be sold to the department of defense of the United States, the value of the articles used is determined according to the value of the ingredients of such articles.
     (e) In the case of an article manufactured or produced for purposes of serving as a prototype for the development of a new or improved product, the value of the article used is determined by: (i) The retail selling price of such new or improved product when first offered for sale; or (ii) the value of materials incorporated into the prototype in cases in which the new or improved product is not offered for sale.
     (f) In the case of an article purchased with a direct pay permit under RCW 82.32.087, the value of the article used is determined by the purchase price of such article if, but for the use of the direct pay permit, the transaction would have been subject to sales tax.
     (8) "Value of the digital good or digital code used" means the purchase price for the digital good or digital code, the use of which is taxable under this chapter. If the digital good or digital code is acquired other than by purchase, the value of the digital good or digital code must be determined as nearly as possible according to the retail selling price at place of use of similar digital goods or digital codes of like quality and character under rules the department may prescribe.
     (9) "Value of the extended warranty used" means the purchase price for the extended warranty, the use of which is taxable under this chapter. If the extended warranty is received by gift or under conditions wherein the purchase price does not represent the true value of the extended warranty, the value of the extended warranty used is determined as nearly as possible according to the retail selling price at place of use of similar extended warranties of like quality and character under rules the department may prescribe.
     (10) "Value of the service used" means the purchase price for the digital automated service or other service, the use of which is taxable under this chapter. If the service is received by gift or under conditions wherein the purchase price does not represent the true value thereof, the value of the service used is determined as nearly as possible according to the retail selling price at place of use of similar services of like quality and character under rules the department may prescribe.

Sec. 405   RCW 82.12.035 and 2009 c 535 s 1107 are each amended to read as follows:
     A credit is allowed against the taxes imposed by this chapter upon the use in this state of tangible personal property, extended warranty, digital good, digital code, digital automated service, or services defined as a retail sale in RCW 82.04.050(2) (a) or (g), (3) (a) or (h), or (6)(b), in the amount that the present user thereof or his or her bailor or donor has paid a legally imposed retail sales or use tax with respect to such property, extended warranty, digital good, digital code, digital automated service, or service defined as a retail sale in RCW 82.04.050 (2) (a) or (g), (3)(a), or (6)(b) to any other state, possession, territory, or commonwealth of the United States, any political subdivision thereof, the District of Columbia, and any foreign country or political subdivision thereof.

NEW SECTION.  Sec. 501   The following acts or parts of acts are each repealed:
     (1) RCW 82.08.811 (Exemptions -- Coal used at coal-fired thermal electric generation facility -- Application -- Demonstration of progress in air pollution control -- Notice of emissions violations -- Reapplication--Payments on cessation of operation) and 1997 c 368 s 4; and
     (2) RCW 82.12.811 (Exemptions -- Coal used at coal-fired thermal electric generation facility -- Application -- Demonstration of progress in air pollution control -- Notice of emissions violations -- Reapplication--Payments on cessation of operation) and 1997 c 368 s 6.

NEW SECTION.  Sec. 601   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, 2011.