A sales tax is a tax applied to the sale, rental, repair, or installation of tangible personal property, digital products, or some services purchased for the buyer's own use.  It is a percentage tax based on the selling price of the items.  A use tax is similar, except that it applies to the value of goods used within the state when a sales tax for them has not been paid.  For example, a sales tax would be imposed on the sale of a car inside Washington, while a use tax would be imposed on a car purchased outside of Washington when it is registered in Washington if no sales tax, or a sales tax at a lower rate than Washington's, was paid at the time of purchase.

The state imposes a sales and use tax at the rate of 6.5 percent of the selling price or value of the article sold or used.  Counties and cities can also impose sales and use taxes when authorized to do so by the Legislature.  In many cases, when the Legislature authorizes the imposition of a tax, it also directs how the revenue from the tax is to be used. 

In two cases, however, the Legislature has authorized the imposition of a sales and use tax while allowing the revenue to be used at the discretion of the local government imposing the tax.  Both of these taxes are similar and both can be imposed legislatively by the governing body of a county or city.

The first of these taxes does not apply to natural or manufactured gas, except for natural gas used as transportation fuel.  The tax may be imposed at a rate of up to 0.5 percent by a county, or a city within a county that has not imposed the tax.  If both the county and a city within the county impose the tax, then the city's tax rate is reduced to 0.425 percent.

The second of these taxes can also be imposed at a rate of up to 0.5 percent by a county or city.  If a county imposes the tax at an equal or greater rate than a city within the county, the county must receive 15 percent of the tax revenue collected by the city.  If a county imposes the tax at a lower rate than a city within the county, then the county must instead receive 15 percent of the tax revenue that the county would have collected had the city not imposed a tax. 

With both taxes, if a tax would be collected by both a county and a city on the same taxable event, the city tax is instead a credit against the county tax.

The rate of either or both taxes imposed by a city, or the percentage of either or both taxes that a county receives from within a city that imposes the tax, may be altered as part of an agreement between local governments for the provision of government services.

An interlocal agreement is an agreement between local governments or other public agencies to cooperatively conduct government activities or provide services.  The agreement must include certain terms, including the duration of the agreement, the precise organization of any entity created, the purpose of the agreement, how the undertaking will be financed, and how the agreement can be terminated.

Cities and towns may enter into an interlocal agreement to share a portion of the two general purpose sales and use taxes.  In addition to the terms required to be included in any interlocal agreement, an agreement to share sales and use tax revenue must include:

• the area or areas in which the agreement applies, if it is only applicable to revenue collected in certain areas, and how the parties will determine the revenue collected in those areas;
• the amount or proportion of revenue to be shared; and
• the mechanism or method the parties will use to share the revenue.