AN ACT Relating to excise taxation; amending RCW 82.04.4281, 82.04.4292, 82.04.4293, 82.04.080, 82.02.030, 82.04.280, 82.04.255; 82.04.240, 82.04.250, 82.04.270, 82.04.050, 82.04.190, 82.08.020, 82.04.070, 82.08.010, 82.04.460, 82.08.0273, 82.61.010, 82.61.030, 82.61.070, 82.12.020, 82.12.040, 82.12.0252, 82.12.0255, 82.12.0259, 82.12.035, 82.12.0253, 82.14.060, and 82.04.440; reenacting and amending RCW 82.04.260 and 82.12.010; adding new sections to chapter 82.04 RCW; adding new sections to chapter 82.08 RCW; adding a new section to chapter 82.16 RCW; adding new sections to chapter 82.32 RCW; repealing RCW 82.16.040, 82.04.300, 82.04.2901, 82.04.2904, 82.08.0253, 82.61.040, and 82.08.100; providing an effective date; and declaring an emergency.

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

NEW SECTION. Sec. 1. A new section is added to chapter 82.16 RCW to read as follows:

(1) In computing the tax imposed by this chapter there may be deducted from gross income forty-eight thousand dollars per calendar year. Any unused deduction shall not be carried forward or carried back to any other calendar year. Persons engaged in more than one business subject to tax under this chapter may allocate this deduction to any one or any combination of those businesses: PROVIDED, That the total deduction taken under this section shall not exceed forty-eight thousand dollars per calendar year for any person, regardless of the number of business activities in which that person may be engaged.

(2) The department of revenue may provide for the deduction provided by this section to be taken on any monthly, quarterly, semiannual, or annual tax reporting basis approved by the department for any person's use, and for end of year adjustments for the efficient administration of this deduction. The deduction may be prorated according to the number of months in each reporting period, as long as such proration does not diminish the total forty-eight thousand dollar deduction per calendar year: PROVIDED, That the department shall prorate this deduction for the first effective year based upon the actual number of months or parts of months in such year so long as such proration does not exceed the equivalent of four thousand dollars per month.

NEW SECTION. Sec. 2. Section 82.16.040, chapter 15, Laws of 1961 and RCW 82.16.040 are each repealed.

NEW SECTION. Sec. 3. A new section is added to chapter 82.04 RCW to read as follows:

(1) In computing the tax imposed by this chapter there may be deducted from the measure of tax forty-eight thousand dollars per calendar year. Any unused deduction shall not be carried forward or carried back to any other calendar year. Persons engaged in business under more than one classification of business subject to tax under this chapter may allocate this deduction to any one or any combination of those classifications: PROVIDED, That the total deduction taken under this section shall not exceed forty-eight thousand dollars per calendar year for any person regardless of the number of business activities in which that person may be engaged.

NEW SECTION. Sec. 4. A new section is added to chapter 82.04 RCW to read as follows:

In computing tax there may be deducted from the measure of tax amounts derived by radio and/or television broadcasters from providing network, national, and regional advertising computed as a standard deduction based on the national average thereof as annually reported by the federal communications commission, or in lieu thereof by itemization by the individual broadcasting station, and there may be deducted that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the one hundred micro-volt signal strength and delivery by wire.

NEW SECTION. Sec. 5. Section 82.04.300, chapter 15, Laws of 1961, section 3, chapter 293, Laws of 1961, section 41, chapter 278, Laws of 1975 1st ex. sess., section 4, chapter 196, Laws of 1979 ex. sess., section 213, chapter 3, Laws of 1983 and RCW 82.04.300 are each repealed.

NEW SECTION. Sec. 6. A new section is added to chapter 82.04 RCW to read as follows:

"Service" means any business activity or conduct engaged in for another person for a valuable consideration. It includes the application of time and labor whether or not it produces a tangible commodity. Further, the term includes all business activities of a personal, professional, and financial nature, including activities performed in respect to real or personal property of or for any person, which are rendered, performed, provided, or furnished to any person or for the benefit of any person. It also includes any service defined as a "retail sale" or "sale at retail" under RCW 82.04.050.

Sec. 7. Section 2, chapter 37, Laws of 1980 and RCW 82.04.4281 are each amended to read as follows:

In computing tax there may be deducted from the measure of tax ((~~amounts derived~~)) by persons, other than those engaging in banking, loan, security, or other financial businesses, amounts derived from gains realized from trading in stocks, bonds, other evidences of indebtedness or other investments in intangible personal or real property, and dividends received from such investments, and by insurance companies amounts from all investments or the use of money as such, and also amounts derived as dividends by ((a)) any parent from its subsidiary corporations.

NEW SECTION. Sec. 8. A new section is added to chapter 82.04 RCW to read as follows:

This chapter shall not apply to any income accrued by an employee benefit plan or trust. For purposes of this section the term "employee benefit plan or trust" means any plan, trust, or custodial arrangement that is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 through 1461 or that is described in Sections 125, 401(a), 403, 408, 409 (as in effect prior to January 1, 1984), 419, 457, 501(c)(9) or (17) through (23) of the Internal Revenue Code of 1986, as amended; or similar plans maintained by state or local governments; or plans, trusts, or custodial arrangements established to self-insure benefits required by federal, state, or local law.

NEW SECTION. Sec. 9. A new section is added to chapter 82.04 RCW to read as follows:

This chapter shall not apply to interest received by The Legal Foundation of Washington, as established by the supreme court of Washington, pursuant to Rule 1.14 of the rules of professional conduct.

NEW SECTION. Sec. 10. A new section is added to chapter 82.04 RCW to read as follows:

This chapter shall not apply to interest, gains realized from trading in stocks, bonds, other evidences of indebtedness or investments in intangible personal or real property, or dividends by any person who is not otherwise required to register and pay tax under this chapter: PROVIDED, That sole proprietors or partners are not subject to the tax under this chapter when investing nonbusiness assets in personal transactions unrelated to the business activities for which the sole proprietorship or partnership is otherwise required to be registered.

Sec. 11. Section 12, chapter 37, Laws of 1980 and RCW 82.04.4292 are each amended to read as follows:

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.

Sec. 12. Section 13, chapter 37, Laws of 1980 and RCW 82.04.4293 are each amended to read as follows:

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 paid on all obligations of the state of Washington, its political subdivisions, and municipal corporations organized pursuant to the laws thereof.

Sec. 13. Section 82.04.080, chapter 15, Laws of 1961 and RCW 82.04.080 are each amended to read as follows:

"Gross income of the business" means the value proceeding or accruing by reason of the transaction of the business engaged in and includes gross proceeds of sales, compensation for the rendition of services, gains realized from trading in stocks, bonds, or other evidences of indebtedness, interest, discount, rents, royalties, fees, commissions, dividends, and other emoluments however designated, all without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, the costs of service, interest, discount, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.

NEW SECTION. Sec. 14. The following acts or parts of acts are each repealed:

(1) Section 4, chapter 32, Laws of 1985 and RCW 82.04.2901; and

(2) Section 3, chapter 9, Laws of 1983, section 3, chapter 3, Laws of 1983 2nd ex. sess., section 5, chapter 32, Laws of 1985 and RCW 82.04.2904.

Sec. 15. Section 31, chapter 35, Laws of 1982 1st ex. sess. as last amended by section 5, chapter 296, Laws of 1986 and RCW 82.02.030 are each amended to read as follows:

(1) The rate of the additional taxes under RCW 54.28.020(2), 54.28.025(2), 66.24.210(2), 66.24.290(2), ((~~82.04.2901,~~)) 82.16.020(2), 82.26.020(2), 82.27.020(5), 82.29A.030(2), 82.44.020(5), and 82.45.060(2) shall be seven percent;

(2) The rate of the additional taxes under RCW 82.08.150(4) shall be fourteen percent; and

(3) The rate of the additional taxes under RCW 82.24.020(2) shall be fifteen percent.

Sec. 16. Section 5, chapter 3, Laws of 1983 2nd ex. sess. as amended by section 2, chapter 135, Laws of 1985 and by section 1, chapter 471, Laws of 1985 and RCW 82.04.260 are each reenacted and amended to read as follows:

(1) Upon every person engaging within this state in the business of buying wheat, oats, dry peas, dry beans, lentils, triticale, corn, rye and barley, but not including any manufactured or processed products thereof, and selling the same at wholesale; the tax imposed shall be equal to the gross proceeds derived from such sales multiplied by the rate of one one-hundredth of one percent.

(2) Upon every person engaging within this state in the business of manufacturing wheat into flour, soybeans into soybean oil, or sunflower seeds into sunflower oil; as to such persons the amount of tax with respect to such business shall be equal to the value of the flour or oil manufactured, multiplied by the rate of one-eighth of one percent.

(3) 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 equal to the value of the peas split or processed, multiplied by the rate of one-quarter of one percent.

(4) Upon every person engaging within this state in the business of manufacturing seafood products which remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured, multiplied by the rate of one-eighth of one percent.

(5) Upon every person engaging within this state in the business of manufacturing by canning, preserving, freezing or dehydrating fresh fruits and vegetables; as to such persons the amount of tax with respect to such business shall be equal to the value of the products canned, preserved, frozen or dehydrated multiplied by the rate of three-tenths of one percent.

(6) ((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 equal to the gross income derived from such activities multiplied by the rate of forty-four one-hundredths of one percent.

~~(7)~~)) 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 twenty-five one-hundredths of one percent through June 30, 1986, and one-eighth of one percent thereafter.

((~~(8)~~)) (7) Upon every person engaging within this state in the business of making sales, at retail or wholesale, of nuclear fuel assemblies manufactured by that person, as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the assemblies multiplied by the rate of twenty-five one-hundredths of one percent.

((~~(9)~~)) (8) Upon every person engaging within this state in the business of manufacturing nuclear fuel assemblies, as to such persons the amount of tax with respect to such business shall be equal to the value of the products manufactured multiplied by the rate of twenty-five one-hundredths of one percent.

((~~(10)~~)) (9) Upon every person engaging within this state in the business of acting as a travel agent; as to such persons the amount of the tax with respect to such activities shall be equal to the gross income derived from such activities multiplied by the rate of twenty-five one-hundredths of one percent.

((~~(11)~~)) (10) 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 equal to the gross income derived from such activities multiplied by the rate of thirty-three one-hundredths of one percent.

((~~(12)~~)) (11) 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 equal to the gross proceeds derived from such activities multiplied by the rate of thirty-three one hundredths of one percent. Persons subject to taxation under this subsection shall be 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.

((~~(13)~~)) (12) 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 equal to the gross income of the business, excluding any fees imposed under chapter 43.200 RCW, multiplied by the rate of thirty percent.

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 be determined in accordance with the methods of apportionment required under RCW 82.04.460.

((~~(14)~~)) (13) Upon every person engaging within this state as an insurance agent, insurance broker, or insurance solicitor licensed under chapter 48.17 RCW; as to such persons, the amount of the tax with respect to such licensed activities shall be ((~~equal to the gross income of such business multiplied by the rate of one percent~~)) determined as follows:

(a) For commissions on insurance contracts entered into before June 1, 1987, and for which the premiums are established and cannot be renegotiated or modified for any purpose under the terms of such contracts, then the tax shall be equal to the commissions from such contracts multiplied by the rate of one percent; and

(b) For commissions under contracts entered into on or after June 1, 1987, or for all commissions under contracts entered into before June 1, 1987, and the premiums can be renegotiated or modified for any purpose under the terms of such contracts, then the tax shall be the tax on retailers under RCW 82.04.250, equal to the commissions from such contracts multiplied by the rate of forty-four one-hundredths of one percent.

Sec. 17. Section 2, chapter 8, Laws of 1970 ex. sess. as last amended by section 2, chapter 226, Laws of 1986 and RCW 82.04.280 are each amended to read as follows:

Upon every person engaging within this state in the business of: (1) ((~~Printing, and of publishing newspapers, periodicals or magazines; (2)~~)) Building, repairing or improving 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 and including any readjustment, reconstruction or relocation of the facilities of any public, private or cooperatively owned utility or railroad in the course of such building, repairing or improving, the cost of which readjustment, reconstruction, or relocation, is the responsibility of the public authority whose street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle is being built, repaired or improved; ((~~(3)~~)) (2) extracting for hire or processing for hire; ((~~(4)~~)) (3) operating a cold storage warehouse or storage warehouse, but not including the rental of cold storage lockers; ((~~(5)~~)) (4) representing and performing services for fire or casualty insurance companies as an independent resident managing general agent licensed under the provisions of RCW 48.05.310; (((6) radio and television broadcasting, excluding network, national and regional advertising computed as a standard deduction based on the national average thereof as annually reported by the Federal Communications Commission, or in lieu thereof by itemization by the individual broadcasting station, and excluding that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the 100 micro-volt signal strength and delivery by wire, if any; (7))) (5) engaging in activities which bring a person within the definition of consumer contained in RCW 82.04.190((~~(6), as now or hereafter amended~~)) (7); as to such persons, the amount of tax on such business shall be equal to the gross income of the business multiplied by the rate of forty-four one hundredths of one percent.

As used in this section, "cold storage warehouse" means a storage warehouse used to store fresh and/or frozen perishable fruits or vegetables, meat, seafood, dairy products, or fowl, or any combination thereof, at a desired temperature to maintain the quality of the product for orderly marketing.

As used in this section, "storage warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation, except field warehouses, fruit warehouses, fruit packing plants, warehouses licensed under chapter 22.09 RCW, public garages storing automobiles, railroad freight sheds, docks and wharves, and "self-storage" or "mini storage" facilities whereby customers have direct access to individual storage areas by separate entrance.

Sec. 18. Section 3, chapter 65, Laws of 1970 ex. sess. as last amended by section 2, chapter 32, Laws of 1985 and RCW 82.04.255 are each amended to read as follows:

Upon every person engaging within the state as a real estate broker; as to such persons, the amount of the tax with respect to such business shall be equal to the gross income of the business, multiplied by the rate of ((~~1.50~~)) forty-four one-hundredths of one percent.

The measure of the tax on real estate commissions earned by the real estate broker shall be the gross commission earned by the particular real estate brokerage office including that portion of the commission paid to salesmen or associate brokers in the same office on a particular transaction: PROVIDED, HOWEVER, That where a real estate commission is divided between an originating brokerage office and a cooperating brokerage office on a particular transaction, each brokerage office shall pay the tax only upon their respective shares of said commission: AND PROVIDED FURTHER, That where the brokerage office has paid the tax as provided herein, salesmen or associate brokers within the same brokerage office shall not be required to pay a similar tax upon the same transaction.

Sec. 19. Section 82.04.240, chapter 15, Laws of 1961 as last amended by section 1, chapter 172, Laws of 1981 and RCW 82.04.240 are each amended to read as follows:

Upon every person except persons taxable under subsections (2)((~~, (3), (4), (5), (7), (8), or (9)~~)) through (8) of RCW 82.04.260 engaging within this state in business as a manufacturer; as to such persons the amount of the tax with respect to such business shall be equal to the value of the products, including byproducts, manufactured, multiplied by the rate of forty-four one-hundredths of one percent.

The measure of the tax is the value of the products, including byproducts, so manufactured regardless of the place of sale or the fact that deliveries may be made to points outside the state.

Sec. 20. Section 82.04.250, chapter 15, Laws of 1961 as last amended by section 2, chapter 172, Laws of 1981 and RCW 82.04.250 are each amended to read as follows:

Upon every person except persons taxable under RCW 82.04.255 and 82.04.260((~~(8)~~)) (7) and (9) engaging within this state in the business of making sales at retail, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales of the business, multiplied by the rate of forty-four one-hundredths of one percent.

Sec. 21. Section 82.04.270, chapter 15, Laws of 1961 as last amended by section 4, chapter 172, Laws of 1981 and RCW 82.04.270 are each amended to read as follows:

(1) Upon every person except persons taxable under subsections (1) or ((~~(8)~~)) (7) of RCW 82.04.260 engaging within this state in the business of making sales at wholesale; as to such persons the amount of tax with respect to such business shall be equal to the gross proceeds of sales of such business multiplied by the rate of forty-four one-hundredths of one percent.

(2) The tax imposed by this section is levied and shall be collected from every person engaged in the business of distributing in this state articles of tangible personal property, owned by them from their own warehouse or other central location in this state to two or more of their own retail stores or outlets, where no change of title or ownership occurs, the intent hereof being to impose a tax equal to the wholesaler's tax upon persons performing functions essentially comparable to those of a wholesaler, but not actually making sales: PROVIDED, That the tax designated in this section may not be assessed twice to the same person for the same article. The amount of the tax as to such persons shall be computed by multiplying forty-four one-hundredths of one percent of the value of the article so distributed as of the time of such distribution: PROVIDED, That persons engaged in the activities described in this subsection shall not be liable for the tax imposed if by proper invoice it can be shown that they have purchased such property from a wholesaler who has paid a business and occupation tax to the state upon the same articles. This proviso shall not apply to purchases from manufacturers as defined in RCW 82.04.110. The department of revenue shall prescribe uniform and equitable rules for the purpose of ascertaining such value, which value shall correspond as nearly as possible to the gross proceeds from sales at wholesale in this state of similar articles of like quality and character, and in similar quantities by other taxpayers: PROVIDED FURTHER, That delivery trucks or vans will not under the purposes of this section be considered to be retail stores or outlets.

Sec. 22. Section 1, chapter 8, Laws of 1970 ex. sess. as last amended by section 1, chapter 231, Laws of 1986 and RCW 82.04.050 are each amended to read as follows:

(1) "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 (a) purchases for the purpose of ((~~resale as~~)) reselling such tangible personal property in the regular course of business without any intervening use by such person, or (b) 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 (c) purchases for the purpose of consuming the property purchased in producing for sale 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 !se (d) 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 (e) purchases for the purpose of providing the property to consumers as part of competitive telephone service, as defined in RCW 82.04.065. The term shall include every sale of tangible personal property which is used or consumed or to be used or consumed in the performance of any activity classified as a "sale at retail" or "retail sale" even though such property is resold or utilized as provided in (a), (b), (c), (d), or (e) above following such use. The term also means every sale of tangible personal property to persons engaged in any business which is taxable under RCW 82.04.280((~~, subsections (2) and (7)~~)) (1) and (5) and RCW 82.04.290.

(2) The term "sale at retail" or "retail sale" shall include 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 coin operated laundry facilities when such facilities are situated in an apartment house, hotel, motel, rooming house, trailer camp or tourist camp for the exclusive use of the tenants thereof, and also excluding sales of laundry service to members by nonprofit associations composed exclusively of nonprofit hospitals((~~, 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 shall also include 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 sale of or charge made for labor and services rendered in respect to the cleaning, fumigating, razing or moving of existing buildings or structures, but shall not include the charge made for janitorial services; and for purposes of this section the term "janitorial services" shall mean 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; (d) the sale of or charge made for labor and services rendered in respect to automobile towing and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16 RCW; (e) the sale of and charge made for 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 shall be 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; (f) the sale of or charge made for tangible personal property, labor and services to persons taxable under (a), (b), (c), (d), and (e) above 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 paragraph shall be construed to modify the first paragraph of this section and nothing contained in the first paragraph of this section shall be construed to modify this paragraph)).

(3) The term "sale at retail" or "retail sale" shall include the sale of or charge made for ((~~personal business or professional services~~)) all labor and services rendered in respect to any "sale at retail" or "retail sale" as defined in subsections (1) and (2) of this section as well as all other services (of any kind or nature, however designated) rendered to or for any persons, including but not limited to amounts designated as interest, rents, fees, commissions, admission, and other service emoluments however designated, ((received by persons engaging in the following business activities: (a) Amusement and recreation businesses including but not limited to golf, pool, billiards, skating, bowling, ski lifts and tows and others; (b) abstract, title insurance and escrow businesses; (c) credit bureau businesses; (d) automobile parking and storage garage businesses)) except only those services expressly excluded by subsections (8) through (19) of this section: PROVIDED, That services consisting of the installation, repairing, cleaning, altering, improving, decorating, or construction of real or personal property shall constitute a "retail sale" or "sale at retail" only when performed, provided, or rendered for any "consumer" as defined by RCW 82.04.190 (5) and (6).

(4) The term shall also include the renting or leasing of tangible personal property to consumers.

(5) The term shall also include the providing of telephone service, as defined in RCW 82.04.065, to consumers.

(6) The term shall include advertising by newspapers, radio and television broadcasters, and others who sell time and space in any media, except, (a) advertising in consumer markets beyond the boundaries of this state, and (b) network, national and regional advertising computed as a standard deduction based on the national average thereof as annually reported by the federal communications commission, or in lieu thereof by itemization by the individual broadcasting station, and that portion of revenue represented by the out-of-state audience computed as a ratio to the station's total audience as measured by the one hundred micro-volt signal strength and delivery by wire.

(7) The term shall include real estate commissions taxable under RCW 82.04.255: PROVIDED, That the term shall not include amounts charged or received for services rendered by a real estate agent to a real estate broker to the extent the real estate broker is not acting as an individual.

(8) The term shall not include any of the activities taxable under RCW 82.04.260, except those enumerated in RCW 82.04.260 (7), (9), and (13)(b), nor shall the term apply to any of the activities taxable under RCW 82.04.280.

(9) The term shall not include the sale of or charge made for the rental of real property and the granting of any similar license to use real property for lodging purposes if such rental or license extends for a continuous period of one month or more.

(10) The term shall not include any charge or fee made by hospitals or nursing homes to a person who has been admitted to such hospital or nursing home on an inpatient basis.

(11)(a) The term shall not include any amounts charged or received as interest or discount income, income from originating or facilitating loans or other credit, servicing, or collection fees or other amounts which are (i) charged by or paid to a person engaging in any financial, investment, insurance, or real estate activity, and (ii) directly related to the business of granting, extending, or facilitating credit or lending of money.

(b) The term shall not include any amounts charged or received as service fees for management, administration, or fiduciary functions with respect to loan obligations, whether compensated directly or through the retention of any portion of a periodic payment received on such obligations.

(c) Notwithstanding (a) of this subsection (11), the term shall include: (i) Selling fees, finders fees, or commissions, however computed; (ii) charges made for all other services performed by a person engaged in any financial, investment, insurance, or real estate activity, which are not compensated in the form of interest or discount or are not charges associated with the granting, extension, or facilitating of credit or lending of money or the servicing or collection of amounts associated therewith; (iii) charges made for the purchase of negotiable instruments, annual charges for credit or debit cards, fiduciary fees not otherwise excluded in this section, fees for safe deposits, fees for checking and similar deposit accounts, or fees for other similar services; and (iv) fees or charges made by collection agencies as defined by RCW 19.16.100.

(d) Further, the term shall not include any trustee, custodian, management, or administrative fee charged or received in connection with any employee benefit plan or trust. For purposes of this subsection the term "employee benefit plan or trust" means any plan, trust, or custodial arrangement that is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sections 1001 through 1461 or that is described in Sections 125, 401(a), 403, 408, 409 (as in effect prior to January 1, 1984), 419, 457, 501(c)(9) or (17) through (23) of the Internal Revenue Code of 1986, as amended; or similar plans maintained by state or local governments; or plans, trusts, or custodial arrangements established to self-insure benefits required by federal, state, or local law.

(e) Further, the term shall not include any amounts charged or received as fees or discounts for the providing of credit or debit cards to individuals or entities or in connection with the use of such cards by holders (except annual charges for such cards) or the providing of credit or debit card charging services to merchants or other purveyors of goods, services, or credit which are paid for by such card.

(12) The term shall 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, nor shall it include sales of feed, seed, fertilizer, and spray materials to persons for the purpose of producing for sale any agricultural product whatsoever, including milk, eggs, wool, fur, meat, honey, or other substances obtained from animals, birds, or insects but only when such production and subsequent sale are exempt from tax under RCW 82.04.330, nor shall it include sales of chemical sprays or washes to persons for the purpose of post-harvest treatment of fruit for the prevention of scald, fungus, mold, or decay.

((~~(7)~~)) (13) The term shall 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 shall 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.

(14)(a) The term shall not include tuition fees or any charges in respect to admission, financial aid, education, or matriculation at any accredited public or private educational institution, including public or privately operated kindergartens, primary and secondary schools, and accredited colleges and universities. This section shall not be construed to provide any exemption or exclusion of tax upon sales of tangible personal property by such educational institutions or others. This exclusion shall not apply to any charges made to any persons for attendance at seminars, conferences, or such special events.

(b) The term "tuition fees," as used in this subsection, means any charge by a kindergarten, school, or educational institution charged in return for instruction and education. In addition to instruction fees, the term includes library, laboratory, and room and board charges made for accommodations furnished to students or faculty of schools and educational institutions.

(15)(a) The term shall not include charges for care services licensed under chapter 74.15 RCW provided for persons of any age; nor charges for providing chore services or any other services provided at the residence of or for the benefit of any persons entitled to such services under programs administered by the state department of social and health services.

(b) The term shall not include the services provided by any health or social welfare organization as defined by RCW 82.04.431.

(16) The term shall not include the collection, delivery, storage, treatment, removal from storage, or disposal of refuse or sewage.

(17) The term shall not include services provided by nonprofit youth organizations described under RCW 82.04.4271.

(18) The term shall not include services which are substantially donated even though nominal consideration may be received.

(19) The term shall not include any amounts charged or received as bona fide initiation fees of dues, by a bona fide business or labor association, organization, or society providing services and privileges of membership, except amusement and recreation services or activities: PROVIDED, That this exclusion shall not apply if initiation fees or dues are in exchange for any significant amount of specific goods or services provided to individual members without additional charge, or if the fees or dues are graduated upon the amount of goods or services provided.

NEW SECTION. Sec. 23. A new section is added to chapter 82.08 RCW to read as follows:

(1) The term "services purchased for resale" means any of the services defined as a "retail sale" or "sale at retail" under RCW 82.04.050 which are purchased by the seller for further sale to a consumer: PROVIDED, That (a) the services are separately purchased for and identified, charged and billed to the consumer and (b) the services so identified, charged and billed are not encumbered with any additional mark-up upon resale. The term includes only such services as are represented and identified by some tangible service product or evidence of the service rendered or performed which is passed straight through to the consumer as a separate component or ingredient of the service rendered or performed by the seller.

(2) The department shall, by rule, provide for the method or methods by which any services purchased for resale may be acquired without payment of the tax imposed by RCW 82.08.020 by providing the supplier of such services with a resale certificate.

(3) The taking of a completed resale certificate shall excuse the provider of any service for resale from the obligation to collect and remit retail sales tax under RCW 82.04.020.

(4) Any seller of any service purchased for resale who purchases such services without payment of retail sales tax by providing a resale certificate and who does not resell such services shall be subject to the use tax imposed by RCW 82.12.020.

NEW SECTION. Sec. 24. A new section is added to chapter 82.08 RCW to read as follows:

A sale of any service defined as a "sale at retail" or "retail sale" by RCW 82.04.050(3) takes place at the location where such service is performed within this state: PROVIDED, That:

(1) For purposes of collecting and reporting the tax imposed by RCW 82.08.020 and 82.14.030, such sales are attributable to the location at which the service provider has its place of business or branch office in this state from which such services are primarily performed.

(2) Where the seller of such services has its place of business outside this state but the service is provided, rendered, or furnished as a result of significant business activity occurring within this state which enables the seller to make the sale, then the sale occurs at the location within this state where such activity takes place.

(3) The department of revenue, by rule, shall provide for the reasonable and fair allocation and apportionment of the tax in all cases where the services sold are provided, rendered, or furnished at places of business located both within and outside this state.

Sec. 25. Section 82.04.190, chapter 15, Laws of 1961 as last amended by section 2, chapter 231, Laws of 1986 and RCW 82.04.190 are each amended to read as follows:

"Consumer" means the following:

(1) Any person who purchases, acquires, owns, holds, or uses any article of tangible personal property irrespective of the nature of the person's 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 for the purpose (a) of resale as tangible personal property in the regular course of business or (b) of incorporating such property as an ingredient or component of real or personal property when installing, repairing, cleaning, altering, imprinting, improving, constructing, or decorating such real or personal property of or for consumers or (c) of consuming such property in producing for sale a new article of tangible personal property or a new substance, of which such property becomes an ingredient or component or as 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 (d) 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;

(2) Any person who purchases, acquires, owns, holds, or uses any service defined as a "retail sale" by RCW 82.04.050 or any product or evidence of such service, other than property services consisting of the installation, repair, cleaning, altering, improving, decorating, or constructing of real or personal property, even though such service or service product may be resold after such use or consumption;

(3) Any person engaged in any business activity taxable under RCW 82.04.290 and any person who purchases, acquires, or uses any telephone service as defined in RCW 82.04.065, other than for resale in the regular course of business;

((~~(3)~~)) (4) Any person engaged in the business of contracting for 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 of Washington 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 as defined in RCW 82.04.280, in respect to tangible personal property when such person incorporates such property as an ingredient or component of such publicly owned street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle by installing, placing or spreading the property in or upon the right of way of such street, place, road, highway, easement, bridge, tunnel, or trestle or in or upon the site of such mass public transportation terminal or parking facility;

((~~(4)~~)) (5) Any person who is an owner, lessee or has the right of possession to or an easement in real property which is being constructed, repaired, decorated, improved, or otherwise altered by a person engaged in business, excluding only (a) municipal corporations or political subdivisions of the state in respect to labor and services rendered to their real property which is used or held for public road purposes, and (b) the United States, instrumentalities thereof, and county and city housing authorities created pursuant to chapter 35.82 RCW in respect to labor and services rendered to their real property. Nothing contained in this or any other subsection of this definition shall be construed to modify any other definition of "consumer";

((~~(5)~~)) (6) Any person who is an owner, lessee, or has the right of possession to personal property which is being constructed, repaired, improved, cleaned, imprinted, or otherwise altered by a person engaged in business;

((~~(6)~~)) (7) Any person engaged in the business of constructing, repairing, decorating, or improving 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; also, any person engaged in the business of clearing land and moving earth of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW. Any such person shall be a consumer within the meaning of this subsection in respect to tangible personal property incorporated into, installed in, or attached to such building or other structure by such person.

Sec. 26. Section 1, chapter 32, Laws of 1985 and RCW 82.08.020 are each amended to read as follows:

(1) There is levied and there shall be collected a tax on each retail sale in this state equal to six ((~~and five-tenths~~)) percent of the selling price.

(2) The tax imposed under this chapter shall apply to successive retail sales of the same property.

(3) The rate provided in this section applies to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

Sec. 27. Section 82.04.070, chapter 15, Laws of 1961 and RCW 82.04.070 are each amended to read as follows:

"Gross proceeds of sales" means the value proceeding or accruing from the sale of tangible personal property and/or for services rendered, without any deduction on account of the cost of property sold, the cost of materials used, labor costs, the costs of service, interest, discount paid, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.

Sec. 28. Section 82.08.010, chapter 15, Laws of 1961 as last amended by section 3, chapter 38, Laws of 1985 and RCW 82.08.010 are each amended to read as follows:

For the purposes of this chapter:

(1) "Selling price" means the consideration, whether money, credits, rights, or other property except trade-in property of like kind, expressed in the terms of money paid or delivered by a buyer to a seller without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, the costs of service, interest, discount, delivery costs, taxes other than taxes imposed under this chapter if the seller advertises the price as including the tax or that the seller is paying the tax, or any other expenses whatsoever paid or accrued and without any deduction on account of losses; but shall not include the amount of cash discount actually taken by a buyer; and shall be subject to modification to the extent modification is provided for in RCW 82.08.080.

When tangible personal property is rented or leased under circumstances that the consideration paid does not represent a reasonable rental for the use of the articles so rented or leased, the "selling price" shall be 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;

(2) "Seller" means every person, including the state and its departments and institutions, making sales at retail or retail sales to a buyer or consumer, whether as agent, broker, or principal, except "seller" does not mean the state and its departments and institutions when making sales to the state and its departments and institutions;

(3) "Buyer" and "consumer" include, without limiting the scope hereof, every individual, receiver, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, corporation, association, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise, municipal corporation, quasi municipal corporation, and also the state, its departments and institutions and all political subdivisions thereof, irrespective of the nature of the activities engaged in or functions performed, and also the United States or any instrumentality thereof;

(4) The meaning attributed in chapter 82.04 RCW to the terms "tax year," "taxable year," "person," "company," "sale," "sale at retail," "retail sale," "sale at wholesale," "wholesale," "business," "engaging in business," "cash discount," "successor," "consumer," "in this state" and "within this state" shall apply equally to the provisions of this chapter.

Sec. 29. Section 82.04.460, chapter 15, Laws of 1961 as last amended by section 154, chapter 7, Laws of 1985 and RCW 82.04.460 are each amended to read as follows:

(1) Any person rendering services taxable under RCW 82.04.290 and maintaining places of business both within and without this state which contribute to the rendition of such services shall, for the purpose of computing tax liability under RCW 82.04.290, apportion to this state that portion of ((~~his~~)) gross income which is derived from services rendered within this state. Where such apportionment cannot be accurately made by separate accounting methods, the taxpayer shall apportion to this state that proportion of ((~~his~~)) 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.

(3) The department shall by rule provide a method or methods of apportioning or allocating gross income derived from sales of ((~~telephone~~)) services taxed under ((~~this chapter~~)) RCW 82.04.250, if the gross proceeds of such sales ((~~subject to tax under this chapter~~)) do not fairly represent the extent of the taxpayer's income attributable to services performed in 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.

NEW SECTION. Sec. 30. A new section is added to chapter 82.08 RCW to read as follows:

The tax imposed under this chapter, as it relates to the services purchased in selling insurance, annuities, and similar vehicles such as performance or surety bonds where an agency relationship exists, shall be reported and paid to the department of revenue by the insurance company consuming such services. The consumer shall file and report at least annually or more frequently as the department may provide by rule, and remit the tax due, all as provided under chapter 82.32 RCW.

NEW SECTION. Sec. 31. Section 21, chapter 37, Laws of 1980 and RCW 82.08.0253 are each repealed.

Sec. 32. Section 39, chapter 37, Laws of 1980 as amended by section 1, chapter 5, Laws of 1982 1st ex. sess. and RCW 82.08.0273 are each amended to read as follows:

The tax levied by RCW 82.08.020 shall not apply to sales to nonresidents of this state of tangible personal property or services as defined in RCW 82.04.050(3) for use outside this state when the purchaser has applied for and received from the department of revenue a permit certifying (1) that ((he)) the taxpayer is a bona fide resident of a state or possession or Province of Canada other than the state of Washington, (2) that such state, possession, or Province of Canada does not impose a retail sales tax or use tax of three percent or more or, if imposing such a tax, permits Washington residents exemption from otherwise taxable sales by reason of their residence, and (3) that ((he)) the taxpayer does agree, when requested, to grant the department of revenue access to such records and other forms of verification at ((~~his~~)) the place of residence to assure that such purchases are not first used substantially in the state of Washington.

Any person claiming exemption from retail sales tax under the provisions of this section must display a nonresident permit as herein provided, and any vendor making a sale to a nonresident without collecting the tax must examine such permit, identify the purchaser as the person to whom the nonresident permit was issued, and maintain records which shall show the permit number attributable to each nontaxable sale.

Permits shall be personal and nontransferable, shall be renewable annually, and shall be issued by the department of revenue upon payment of a fee of five dollars. The department may in its discretion designate independent agents for the issuance of permits, according to such standards and qualifications as the department may prescribe. Such agents shall pay over and account to the department for all permit fees collected, after deducting as a collection fee the sum of one dollar for each permit issued.

Any person making fraudulent statements in order to secure a permit shall be guilty of perjury. Any person making tax exempt purchases by displaying a permit not his or her own, or a counterfeit permit, with intent to violate the provisions of this section shall be guilty of a misdemeanor and, in addition, may be subject to a penalty not to exceed the amount of the tax due on such purchases. Any vendor who makes sales without collecting the tax to a person who does not hold a valid permit, and any vendor who fails to maintain records of permit numbers as provided in this section shall be personally liable for the amount of tax due.

NEW SECTION. Sec. 33. A new section is added to chapter 82.08 RCW to read as follows:

The tax levied by RCW 82.08.020 shall not apply to sales of medical care or medical treatment compensated or reimbursed by federal funds.

NEW SECTION. Sec. 34. A new section is added to chapter 82.08 RCW to read as follows:

The tax levied by RCW 82.08.020 shall not apply to the amount of the selling price of any service defined as a "retail sale" or "sale at retail" by RCW 82.04.050 that is attributable to the proportion of the service that is purchased for use outside this state, when the seller takes from the buyer a certificate bearing the name and address of the buyer, the Washington state registration number, if any, and the name of the buyer's purchasing agent if any, certifying the proportion of the service purchased that will be consumed outside this state: PROVIDED, That the exemption provided in this section shall not be construed as providing any exemption or deduction from the taxes imposed by chapter 82.04 or 82.12 RCW.

Sec. 35. Section 1, chapter 2, Laws of 1985 ex. sess. as amended by section 9, chapter 116, Laws of 1986 and RCW 82.61.010 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Person" has the meaning given in RCW 82.04.030.

(3) "Department" means the department of revenue.

(4) "Eligible investment project" means: (a) Construction of new buildings and the acquisition of related machinery and equipment when the buildings, machinery, and equipment are to be used for either manufacturing or research and development activities((~~, which construction is commenced prior to December 31, 1988~~)); or (b) acquisition ((~~prior to December 31, 1988,~~)) of machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or (c) the expansion or renovation of an existing building, for either manufacturing or research and development purposes, provided that the costs of such expansion or renovation are in excess of twenty-five percent of the true and fair value of the plant complex. The department of revenue shall, by rule, provide for the computation of true and fair value.

(5) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and includes the production or fabrication of specially made or custom-made articles.

(6) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun.

(7) "Buildings" means only those new structures used for either manufacturing or research and development activities, including plant offices and warehouses or other facilities for the storage of raw materials or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development purposes. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.

(8) "Machinery and equipment" means all new industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery. For purposes of this definition, new machinery and equipment means either new to the taxing jurisdiction of the state or new to the certificate holder. Used machinery and equipment are eligible for deferral if the certificate holder either brings the machinery and equipment into Washington or makes a retail purchase of the machinery and equipment in Washington or elsewhere.

(9) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year.

(10) "Recipient" means a person receiving a tax deferral under this chapter.

(11) "Certificate holder" means an applicant to whom a tax deferral certificate has been issued.

(12) "Operationally complete" means constructed or improved to the point of being functionally useable for the intended purpose.

(13) "Initiation of construction" means that date upon which on-site construction commences.

Sec. 36. Section 3, chapter 2, Laws of 1985 ex. sess. and RCW 82.61.030 are each amended to read as follows:

((A tax deferral certificate shall only be issued to persons who, on June 14, 1985, are not engaged in manufacturing or research and development activities within this state. For purposes of this section, a person shall not be considered to be engaged in manufacturing or research and development activities where the only activities performed by such person in this state are sales, installation, repair, or promotional activities in respect to products manufactured outside this state. Any person who has succeeded by merger, consolidation, incorporation or any other form or change of identity to the business of a person engaged in manufacturing or research and development activities in this state on June 14, 1985, and any person who is a subsidiary of a person engaged in manufacturing or research and development activities in this state on June 14, 1985, shall also be ineligible to receive a tax deferral certificate.)) Effective June 1, 1987, any person, engaging in manufacturing or research and development activities within this state, and who begins construction and/or acquires equipment as necessary for a qualified investment project shall be eligible to apply for tax deferral certificates.

Sec. 37. Section 6, chapter 2, Laws of 1985 ex. sess. as amended by section 11, chapter 116, Laws of 1986 and RCW 82.61.070 are each amended to read as follows:

The department and the department of trade and economic development shall jointly report to the legislature about the effects of this chapter on new manufacturing and research and development activities in this state. The report shall contain information concerning the number of deferral certificates granted, the amount of sales tax deferred, the number of jobs created and other information useful in measuring such effects. Reports shall be submitted every year by January 1((~~, 1986, and by January 1 of each year through 1989~~)).

NEW SECTION. Sec. 38. Section 8, chapter 2, Laws of 1985 ex. sess., section 10, chapter 116, Laws of 1986 and RCW 82.61.040 are each repealed.

Sec. 39. Section 82.12.020, chapter 15, Laws of 1961 as last amended by section 7, chapter 7, Laws of 1983 and RCW 82.12.020 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 article of tangible personal property or any service defined as a sale at retail in RCW 82.04.050, 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, subsection((~~s (2) or (7)~~)) (1) or (5).

(2) This tax will not apply with respect to the use of any article of tangible personal property or any service purchased, extracted, produced or manufactured outside this state until the transportation of such article or product or evidence of such service has finally ended or until such article or service product has become commingled with the general mass of property and services in this state.

(3) This tax shall apply to the use of every article of tangible personal property, including property acquired at a casual or isolated sale, and including byproducts used by the manufacturer thereof, except as hereinafter provided, irrespective of whether the article or similar articles are manufactured or are available for purchase within this state.

(4) Except as provided in RCW 82.12.0252, payment by one purchaser or user of tangible personal property of the tax imposed by chapter 82.08 or 82.12 RCW shall not have the effect of exempting any other purchaser or user of the same property from the taxes imposed by such chapters.

(5) The tax shall be levied and collected in an amount equal to the value of the article or service used by the taxpayer multiplied by the rate in effect for the retail sales tax under RCW 82.08.020, as now or hereafter amended, in the county in which the article or service is used.

(6) This tax shall not apply if the person rendering the services is an employee of the user.

(7) This tax shall not apply to services which are substantially donated even though nominal consideration may be received.

Sec. 40. Section 82.12.010, chapter 15, Laws of 1961 as last amended by section 1, chapter 132, Laws of 1985 and by section 1, chapter 222, Laws of 1985 and RCW 82.12.010 are each reenacted and amended to read as follows:

For the purposes of this chapter:

(1)(a) "Value of the article used" shall mean the consideration, whether money, credit, rights, or other property except trade-in property of like kind, expressed in terms of money, paid or given or contracted to be paid or given by the purchaser to the seller for the article of tangible personal property, the use of which is taxable under this chapter. The term includes, in addition to the consideration paid or given or contracted to be paid or given, 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 shall be 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 and regulations as the department of revenue may prescribe.

(b) In case the articles used are acquired by bailment, the value of the use of the articles so used shall 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 and regulations as the department of revenue may prescribe: PROVIDED, That 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 shall be 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 and regulations 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 ninety 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 shall 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 the first paragraph 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 shall be 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 shall be determined by: ((~~(a)~~)) (i) The retail selling price of such new or improved product when first offered for sale; or ((~~(b)~~)) (ii) the value of materials incorporated into the prototype in cases in which the new or improved product is not offered for sale.

(2) "Value of the service used" shall mean 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 of any service defined as a "sale at retail" or "retail sale" under RCW 82.04.050. This term shall not include the value of any services rendered by an employee of an employer in return for salary, wages, or other employment benefits.

(3) "Use," "used," "using," or "put to use" shall have their ordinary meaning, and shall mean the first act within this state by which the taxpayer takes or assumes dominion or control over the article of tangible personal property or any service product or evidence of any service consumed in this state (as a consumer), and include installation, storage, withdrawal from storage, or any other act preparatory to subsequent actual use or consumption within this state;

((~~(3)~~)) (4) "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;

((~~(4)~~)) (5) "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;

((~~(5)~~)) (6) The meaning ascribed to words and phrases in chapters 82.04 and 82.08 RCW, insofar as applicable, shall have 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, shall also mean any person who distributes or displays, or causes to be distributed or displayed, any article of tangible personal property((~~, except newspapers~~)) or service, the primary purpose of which is to promote the sale of products or services.

Sec. 41. Section 82.12.040, chapter 15, Laws of 1961 as last amended by section 1, chapter 48, Laws of 1986 and RCW 82.12.040 are each amended to read as follows:

(1) Every person who maintains in this state a place of business or a stock of goods, or engages in business activities within this state, shall obtain from the department a certificate of registration, and shall, at the time of making sales, or making transfers of either possession or title or both, of tangible personal property or services defined as a "retail sale" in RCW 82.04.050, for use in this state, collect from the purchasers or transferees the tax imposed under this chapter. For the purposes of this chapter, the phrase "maintains in this state a place of business" shall include the solicitation of sales and/or taking of orders by sales agents or traveling representatives. For the purposes of this chapter, "engages in business activity within this state" includes every activity which is sufficient under the Constitution of the United States for this state to require collection of tax under this chapter. The department shall in rules specify activities which constitute engaging in business activity within this state, and shall keep the rules current with future court interpretations of the Constitution of the United States.

(2) Every person who engages in this state in the business of acting as an independent selling agent for persons who do not hold a valid certificate of registration, and who receives compensation by reason of sales of tangible personal property or services defined as a "retail sale" in RCW 82.04.050, on behalf of his principals made for use in this state, shall, at the time such sales are made, collect from the purchasers the tax imposed under this chapter, and for that purpose shall be deemed a retailer as defined in this chapter.

(3) The tax required to be collected by this chapter shall be deemed to be held in trust by the retailer until paid to the department and any retailer who appropriates or converts the tax collected to his own use or to any use other than the payment of the tax provided herein to the extent that the money required to be collected is not available for payment on the due date as prescribed shall be guilty of a misdemeanor. In case any seller fails to collect the tax herein imposed or having collected the tax, fails to pay the same to the department in the manner prescribed, whether such failure is the result of his own acts or the result of acts or conditions beyond his control, he shall nevertheless, be personally liable to the state for the amount of such tax.

(4) Any retailer who refunds, remits, or rebates to a purchaser, or transferee, either directly or indirectly, and by whatever means, all or any part of the tax levied by this chapter shall be guilty of a misdemeanor.

Sec. 42. Section 52, chapter 37, Laws of 1980 and RCW 82.12.0252 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of any article of tangible personal property or any service or service product purchased at retail or acquired by lease, gift or bailment if the sale thereof to, or the use thereof by, the present user or his bailor or donor has already been subjected to the tax under chapter 82.08 or 82.12 RCW and such tax has been paid by the present user or by his bailor or donor; or in respect to the use of property acquired by bailment and such 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 or 82.12 RCW as of the time of first use; or 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 such original bailment was prior to June 9, 1961.

Sec. 43. Section 55, chapter 37, Laws of 1980 and RCW 82.12.0255 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of any article of tangible personal property or service or service product which the state is prohibited from taxing under the Constitution of the state or under the Constitution or laws of the United States.

Sec. 44. Section 59, chapter 37, Laws of 1980 and RCW 82.12.0259 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of tangible personal property or service defined as a "retail sale" under RCW 82.04.050 by corporations which have been incorporated under any act of the congress of the United States and whose principal purposes are to furnish volunteer aid to members of the armed forces of the United States and also to carry on a system of national and international relief and to apply the same in mitigating the sufferings caused by pestilence, famine, fire, flood, and other national calamities and to devise and carry on measures for preventing the same.

Sec. 45. Section 5, chapter 89, Laws of 1967 ex. sess. and RCW 82.12.035 are each amended to read as follows:

A credit shall be allowed against the taxes imposed by this chapter upon the use in this state of tangible personal property ((~~in this state~~)) or service defined as a "retail sale" under RCW 82.04.050 in the amount that the present user thereof or his bailor or donor has paid a retail sales or use tax with respect to such property or service to any other state, political subdivision thereof, or the District of Columbia, prior to the use of such property in this state.

Sec. 46. Section 53, chapter 37, Laws of 1980 and RCW 82.12.0253 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of any article of tangible personal property or service the sale of which is specifically taxable under chapter 82.16 RCW.

NEW SECTION. Sec. 47. Section 82.08.100, chapter 15, Laws of 1961, section 50, chapter 278, Laws of 1975 1st ex. sess., section 37, chapter 35, Laws of 1982 1st ex. sess. and RCW 82.08.100 are each repealed.

NEW SECTION. Sec. 48. A new section is added to chapter 82.32 RCW to read as follows:

(1) The department of revenue, by general regulation, shall provide that a taxpayer whose regular books of account are kept on a cash receipts basis may file returns based upon the taxpayer's cash receipts for each reporting period and pay the tax herein provided upon such basis in lieu of reporting and paying the tax on all sales made during such period. A taxpayer filing returns on a cash basis is not required to pay such tax on debts which are deductible as worthless for federal income tax purposes. Absent regular books and records to substantiate the accounting method chosen, returns shall be reported in the same manner as reported for federal income tax purposes.

(2) The accounting method for taxes administered under this section shall be uniform for all excise taxes unless a combined method is first approved by the department.

(3) A taxpayer may convert its reporting method to a different method which has prior approval by the department if the conversion satisfies the requirement in the rules promulgated by the department pertaining to adjustments necessary to account for all income. The department shall not withhold its approval unless the taxpayer cannot, for whatever reason, make the necessary adjustments to account for all income. The department may permit adjustments which cause an increase in the income to be amortized over a period not to exceed twelve consecutive months.

NEW SECTION. Sec. 49. A new section is added to chapter 82.32 RCW to read as follows:

If any person uses an out-of-state address to fall within the exemption provided by RCW 82.08.0273 to avoid the tax imposed under chapter 82.08 RCW and it is ultimately determined that such services were substantially consumed in this state and subject to tax under chapter 82.08 RCW, then the use of such out-of-state address shall be presumptive proof, rebuttable only by clear and convincing evidence to the contrary, that the taxpayer intended to evade the taxes payable under chapter 82.08 RCW and the evasion penalty of fifty percent authorized under RCW 82.32.050 shall be assessed. The department, by rule, may establish conditions under which the penalty provided by this section may be mitigated or abated.

Sec. 50. Section 7, chapter 94, Laws of 1970 ex. sess. as last amended by section 11, chapter 4, Laws of 1981 2nd ex. sess. and RCW 82.14.060 are each amended to read as follows:

((~~Bimonthly~~)) Monthly the state treasurer shall make distribution from the local sales and use tax account to the counties, metropolitan municipal corporations and cities the amount of tax collected on behalf of each county, metropolitan municipal corporation or city, less the deduction provided for in RCW 82.14.050. The state treasurer shall make the distribution under this section without appropriation.

In the event that any ordinance or resolution imposes a sales and use tax at a rate in excess of the applicable limits contained herein, such ordinance or resolution shall not be considered void in toto, but only with respect to that portion of the rate which is in excess of the applicable limits contained herein.

Sec. 51. Section 82.04.440, chapter 15, Laws of 1961 as last amended by section 1, chapter 190, Laws of 1985 and RCW 82.04.440 are each amended to read as follows:

(1) Except as provided in subsections (2) and (3) of this section, every person engaged in activities which are within the purview of the provisions of two or more of sections RCW 82.04.230 to 82.04.290, inclusive, shall be taxable under each paragraph applicable to the activities engaged in.

(2) Persons taxable under RCW 82.04.250 or 82.04.270 shall not be taxable under RCW 82.04.230, 82.04.240, or subsection (2), (3), (4), (5), or ((~~(7)~~)) (6) of RCW 82.04.260 with respect to extracting or manufacturing of the products so sold.

(3) Persons taxable under RCW 82.04.240 or 82.04.260 subsection (4) shall not be taxable under RCW 82.04.230 with respect to extracting the ingredients of the products so manufactured.

(4)(a) If it is determined by a court of competent jurisdiction, in a judgment not subject to review, that subsection (2) of this section results in an unconstitutional discrimination against interstate or foreign commerce, and that relief is appropriate for any tax reporting periods either before or after April 30, 1985, it is the intent of the legislature that the credit provided in (b) of this subsection shall be applied to such reporting periods and that relief for such periods be limited to the granting of such credit. It is further the intent of the legislature that such credit shall be applicable only under the conditions and to the extent provided in this subsection (4).

(b) As provided in (a) of this subsection, a person taxable under RCW 82.04.230, 82.04.240, or subsection (2), (3), (4), (5), or ((~~(7)~~)) (6) of RCW 82.04.260 with respect to extracting or manufacturing products in this state shall be allowed a credit against those taxes for any gross receipts taxes paid to another state with respect to the sales of the products so extracted or manufactured in this state. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the extraction or manufacturing of those products.

(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.

(d) For the purpose of this subsection, "state" means state of the United States, any political subdivision thereof, or the District of Columbia, and any foreign country or political subdivision thereof.

NEW SECTION. Sec. 52. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect June 1, 1987.