MORNING SESSION
Senate Chamber, Olympia, Thursday, March 25, 2010
The Senate was called to order at 10:00 a.m. by President Owen. The Secretary called the roll and announced to the President that all Senators were present with the exception of Senators Benton, Brandland, Gordon, Haugen, Hobbs, Holmquist, McAuliffe, McCaslin, Morton, Pflug, Pridemore and Tom.
The Sergeant at Arms Color Guard consisting of Senate employees Krista Winters and Penny McWain, presented the Colors. Legislative Assistant to Senator Hargrove, Shawn O'Neill offered the prayer.
MOTION
On motion of Senator Eide, the reading of the Journal of the previous day was dispensed with and it was approved.
MOTION
On motion of Senator Eide, the Senate advanced to the sixth order of business.
SECOND READING
CONFIRMATION OF GUBERNATORIAL APPOINTMENTS
MOTION
Senator McDermott moved that Gubernatorial Appointment No. 9204, Shaunta Hyde, as a member of the State Board for Community and Technical Colleges, be confirmed.
Senator McDermott spoke in favor of the motion.
MOTION
On motion of Senator Schoesler, Senators Benton, Brandland, Delvin, Hewitt, Holmquist, Honeyford, McCaslin, Morton, Parlette and Pflug were excused.
MOTION
On motion of Senator Marr, Senators Gordon, Haugen, Hobbs and Prentice were excused.
APPOINTMENT OF SHAUNTA HYDE
The President declared the question before the Senate to be the confirmation of Gubernatorial Appointment No. 9204, Shaunta Hyde as a member of the State Board for Community and Technical Colleges.
The Secretary called the roll on the confirmation of Gubernatorial Appointment No. 9204, Shaunta Hyde as a member of the State Board for Community and Technical Colleges and the appointment was confirmed by the following vote: Yeas, 36; Nays, 1; Absent, 3; Excused, 9.
Voting yea: Senators Becker, Berkey, Brown, Carrell, Delvin, Eide, Fairley, Franklin, Fraser, Hargrove, Hatfield, Hewitt, Jacobsen, Kastama, Kauffman, Keiser, Kilmer, King, Kline, Kohl-Welles, Marr, McDermott, Murray, Oemig, Parlette, Prentice, Ranker, Regala, Roach, Rockefeller, Schoesler, Sheldon, Shin, Stevens, Swecker and Zarelli
Voting nay: Senator Honeyford
Absent: Senators McAuliffe, Pridemore and Tom
Excused: Senators Benton, Brandland, Gordon, Haugen, Hobbs, Holmquist, McCaslin, Morton and Pflug
Gubernatorial Appointment No. 9204, Shaunta Hyde, having received the constitutional majority was declared confirmed as a member of the State Board for Community and Technical Colleges.
MOTION
On motion of Senator Marr, Senators McAuliffe, Pridemore and Tom were excused.
PERSONAL PRIVILEGE
Senator Sheldon: “Well Mr. President, I’m a little nervous today but very proud of the Washington Huskies as they go forth to do battle with the West Virginia Mountaineers in Syracuse, New York. As I was growing up one of my personal favorites was Jerry West but he is just a memory, hopefully as they do battle. I know that the rules of the Senate prohibit inappropriate attire so I want to put this hat on Mr. President and suggest that other members wear hats and then you could send us all home and we could end this special session. So, how about that suggestion Mr. President!”
REPLY BY THE PRESIDENT
President Owen: “Or at least you.”
REMARKS BY SENATOR SHELDON
Senator Sheldon: “Alright, I’ll go for it if I can go home and watch the game and root our Huskies on. Go Huskies.”
MOTION
At 10:15 a.m., on motion of Senator Eide, the Senate was declared to be at ease subject to the call of the President.
The Senate was called to order at 11:22 a.m. by President Owen.
SECOND READING
CONFIRMATION OF GUBERNATORIAL APPOINTMENTS
MOTION
Senator Marr moved that Gubernatorial Appointment No. 9256, Ryland P. Davis, as a member of The Life Sciences Discovery Fund Authority Board of Trustees, be confirmed.
Senator Marr spoke in favor of the motion.
APPOINTMENT OF RYLAND P. DAVIS
The President declared the question before the Senate to be the confirmation of Gubernatorial Appointment No. 9256, Ryland P. Davis as a member of The Life Sciences Discovery Fund Authority Board of Trustees.
The Secretary called the roll on the confirmation of Gubernatorial Appointment No. 9256, Ryland P. Davis as a member of The Life Sciences Discovery Fund Authority Board of Trustees and the appointment was confirmed by the following vote: Yeas, 42; Nays, 1; Absent, 1; Excused, 5.
Voting yea: Senators Becker, Benton, Berkey, Brown, Delvin, Eide, Fairley, Franklin, Fraser, Hargrove, Hatfield, Haugen, Hewitt, Hobbs, Jacobsen, Kastama, Kauffman, Keiser, Kilmer, King, Kline, Kohl-Welles, Marr, McAuliffe, McDermott, Murray, Oemig, Parlette, Pflug, Prentice, Pridemore, Ranker, Regala, Roach, Rockefeller, Schoesler, Sheldon, Shin, Stevens, Swecker, Tom and Zarelli
Voting nay: Senator Honeyford
Absent: Senator Carrell
Excused: Senators Brandland, Gordon, Holmquist, McCaslin and Morton
Gubernatorial Appointment No. 9256, Ryland P. Davis, having received the constitutional majority was declared confirmed as a member of The Life Sciences Discovery Fund Authority Board of Trustees.
MOTION
On motion of Senator Delvin, Senator Carrell was excused.
MOTION
On motion of Senator Eide, the Senate advanced to the seventh order of business.
THIRD READING
SUBSTITUTE SENATE CONCURRENT RESOLUTION NO. 8409, by Senate Committee on Health & Long-Term Care (originally sponsored by Senator Keiser).
Forming a joint select committee on health reform implementation.
The measure was read on Third Reading.
Senators Keiser and Hargrove spoke in favor of passage of the resolution.
Senator Schoesler spoke against passage of the resolution.
MOTION
Senator Benton moved that the rules be suspended and Substitute Senate Concurrent Resolution No. 8409 be returned to second reading for the purpose of amendment.
Senator Eide spoke against the motion.
The President declared the question before the Senate to be the motion by Senator Benton that the rules be suspended and Substitute Senate Concurrent Resolution No. 8409 be referred to second reading for the purpose of an amendment(s).
The motion by Senator Benton did not carry by a voice vote.
The President declared the question before the Senate to be the final passage of Substitute Senate Concurrent Resolution No. 8409.
ROLL CALL
The Secretary called the roll on the final passage of Substitute Senate Concurrent Resolution No. 8409 and the resolution passed the Senate by the following vote: Yeas, 43; Nays, 1; Absent, 0; Excused, 5.
Voting yea: Senators Becker, Benton, Berkey, Brown, Carrell, Delvin, Eide, Fairley, Franklin, Fraser, Hargrove, Hatfield, Haugen, Hewitt, Hobbs, Honeyford, Jacobsen, Kastama, Kauffman, Keiser, Kilmer, King, Kline, Kohl-Welles, Marr, McAuliffe, McDermott, Murray, Oemig, Parlette, Pflug, Prentice, Pridemore, Ranker, Regala, Roach, Rockefeller, Sheldon, Shin, Stevens, Swecker, Tom and Zarelli
Voting nay: Senator Schoesler
Excused: Senators Brandland, Gordon, Holmquist, McCaslin and Morton
SUBSTITUTE SENATE CONCURRENT RESOLUTION NO. 8409, having received the constitutional majority, was declared passed.
MOTION
On motion of Senator Eide, Senate Concurrent Resolution No. 8409 was immediately transmitted to the House of Representatives.
MOTION
On motion of Senator Eide, the Senate reverted to the fourth order of business.
MOTION
At 11:36 a.m., on motion of Senator Eide, the Senate was declared to be at ease subject to the call of the President.
The Senate was called to order at 11:58 a.m. by President Owen.
MESSAGE FROM THE HOUSE
March 22, 2010
MR. PRESIDENT:
The House refuses to concur in the Senate amendment(s) to ENGROSSED SUBSTITUTE HOUSE BILL NO. 3014 and asks the Senate to recede therefrom.
and the same is herewith transmitted.
BARBARA BAKER, Chief Clerk
MOTION
Senator Kastama moved that the Senate recede from its position on the Senate amendments to Engrossed Substitute House Bill No. 3014.
The President declared the question before the Senate to be motion by Senator Kastama that the Senate recede from its position on the Senate amendments to Engrossed Substitute House Bill No. 3014.
The motion by Senator Kastama carried and the Senate receded from its amendments to Engrossed Substitute House Bill No. 3014.
MOTION
On motion of Senator Kastama, the rules were suspended and Engrossed Substitute House Bill No. 3014 was returned to second reading for the purposes of amendment.
SECOND READING
ENGROSSED SUBSTITUTE HOUSE BILL NO. 3014, by House Committee on Finance (originally sponsored by Representatives Kessler, Morrell and Van De Wege)
Modifying the sales and use tax deferral program for investment projects in rural counties.
The measure was read the second time.
MOTION
Senator Kastama moved that the following striking amendment by Senators Kastama and Zarelli be adopted:
Strike everything after the enacting clause and insert the following:
"Sec. 1. RCW 82.60.010 and 1985 c 232 s 1 are each amended to read as follows:
The legislature finds
that there are several areas in the state that are characterized by very high
levels of unemployment and poverty. The ((legislative [legislature])) legislature
further finds that economic stagnation is the primary cause of this high
unemployment rate and poverty; that new state policies are necessary in order
to promote economic stimulation and new employment opportunities in these
distressed areas; and that policies providing incentives for economic growth in
these distressed areas are essential. For these reasons, the legislature ((hereby))
reestablishes a tax deferral program to be effective solely in
distressed ((areas and under circumstances where the deferred tax payments
are for investments or costs that result in the creation of a specified number
of jobs)) counties. The legislature declares that this limited
program serves the vital public purpose of creating employment opportunities
and reducing poverty in the distressed ((areas)) counties of the
state.
Sec. 2. RCW 82.60.020 and 2010 c ... (SHB 3066) s 138 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) "Department" means the department of revenue.
(3) "Eligible
area" means ((a)):
(a) Through June 30, 2010, a rural county as defined in RCW
82.14.370; and
(b) Beginning July 1, 2010, a qualifying county.
(4)(a) "Eligible investment project" means an investment project that is located, as of the date the application required by RCW 82.60.030 is received by the department, in an eligible area as defined in subsection (3) of this section.
(b) ((The lessor or
owner of a qualified building is not eligible for a deferral unless:
(i) The underlying ownership of the buildings, machinery, and
equipment vests exclusively in the same person; or
(ii)(A) The lessor by written contract agrees to pass the economic
benefit of the deferral to the lessee;
(B) The lessee that receives the economic benefit of the deferral
agrees in writing with the department to complete the annual survey required
under RCW 82.60.070; and
(C) The economic benefit of the deferral passed to the lessee is no
less than the amount of tax deferred by the lessor and is evidenced by written
documentation of any type of payment, credit, or other financial arrangement
between the lessor or owner of the qualified building and the lessee.
(c))) "Eligible investment project" does not include any
portion of an investment project undertaken by a light and power business as defined
in RCW 82.16.010(4), other than that portion of a cogeneration project that is
used to generate power for consumption within the manufacturing site of which
the cogeneration project is an integral part, or investment projects ((which))
that have already received deferrals under this chapter.
(5) "Initiation of construction" has the same meaning as in RCW 82.63.010.
(6) "Investment project" means an investment in qualified buildings or qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction of the project.
(7)
"Manufacturing" means the same as defined in RCW 82.04.120.
"Manufacturing" also includes:
(a) Before July 1, 2010: (i) Computer programming, the production
of computer software, and other computer-related services, but only when the
computer programming, production of computer software, or other
computer-related services are performed by a manufacturer as defined in RCW
82.04.110 and contribute to the production of a new, different, or useful
substance or article of tangible personal property for sale; (ii) the
activities performed by research and development laboratories and commercial
testing laboratories((,)); and (iii) the conditioning of
vegetable seeds; and
(b) Beginning July 1, 2010: (i) The activities performed by research
and development laboratories and commercial testing laboratories; and (ii) the
conditioning of vegetable seeds.
(8) "Person" has the meaning given in RCW 82.04.030.
(9) "Qualified
buildings" means construction of new structures, and expansion or
renovation of existing structures for the purpose of increasing floor space or
production capacity used for manufacturing ((and)) or research
and development activities, including plant offices and warehouses or other
facilities for the storage of raw material 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. If a building is used
partly for manufacturing or research and development and partly for other
purposes, the applicable tax deferral ((shall)) must be
determined by apportionment of the costs of construction under rules adopted by
the department.
(10) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year. The term "entire tax year" means a full-time position that is filled for a period of twelve consecutive months. The term "full- time" means at least thirty-five hours a week, four hundred fifty-five hours a quarter, or one thousand eight hundred twenty hours a year.
(11) "Qualified 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.
(12) "Qualifying
county" means a county that has an unemployment rate, as determined by the
employment security department, which is at least twenty percent above the
state average for the three calendar years immediately preceding the year in
which the list of qualifying counties is established or updated, as the case
may be, as provided in section 3 of this act.
(13) "Recipient" means a person receiving a tax deferral
under this chapter.
(((13))) (14)
"Research and development" means the development, refinement,
testing, marketing, and commercialization of a product, service, or process
before commercial sales have begun, but only when such activities are
intended to ultimately result in the production of a new, different, or useful
substance or article of tangible personal property for sale. As used in
this subsection, "commercial sales" excludes sales of prototypes or
sales for market testing if the total gross receipts from such sales of the
product, service, or process do not exceed one million dollars.
NEW SECTION. Sec. 3. A new section is added to chapter 82.60 RCW to read as follows:
The department, with the assistance of the employment security department, must establish a list of qualifying counties effective July 1, 2010. The list of qualifying counties is effective for a twenty- four month period and must be updated by July 1st of the year that is two calendar years after the list was established or last updated, as the case may be.
NEW SECTION. Sec. 4. A new section is added to chapter 82.60 RCW to read as follows:
The lessor or owner of a qualified building is not eligible for a deferral unless:
(1) The underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or
(2)(a) The lessor by written contract agrees to pass the economic benefit of the deferral to the lessee;
(b) The lessee that receives the economic benefit of the deferral agrees in writing with the department to complete the annual survey required under RCW 82.60.070; and
(c) The economic benefit of the deferral passed to the lessee is no less than the amount of tax deferred by the lessor and is evidenced by written documentation of any type of payment, credit, or other financial arrangement between the lessor or owner of the qualified building and the lessee.
Sec. 5. RCW 82.60.030 and 1994 sp.s. c 1 s 2 are each amended to read as follows:
(1) Application for deferral of taxes under this chapter
must be made before initiation of the construction of the investment project or
acquisition of equipment or machinery. The application ((shall)) must
be made to the department in a form and manner prescribed by the department.
The application ((shall)) must contain information regarding the
location of the investment project, the applicant's average employment in the
state for the prior year, estimated or actual new employment related to the
project, estimated or actual wages of employees related to the project,
estimated or actual costs, time schedules for completion and operation, and
other information required by the department. The department ((shall)) must
rule on the application within sixty days.
(2) This section expires July 1, 2020.
Sec. 6. RCW 82.60.040 and 2004 c 25 s 4 are each amended to read as follows:
(1) The department ((shall))
must issue a sales and use tax deferral certificate for state and local
sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW on each
eligible investment project ((that is located in an eligible area as defined
in RCW 82.60.020)).
(2) The department ((shall))
must keep a running total of all deferrals granted under this chapter
during each fiscal biennium.
(3) This section expires
July 1, ((2010)) 2020.
Sec. 7. RCW 82.60.049 and 2004 c 25 s 5 are each amended to read as follows:
(1) For the purposes of this section:
(a) "Eligible
area" also means a designated community empowerment zone approved under
RCW 43.31C.020 ((or a county containing a community empowerment zone)).
(b) "Eligible investment project" also means an investment project in an eligible area as defined in this section.
(2) In addition to the provisions of RCW 82.60.040, the department shall issue a sales and use tax deferral certificate for state and local sales and use taxes due under chapters 82.08, 82.12, and 82.14 RCW, on each eligible investment project that is located in an eligible area, if the applicant establishes that at the time the project is operationally complete:
(a) The applicant will hire at least one qualified employment position for each seven hundred fifty thousand dollars of investment for which a deferral is requested; and
(b) The positions will be filled by persons who at the time of hire are residents of the community empowerment zone. As used in this subsection, "resident" means the person makes his or her home in the community empowerment zone or the county in which the zone is located. A mailing address alone is insufficient to establish that a person is a resident for the purposes of this section. The persons must be hired after the date the application is filed with the department.
(3) All other provisions and eligibility requirements of this chapter apply to applicants eligible under this section.
(4) The qualified employment position must be filled by the end of the calendar year following the year in which the project is certified as operationally complete. If a person does not meet the requirements for qualified employment positions by the end of the second calendar year following the year in which the project is certified as operationally complete, all deferred taxes are immediately due.
Sec. 8. RCW 82.60.060 and 2000 c 106 s 5 are each amended to read as follows:
(1) The recipient ((shall))
must begin paying the deferred taxes in the third year after the date
certified by the department as the date on which the ((construction)) investment
project has been operationally completed. The first payment will be due on December
31st of the third calendar year after such certified date, with subsequent
annual payments due on December 31st of the following four years with amounts
of payment scheduled as follows:
|
Repayment Year |
% of Deferred Tax Repaid |
|
1 |
10% |
|
2 |
15% |
|
3 |
20% |
|
4 |
25% |
|
5 |
30% |
(2) The department may authorize an accelerated repayment schedule upon request of the recipient.
(3) Interest ((shall))
may not be charged on any taxes deferred under this chapter for the
period of deferral, although all other penalties and interest applicable to
delinquent excise taxes may be assessed and imposed for delinquent payments
under this chapter. The debt for deferred taxes will not be extinguished by insolvency
or other failure of the recipient. Transfer of ownership does not terminate
the deferral. The deferral is transferred, subject to the successor meeting
the eligibility requirements of this chapter, for the remaining periods of the
deferral.
Sec. 9. RCW 82.60.070 and 2010 c ... (SHB 3066) s 139 are each amended to read as follows:
(1)(a) Each recipient of
a deferral of taxes granted under this chapter must file a complete annual
survey with the department under RCW 82.32. . . (section 102, chapter . . .
(SHB 3066), Laws of 2010). If the economic benefits of the deferral are passed
to a lessee as provided in ((RCW 82.60.020(4))) section 4 of this act,
the lessee must file a complete annual survey, and the applicant is not
required to file a complete annual survey.
(b) The department must
use the information reported on the annual survey required by this section to
study the tax deferral program authorized under this chapter. The department
must report to the legislature by December 1, ((2009)) 2019. The
report must measure the effect of the program on job creation, the number of
jobs created for residents of eligible areas, company growth, the introduction
of new products, the diversification of the state's economy, growth in research
and development investment, the movement of firms or the consolidation of
firms' operations into the state, and such other factors as the department
selects.
(2) Except as
provided in section 10 of this act, if, on the basis of a survey under ((section))
RCW 82.32. . . (section 102, chapter . . . (SHB 3066), Laws of 2010) or other
information, the department finds that an investment project is not eligible
for tax deferral under this chapter, the amount of deferred taxes outstanding
for the project ((is)), according to the repayment schedule in RCW
82.60.060, is immediately due. For purposes of this subsection (2)(a),
the repayment schedule in RCW 82.60.060 is tolled during the period of time
that a taxpayer is receiving relief from repayment of deferred taxes under
section 10 of this act.
(3) A recipient who must repay deferred taxes under subsection (2) of this section because the department has found that an investment project is not eligible for tax deferral under this chapter is no longer required to file annual surveys under RCW 82.32. . . (section 102, chapter . . . (SHB 3066), Laws of 2010) beginning on the date an investment project is used for nonqualifying purposes.
(4) Notwithstanding any other provision of this section or RCW 82.32. . . (section 102, chapter . . . (SHB 3066), Laws of 2010), deferred taxes on the following need not be repaid:
(a) Machinery and equipment, and sales of or charges made for labor and services, which at the time of purchase would have qualified for exemption under RCW 82.08.02565; and
(b) Machinery and equipment which at the time of first use would have qualified for exemption under RCW 82.12.02565.
NEW SECTION. Sec. 10. A new section is added to chapter 82.60 RCW to read as follows:
(1) Subject to the conditions in this section, a person is not liable for the amount of deferred taxes outstanding for an investment project when the person temporarily ceases to use its qualified buildings and qualified machinery and equipment for manufacturing or research and development activities in a county with a population of less than twenty thousand persons for a period not to exceed twenty- four months from the date that the department sent its assessment for the amount of outstanding deferred taxes to the taxpayer.
(2) The relief from repayment of deferred taxes under this section does not apply unless the number of qualified employment positions maintained at the investment project after manufacturing or research and development activities are temporarily ceased is at least ten percent of the number of qualified employment positions employed at the investment project at the time the deferral was approved by the department. If a person has been approved for more than one deferral under this chapter, relief from repayment of deferred taxes under this section does not apply unless the number of qualified employment positions maintained at the investment project after manufacturing or research and development activities are temporarily ceased is at least ten percent of the highest number of qualified employment positions at the investment project at the time any of the deferrals were approved by the department. If, at any time during the twenty-four month period after the department has sent the taxpayer an assessment for outstanding deferred taxes resulting from the person temporarily ceasing to use its qualified buildings and qualified machinery and equipment for manufacturing or research and development activities, the number of qualified employment positions falls below the ten percent threshold in this subsection, the amount of deferred taxes outstanding for the project is immediately due.
(3) The lessor of an investment project for which a deferral has been granted under this chapter who has passed the economic benefits of the deferral to the lessee is not eligible for relief from the payment of deferred taxes under this section.
(4) A person seeking relief from the payment of deferred taxes under this section must apply to the department in a form and manner prescribed by the department. The application required under this subsection must be received by the department within thirty days of the date that the department sent its assessment for outstanding deferred taxes resulting from the person temporarily ceasing to use its qualified buildings and qualified machinery and equipment for manufacturing or research and development activities. The department must approve applications that meet the requirements in this section for relief from the payment of deferred taxes.
(5) A person is entitled to relief under this section only once.
(6) A person whose application for relief from the payment of deferred taxes has been approved under this section must continue to file an annual survey as required under RCW 82.60.070(1) or any successor statute. In addition, the person must file, in a form and manner prescribed by the department, a report on the status of the business and the outlook for commencing manufacturing or research and development activities.
Sec. 11. RCW 82.62.010 and 2010 c ... (E2SHB 1597) s 232 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 credit under this chapter.
(2) "Department" means the department of revenue.
(3) "Eligible
area" means ((an area)) a "rural county" as
defined in RCW ((82.60.020)) 82.14.370.
(4)(a) "Eligible business project" means manufacturing or research and development activities which are conducted by an applicant in an eligible area at a specific facility, provided the applicant's average qualified employment positions at the specific facility will be at least fifteen percent greater in the four consecutive full calendar quarters after the calendar quarter during which the first qualified employment position is filled than the applicant's average qualified employment positions at the same facility in the four consecutive full calendar quarters immediately preceding the calendar quarter during which the first qualified employment position is filled.
(b) "Eligible
business project" does not include any portion of a business project
undertaken by a light and power business as defined in RCW 82.16.010(((4)))
or that portion of a business project creating qualified full-time employment
positions outside an eligible area.
(5) "First qualified employment position" means the first qualified employment position filled for which a credit under this chapter is sought.
(6)
"Manufacturing" means the same as defined in RCW 82.04.120.
"Manufacturing" also includes:
(a) Before July 1, 2010: (i) Computer programming, the production
of computer software, and other computer-related services, but only when the
computer programming, production of computer software, or other
computer-related services are performed by a manufacturer as defined in RCW
82.04.110 and contribute to the production of a new, different, or useful
substance or article of tangible personal property for sale; and (ii)
the activities performed by research and development laboratories and
commercial testing laboratories; and
(b) Beginning July 1, 2010, the activities performed by research and
development laboratories and commercial testing laboratories.
(7) "Person" has the meaning given in RCW 82.04.030.
(8)(a)(i) "Qualified employment position" means a permanent full- time employee employed in the eligible business project during four consecutive full calendar quarters.
(ii) For seasonal employers, "qualified employment position" also includes the equivalent of a full‑time employee in work hours for four consecutive full calendar quarters.
(b) For purposes of this subsection, "full time" means a normal work week of at least thirty‑five hours.
(c) Once a permanent, full‑time employee has been employed, a position does not cease to be a qualified employment position solely due to periods in which the position goes vacant, as long as:
(i) The cumulative period of any vacancies in that position is not more than one hundred twenty days in the four-quarter period; and
(ii) During a vacancy, the employer is training or actively recruiting a replacement permanent, full‑time employee for the position.
(9) "Recipient" means a person receiving tax credits under this chapter.
(10) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun, but only when such activities are intended to ultimately result in the production of a new, different, or useful substance or article of tangible personal property for sale. As used in this subsection, "commercial sales" excludes sales of prototypes or sales for market testing if the total gross receipts from such sales of the product, service, or process do not exceed one million dollars.
(11) "Seasonal employee" means an employee of a seasonal employer who works on a seasonal basis. For the purposes of this subsection and subsection (12) of this section, "seasonal basis" means a continuous employment period of less than twelve consecutive months.
(12) "Seasonal employer" means a person who regularly hires more than fifty percent of its employees to work on a seasonal basis.
NEW SECTION. Sec. 12. RCW 82.60.900 and 82.60.901 are each decodified.
NEW SECTION. Sec. 13. The following acts or parts of acts are each repealed:
(1) RCW 82.60.050 (Expiration of RCW 82.60.030 and 82.60.040) and 2004 c 25 s 6, 1994 sp.s. c 1 s 7, 1993 sp.s. c 25 s 404, 1988 c 41 s 5, & 1985 c 232 s 10; and
(2) RCW 82.60.110 (Competing projects‑-Impact study) and 1998 c 245 s 169 & 1994 sp.s. c 1 s 8.
NEW SECTION. Sec. 14. Except for section 3 of this act, this act takes effect July 1, 2010.
NEW SECTION. Sec. 15. The amendments to the definitions of "manufacturing" and "research and development" in sections 2 and 11 of this act apply retroactively as well as prospectively."
Senator Kastama spoke in favor of adoption of the striking amendment.
The President declared the question before the Senate to be the adoption of the striking amendment by Senators Kastama and Zarelli to Engrossed Substitute House Bill No. 3014.
The motion by Senator Kastama carried and the striking amendment was adopted by voice vote.
MOTION
There being no objection, the following title amendment was adopted:
On page 1, line 2 of the title, after "counties;" strike the remainder of the title and insert "amending RCW 82.60.010, 82.60.020, 82.60.030, 82.60.040, 82.60.049, 82.60.060, 82.60.070, and 82.62.010; adding new sections to chapter 82.60 RCW; decodifying RCW 82.60.900 and 82.60.901; repealing RCW 82.60.050 and 82.60.110; providing an effective date; and providing expiration dates."
MOTION
On motion of Senator Kastama, the rules were suspended, Engrossed Substitute House Bill No. 3014 as amended by the Senate was advanced to third reading, the second reading considered the third and the bill was placed on final passage.
Senator Kastama spoke in favor of passage of the bill.
The President declared the question before the Senate to be the final passage of Engrossed Substitute House Bill No. 3014 as amended by the Senate.
ROLL CALL
The Secretary called the roll on the final passage of Engrossed Substitute House Bill No. 3014 as amended by the Senate and the bill passed the Senate by the following vote: Yeas, 43; Nays, 0; Absent, 1; Excused, 5.
Voting yea: Senators Becker, Benton, Berkey, Brown, Carrell, Delvin, Eide, Fairley, Franklin, Fraser, Hargrove, Hatfield, Haugen, Hewitt, Hobbs, Honeyford, Kastama, Kauffman, Keiser, Kilmer, King, Kline, Kohl-Welles, Marr, McAuliffe, McDermott, Murray, Oemig, Parlette, Pflug, Prentice, Pridemore, Ranker, Regala, Roach, Rockefeller, Schoesler, Sheldon, Shin, Stevens, Swecker, Tom and Zarelli
Absent: Senator Jacobsen
Excused: Senators Brandland, Gordon, Holmquist, McCaslin and Morton
ENGROSSED SUBSTITUTE HOUSE BILL NO. 3014 as amended by the Senate, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.
MOTION
On motion of Senator Marr, Senator Jacobsen was excused.
MOTION
On motion of Senator Eide, the Senate reverted to the fourth order of business.
MESSAGE FROM THE HOUSE
March 20, 2010
MR. PRESIDENT:
The House passed SECOND ENGROSSED SUBSTITUTE SENATE BILL NO. 6143 with the following amendment(s): 6143-S.E2 AMH ENGR H5824.E
Strike everything after the enacting clause and insert the following:
"NEW SECTION. Sec. 1. In order to preserve funding for education, public safety, health care, environmental protection, and safety net services for children, elderly, disabled, and vulnerable people, it is the intent of the legislature to close obsolete tax preferences, clarify the legislature's intent regarding existing tax policy, and to ensure balanced tax policy while bolstering emerging industries.
PART I
Minimum Nexus Standards
NEW SECTION. Sec. 101. (1) The legislature finds that out-of-state businesses that do not have a physical presence in Washington earn significant income from Washington residents from providing services or collecting royalties on the use of intangible property in this state. The legislature further finds that these businesses receive significant benefits and opportunities provided by the state, such as: Laws providing protection of business interests or regulating consumer credit; access to courts and judicial process to enforce business rights, including debt collection and intellectual property rights; an orderly and regulated marketplace; and police and fire protection and a transportation system benefiting in-state agents and other representatives of out-of-state businesses. Therefore, the legislature intends to extend the state's business and occupation tax to these companies to ensure that they pay their fair share of the cost of services that this state renders and the infrastructure it provides.
(2)(a) The legislature also finds that the current cost apportionment method in RCW 82.04.460(1) for apportioning most service income has been difficult for both taxpayers and the department to apply due in large part (i) to the difficulty in assigning certain costs of doing business inside or outside of this state, and (ii) to its dissimilarity with the apportionment methods used in other states for their business activity taxes.
(b) The legislature further finds that there is a trend among states to adopt a single factor apportionment formula based on sales. The legislature recognizes that adoption of a sales factor only apportionment method has the advantages of simplifying apportionment and making Washington a more attractive place for businesses to expand their property and payroll. For these reasons, the legislature adopts single factor sales apportionment for purposes of apportioning royalty income and certain service income for state business and occupation tax purposes.
(c) Nothing in this act may be construed, however, to authorize apportionment of the gross income or value of products taxable under the following business and occupation tax classifications: Retailing, wholesaling, manufacturing, processing for hire, extracting, extracting for hire, printing, government contracting, public road construction, the classifications in RCW 82.04.280 (2), (4), (6), and (7), and any other activity not specifically included in the definition of apportionable activities in RCW 82.04.460.
(d) Nothing in this part is intended to modify the nexus and apportionment requirements for local gross receipts business and occupation taxes.
Sec. 102. RCW 82.04.220 and 1961 c 15 s 82.04.220 are each amended to read as follows:
(1) There is levied and ((shall be)) collected from
every person that has a substantial nexus with this state a tax for the
act or privilege of engaging in business activities. ((Such)) The
tax ((shall be)) is measured by the application of rates against
value of products, gross proceeds of sales, or gross income of the business, as
the case may be.
(2) A person who has a substantial nexus with this state in any tax year will be deemed to have a substantial nexus with this state for the following tax year.
NEW SECTION. Sec. 103. A new section is added to chapter 82.04 RCW to read as follows:
"Engaging within this state" and "engaging within the state," when used in connection with any apportionable activity as defined in RCW 82.04.460, means that a person generates gross income of the business from sources within this state, such as customers or intangible property located in this state, regardless of whether the person is physically present in this state.
NEW SECTION. Sec. 104. A new section is added to chapter 82.04 RCW to read as follows:
(1) A person engaging in business is deemed to have substantial nexus with this state if the person is:
(a) An individual and is a resident or domiciliary of this state;
(b) A business entity and is organized or commercially domiciled in this state; or
(c) A nonresident individual or a business entity that is organized or commercially domiciled outside this state, and in any tax year the person has:
(i) More than fifty thousand dollars of property in this state;
(ii) More than fifty thousand dollars of payroll in this state;
(iii) More than two hundred fifty thousand dollars of receipts from this state; or
(iv) At least twenty-five percent of the person's total property, total payroll, or total receipts in this state.
(2)(a) Property counting toward the thresholds in subsection (1)(c)(i) and (iv) of this section is the average value of the taxpayer's property, including intangible property, owned or rented and used in this state during the tax year.
(b)(i) Property owned by the taxpayer, other than loans and credit card receivables owned by the taxpayer, is valued at its original cost basis. Loans and credit card receivables owned by the taxpayer are valued at their outstanding principal balance, without regard to any reserve for bad debts. However, if a loan or credit card receivable is charged off in whole or in part for federal income tax purposes, the portion of the loan or credit card receivable charged off is deducted from the outstanding principal balance.
(ii) Property rented by the taxpayer is valued at eight times the net annual rental rate. For purposes of this subsection, "net annual rental rate" means the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals.
(c) The average value of property must be determined by averaging the values at the beginning and ending of the tax year; but the department may require the averaging of monthly values during the tax year if reasonably required to properly reflect the average value of the taxpayer's property.
(d)(i) For purposes of this subsection (2), loans and credit card receivables are deemed owned and used in this state as follows:
(A) Loans secured by real property, personal property, or both real and personal property, are deemed owned and used in the state if the real property or personal property securing the loan is located within this state. If the property securing the loan is located both within this state and one or more other states, the loan is deemed owned and used in this state if more than fifty percent of the fair market value of the real or personal property is located within this state. If more than fifty percent of the fair market value of the real or personal property is not located within any one state, then the loan is deemed owned and used in this state if the borrower is located in this state. The determination of whether the real or personal property securing a loan is located within this state must be made, as of the time the original agreement was made, and any and all subsequent substitutions of collateral must be disregarded.
(B) Loans not secured by real or personal property are deemed owned and used in this state if the borrower is located in this state.
(C) Credit card receivables are deemed owned and used in this state if the billing address of the cardholder is in this state.
(ii)(A) Except as otherwise provided in (d)(ii)(B) of this subsection (2), the definitions in the multistate tax commission's recommended formula for the apportionment and allocation of net income of financial institutions as existing on the effective date of this section or such subsequent date as may be provided by the department by rule, consistent with the purposes of this section, apply to this section.
(B) "Credit card" means a card or device existing for the purpose of obtaining money, property, labor, or services on credit.
(e) Notwithstanding anything else to the contrary in this subsection, property counting toward the thresholds in subsection (1)(c)(i) and (iv) of this section does not include a person's ownership of, or rights in, computer software as defined in RCW 82.04.215, including computer software used in providing a digital automated service; master copies of software; and digital goods and digital codes residing on servers located in this state.
(3)(a) Payroll counting toward the thresholds in subsection (1)(c)(ii) and (iv) of this section is the total amount paid by the taxpayer for compensation in this state during the tax year plus nonemployee compensation paid to representative third parties in this state. Nonemployee compensation paid to representative third parties includes the gross amount paid to nonemployees who represent the taxpayer in interactions with the taxpayer's clients and includes sales commissions.
(b) Employee compensation is paid in this state if the compensation is properly reportable to this state for unemployment compensation tax purposes, regardless of whether the compensation was actually reported to this state.
(c) Nonemployee compensation is paid in this state if the service performed by the representative third party occurs entirely or primarily within this state.
(d) For purposes of this subsection, "compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees or nonemployees and defined as gross income under 26 U.S.C. Sec. 61 of the federal internal revenue code of 1986, as existing on the effective date of this section.
(4) Receipts counting toward the thresholds in subsection (1)(c)(iii) and (iv) of this section are those amounts included in the numerator of the receipts factor under section 105 of this act and, for financial institutions, those amounts included in the numerator of the receipts factor under the rule adopted by the department as authorized in RCW 82.04.460(2).
(5)(a) Each December, the department must review the cumulative percentage change in the consumer price index. The department must adjust the thresholds in subsection (1)(c)(i) through (iii) of this section if the consumer price index has changed by five percent or more since the later of the effective date of this section, or the date that the thresholds were last adjusted under this subsection. For purposes of determining the cumulative percentage change in the consumer price index, the department must compare the consumer price index available as of December 1st of the current year with the consumer price index as of the later of the effective date of this section, or the date that the thresholds were last adjusted under this subsection. The thresholds must be adjusted to reflect that cumulative percentage change in the consumer price index. The adjusted thresholds must be rounded to the nearest one thousand dollars. Any adjustment will apply to tax periods that begin after the adjustment is made.
(b) As used in this subsection, "consumer price index" means the consumer price index for all urban consumers (CPI-U) available from the bureau of labor statistics of the United States department of labor.
(6) Subsections (1) through (5) of this section only apply with respect to the taxes imposed under this chapter on apportionable activities as defined in RCW 82.04.460. For purposes of the taxes imposed under this chapter on any activity not included in the definition of apportionable activities in RCW 82.04.460, a person is deemed to have a substantial nexus with this state if the person has a physical presence in this state, which need only be demonstrably more than a slightest presence. For purposes of this subsection, a person is physically present in this state if the person has property or employees in this state. A person is also physically present in this state if the person, either directly or through an agent or other representative, engages in activities in this state that are significantly associated with the person's ability to establish or maintain a market for its products in this state.
NEW SECTION. Sec. 105. A new section is added to chapter 82.04 RCW to read as follows:
(1) The apportionable income of a person within the scope of RCW 82.04.460(1) is apportioned to Washington by multiplying its apportionable income by the receipts factor. Persons who are subject to tax under more than one of the tax classifications enumerated in RCW 82.04.460(4)(a) (i) through (ix) must calculate a separate receipts factor for each tax classification that the person is taxable under.
(2) For purposes of subsection (1) of this section, the receipts factor is a fraction and is calculated as provided in subsections (3) and (4) of this section and, for financial institutions, as provided in the rule adopted by the department under the authority of RCW 82.04.460(2).
(3)(a) The numerator of the receipts factor is the total gross income of the business of the taxpayer attributable to this state during the tax year from engaging in an apportionable activity. The denominator of the receipts factor is the total gross income of the business of the taxpayer from engaging in an apportionable activity everywhere in the world during the tax year.
(b) Except as otherwise provided in this section, for purposes of computing the receipts factor, gross income of the business generated from each apportionable activity is attributable to the state:
(i) Where the customer received the benefit of the taxpayer's service or, in the case of gross income from royalties, where the customer used the taxpayer's intangible property.
(ii) If the customer received the benefit of the service or used the intangible property in more than one state, gross income of the business must be attributed to the state in which the benefit of the service was primarily received or in which the intangible property was primarily used.
(iii) If the taxpayer is unable to attribute gross income of the business under the provisions of (b)(i) or (ii) of this subsection (3), gross income of the business must be attributed to the state from which the customer ordered the service or, in the case of royalties, the office of the customer from which the royalty agreement with the taxpayer was negotiated.
(iv) If the taxpayer is unable to attribute gross income of the business under the provisions of (b)(i), (ii), or (iii) of this subsection (3), gross income of the business must be attributed to the state to which the billing statements or invoices are sent to the customer by the taxpayer.
(v) If the taxpayer is unable to attribute gross income of the business under the provisions of (b)(i), (ii), (iii), or (iv) of this subsection (3), gross income of the business must be attributed to the state from which the customer sends payment to the taxpayer.
(vi) If the taxpayer is unable to attribute gross income of the business under the provisions of (b)(i), (ii), (iii), (iv), or (v) of this subsection (3), gross income of the business must be attributed to the state where the customer is located as indicated by the customer's address: (A) Shown in the taxpayer's business records maintained in the regular course of business; or (B) obtained during consummation of the sale or the negotiation of the contract for services or for the use of the taxpayer's intangible property, including any address of a customer's payment instrument when readily available to the taxpayer and no other address is available.
(vii) If the taxpayer is unable to attribute gross income of the business under the provisions of (b)(i), (ii), (iii), (iv), (v), or (vi) of this subsection (3), gross income of the business must be attributed to the commercial domicile of the taxpayer.
(viii) For purposes of this subsection (3)(b), "customer" means a person or entity to whom the taxpayer makes a sale or renders services or from whom the taxpayer otherwise receives gross income of the business. "Customer" includes anyone who pays royalties or charges in the nature of royalties for the use of the taxpayer's intangible property.
(c) Gross income of the business from engaging in an apportionable activity must be excluded from the denominator of the receipts factor if, in respect to such activity, at least some of the activity is performed in this state, and the gross income is attributable under (b) of this subsection (3) to a state in which the taxpayer is not taxable. For purposes of this subsection (3)(c), "not taxable" means that the taxpayer is not subject to a business activities tax by that state, except that a taxpayer is taxable in a state in which it would be deemed to have a substantial nexus with that state under the standards in section 104(1) of this act regardless of whether that state imposes such a tax. "Business activities tax" means a tax measured by the amount of, or economic results of, business activity conducted in a state. The term includes taxes measured in whole or in part on net income or gross income or receipts. "Business activities tax" does not include a sales tax, use tax, or a similar transaction tax, imposed on the sale or acquisition of goods or services, whether or not denominated a gross receipts tax or a tax imposed on the privilege of doing business.
(d) This subsection (3) does not apply to financial institutions with respect to apportionable income taxable under RCW 82.04.290. Financial institutions must calculate the receipts factor as provided in subsection (4) of this section and the rule adopted by the department under the authority of RCW 82.04.460(2) with respect to apportionable income taxable under RCW 82.04.290. Financial institutions that are subject to tax under any other tax classification enumerated in RCW 82.04.460(4)(a) (i) through (v) and (vii) through (x) must calculate a separate receipts factor, as provided in this section, for each of the other tax classifications that the financial institution is taxable under.
(4) A taxpayer may calculate the receipts factor for the current tax year based on the most recent calendar year for which information is available for the full calendar year. If a taxpayer does not calculate the receipts factor for the current tax year based on previous calendar year information as authorized in this subsection, the business must use current year information to calculate the receipts factor for the current tax year. In either case, a taxpayer must correct the reporting for the current tax year when complete information is available to calculate the receipts factor for that year, but not later than October 31st of the following tax year. Interest will apply to any additional tax due on a corrected tax return. Interest must be assessed at the rate provided for delinquent excise taxes under chapter 82.32 RCW, retroactively to the date the original return was due, and will accrue until the additional taxes are paid. Penalties as provided in RCW 82.32.090 will apply to any such additional tax due only if the current tax year reporting is not corrected and the additional tax is not paid by October 31st of the following tax year. Interest as provided in RCW 82.32.060 will apply to any tax paid in excess of that properly due on a return as a result of a taxpayer using previous calendar year data or incomplete current-year data to calculate the receipts factor.
(5) Unless the context clearly requires otherwise, the definitions in this subsection apply throughout this section.
(a) "Apportionable activities" and "apportionable income" have the same meaning as in RCW 82.04.460.
(b) "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or any foreign country or political subdivision of a foreign country.
Sec. 106. RCW 82.04.2907 and 2009 c 535 s 407 are each amended to read as follows:
(1) Upon every person
engaging within this state in the business of receiving income from royalties
((or charges in the nature of royalties for the granting of intangible
rights, such as copyrights, licenses, patents, or franchise fees)), the
amount of tax with respect to ((such)) the business ((shall be))
is equal to the gross income from royalties ((or charges in the
nature of royalties from the business)) multiplied by the rate of 0.484
percent.
(2) For the purposes of
this section, "gross income from royalties" means compensation
for the use of intangible property, ((such as)) including charges in
the nature of royalties, regardless of where the intangible property will be
used. For purposes of this subsection, "intangible property"
includes copyrights, patents, licenses, franchises, trademarks, trade
names, and similar items. ((It)) "Gross income from
royalties" does not include compensation for any natural resource, the
licensing of prewritten computer software to the end user, or the licensing ((or
use)) of digital goods, digital codes, or digital automated services to
the end user as defined in RCW 82.04.190(11).
Sec. 107. RCW 82.04.2907 and 2010 c . . . (SHB 2620) s 302 are each amended to read as follows:
(1) Upon every person
engaging within this state in the business of receiving income from royalties
((or charges in the nature of royalties for the granting of intangible
rights, such as copyrights, licenses, patents, or franchise fees)), the
amount of tax with respect to the business is equal to the gross income from
royalties ((or charges in the nature of royalties from the business))
multiplied by the rate of 0.484 percent.
(2) For the purposes of
this section, "gross income from royalties" means compensation
for the use of intangible property, ((such as)) including charges in
the nature of royalties, regardless of where the intangible property will be
used. For purposes of this subsection, "intangible property"
includes copyrights, patents, licenses, franchises, trademarks, trade
names, and similar items. ((It)) "Gross income from
royalties" does not include compensation for any natural resource, the
licensing of prewritten computer software to the end user, or the licensing of
digital goods, digital codes, or digital automated services to the end user as
defined in RCW 82.04.190(11).
Sec. 108. RCW 82.04.460 and 2004 c 174 s 6 are each amended to read as follows:
(1) Except as
otherwise provided in this section, any person ((rendering services))
earning apportionable income taxable under ((RCW 82.04.290 or
82.04.2908)) this chapter and ((maintaining places of business
both within and without this state which contribute to the rendition of such
services shall)) also taxable in another state, must, for the
purpose of computing tax liability under ((RCW 82.04.290 or 82.04.2908))
this chapter, apportion to this state, in accordance with section 105
of this act, that portion of the person's ((gross)) apportionable
income ((which is)) derived from ((services rendered)) business
activities performed within this state. ((Where such apportionment
cannot be accurately made by separate accounting methods, the taxpayer shall
apportion to this state that proportion of the taxpayer's total income which
the cost of doing business within the state bears to the total cost of doing
business both within and without the state.))
(2) ((Notwithstanding
the provision of subsection (1) of this section, persons doing business both
within and without the state who receive gross income from service charges, as
defined in RCW 63.14.010 (relating to amounts charged for granting the right or
privilege to make deferred or installment payments) or who receive gross income
from engaging in business as financial institutions within the scope of chapter
82.14A RCW (relating to city taxes on financial institutions) shall apportion
or allocate gross income taxable under RCW 82.04.290 to this state pursuant to
rules promulgated by the department consistent with uniform rules for
apportionment or allocation developed by the states.)) The department
must by rule provide a method of apportioning the apportionable income of
financial institutions, where such apportionable income is taxable under RCW
82.04.290. The rule adopted by the department must, to the extent feasible, be
consistent with the multistate tax commission's recommended formula for the
apportionment and allocation of net income of financial institutions as
existing on the effective date of this section or such subsequent date as may
be provided by the department by rule, consistent with the purposes of this
section, except that:
(a) The department's rule must provide for a single factor
apportionment method based on the receipts factor; and
(b) The definition of "financial institution" contained in
appendix A to the multistate tax commission's recommended formula for the
apportionment and allocation of net income of financial institutions is
advisory only.
(3) The department ((shall))
may by rule provide a method or methods of apportioning or allocating
gross income derived from sales of telecommunications service and
competitive telephone service((s)) taxed under this chapter, if the
gross proceeds of sales subject to tax under this chapter do not fairly
represent the extent of the taxpayer's income attributable to this state. ((The
rules shall be, so far as feasible, consistent with the methods of
apportionment contained in this section and shall require the consideration of
those facts, circumstances, and apportionment factors as will result in an
equitable and constitutionally permissible division of the services.)) The
rule must provide for an equitable and constitutionally permissible division of
the tax base.
(4) For purposes of this section, the following definitions apply
unless the context clearly requires otherwise:
(a) "Apportionable income" means gross income of the
business generated from engaging in apportionable activities, including income
received from apportionable activities performed outside this state if the
income would be taxable under this chapter if received from activities in this
state, less the exemptions and deductions allowable under this chapter. For
purposes of this subsection, "apportionable activities" means only
those activities taxed under:
(i) RCW 82.04.255;
(ii) RCW 82.04.260 (3), (4), (5), (6), (7), (8), (9), and (12);
(iii) RCW 82.04.280(5);
(iv) RCW 82.04.285;
(v) RCW 82.04.286;
(vi) RCW 82.04.290;
(vii) RCW 82.04.2907;
(viii) RCW 82.04.2908;
(ix) RCW 82.04.263, but only to the extent of any activity that would
be taxable under any of the provisions enumerated under (a)(i) through (viii)
of this subsection (4) if the tax classification in RCW 82.04.263 did not
exist; and
(x) RCW 82.04.260(13) and 82.04.280(1), but only with respect to
advertising.
(b)(i) "Taxable in another state" means that the taxpayer is
subject to a business activities tax by another state on its income received
from engaging in apportionable activities; or the taxpayer is not subject to a
business activities tax by another state on its income received from engaging
in apportionable activities, but any other state has jurisdiction to subject
the taxpayer to a business activities tax on such income under the substantial
nexus standards in section 104(1) of this act.
(ii) For purposes of this subsection (4)(b), "business activities
tax" and "state" have the same meaning as in section 105 of this
act.
Sec. 109. RCW 82.04.080 and 1961 c 15 s 82.04.080 are each amended to read as follows:
(1) "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, interest, discount, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.
(2) Financial institutions must determine gains realized from trading in stocks, bonds, and other evidences of indebtedness on a net annualized basis. For purposes of this subsection, a financial institution means a person within the scope of the rule adopted by the department under the authority of RCW 82.04.460(2).
NEW SECTION. Sec. 110. A new section is added to chapter 82.04 RCW to read as follows:
(1) This chapter does not apply to amounts received by a financial institution from an affiliated person if the amounts are received from transactions that are required to be at arm's length under sections 23A or 23B of the federal reserve act as existing on the effective date of this section or such subsequent date as may be provided by the department by rule, consistent with the purposes of this section. For purposes of this subsection, "financial institution" has the same meaning as in RCW 82.04.080.
(2) As used in this section, "affiliated" means under common control. "Common 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.
NEW SECTION. Sec. 111. A new section is added to chapter 82.04 RCW to read as follows:
(1) This chapter does not apply to amounts received by investment conduits or securitization entities from cash and securities.
(2) For purposes of this section, the following definitions apply:
(a) "Investment conduit" means an entity formed by a financial institution as defined in RCW 82.04.080 for the express purpose of holding or owning cash or securities if the entity formed:
(i) Has no employees;
(ii) Has no direct profit-making motive;
(iii) Owns no tangible assets, other than cash or securities;
(iv) Holds or owns cash or securities solely as a conduit, allocating its income to holders of its ownership interests; and
(v) Has, within twelve months of its organization or initial capitalization date, issued ownership interests to other than affiliated persons, equal to or greater than twenty-five percent of its total issued ownership interests.
(b) "Securities" has the same meaning as in section 2 of the securities act of 1933 and includes eligible assets as defined by Rule 3a-7 of the investment company act, as the law and rule exist on the effective date of this section or such subsequent date as may be provided by the department by rule, consistent with the purposes of this section.
(c) "Securitization entity" means an entity created by a bank holding company if the entity created:
(i) Has no employees;
(ii) Has no direct profit-making motive;
(iii) Owns no tangible assets, other than cash, fixed or revolving discrete pools of credit or charge card receivables originated by a financial institution, or securities;
(iv) Acts solely as a conduit, allocating its income to holders of its ownership interests; and
(v) Has as its sole business activities the:
(A) Acquisition of such discrete pools of credit or charge card receivables; and
(B) Issuance or causing the issuance of securities primarily to persons not affiliated with the entity.
(d) "Bank holding company" has the same meaning as provided in the bank holding company act of 1956, as existing on the effective date of this section or such subsequent date as may be provided by the department by rule, consistent with the purposes of this section.
(e) "No direct profit-making motive" means that all of an entity's income, less a reasonable servicing fee, is paid to holders of its ownership interests.
(f) "Ownership interest" means interests categorized as debt or equity for purposes of federal tax or generally accepted accounting principles.
(g) "Affiliated" has the same meaning as in section 110 of this act.
PART II
Tax Avoidance Transactions
NEW SECTION. Sec. 201. (1) The legislature finds that this state's tax policy with respect to the taxation of transactions between affiliated entities and the income derived from such transactions (intercompany transactions) has motivated some taxpayers to engage in transactions designed solely or primarily to minimize the tax effects of intercompany transactions. The legislature further finds that some intercompany transactions result from taxpayers that are required to establish affiliated entities to comply with regulatory mandates and that transactions between such affiliates effectively increases the tax burden in this state on the affiliated group of entities.
(2) Therefore, as existing resources allow, the department of revenue is directed to conduct a review of the state's tax policy with respect to the taxation of intercompany transactions. The review must include the impacts of such transactions under the state's business and occupation tax and state and local sales and use taxes. The department may include other taxes in the review as it deems appropriate.
(3) In conducting the review, the department must examine how this state's tax policy compares to the tax policy of other states with respect to the taxation of intercompany transactions. The department's review must include an analysis of potential alternatives to the current policy of taxing intercompany transactions, including their estimated revenue impacts if practicable.
(4) In conducting this review, the department may seek input from members of the business community and others as it deems appropriate.
(5) The department must report its findings to the fiscal committees of the house of representatives and senate by December 1, 2010. However, if the department has not completed its review by December 1, 2010, the department must provide the fiscal committees of the legislature with a brief status report by December 1, 2010, and the final report by December 1, 2011.
Sec. 202. RCW 82.12.020 and 2009 c 535 s 305 are each amended to read as follows:
(1) There is ((hereby))
levied and ((there shall be)) collected from every person in this state
a tax or excise for the privilege of using within this state as a consumer any:
(a) Article of tangible
personal property ((purchased at retail, or)) acquired by ((lease,
gift, repossession, or bailment, or extracted or produced or manufactured by
the person so using the same, or otherwise furnished to a person engaged in any
business taxable under RCW 82.04.280 (2) or (7))) the user in any manner,
including tangible personal property acquired at a casual or isolated sale, and
including by-products used by the manufacturer thereof, except as otherwise
provided in this chapter, irrespective of whether the article or similar
articles are manufactured or are available for purchase within this state;
(b) Prewritten computer software, regardless of the method of delivery, but excluding prewritten computer software that is either provided free of charge or is provided for temporary use in viewing information, or both;
(c) Services defined as a retail sale in RCW 82.04.050 (2)(a) or (g), (3)(a), or (6)(b), excluding services defined as a retail sale in RCW 82.04.050(6)(b) that are provided free of charge;
(d) Extended warranty; or
(e)(i) Digital good, digital code, or digital automated service, including the use of any services provided by a seller exclusively in connection with digital goods, digital codes, or digital automated services, whether or not a separate charge is made for such services.
(ii) With respect to the use of digital goods, digital automated services, and digital codes acquired by purchase, the tax imposed in this subsection (1)(e) applies in respect to:
(A) Sales in which the seller has granted the purchaser the right of permanent use;
(B) Sales in which the seller has granted the purchaser a right of use that is less than permanent;
(C) Sales in which the purchaser is not obligated to make continued payment as a condition of the sale; and
(D) Sales in which the purchaser is obligated to make continued payment as a condition of the sale.
(iii) With respect to digital goods, digital automated services, and digital codes acquired other than by purchase, the tax imposed in this subsection (1)(e) applies regardless of whether or not the consumer has a right of permanent use or is obligated to make continued payment as a condition of use.
(2) The provisions of this chapter do not apply in respect to the use of any article of tangible personal property, extended warranty, digital good, digital code, digital automated service, or service taxable under RCW 82.04.050 (2)(a) or (g), (3)(a), or (6)(b), if the sale to, or the use by, the present user or the present user's bailor or donor has already been subjected to the tax under chapter 82.08 RCW or this chapter and the tax has been paid by the present user or by the present user's bailor or donor.
(3)(a) Except as provided in this section, payment of the tax imposed by this chapter or chapter 82.08 RCW by one purchaser or user of tangible personal property, extended warranty, digital good, digital code, digital automated service, or other service does not have the effect of exempting any other purchaser or user of the same property, extended warranty, digital good, digital code, digital automated service, or other service from the taxes imposed by such chapters.
(b) The tax imposed by this chapter does not apply:
(i) If the sale to, or the use by, the present user or his or her bailor or donor has already been subjected to the tax under chapter 82.08 RCW or this chapter and the tax has been paid by the present user or by his or her bailor or donor;
(ii) In respect to the use of any article of tangible personal property acquired by bailment and the tax has once been paid based on reasonable rental as determined by RCW 82.12.060 measured by the value of the article at time of first use multiplied by the tax rate imposed by chapter 82.08 RCW or this chapter as of the time of first use;
(iii) In respect to the use of any article of tangible personal property acquired by bailment, if the property was acquired by a previous bailee from the same bailor for use in the same general activity and the original bailment was prior to June 9, 1961; or
(iv) To the use of digital goods or digital automated services, which were obtained through the use of a digital code, if the sale of the digital code to, or the use of the digital code by, the present user or the present user's bailor or donor has already been subjected to the tax under chapter 82.08 RCW or this chapter and the tax has been paid by the present user or by the present user's bailor or donor.
(4)(a) Except as provided in (b) of this subsection (4), the tax is levied and must be collected in an amount equal to the value of the article used, value of the digital good or digital code used, value of the extended warranty used, or value of the service used by the taxpayer, multiplied by the applicable rates in effect for the retail sales tax under RCW 82.08.020.
(b) In the case of a seller required to collect use tax from the purchaser, the tax must be collected in an amount equal to the purchase price multiplied by the applicable rate in effect for the retail sales tax under RCW 82.08.020.
(5) For purposes of the tax imposed in this section, "person" includes anyone within the definition of "buyer," "purchaser," and "consumer" in RCW 82.08.010.
Sec. 203. RCW 82.45.010 and 2008 c 116 s 3 and 2008 c 6 s 701 are each reenacted and amended to read as follows:
(1) As used in this
chapter, the term "sale" ((shall have)) has its ordinary
meaning and ((shall)) includes any conveyance, grant, assignment,
quitclaim, or transfer of the ownership of or title to real property, including
standing timber, or any estate or interest therein for a valuable
consideration, and any contract for such conveyance, grant, assignment,
quitclaim, or transfer, and any lease with an option to purchase real property,
including standing timber, or any estate or interest therein or other contract
under which possession of the property is given to the purchaser, or any other
person at the purchaser's direction, and title to the property is retained by
the vendor as security for the payment of the purchase price. The term also
includes the grant, assignment, quitclaim, sale, or transfer of improvements
constructed upon leased land.
(2)(a) The term "sale" also includes the transfer or acquisition within any twelve-month period of a controlling interest in any entity with an interest in real property located in this state for a valuable consideration.
(b) For the sole purpose of
determining whether, pursuant to the exercise of an option, a controlling
interest was transferred or acquired within a twelve-month period, the date
that the option agreement was executed is the date on which the transfer or
acquisition of the controlling interest is deemed to occur. For all other
purposes under this chapter, the date upon which the option is exercised is the
date of the transfer or acquisition of the controlling interest.
(c) For purposes of this subsection, all acquisitions of persons
acting in concert ((shall)) must be aggregated for purposes of
determining whether a transfer or acquisition of a controlling interest has
taken place. The department ((of revenue shall)) must adopt
standards by rule to determine when persons are acting in concert. In adopting
a rule for this purpose, the department ((shall)) must consider
the following:
(((a))) (i)
Persons ((shall)) must be treated as acting in concert when they
have a relationship with each other such that one person influences or controls
the actions of another through common ownership; and
(((b))) (ii)
When persons are not commonly owned or controlled, they ((shall)) must
be treated as acting in concert only when the unity with which the purchasers
have negotiated and will consummate the transfer of ownership interests
supports a finding that they are acting as a single entity. If the
acquisitions are completely independent, with each purchaser buying without regard
to the identity of the other purchasers, then the acquisitions ((shall be))
are considered separate acquisitions.
(3) The term
"sale" ((shall)) does not include:
(a) A transfer by gift, devise, or inheritance.
(b) A transfer of any leasehold interest other than of the type mentioned above.
(c) A cancellation or forfeiture of a vendee's interest in a contract for the sale of real property, whether or not such contract contains a forfeiture clause, or deed in lieu of foreclosure of a mortgage.
(d) The partition of property by tenants in common by agreement or as the result of a court decree.
(e) The assignment of property or interest in property from one spouse or one domestic partner to the other spouse or other domestic partner in accordance with the terms of a decree of dissolution of marriage or state registered domestic partnership or in fulfillment of a property settlement agreement.
(f) The assignment or other transfer of a vendor's interest in a contract for the sale of real property, even though accompanied by a conveyance of the vendor's interest in the real property involved.
(g) Transfers by appropriation or decree in condemnation proceedings brought by the United States, the state or any political subdivision thereof, or a municipal corporation.
(h) A mortgage or other transfer of an interest in real property merely to secure a debt, or the assignment thereof.
(i) Any transfer or conveyance made pursuant to a deed of trust or an order of sale by the court in any mortgage, deed of trust, or lien foreclosure proceeding or upon execution of a judgment, or deed in lieu of foreclosure to satisfy a mortgage or deed of trust.
(j) A conveyance to the federal housing administration or veterans administration by an authorized mortgagee made pursuant to a contract of insurance or guaranty with the federal housing administration or veterans administration.
(k) A transfer in compliance with the terms of any lease or contract upon which the tax as imposed by this chapter has been paid or where the lease or contract was entered into prior to the date this tax was first imposed.
(l) The sale of any grave or lot in an established cemetery.
(m) A sale by the United States, this state or any political subdivision thereof, or a municipal corporation of this state.
(n) A sale to a regional transit authority or public corporation under RCW 81.112.320 under a sale/leaseback agreement under RCW 81.112.300.
(o) A transfer of real
property, however effected, if it consists of a mere change in identity or form
of ownership of an entity where there is no change in the beneficial
ownership. These include transfers to a corporation or partnership which is
wholly owned by the transferor and/or the transferor's spouse or domestic
partner or children of the transferor or the transferor's spouse or domestic
partner((: PROVIDED, That)). However, if thereafter such
transferee corporation or partnership voluntarily transfers such real property,
or such transferor, spouse or domestic partner, or children of the transferor
or the transferor's spouse or domestic partner voluntarily transfer stock in
the transferee corporation or interest in the transferee partnership capital,
as the case may be, to other than (((1))) (i) the transferor
and/or the transferor's spouse or domestic partner or children of the
transferor or the transferor's spouse or domestic partner, (((2))) (ii)
a trust having the transferor and/or the transferor's spouse or domestic
partner or children of the transferor or the transferor's spouse or domestic
partner as the only beneficiaries at the time of the transfer to the trust, or
(((3))) (iii) a corporation or partnership wholly owned by the original
transferor and/or the transferor's spouse or domestic partner or children of
the transferor or the transferor's spouse or domestic partner, within three
years of the original transfer to which this exemption applies, and the tax on
the subsequent transfer has not been paid within sixty days of becoming due,
excise taxes ((shall)) become due and payable on the original transfer
as otherwise provided by law.
(p)(i) A transfer that
for federal income tax purposes does not involve the recognition of gain or
loss for entity formation, liquidation or dissolution, and reorganization,
including but not limited to nonrecognition of gain or loss because of
application of ((section)) 26 U.S.C. Sec. 332, 337, 351,
368(a)(1), 721, or 731 of the internal revenue code of
1986, as amended.
(ii) However, the transfer described in (p)(i) of this subsection cannot be preceded or followed within a twelve-month period by another transfer or series of transfers, that, when combined with the otherwise exempt transfer or transfers described in (p)(i) of this subsection, results in the transfer of a controlling interest in the entity for valuable consideration, and in which one or more persons previously holding a controlling interest in the entity receive cash or property in exchange for any interest the person or persons acting in concert hold in the entity. This subsection (3)(p)(ii) does not apply to that part of the transfer involving property received that is the real property interest that the person or persons originally contributed to the entity or when one or more persons who did not contribute real property or belong to the entity at a time when real property was purchased receive cash or personal property in exchange for that person or persons' interest in the entity. The real estate excise tax under this subsection (3)(p)(ii) is imposed upon the person or persons who previously held a controlling interest in the entity.
(q) A qualified sale of a manufactured/mobile home community, as defined in RCW 59.20.030, that takes place on or after June 12, 2008, but before December 31, 2018.
Sec. 204. RCW 82.45.033 and 1993 sp.s. c 25 s 505 are each amended to read as follows:
(1) As used in this chapter, the term "controlling interest" has the following meaning:
(((1))) (a)
In the case of a corporation, either fifty percent or more of the total
combined voting power of all classes of stock of the corporation entitled to
vote, or fifty percent of the capital, profits, or beneficial interest in the
voting stock of the corporation; and
(((2))) (b)
In the case of a partnership, association, trust, or other entity, fifty
percent or more of the capital, profits, or beneficial interest in such
partnership, association, trust, or other entity.
(2) The department may, at
the department's option, enforce the obligation of the seller under this
chapter as provided in this subsection (2):
(a) In the transfer or acquisition of a controlling interest as
defined in subsection (1)(a) of this section, either against the corporation in
which a controlling interest is transferred or acquired, against the person or
persons who acquired the controlling interest in the corporation or, when the
corporation is not a publicly traded company, against the person or persons who
transferred the controlling interest in the corporation; and
(b) In the transfer or acquisition of a controlling interest as
defined in subsection (1)(b) of this section, either against the entity in
which a controlling interest is transferred or acquired or against the person
or persons who transferred or acquired the controlling interest in the entity.
Sec. 205. RCW 82.45.070 and 1969 ex.s. c 223 s 28A.45.070 are each amended to read as follows:
The tax ((herein))
provided for in this chapter and any interest or penalties thereon ((shall
be)) is a specific lien upon each ((piece)) parcel of
real property located in this state that is either sold or that is
owned by an entity in which a controlling interest has been transferred or
acquired. The lien attaches from the time of sale until the tax ((shall
have been)) is paid, which lien may be enforced in the manner
prescribed for the foreclosure of mortgages.
Sec. 206. RCW 82.45.080 and 1980 c 154 s 3 are each amended to read as follows:
(1) The tax levied under this chapter ((shall be)) is
the obligation of the seller and the department ((of revenue)) may, at
the department's option, enforce the obligation through an action of debt against
the seller or the department may proceed in the manner prescribed for the
foreclosure of mortgages ((and resort to)). The department's use of
one course of enforcement ((shall)) is not ((be)) an
election not to pursue the other.
(2) For purposes of this section and notwithstanding any other provisions of law, the seller is the parent corporation of a wholly owned subsidiary, when such subsidiary is the transferor to a third-party transferee and the subsidiary is dissolved before paying the tax imposed under this chapter.
Sec. 207. RCW 82.45.100 and 2007 c 111 s 112 are each amended to read as follows:
(1) Payment of the tax
imposed under this chapter is due and payable immediately at the time of sale,
and if not paid within one month thereafter ((shall)) will bear
interest from the time of sale until the date of payment.
(a) Interest imposed
before January 1, 1999, ((shall be)) is computed at the rate of
one percent per month.
(b) Interest imposed
after December 31, 1998, ((shall be)) is computed on a monthly
basis at the rate as computed under RCW 82.32.050(2). The rate so computed ((shall))
must be adjusted on the first day of January of each year for use in
computing interest for that calendar year. The department ((of revenue
shall)) must provide written notification to the county treasurers
of the variable rate on or before December 1st of the year preceding the
calendar year in which the rate applies.
(2) In addition to the
interest described in subsection (1) of this section, if the payment of any tax
is not received by the county treasurer or the department of revenue, as the
case may be, within one month of the date due, there ((shall be)) is
assessed a penalty of five percent of the amount of the tax; if the tax is not
received within two months of the date due, there ((shall)) will
be assessed a total penalty of ten percent of the amount of the tax; and if the
tax is not received within three months of the date due, there ((shall))
will be assessed a total penalty of twenty percent of the amount of the
tax. The payment of the penalty described in this subsection ((shall be))
is collectible from the seller only, and RCW 82.45.070 does not apply to
the penalties described in this subsection.
(3) If the tax imposed
under this chapter is not received by the due date, the transferee ((shall
be)) is personally liable for the tax, along with any interest as
provided in subsection (1) of this section, unless((:
(a))) an instrument evidencing the sale is recorded in the
official real property records of the county in which the property conveyed is
located((; or
(b) Either the transferor or transferee notifies the department of
revenue in writing of the occurrence of the sale within thirty days following
the date of the sale)).
(4) If upon examination
of any affidavits or from other information obtained by the department or its
agents it appears that all or a portion of the tax is unpaid, the department ((shall))
must assess against the taxpayer the additional amount found to be due
plus interest and penalties as provided in subsections (1) and (2) of this
section. The department ((shall)) must notify the taxpayer by
mail, or electronically as provided in RCW 82.32.135, of the additional amount
and the same ((shall)) becomes due and ((shall)) must
be paid within thirty days from the date of the notice, or within such further
time as the department may provide.
(5) No assessment or refund may be made by the department more than four years after the date of sale except upon a showing of:
(a) Fraud or misrepresentation of a material fact by the taxpayer;
(b) A failure by the taxpayer to record documentation of a sale or otherwise report the sale to the county treasurer; or
(c) A failure of the transferor or transferee to report the sale under RCW 82.45.090(2).
(6) Penalties collected
on taxes due under this chapter under subsection (2) of this section and RCW
82.32.090 (2) through (7) ((shall)) must be deposited in the
housing trust fund as described in chapter 43.185 RCW.
Sec. 208. RCW 82.45.220 and 2005 c 326 s 3 are each amended to read as follows:
(1) An organization that fails to report a transfer of the
controlling interest in the organization under RCW 43.07.390 to the secretary
of state and is later determined to be subject to real estate excise taxes due
to the transfer, ((shall be)) is subject to the provisions of RCW
82.45.100 as well as the evasion penalty in RCW 82.32.090(6).
(2) Subsection (1) of this section also applies to the failure to report to the secretary of state the granting of an option to acquire an interest in the organization if the exercise of the option would result in a sale as defined in RCW 82.45.010(2).
Sec. 209. RCW 43.07.390 and 2005 c 326 s 2 are each amended to read as follows:
(1)(a) The
secretary of state ((shall)) must adopt rules requiring any
entity that is required to file an annual report with the secretary of state,
including entities under Titles 23, 23B, 24, and 25 RCW, to disclose: (i) Any
transfer ((in)) of the controlling interest ((of)) in
the entity ((and any interest in real property)); and (ii) the
granting of any option to acquire an interest in the entity if the exercise of
the option would result in a sale as defined in RCW 82.45.010(2).
(b) The disclosure requirement in this subsection only applies to
entities owning an interest in real property located in this state.
(2) This information ((shall))
must be made available to the department of revenue upon request for the
purposes of tracking the transfer of the controlling interest in entities
owning real property and to determine when the real estate excise tax is
applicable in such cases.
(3) For the purposes of this section, "controlling interest" has the same meaning as provided in RCW 82.45.033.
PART III
Modifying and Placing a Cap on the First Mortgage Deduction
NEW SECTION. Sec. 301. In 1980, the legislature adopted a business and occupation tax deduction to financial businesses for amounts derived from interest received on investments or loans primarily secured by first mortgages or trust deeds on nontransient residential properties which was codified in RCW 82.04.4292. However, the Washington state supreme court in Homestreet, Inc. v. Dep't of Revenue, 166 Wn.2d 444 (2009) held that a mortgage lender was entitled to a business and occupation tax deduction under RCW 82.04.4292 for the portion of interest it retained for servicing loans and mortgage-backed securities that it sold on a service-retained basis on the secondary market. The legislature finds that inclusion of interest retained for servicing loans and mortgage-backed securities was not within the legislative intent when the deduction provided in 82.04.4292 was adopted in 1980. Therefore, by this act, the legislature declares that the deduction provided by RCW 82.04.4292 does not apply to fees that are received in exchange for services, regardless of whether the source of the fees is or may have been interest when paid by a borrower.
Sec. 302. RCW 82.04.4292 and 1980 c 37 s 12 are each amended to read as follows:
(1) In computing tax there may be deducted from the measure of tax by those engaged in banking, loan, security or other financial businesses, amounts derived from interest received on investments or loans primarily secured by first mortgages or trust deeds on nontransient residential properties.
(2) 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, including servicing fees received by lenders when they
sell loans or mortgage-backed or mortgage-related securities in the secondary
market while retaining the right to service the loans or securities and receive
a portion of the interest payments as the servicing fee; 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; and
(d) Gains on the sale of valuable rights such as:
(i) Service release premiums, which are amounts received when
servicing rights are sold; and
(ii) Gains on the sale of loans.
(4) The total amount a person may deduct under this section for any
calendar year may not exceed one hundred twenty million dollars.
PART IV
Repealing the Nonresident Sales Tax Exemption
NEW SECTION. Sec. 401. RCW 82.08.0273 (Exemptions‑-Sales to nonresidents of tangible personal property, digital goods, and digital codes for use outside the state‑-Proof of nonresident status‑-Penalties) and 2009 c 535 s 512, 2007 c 135 s 2, 2003 c 53 s 399, 1993 c 444 s 1, 1988 c 96 s 1, 1982 1st ex.s. c 5 s 1, & 1980 c 37 s 39 are each repealed.
NEW SECTION. Sec. 402. RCW 82.08.0273 (Exemptions‑-Sales to nonresidents of tangible personal property, digital goods, and digital codes for use outside the state‑-Proof of nonresident status‑-Penalties) and 2010 c . . . (E2SHB 1597) s 215, 2009 c 535 s 512, 2007 c 135 s 2, 2003 c 53 s 399, 1993 c 444 s 1, 1988 c 96 s 1, 1982 1st ex.s. c 5 s 1, & 1980 c 37 s 39 are each repealed.
PART V
Direct Seller Business and Occupation Tax Exemption
NEW SECTION. Sec. 501. (1) A business and occupation tax exemption is provided in RCW 82.04.423 for certain out-of-state sellers that sell consumer products exclusively to or through a direct seller's representative. The intent of the legislature in enacting this exemption was to provide a narrow exemption for out-of-state businesses engaged in direct sales of consumer products, typically accomplished through in-home parties or door-to-door selling.
(2) In Dot Foods, Inc. v. Dep't of Revenue, Docket No. 81022-2 (September 10, 2009), the Washington supreme court held that the exemption in RCW 82.04.423 applied to a taxpayer: (a) That sold nonconsumer products through its representative in addition to consumer products; and (b) whose consumer products were ultimately sold at retail in permanent retail establishments.
(3) The legislature finds that most out-of-state businesses selling consumer products in this state will either be eligible for the exemption under RCW 82.04.423 or could easily restructure their business operations to qualify for the exemption. As a result, the legislature expects that the broadened interpretation of the direct sellers' exemption will lead to large and devastating revenue losses. This comes at a time when the state's existing budget is facing a two billion six hundred million dollar shortfall, which could grow, while at the same time the demand for state and state-funded services is also growing. Moreover, the legislature further finds that RCW 82.04.423 provides preferential tax treatment for out-of-state businesses over their in-state competitors and now creates a strong incentive for in-state businesses to move their operations outside Washington.
(4) Therefore, the legislature finds that it is necessary to reaffirm the legislature's intent in establishing the direct sellers' exemption and prevent the loss of revenues resulting from the expanded interpretation of the exemption by amending RCW 82.04.423 retroactively to conform the exemption to the original intent of the legislature and by prospectively ending the direct sellers' exemption as of the effective date of this section.
Sec. 502. RCW 82.04.423 and 1983 1st ex.s. c 66 s 5 are each amended to read as follows:
(1) Prior to April 1,
2010, this chapter ((shall)) does not apply to any person in
respect to gross income derived from the business of making sales at wholesale
or retail if such person:
(a) Does not own or lease real property within this state; and
(b) Does not regularly maintain a stock of tangible personal property in this state for sale in the ordinary course of business; and
(c) Is not a corporation incorporated under the laws of this state; and
(d) Makes sales in this state exclusively to or through a direct seller's representative.
(2) For purposes of this section, the term "direct seller's representative" means a person who buys only consumer products on a buy-sell basis or a deposit-commission basis for resale, by the buyer or any other person, in the home or otherwise than in a permanent retail establishment, or who sells at retail, or solicits the sale at retail of, only consumer products in the home or otherwise than in a permanent retail establishment; and
(a) Substantially all of the remuneration paid to such person, whether or not paid in cash, for the performance of services described in this subsection is directly related to sales or other output, including the performance of services, rather than the number of hours worked; and
(b) The services performed by the person are performed pursuant to a written contract between such person and the person for whom the services are performed and such contract provides that the person will not be treated as an employee with respect to such purposes for federal tax purposes.
(3) Nothing in this
section ((shall)) may be construed to imply that a person exempt
from tax under this section was engaged in a business activity taxable under
this chapter prior to ((the enactment of this section)) August 23,
1983.
PART VI
Business and Occupation Tax Preferences for Manufacturers of Products Derived from Certain Agricultural Products
NEW SECTION. Sec. 601. (1)(a) In 1967, the legislature amended RCW 82.04.260 in chapter 149, Laws of 1967 ex. sess. to authorize a preferential business and occupation tax rate for slaughtering, breaking, and/or processing perishable meat products and/or selling the same at wholesale. The legislature finds that RCW 82.04.260(4) was interpreted by the state supreme court on January 13, 2005, in Agrilink Foods, Inc. v. Department of Revenue, 153 Wn.2d 392 (2005). The supreme court held that the preferential business and occupation tax rate on the slaughtering, breaking, and/or processing of perishable meat products applied to the processing of perishable meat products into nonperishable finished products, such as canned food.
(b) The legislature intends to narrow the exemption provided for slaughtering, breaking, and/or processing perishable meat products and/or selling such products at wholesale by requiring that the end product be a perishable meat product; a nonperishable meat product that is comprised primarily of animal carcass by weight or volume, other than a canned meat product; or a meat by-product.
(2)(a) A business and occupation tax exemption is provided for (i) manufacturing by canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables, and (ii) selling such products at wholesale by the manufacturer to purchasers who transport the goods out of state in the ordinary course of business. This exemption expires July 1, 2012, and is replaced by a preferential business and occupation tax rate.
(b) The legislature finds that the rationale of the Agrilink decision, if applied to these tax preferences, could result in preferential tax treatment for any processed food product that contained any fresh fruit or vegetable as an ingredient, however small the amount.
(c) The legislature intends to narrow the tax preference provided to fruit and vegetable manufacturers by requiring that the end product be comprised either (i) exclusively of fruits and/or vegetables, or (ii) of any combination of fruits, vegetables, and certain other substances that, cumulatively, may not exceed the amount of fruits and vegetables contained in the product measured by weight or volume.
NEW SECTION. Sec. 602. A new section is added to chapter 82.04 RCW to read as follows:
(1) Upon every person engaging within this state in the business of manufacturing:
(a) Perishable meat products, by slaughtering, breaking, or processing, if the finished product is a perishable meat product; as to such persons the tax imposed is equal to the value of the perishable meat products manufactured, or, in the case of a processor for hire, the gross income of the business, multiplied by the rate of 0.138 percent;
(b) Meat products, by dehydration, curing, smoking, or any combination of these activities, if the finished meat products are not canned; as to such persons the tax imposed is equal to the value of the meat products manufactured, or, in the case of a processor for hire, the gross income of the business, multiplied by the rate of 0.138 percent;
(c) Hides, tallow, meat meal, and other similar meat by-products, if such products are derived in part from animals and manufactured in a rendering plant licensed under chapter 16.68 RCW; as to such persons the tax imposed is equal to the value of the products manufactured, or, in the case of a processor for hire, the gross income of the business, multiplied by the rate of 0.138 percent.
(2) Upon every person engaging within this state in the business of selling at wholesale:
(a) Perishable meat products; as to such persons the tax imposed is equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent;
(b) Meat products that have been manufactured by the seller by dehydration, curing, smoking, or any combination of such activities, if the finished meat products are not canned; as to such persons the tax imposed is equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent;
(c) Hides, tallow, meat meal, and other similar meat by-products, if such products are derived in part from animals and manufactured by the seller in a rendering plant; as to such persons the tax imposed is equal to the gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
(3) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Animal" means all members of the animal kingdom except humans, fish, and insects.
(b) "Carcass" means all or any parts, including viscera, of a slaughtered animal.
(c) "Fish" means any water-breathing animal, including shellfish.
(d) "Hide" means any unprocessed animal pelt or skin.
(e)(i) "Meat products" means:
(A) Products comprised exclusively of animal carcass; and
(B) Products, such as jerky, sausage, and other cured meat products, that are comprised primarily of animal carcass by weight or volume and may also contain water; nitrates; nitrites; acids; binders and extenders; natural or synthetic casings; colorings; flavorings such as soy sauce, liquid smoke, seasonings, citric acid, sugar, molasses, corn syrup, and vinegar; and similar substances.
(ii) Except as provided in (e)(i) of this subsection (3), "meat products" does not include products containing any cereal grains or cereal-grain products, dairy products, legumes and legume products, fruit or vegetable products as defined in RCW 82.04.260, and similar ingredients, unless the ingredient is used as a flavoring. For purposes of this subsection, "flavoring" means a substance that contains the flavoring constituents derived from a spice, fruit or fruit juice, vegetable or vegetable juice, edible yeast, herb, bark, bud, root, leaf, or any other edible substance of plant origin, whose primary function in food is flavoring or seasoning rather than nutritional, and which may legally appear as "natural flavor," "flavor," or "flavorings" in the ingredient statement on the label of the meat product.
(iii) "Meat products" includes only products that are intended for human consumption as food or animal consumption as feed.
(f) "Perishable" means having a high risk of spoilage within thirty days of manufacture without any refrigeration or freezing.
(g) "Rendering plant" means any place of business or location where dead animals or any part or portion thereof, or packing house refuse, are processed for the purpose of obtaining the hide, skin, grease residue, or any other by-product whatsoever.
Sec. 603. RCW 82.04.4266 and 2006 c 354 s 3 are each amended to read as follows:
(1) This chapter ((shall))
does not apply to the value of products or the gross proceeds of sales
derived from:
(a) Manufacturing
fruit((s)) or vegetable((s)) products by canning, preserving,
freezing, processing, or dehydrating fresh fruits or vegetables; or
(b) Selling at wholesale
fruit((s)) or vegetable((s)) products manufactured by the
seller by canning, preserving, freezing, processing, or dehydrating fresh
fruits or vegetables and sold to purchasers who transport in the ordinary
course of business the goods out of this state. A person taking an exemption
under this subsection (1)(b) must keep and preserve records for the period
required by RCW 82.32.070 establishing that the goods were transported by the
purchaser in the ordinary course of business out of this state.
(2)(a) "Fruit or
vegetable products" means:
(i) Products comprised exclusively of fruits, vegetables, or both; and
(ii) Products comprised of fruits, vegetables, or both, and which may
also contain water, sugar, salt, seasonings, preservatives, binders,
stabilizers, flavorings, yeast, and similar substances. However, the
amount of all ingredients contained in the product, other than fruits,
vegetables, and water, may not exceed the amount of fruits and vegetables
contained in the product measured by weight or volume.
(b) "Fruit or vegetable products" includes only products
that are intended for human consumption as food or animal consumption as feed.
(3) This section expires July 1, 2012.
Sec. 604. RCW 82.04.4266 and 2010 c . . . (SHB 3066) s 111 are each amended to read as follows:
(1) This chapter does not apply to the value of products or the gross proceeds of sales derived from:
(a) Manufacturing
fruit((s)) or vegetable((s)) products by canning,
preserving, freezing, processing, or dehydrating fresh fruits or vegetables; or
(b) Selling at wholesale
fruit((s)) or vegetable((s)) products manufactured by the
seller by canning, preserving, freezing, processing, or dehydrating fresh
fruits or vegetables and sold to purchasers who transport in the ordinary
course of business the goods out of this state. A person taking an exemption
under this subsection (1)(b) must keep and preserve records for the period
required by RCW 82.32.070 establishing that the goods were transported by the
purchaser in the ordinary course of business out of this state.
(2)(a) "Fruit or
vegetable products" means:
(i) Products comprised exclusively of fruits, vegetables, or both; and
(ii) Products comprised of fruits, vegetables, or both, and which may
also contain water, sugar, salt, seasonings, preservatives, binders,
stabilizers, flavorings, yeast, and similar substances. However, the
amount of all ingredients contained in the product, other than fruits,
vegetables, and water, may not exceed the amount of fruits and vegetables
contained in the product measured by weight or volume.
(b) "Fruit or vegetable products" includes only products
that are intended for human consumption as food or animal consumption as feed.
(3) A person claiming the exemption provided in this section must
file a complete annual survey with the department under RCW 82.32.--- (section
102, chapter . . . (SHB 3066), Laws of 2010).
(((3))) (4)
This section expires July 1, 2012.
Sec. 605. RCW 82.04.260 and 2009 c 479 s 64, 2009 c 461 s 1, and 2009 c 162 s 34 are each reenacted and amended to read as follows:
(1) Upon every person engaging within this state in the business of manufacturing:
(a) Wheat into flour,
barley into pearl barley, soybeans into soybean oil, canola into canola oil,
canola meal, or canola by-products, or sunflower seeds into sunflower oil; as
to such persons the amount of tax with respect to such business ((shall be))
is equal to the value of the flour, pearl barley, oil, canola meal, or
canola by-product manufactured, multiplied by the rate of 0.138 percent;
(b) Beginning July 1,
2012, seafood products that remain in a raw, raw frozen, or raw salted state at
the completion of the manufacturing by that person; or selling manufactured
seafood products that remain in a raw, raw frozen, or raw salted state at the
completion of the manufacturing, to purchasers who transport in the ordinary
course of business the goods out of this state; as to such persons the amount
of tax with respect to such business ((shall be)) is equal to the
value of the products manufactured or the gross proceeds derived from such
sales, multiplied by the rate of 0.138 percent. Sellers must keep and preserve
records for the period required by RCW 82.32.070 establishing that the goods
were transported by the purchaser in the ordinary course of business out of
this state;
(c) Beginning July 1,
2012, dairy products that as of September 20, 2001, are identified in 21
C.F.R., chapter 1, parts 131, 133, and 135, including by-products from the
manufacturing of the dairy products such as whey and casein; or selling the
same to purchasers who transport in the ordinary course of business the goods
out of state; as to such persons the tax imposed ((shall be)) is
equal to the value of the products manufactured or the gross proceeds derived
from such sales multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing that the
goods were transported by the purchaser in the ordinary course of business out
of this state;
(d)(i) Beginning
July 1, 2012, fruit((s)) or vegetable((s)) products by
canning, preserving, freezing, processing, or dehydrating fresh fruits or
vegetables, or selling at wholesale fruit((s)) or vegetable((s)) products
manufactured by the seller by canning, preserving, freezing, processing, or
dehydrating fresh fruits or vegetables and sold to purchasers who transport in
the ordinary course of business the goods out of this state; as to such persons
the amount of tax with respect to such business ((shall be)) is
equal to the value of the products manufactured or the gross proceeds derived
from such sales multiplied by the rate of 0.138 percent. Sellers must keep and
preserve records for the period required by RCW 82.32.070 establishing that the
goods were transported by the purchaser in the ordinary course of business out
of this state;
(ii) For purposes of this
subsection, "fruit or vegetable products" means:
(A) Products comprised exclusively of fruits, vegetables, or both; or
(B) Products comprised of fruits, vegetables, or both, and which may
also contain water, sugar, salt, seasonings, preservatives, binders,
stabilizers, flavorings, yeast, and similar substances. However, the
amount of all ingredients contained in the product, other than fruits,
vegetables, and water, may not exceed the amount of fruits and vegetables
contained in the product measured by weight or volume;
(iii) "Fruit and vegetable products" includes only products
that are intended for human consumption as food or animal consumption as feed;
(e) Until July 1, 2009,
alcohol fuel, biodiesel fuel, or biodiesel feedstock, as those terms are
defined in RCW 82.29A.135; as to such persons the amount of tax with respect to
the business ((shall be)) is equal to the value of alcohol fuel,
biodiesel fuel, or biodiesel feedstock manufactured, multiplied by the rate of
0.138 percent; and
(f) Alcohol fuel or wood
biomass fuel, as those terms are defined in RCW 82.29A.135; as to such persons
the amount of tax with respect to the business ((shall be)) is
equal to the value of alcohol fuel or wood biomass fuel manufactured,
multiplied by the rate of 0.138 percent.
(2) Upon every person
engaging within this state in the business of splitting or processing dried
peas; as to such persons the amount of tax with respect to such business ((shall
be)) is equal to the value of the peas split or processed,
multiplied by the rate of 0.138 percent.
(3) Upon every nonprofit
corporation and nonprofit association engaging within this state in research
and development, as to such corporations and associations, the amount of tax
with respect to such activities ((shall be)) is equal to the
gross income derived from such activities multiplied by the rate of 0.484
percent.
(4) ((Upon every
person engaging within this state in the business of slaughtering, breaking and/or
processing perishable meat products and/or selling the same at wholesale only
and not at retail; as to such persons the tax imposed shall be equal to the
gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
(5))) Upon every person engaging within this state in the business
of acting as a travel agent or tour operator; as to such persons the amount of
the tax with respect to such activities ((shall be)) is equal to
the gross income derived from such activities multiplied by the rate of 0.275
percent.
(((6))) (5)
Upon every person engaging within this state in business as an international
steamship agent, international customs house broker, international freight
forwarder, vessel and/or cargo charter broker in foreign commerce, and/or
international air cargo agent; as to such persons the amount of the tax with
respect to only international activities ((shall be)) is equal to
the gross income derived from such activities multiplied by the rate of 0.275
percent.
(((7))) (6)
Upon every person engaging within this state in the business of stevedoring and
associated activities pertinent to the movement of goods and commodities in
waterborne interstate or foreign commerce; as to such persons the amount of tax
with respect to such business ((shall be)) is equal to the gross
proceeds derived from such activities multiplied by the rate of 0.275 percent.
Persons subject to taxation under this subsection ((shall be)) are
exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of
their business subject to taxation under this subsection. Stevedoring and
associated activities pertinent to the conduct of goods and commodities in
waterborne interstate or foreign commerce are defined as all activities of a
labor, service or transportation nature whereby cargo may be loaded or unloaded
to or from vessels or barges, passing over, onto or under a wharf, pier, or
similar structure; cargo may be moved to a warehouse or similar holding or
storage yard or area to await further movement in import or export or may move
to a consolidation freight station and be stuffed, unstuffed, containerized,
separated or otherwise segregated or aggregated for delivery or loaded on any
mode of transportation for delivery to its consignee. Specific activities
included in this definition are: Wharfage, handling, loading, unloading,
moving of cargo to a convenient place of delivery to the consignee or a
convenient place for further movement to export mode; documentation services in
connection with the receipt, delivery, checking, care, custody and control of
cargo required in the transfer of cargo; imported automobile handling prior to
delivery to consignee; terminal stevedoring and incidental vessel services,
including but not limited to plugging and unplugging refrigerator service to
containers, trailers, and other refrigerated cargo receptacles, and securing
ship hatch covers.
(((8))) (7)(a)
Upon every person engaging within this state in the business of disposing of
low-level waste, as defined in RCW 43.145.010; as to such persons the amount of
the tax with respect to such business ((shall be)) is equal to
the gross income of the business, excluding any fees imposed under chapter
43.200 RCW, multiplied by the rate of 3.3 percent.
(b) If the gross income of the taxpayer is attributable to
activities both within and without this state, the gross income attributable to
this state ((shall)) must be determined in accordance with the
methods of apportionment required under RCW 82.04.460.
(((9))) (8)
Upon every person engaging within this state as an insurance producer or title
insurance agent licensed under chapter 48.17 RCW or a surplus line broker
licensed under chapter 48.15 RCW; as to such persons, the amount of the tax
with respect to such licensed activities ((shall be)) is equal to
the gross income of such business multiplied by the rate of 0.484 percent.
(((10))) (9)
Upon every person engaging within this state in business as a hospital, as
defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by
the state or any of its political subdivisions, as to such persons, the amount
of tax with respect to such activities ((shall be)) is equal to
the gross income of the business multiplied by the rate of 0.75 percent through
June 30, 1995, and 1.5 percent thereafter.
(((11))) (10)(a)
Beginning October 1, 2005, upon every person engaging within this state in the
business of manufacturing commercial airplanes, or components of such
airplanes, or making sales, at retail or wholesale, of commercial airplanes or
components of such airplanes, manufactured by the seller, as to such persons
the amount of tax with respect to such business ((shall)), in the case
of manufacturers, ((be)) is equal to the value of the product
manufactured and the gross proceeds of sales of the product manufactured, or in
the case of processors for hire, ((be)) is equal to the gross
income of the business, multiplied by the rate of:
(i) 0.4235 percent from
October 1, 2005, through ((the later of)) June 30, 2007; and
(ii) 0.2904 percent beginning July 1, 2007.
(b) Beginning July 1,
2008, upon every person who is not eligible to report under the provisions of
(a) of this subsection (((11))) (10) and is engaging within this
state in the business of manufacturing tooling specifically designed for use in
manufacturing commercial airplanes or components of such airplanes, or making
sales, at retail or wholesale, of such tooling manufactured by the seller, as
to such persons the amount of tax with respect to such business ((shall)),
in the case of manufacturers, ((be)) is equal to the value of the
product manufactured and the gross proceeds of sales of the product
manufactured, or in the case of processors for hire, ((be)) is
equal to the gross income of the business, multiplied by the rate of 0.2904
percent.
(c) For the purposes of
this subsection (((11))) (10), "commercial airplane"
and "component" have the same meanings as provided in RCW 82.32.550.
(d) In addition to all
other requirements under this title, a person eligible for the tax rate under
this subsection (((11))) (10) must report as required under RCW
82.32.545.
(e) This subsection (((11)))
(10) does not apply on and after July 1, 2024.
(((12))) (11)(a)
Until July 1, 2024, upon every person engaging within this state in the
business of extracting timber or extracting for hire timber; as to such persons
the amount of tax with respect to the business ((shall)), in the case of
extractors, ((be)) is equal to the value of products, including
by-products, extracted, or in the case of extractors for hire, ((be)) is
equal to the gross income of the business, multiplied by the rate of 0.4235
percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July
1, 2007, through June 30, 2024.
(b) Until July 1, 2024,
upon every person engaging within this state in the business of manufacturing
or processing for hire: (i) Timber into timber products or wood products; or
(ii) timber products into other timber products or wood products; as to such
persons the amount of the tax with respect to the business ((shall)), in
the case of manufacturers, ((be)) is equal to the value of
products, including by-products, manufactured, or in the case of processors for
hire, ((be)) is equal to the gross income of the business,
multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30,
2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
(c) Until July 1, 2024,
upon every person engaging within this state in the business of selling at
wholesale: (i) Timber extracted by that person; (ii) timber products
manufactured by that person from timber or other timber products; or (iii) wood
products manufactured by that person from timber or timber products; as to such
persons the amount of the tax with respect to the business ((shall be)) is
equal to the gross proceeds of sales of the timber, timber products, or wood
products multiplied by the rate of 0.4235 percent from July 1, 2006, through
June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
(d) Until July 1, 2024,
upon every person engaging within this state in the business of selling
standing timber; as to such persons the amount of the tax with respect to the
business ((shall be)) is equal to the gross income of the
business multiplied by the rate of 0.2904 percent. For purposes of this
subsection (((12))) (11)(d), "selling standing timber"
means the sale of timber apart from the land, where the buyer is required to
sever the timber within thirty months from the date of the original contract,
regardless of the method of payment for the timber and whether title to the
timber transfers before, upon, or after severance.
(e) For purposes of this subsection, the following definitions apply:
(i) "Biocomposite surface products" means surface material products containing, by weight or volume, more than fifty percent recycled paper and that also use nonpetroleum‑based phenolic resin as a bonding agent.
(ii) "Paper and paper products" means products made of interwoven cellulosic fibers held together largely by hydrogen bonding. "Paper and paper products" includes newsprint; office, printing, fine, and pressure-sensitive papers; paper napkins, towels, and toilet tissue; kraft bag, construction, and other kraft industrial papers; paperboard, liquid packaging containers, containerboard, corrugated, and solid-fiber containers including linerboard and corrugated medium; and related types of cellulosic products containing primarily, by weight or volume, cellulosic materials. "Paper and paper products" does not include books, newspapers, magazines, periodicals, and other printed publications, advertising materials, calendars, and similar types of printed materials.
(iii) "Recycled
paper" means paper and paper products having fifty percent or more of
their fiber content that comes from postconsumer waste. For purposes of this
subsection (((12))) (11)(e)(iii), "postconsumer waste"
means a finished material that would normally be disposed of as solid waste,
having completed its life cycle as a consumer item.
(iv) "Timber" means forest trees, standing or down, on privately or publicly owned land. "Timber" does not include Christmas trees that are cultivated by agricultural methods or short-rotation hardwoods as defined in RCW 84.33.035.
(v) "Timber products" means:
(A) Logs, wood chips, sawdust, wood waste, and similar products obtained wholly from the processing of timber, short-rotation hardwoods as defined in RCW 84.33.035, or both;
(B) Pulp, including market pulp and pulp derived from recovered paper or paper products; and
(C) Recycled paper, but only when used in the manufacture of biocomposite surface products.
(vi) "Wood products" means paper and paper products; dimensional lumber; engineered wood products such as particleboard, oriented strand board, medium density fiberboard, and plywood; wood doors; wood windows; and biocomposite surface products.
(((13))) (12)
Upon every person engaging within this state in inspecting, testing, labeling,
and storing canned salmon owned by another person, as to such persons, the
amount of tax with respect to such activities ((shall be)) is
equal to the gross income derived from such activities multiplied by the rate
of 0.484 percent.
(((14))) (13)
Upon every person engaging within this state in the business of printing a
newspaper, publishing a newspaper, or both, the amount of tax on such business
is equal to the gross income of the business multiplied by the rate of 0.2904
percent.
Sec. 606. RCW 82.04.260 and 2010 c . . . (SHB 3066) s 107 are each amended to read as follows:
(1) Upon every person engaging within this state in the business of manufacturing:
(a) Wheat into flour, barley into pearl barley, soybeans into soybean oil, canola into canola oil, canola meal, or canola by-products, or sunflower seeds into sunflower oil; as to such persons the amount of tax with respect to such business is equal to the value of the flour, pearl barley, oil, canola meal, or canola by-product manufactured, multiplied by the rate of 0.138 percent;
(b) Beginning July 1, 2012, seafood products that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; or selling manufactured seafood products that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing, to purchasers who transport in the ordinary course of business the goods out of this state; as to such persons the amount of tax with respect to such business is equal to the value of the products manufactured or the gross proceeds derived from such sales, multiplied by the rate of 0.138 percent. Sellers must keep and preserve records for the period required by RCW 82.32.070 establishing that the goods were transported by the purchaser in the ordinary course of business out of this state;
(c) Beginning July 1, 2012, dairy products that as of September 20, 2001, are identified in 21 C.F.R., chapter 1, parts 131, 133, and 135, including by-products from the manufacturing of the dairy products such as whey and casein; or selling the same to purchasers who transport in the ordinary course of business the goods out of state; as to such persons the tax imposed is equal to the value of the products manufactured or the gross proceeds derived from such sales multiplied by the rate of 0.138 percent. Sellers must keep and preserve records for the period required by RCW 82.32.070 establishing that the goods were transported by the purchaser in the ordinary course of business out of this state;
(d)(i) Beginning
July 1, 2012, fruit((s)) or vegetable((s)) products by
canning, preserving, freezing, processing, or dehydrating fresh fruits or
vegetables, or selling at wholesale fruit((s)) or vegetable((s)) products
manufactured by the seller by canning, preserving, freezing, processing, or
dehydrating fresh fruits or vegetables and sold to purchasers who transport in
the ordinary course of business the goods out of this state; as to such persons
the amount of tax with respect to such business is equal to the value of the
products manufactured or the gross proceeds derived from such sales multiplied
by the rate of 0.138 percent. Sellers must keep and preserve records for the
period required by RCW 82.32.070 establishing that the goods were transported
by the purchaser in the ordinary course of business out of this state;
(ii) For purposes of this
subsection, "fruit or vegetable products" means:
(A) Products comprised exclusively of fruits, vegetables, or both; or
(B) Products comprised of fruits, vegetables, or both, and which may
also contain water, sugar, salt, seasonings, preservatives, binders,
stabilizers, flavorings, yeast, and similar substances. However, the
amount of all ingredients contained in the product, other than fruits,
vegetables, and water, may not exceed the amount of fruits and vegetables
contained in the product measured by weight or volume;
(iii) "Fruit and vegetable products" includes only products
that are intended for human consumption as food or animal consumption as feed;
(e) Until July 1, 2009, alcohol fuel, biodiesel fuel, or biodiesel feedstock, as those terms are defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business is equal to the value of alcohol fuel, biodiesel fuel, or biodiesel feedstock manufactured, multiplied by the rate of 0.138 percent; and
(f) Wood biomass fuel as defined in RCW 82.29A.135; as to such persons the amount of tax with respect to the business is equal to the value of wood biomass fuel manufactured, multiplied by the rate of 0.138 percent.
(2) Upon every person engaging within this state in the business of splitting or processing dried peas; as to such persons the amount of tax with respect to such business is equal to the value of the peas split or processed, multiplied by the rate of 0.138 percent.
(3) Upon every nonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the amount of tax with respect to such activities is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.
(4) ((Upon every
person engaging within this state in the business of slaughtering, breaking
and/or processing perishable meat products and/or selling the same at wholesale
only and not at retail; as to such persons the tax imposed is equal to the
gross proceeds derived from such sales multiplied by the rate of 0.138 percent.
(5))) Upon every person engaging within this state in the business
of acting as a travel agent or tour operator; as to such persons the amount of
the tax with respect to such activities is equal to the gross income derived
from such activities multiplied by the rate of 0.275 percent.
(((6))) (5)
Upon every person engaging within this state in business as an international
steamship agent, international customs house broker, international freight
forwarder, vessel and/or cargo charter broker in foreign commerce, and/or
international air cargo agent; as to such persons the amount of the tax with
respect to only international activities is equal to the gross income derived
from such activities multiplied by the rate of 0.275 percent.
(((7))) (6)
Upon every person engaging within this state in the business of stevedoring and
associated activities pertinent to the movement of goods and commodities in
waterborne interstate or foreign commerce; as to such persons the amount of tax
with respect to such business is equal to the gross proceeds derived from such
activities multiplied by the rate of 0.275 percent. Persons subject to
taxation under this subsection are exempt from payment of taxes imposed by
chapter 82.16 RCW for that portion of their business subject to taxation under
this subsection. Stevedoring and associated activities pertinent to the
conduct of goods and commodities in waterborne interstate or foreign commerce
are defined as all activities of a labor, service or transportation nature
whereby cargo may be loaded or unloaded to or from vessels or barges, passing
over, onto or under a wharf, pier, or similar structure; cargo may be moved to
a warehouse or similar holding or storage yard or area to await further
movement in import or export or may move to a consolidation freight station and
be stuffed, unstuffed, containerized, separated or otherwise segregated or
aggregated for delivery or loaded on any mode of transportation for delivery to
its consignee. Specific activities included in this definition are: Wharfage,
handling, loading, unloading, moving of cargo to a convenient place of delivery
to the consignee or a convenient place for further movement to export mode;
documentation services in connection with the receipt, delivery, checking,
care, custody and control of cargo required in the transfer of cargo; imported
automobile handling prior to delivery to consignee; terminal stevedoring and
incidental vessel services, including but not limited to plugging and
unplugging refrigerator service to containers, trailers, and other refrigerated
cargo receptacles, and securing ship hatch covers.
(((8))) (7)(a)
Upon every person engaging within this state in the business of disposing of
low-level waste, as defined in RCW 43.145.010; as to such persons the amount of
the tax with respect to such business is equal to the gross income of the
business, excluding any fees imposed under chapter 43.200 RCW, multiplied by
the rate of 3.3 percent.
(b) If the gross income of the taxpayer is attributable to activities both within and without this state, the gross income attributable to this state must be determined in accordance with the methods of apportionment required under RCW 82.04.460.
(((9))) (8)
Upon every person engaging within this state as an insurance producer or title
insurance agent licensed under chapter 48.17 RCW or a surplus line broker
licensed under chapter 48.15 RCW; as to such persons, the amount of the tax
with respect to such licensed activities is equal to the gross income of such
business multiplied by the rate of 0.484 percent.
(((10))) (9)
Upon every person engaging within this state in business as a hospital, as
defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by
the state or any of its political subdivisions, as to such persons, the amount
of tax with respect to such activities is equal to the gross income of the
business multiplied by the rate of 0.75 percent through June 30, 1995, and 1.5
percent thereafter.
(((11))) (10)(a)
Beginning October 1, 2005, upon every person engaging within this state in the
business of manufacturing commercial airplanes, or components of such
airplanes, or making sales, at retail or wholesale, of commercial airplanes or
components of such airplanes, manufactured by the seller, as to such persons
the amount of tax with respect to such business is, in the case of manufacturers,
equal to the value of the product manufactured and the gross proceeds of sales
of the product manufactured, or in the case of processors for hire, equal to
the gross income of the business, multiplied by the rate of:
(i) 0.4235 percent from October 1, 2005, through June 30, 2007; and
(ii) 0.2904 percent beginning July 1, 2007.
(b) Beginning July 1, 2008, upon every person who is not eligible to report under the provisions of (a) of this subsection (11) and is engaging within this state in the business of manufacturing tooling specifically designed for use in manufacturing commercial airplanes or components of such airplanes, or making sales, at retail or wholesale, of such tooling manufactured by the seller, as to such persons the amount of tax with respect to such business is, in the case of manufacturers, equal to the value of the product manufactured and the gross proceeds of sales of the product manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of 0.2904 percent.
(c) For the purposes of
this subsection (((11))) (10), "commercial airplane"
and "component" have the same meanings as provided in RCW 82.32.550.
(d) In addition to all
other requirements under this title, a person reporting under the tax rate
provided in this subsection (((11))) (10) must file a complete
annual report with the department under RCW 82.32.--- (section 103, chapter . .
. (SHB 3066), Laws of 2010).
(e) This subsection (((11)))
(10) does not apply on and after July 1, 2024.
(((12))) (11)(a)
Until July 1, 2024, upon every person engaging within this state in the
business of extracting timber or extracting for hire timber; as to such persons
the amount of tax with respect to the business is, in the case of extractors,
equal to the value of products, including by-products, extracted, or in the
case of extractors for hire, equal to the gross income of the business,
multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30,
2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
(b) Until July 1, 2024, upon every person engaging within this state in the business of manufacturing or processing for hire: (i) Timber into timber products or wood products; or (ii) timber products into other timber products or wood products; as to such persons the amount of the tax with respect to the business is, in the case of manufacturers, equal to the value of products, including by-products, manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
(c) Until July 1, 2024, upon every person engaging within this state in the business of selling at wholesale: (i) Timber extracted by that person; (ii) timber products manufactured by that person from timber or other timber products; or (iii) wood products manufactured by that person from timber or timber products; as to such persons the amount of the tax with respect to the business is equal to the gross proceeds of sales of the timber, timber products, or wood products multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2024.
(d) Until July 1, 2024,
upon every person engaging within this state in the business of selling
standing timber; as to such persons the amount of the tax with respect to the
business is equal to the gross income of the business multiplied by the rate of
0.2904 percent. For purposes of this subsection (((12))) (11)(d),
"selling standing timber" means the sale of timber apart from the
land, where the buyer is required to sever the timber within thirty months from
the date of the original contract, regardless of the method of payment for the
timber and whether title to the timber transfers before, upon, or after
severance.
(e) For purposes of this subsection, the following definitions apply:
(i) "Biocomposite surface products" means surface material products containing, by weight or volume, more than fifty percent recycled paper and that also use nonpetroleum‑based phenolic resin as a bonding agent.
(ii) "Paper and paper products" means products made of interwoven cellulosic fibers held together largely by hydrogen bonding. "Paper and paper products" includes newsprint; office, printing, fine, and pressure-sensitive papers; paper napkins, towels, and toilet tissue; kraft bag, construction, and other kraft industrial papers; paperboard, liquid packaging containers, containerboard, corrugated, and solid-fiber containers including linerboard and corrugated medium; and related types of cellulosic products containing primarily, by weight or volume, cellulosic materials. "Paper and paper products" does not include books, newspapers, magazines, periodicals, and other printed publications, advertising materials, calendars, and similar types of printed materials.
(iii) "Recycled
paper" means paper and paper products having fifty percent or more of
their fiber content that comes from postconsumer waste. For purposes of this
subsection (((12))) (11)(e)(iii), "postconsumer waste"
means a finished material that would normally be disposed of as solid waste,
having completed its life cycle as a consumer item.
(iv) "Timber" means forest trees, standing or down, on privately or publicly owned land. "Timber" does not include Christmas trees that are cultivated by agricultural methods or short-rotation hardwoods as defined in RCW 84.33.035.
(v) "Timber products" means:
(A) Logs, wood chips, sawdust, wood waste, and similar products obtained wholly from the processing of timber, short-rotation hardwoods as defined in RCW 84.33.035, or both;
(B) Pulp, including market pulp and pulp derived from recovered paper or paper products; and
(C) Recycled paper, but only when used in the manufacture of biocomposite surface products.
(vi) "Wood products" means paper and paper products; dimensional lumber; engineered wood products such as particleboard, oriented strand board, medium density fiberboard, and plywood; wood doors; wood windows; and biocomposite surface products.
(f) Except for small
harvesters as defined in RCW 84.33.035, a person reporting under the tax rate
provided in this subsection (((12))) (11) must file a complete
annual survey with the department under RCW 82.32.--- (section 102, chapter . .
. (SHB 3066), Laws of 2010).
(((13))) (12)
Upon every person engaging within this state in inspecting, testing, labeling,
and storing canned salmon owned by another person, as to such persons, the
amount of tax with respect to such activities is equal to the gross income
derived from such activities multiplied by the rate of 0.484 percent.
(((14))) (13)(a)
Upon every person engaging within this state in the business of printing a
newspaper, publishing a newspaper, or both, the amount of tax on such business
is equal to the gross income of the business multiplied by the rate of 0.2904
percent.
(b) A person reporting
under the tax rate provided in this subsection (((14))) (13) must
file a complete annual report with the department under RCW 82.32.--- (section
103, chapter . . . (SHB 3066), Laws of 2010).
Sec. 607. RCW 82.04.250 and 2008 c 81 s 5 are each amended to read as follows:
(1) Upon every person
engaging within this state in the business of making sales at retail, except
persons taxable as retailers under other provisions of this chapter, as to such
persons, the amount of tax with respect to such business ((shall be)) is
equal to the gross proceeds of sales of the business, multiplied by the rate of
0.471 percent.
(2) Upon every person
engaging within this state in the business of making sales at retail that are
exempt from the tax imposed under chapter 82.08 RCW by reason of RCW
82.08.0261, 82.08.0262, or 82.08.0263, except persons taxable under RCW
82.04.260(((11))) (10) or subsection (3) of this section, as to
such persons, the amount of tax with respect to such business ((shall be))
is equal to the gross proceeds of sales of the business, multiplied by
the rate of 0.484 percent.
(3) Upon every person
classified by the federal aviation administration as a federal aviation
regulation part 145 certificated repair station and that is engaging within
this state in the business of making sales at retail that are exempt from the
tax imposed under chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or
82.08.0263, as to such persons, the amount of tax with respect to such business
((shall be)) is equal to the gross proceeds of sales of the
business, multiplied by the rate of .2904 percent.
Sec. 608. RCW 82.04.250 and 2007 c 54 s 5 are each amended to read as follows:
(1) Upon every person
engaging within this state in the business of making sales at retail, except
persons taxable as retailers under other provisions of this chapter, as to such
persons, the amount of tax with respect to such business ((shall be)) is
equal to the gross proceeds of sales of the business, multiplied by the rate of
0.471 percent.
(2) Upon every person
engaging within this state in the business of making sales at retail that are
exempt from the tax imposed under chapter 82.08 RCW by reason of RCW
82.08.0261, 82.08.0262, or 82.08.0263, except persons taxable under RCW
82.04.260(((11))) (10), as to such persons, the amount of tax
with respect to such business ((shall be)) is equal to the gross
proceeds of sales of the business, multiplied by the rate of 0.484 percent.
Sec. 609. RCW 82.04.261 and 2007 c 54 s 7 and 2007 c 48 s 4 are each reenacted and amended to read as follows:
(1) In addition to the
taxes imposed under RCW 82.04.260(((12))) (11), a surcharge is
imposed on those persons who are subject to any of the taxes imposed under RCW
82.04.260(((12))) (11). Except as otherwise provided in this
section, the surcharge is equal to 0.052 percent. The surcharge is added to
the rates provided in RCW 82.04.260(((12))) (11) (a), (b), (c),
and (d). The surcharge and this section expire July 1, 2024.
(2) All receipts from
the surcharge imposed under this section ((shall)) must be
deposited into the forest and fish support account created in RCW 76.09.405.
(3)(a) The surcharge
imposed under this section ((shall be)) is suspended if:
(i) Receipts from the surcharge total at least eight million dollars during any fiscal biennium; or
(ii) The office of financial management certifies to the department that the federal government has appropriated at least two million dollars for participation in forest and fish report‑related activities by federally recognized Indian tribes located within the geographical boundaries of the state of Washington for any federal fiscal year.
(b)(i) The suspension of
the surcharge under (a)(i) of this subsection (3) ((shall)) takes
effect on the first day of the calendar month that is at least thirty days
after the end of the month during which the department determines that receipts
from the surcharge total at least eight million dollars during the fiscal
biennium. The surcharge ((shall be)) is imposed again at the
beginning of the following fiscal biennium.
(ii) The suspension of
the surcharge under (a)(ii) of this subsection (3) ((shall)) takes
effect on the later of the first day of October of any federal fiscal year for
which the federal government appropriates at least two million dollars for
participation in forest and fish report‑related activities by federally
recognized Indian tribes located within the geographical boundaries of the
state of Washington, or the first day of a calendar month that is at least
thirty days following the date that the office of financial management makes a
certification to the department under subsection (5) of this section. The
surcharge ((shall be)) is imposed again on the first day of the
following July.
(4)(a) If, by October
1st of any federal fiscal year, the office of financial management certifies to
the department that the federal government has appropriated funds for
participation in forest and fish report‑related activities by federally
recognized Indian tribes located within the geographical boundaries of the
state of Washington but the amount of the appropriation is less than two
million dollars, the department ((shall)) must adjust the
surcharge in accordance with this subsection.
(b) The department ((shall))
must adjust the surcharge by an amount that the department estimates will
cause the amount of funds deposited into the forest and fish support account
for the state fiscal year that begins July 1st and that includes the beginning
of the federal fiscal year for which the federal appropriation is made, to be
reduced by twice the amount of the federal appropriation for participation in
forest and fish report-related activities by federally recognized Indian tribes
located within the geographical boundaries of the state of Washington.
(c) Any adjustment in
the surcharge ((shall)) takes effect at the beginning of a
calendar month that is at least thirty days after the date that the office of
financial management makes the certification under subsection (5) of this
section.
(d) The surcharge ((shall
be)) is imposed again at the rate provided in subsection (1) of this
section on the first day of the following state fiscal year unless the
surcharge is suspended under subsection (3) of this section or adjusted for
that fiscal year under this subsection.
(e) Adjustments of the
amount of the surcharge by the department are final and ((shall)) may
not be used to challenge the validity of the surcharge imposed under this
section.
(f) The department ((shall))
must provide timely notice to affected taxpayers of the suspension of
the surcharge or an adjustment of the surcharge.
(5) The office of
financial management ((shall)) must make the certification to the
department as to the status of federal appropriations for tribal participation
in forest and fish report-related activities.
Sec. 610. RCW 82.04.298 and 2008 c 49 s 1 are each amended to read as follows:
(1) The amount of tax
with respect to a qualified grocery distribution cooperative's sales of
groceries or related goods for resale, excluding items subject to tax under ((RCW
82.04.260(4))) section 602 of this act, to customer-owners of the
grocery distribution cooperative is equal to the gross proceeds of sales of the
grocery distribution cooperative multiplied by the rate of one and one‑half
percent.
(2) A qualified grocery
distribution cooperative is allowed a deduction from the gross proceeds of
sales of groceries or related goods for resale, excluding items subject to tax
under ((RCW 82.04.260(4))) section 602 of this act, to
customer-owners of the grocery distribution cooperative that is equal to the
portion of the gross proceeds of sales for resale that represents the actual
cost of the merchandise sold by the grocery distribution cooperative to
customer-owners.
(3) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Grocery distribution cooperative" means an entity that sells groceries and related items to customer-owners of the grocery distribution cooperative and has customer-owners, in the aggregate, who own a majority of the outstanding ownership interests of the grocery distribution cooperative or of the entity controlling the grocery distribution cooperative. "Grocery distribution cooperative" includes an entity that controls a grocery distribution cooperative.
(b) "Qualified grocery distribution cooperative" means:
(i) A grocery distribution cooperative that has been determined by a court of record of the state of Washington to be not engaged in wholesaling or making sales at wholesale, within the meaning of RCW 82.04.270 or any similar provision of a municipal ordinance that imposes a tax on gross receipts, gross proceeds of sales, or gross income, with respect to purchases made by customer-owners, and subsequently changes its form of doing business to make sales at wholesale of groceries or related items to its customer-owners; or
(ii) A grocery distribution cooperative that has acquired substantially all of the assets of a grocery distribution cooperative described in (b)(i) of this subsection.
(c) "Customer-owner" means a person who has an ownership interest in a grocery distribution cooperative and purchases groceries and related items at wholesale from that grocery distribution cooperative.
(d) "Controlling" means holding fifty percent or more of the voting interests of an entity and having at least equal power to direct or cause the direction of the management and policies of the entity, whether through the ownership of voting securities, by contract, or otherwise.
Sec. 611. RCW 82.04.334 and 2007 c 48 s 3 are each amended to read as follows:
This chapter does not
apply to any sale of standing timber excluded from the definition of
"sale" in RCW 82.45.010(3). The definitions in RCW 82.04.260(((12)))
(11) apply to this section.
Sec. 612. RCW 82.04.440 and 2006 c 300 s 8 and 2006 c 84 s 6 are each reenacted and amended to read as follows:
(1) Every person engaged
in activities that are subject to tax under two or more provisions of RCW
82.04.230 through 82.04.298, inclusive, ((shall be)) is taxable
under each provision applicable to those activities.
(2) Persons taxable
under RCW 82.04.2909(2), 82.04.250, 82.04.270, 82.04.294(2), or 82.04.260 (1)(b),
(c), (((4),)) or (d), (10), or (11), or (((12))) section
602(2) of this act with respect to selling products in this state,
including those persons who are also taxable under RCW 82.04.261, ((shall be))
are allowed a credit against those taxes for any (a) manufacturing taxes
paid with respect to the manufacturing of products so sold in this state,
and/or (b) extracting taxes paid with respect to the extracting of products so
sold in this state or ingredients of products so sold in this state.
Extracting taxes taken as credit under subsection (3) of this section may also
be taken under this subsection, if otherwise allowable under this subsection.
The amount of the credit ((shall)) may not exceed the tax
liability arising under this chapter with respect to the sale of those
products.
(3) Persons taxable as
manufacturers under RCW 82.04.240 or 82.04.260 (1)(b) or (((12))) (11),
including those persons who are also taxable under RCW 82.04.261, ((shall be))
are allowed a credit against those taxes for any extracting taxes paid
with respect to extracting the ingredients of the products so manufactured in
this state. The amount of the credit ((shall)) may not exceed
the tax liability arising under this chapter with respect to the manufacturing
of those products.
(4) Persons taxable
under RCW 82.04.230, 82.04.240, 82.04.2909(1), 82.04.294(1), 82.04.2404, or
82.04.260 (1), (2), (((4),)) (10), or (11), or (((12))) section
602(1) of this act, including those persons who are also taxable under RCW
82.04.261, with respect to extracting or manufacturing products in this state
((shall be)) are allowed a credit against those taxes for any (i)
gross receipts taxes paid to another state with respect to the sales of the
products so extracted or manufactured in this state, (ii) manufacturing taxes
paid with respect to the manufacturing of products using ingredients so
extracted in this state, or (iii) manufacturing taxes paid with respect to
manufacturing activities completed in another state for products so
manufactured in this state. The amount of the credit ((shall)) may
not exceed the tax liability arising under this chapter with respect to the
extraction or manufacturing of those products.
(5) For the purpose of this section:
(a) "Gross receipts tax" means a tax:
(i) Which is imposed on or measured by the gross volume of business, in terms of gross receipts or in other terms, and in the determination of which the deductions allowed would not constitute the tax an income tax or value added tax; and
(ii) Which is also not, pursuant to law or custom, separately stated from the sales price.
(b) "State" means (i) the state of Washington, (ii) a state of the United States other than Washington, or any political subdivision of such other state, (iii) the District of Columbia, and (iv) any foreign country or political subdivision thereof.
(c) "Manufacturing
tax" means a gross receipts tax imposed on the act or privilege of
engaging in business as a manufacturer, and includes (i) the taxes imposed in
RCW 82.04.240, 82.04.2404, 82.04.2909(1), 82.04.260 (1), (2), (((4),)) (10),
and (11), ((and (12))) section 602(1) of this act, and
82.04.294(1); (ii) the tax imposed under RCW 82.04.261 on persons who are
engaged in business as a manufacturer; and (iii) similar gross receipts taxes
paid to other states.
(d) "Extracting
tax" means a gross receipts tax imposed on the act or privilege of
engaging in business as an extractor, and includes (i) the tax imposed on
extractors in RCW 82.04.230 and 82.04.260(((12))) (11); (ii) the
tax imposed under RCW 82.04.261 on persons who are engaged in business as an
extractor; and (iii) similar gross receipts taxes paid to other states.
(e) "Business", "manufacturer", "extractor", and other terms used in this section have the meanings given in RCW 82.04.020 through 82.04.212, notwithstanding the use of those terms in the context of describing taxes imposed by other states.
Sec. 613. RCW 82.04.4463 and 2008 c 81 s 8 are each amended to read as follows:
(1) In computing the tax imposed under this chapter, a credit is allowed for property taxes and leasehold excise taxes paid during the calendar year.
(2) The credit is equal to:
(a)(i)(A) Property taxes paid on buildings, and land upon which the buildings are located, constructed after December 1, 2003, and used exclusively in manufacturing commercial airplanes or components of such airplanes; and
(B) Leasehold excise taxes paid with respect to buildings constructed after January 1, 2006, the land upon which the buildings are located, or both, if the buildings are used exclusively in manufacturing commercial airplanes or components of such airplanes; and
(C) Property taxes or leasehold excise taxes paid on, or with respect to, buildings constructed after June 30, 2008, the land upon which the buildings are located, or both, and used exclusively for aerospace product development or in providing aerospace services, by persons not within the scope of (a)(i)(A) and (B) of this subsection (2) and are: (I) Engaged in manufacturing tooling specifically designed for use in manufacturing commercial airplanes or their components; or (II) taxable under RCW 82.04.290(3) or 82.04.250(3); or
(ii) Property taxes attributable to an increase in assessed value due to the renovation or expansion, after: (A) December 1, 2003, of a building used exclusively in manufacturing commercial airplanes or components of such airplanes; and (B) June 30, 2008, of buildings used exclusively for aerospace product development or in providing aerospace services, by persons not within the scope of (a)(ii)(A) of this subsection (2) and are: (I) Engaged in manufacturing tooling specifically designed for use in manufacturing commercial airplanes or their components; or (II) taxable under RCW 82.04.290(3) or 82.04.250(3); and
(b) An amount equal to:
(i)(A) Property taxes
paid, by persons taxable under RCW 82.04.260(((11))) (10)(a), on
machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and
acquired after December 1, 2003;
(B) Property taxes paid,
by persons taxable under RCW 82.04.260(((11))) (10)(b), on
machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and
acquired after June 30, 2008; or
(C) Property taxes paid,
by persons taxable under RCW ((82.04.0250(3) [82.04.250(3)])) 82.04.250(3)
or 82.04.290(3), on computer hardware, computer peripherals, and software
exempt under RCW 82.08.975 or 82.12.975 and acquired after June 30, 2008.
(ii) For purposes of determining the amount eligible for credit under (i)(A) and (B) of this subsection (2)(b), the amount of property taxes paid is multiplied by a fraction.
(((I))) (A)
The numerator of the fraction is the total taxable amount subject to the tax
imposed under RCW 82.04.260(((11))) (10) (a) or (b) on the
applicable business activities of manufacturing commercial airplanes,
components of such airplanes, or tooling specifically designed for use in the
manufacturing of commercial airplanes or components of such airplanes.
(((II))) (B)
The denominator of the fraction is the total taxable amount subject to the tax
imposed under all manufacturing classifications in chapter 82.04 RCW.
(((III))) (C)
For purposes of both the numerator and denominator of the fraction, the total
taxable amount refers to the total taxable amount required to be reported on
the person's returns for the calendar year before the calendar year in which
the credit under this section is earned. The department may provide for an
alternative method for calculating the numerator in cases where the tax rate
provided in RCW 82.04.260(((11))) (10) for manufacturing was not
in effect during the full calendar year before the calendar year in which the
credit under this section is earned.
(((IV))) (D)
No credit is available under (b)(i)(A) or (B) of this subsection (2) if either
the numerator or the denominator of the fraction is zero. If the fraction is
greater than or equal to nine-tenths, then the fraction is rounded to one.
(((V))) (E)
As used in (((III))) (b)(ii)(C) of this subsection (2)(((b)(ii)(C))),
"returns" means the tax returns for which the tax imposed under this
chapter is reported to the department.
(3) The definitions in this subsection apply throughout this section, unless the context clearly indicates otherwise.
(a) "Aerospace product development" has the same meaning as provided in RCW 82.04.4461.
(b) "Aerospace services" has the same meaning given in RCW 82.08.975.
(c) "Commercial airplane" and "component" have the same meanings as provided in RCW 82.32.550.
(4) A credit earned during one calendar year may be carried over to be credited against taxes incurred in a subsequent calendar year, but may not be carried over a second year. No refunds may be granted for credits under this section.
(5) In addition to all other requirements under this title, a person taking the credit under this section must report as required under RCW 82.32.545.
(6) This section expires July 1, 2024.
Sec. 614. RCW 82.04.4463 and 2010 c . . . (SHB 3066) s 116 are each amended to read as follows:
(1) In computing the tax imposed under this chapter, a credit is allowed for property taxes and leasehold excise taxes paid during the calendar year.
(2) The credit is equal to:
(a)(i)(A) Property taxes paid on buildings, and land upon which the buildings are located, constructed after December 1, 2003, and used exclusively in manufacturing commercial airplanes or components of such airplanes; and
(B) Leasehold excise taxes paid with respect to buildings constructed after January 1, 2006, the land upon which the buildings are located, or both, if the buildings are used exclusively in manufacturing commercial airplanes or components of such airplanes; and
(C) Property taxes or
leasehold excise taxes paid on, or with respect to, buildings constructed after
June 30, 2008, the land upon which the buildings are located, or both, and used
exclusively for aerospace product development, manufacturing tooling
specifically designed for use in manufacturing commercial airplanes or their
components, or in providing aerospace services, by persons not within the scope
of (a)(i)(A) and (B) of this subsection (2) and are taxable under RCW
82.04.290(3), 82.04.260(((11))) (10)(b), or 82.04.250(3); or
(ii) Property taxes
attributable to an increase in assessed value due to the renovation or
expansion, after: (A) December 1, 2003, of a building used exclusively in
manufacturing commercial airplanes or components of such airplanes; and (B)
June 30, 2008, of buildings used exclusively for aerospace product development,
manufacturing tooling specifically designed for use in manufacturing commercial
airplanes or their components, or in providing aerospace services, by persons
not within the scope of (a)(ii)(A) of this subsection (2) and are taxable under
RCW 82.04.290(3), 82.04.260(((11))) (10)(b), or 82.04.250(3); and
(b) An amount equal to:
(i)(A) Property taxes
paid, by persons taxable under RCW 82.04.260(((11))) (10)(a), on
machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and
acquired after December 1, 2003;
(B) Property taxes paid,
by persons taxable under RCW 82.04.260(((11))) (10)(b), on
machinery and equipment exempt under RCW 82.08.02565 or 82.12.02565 and
acquired after June 30, 2008; or
(C) Property taxes paid, by persons taxable under RCW 82.04.250(3) or 82.04.290(3), on computer hardware, computer peripherals, and software exempt under RCW 82.08.975 or 82.12.975 and acquired after June 30, 2008.
(ii) For purposes of determining the amount eligible for credit under (i)(A) and (B) of this subsection (2)(b), the amount of property taxes paid is multiplied by a fraction.
(A) The numerator of the
fraction is the total taxable amount subject to the tax imposed under RCW
82.04.260(((11))) (10) (a) or (b) on the applicable business
activities of manufacturing commercial airplanes, components of such airplanes,
or tooling specifically designed for use in the manufacturing of commercial
airplanes or components of such airplanes.
(B) The denominator of the fraction is the total taxable amount subject to the tax imposed under all manufacturing classifications in chapter 82.04 RCW.
(C) For purposes of both
the numerator and denominator of the fraction, the total taxable amount refers
to the total taxable amount required to be reported on the person's returns for
the calendar year before the calendar year in which the credit under this
section is earned. The department may provide for an alternative method for
calculating the numerator in cases where the tax rate provided in RCW
82.04.260(((11))) (10) for manufacturing was not in effect during
the full calendar year before the calendar year in which the credit under this
section is earned.
(D) No credit is available under (b)(i)(A) or (B) of this subsection (2) if either the numerator or the denominator of the fraction is zero. If the fraction is greater than or equal to nine-tenths, then the fraction is rounded to one.
(E) As used in (b)(ii)(C)
of this subsection (2)(((b)(ii))), "returns" means the tax
returns for which the tax imposed under this chapter is reported to the
department.
(3) The definitions in this subsection apply throughout this section, unless the context clearly indicates otherwise.
(a) "Aerospace product development" has the same meaning as provided in RCW 82.04.4461.
(b) "Aerospace services" has the same meaning given in RCW 82.08.975.
(c) "Commercial airplane" and "component" have the same meanings as provided in RCW 82.32.550.
(4) A credit earned during one calendar year may be carried over to be credited against taxes incurred in a subsequent calendar year, but may not be carried over a second year. No refunds may be granted for credits under this section.
(5) In addition to all other requirements under this title, a person claiming the credit under this section must file a complete annual report with the department under RCW 82.32.--- (section 103, chapter . . . (SHB 3066), Laws of 2010).
(6) This section expires July 1, 2024.
Sec. 615. RCW 82.08.806 and 2009 c 461 s 5 are each amended to read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to sales, to a printer or publisher, of computer equipment, including repair parts and replacement parts for such equipment, when the computer equipment is used primarily in the printing or publishing of any printed material, or to sales of or charges made for labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the computer equipment. This exemption applies only to computer equipment not otherwise exempt under RCW 82.08.02565.
(2) A person taking the
exemption under this section must keep records necessary for the department to
verify eligibility under this section. This exemption is available only when
the purchaser provides the seller with an exemption certificate in a form and
manner prescribed by the department. The seller ((shall)) must
retain a copy of the certificate for the seller's files.
(3) The definitions in this subsection (3) apply throughout this section, unless the context clearly requires otherwise.
(a) "Computer" has the same meaning as in RCW 82.04.215.
(b) "Computer equipment" means a computer and the associated physical components that constitute a computer system, including monitors, keyboards, printers, modems, scanners, pointing devices, and other computer peripheral equipment, cables, servers, and routers. "Computer equipment" also includes digital cameras and computer software.
(c) "Computer software" has the same meaning as in RCW 82.04.215.
(d) "Primarily" means greater than fifty percent as measured by time.
(e) "Printer or
publisher" means a person, as defined in RCW 82.04.030, who is subject to
tax under RCW 82.04.260(((14))) (13) or 82.04.280(1).
(4) "Computer
equipment" does not include computer equipment that is used primarily for
administrative purposes including but not limited to payroll processing,
accounting, customer service, telemarketing, and collection. If computer
equipment is used simultaneously for administrative and nonadministrative
purposes, the administrative use ((shall)) must be disregarded
during the period of simultaneous use for purposes of determining whether the
computer equipment is used primarily for administrative purposes.
Sec. 616. RCW 82.32.550 and 2008 c 81 s 12 are each amended to read as follows:
(1)(((a) Chapter 1,
Laws of 2003 2nd sp. sess. takes effect on the first day of the month in which
the governor and a manufacturer of commercial airplanes sign a memorandum of
agreement regarding an affirmative final decision to site a significant
commercial airplane final assembly facility in Washington state. The
department shall provide notice of the effective date of chapter 1, Laws of
2003 2nd sp. sess. to affected taxpayers, the legislature, and others as deemed
appropriate by the department.
(b) Chapter 1, Laws of 2003 2nd sp. sess. is contingent upon the
siting of a significant commercial airplane final assembly facility in the
state of Washington. If a memorandum of agreement under subsection (1) of this
section is not signed by June 30, 2005, chapter 1, Laws of 2003 2nd sp. sess.
is null and void.
(c)(i) The rate in RCW 82.04.260(11)(a)(ii) takes effect July 1, 2007.
(ii) If on December 31, 2007, final assembly of a superefficient
airplane has not begun in Washington state, the department shall provide notice
of such to affected taxpayers, the legislature, and others as deemed
appropriate by the department.
(2) The definitions in this subsection apply throughout this section.
(a))) "Commercial airplane" has its ordinary meaning,
which is an airplane certified by the federal aviation administration for
transporting persons or property, and any military derivative of such an
airplane.
(((b))) (2)
"Component" means a part or system certified by the federal aviation
administration for installation or assembly into a commercial airplane.
(((c) "Final
assembly of a superefficient airplane" means the activity of assembling an
airplane from components parts necessary for its mechanical operation such that
the finished commercial airplane is ready to deliver to the ultimate consumer.
(d) "Significant commercial airplane final assembly
facility" means a location with the capacity to produce at least
thirty-six superefficient airplanes a year.
(e) "Siting" means a final decision by a manufacturer to
locate a significant commercial airplane final assembly facility in Washington
state.
(f))) (3) "Superefficient airplane" means a twin
aisle airplane that carries between two hundred and three hundred fifty
passengers, with a range of more than seven thousand two hundred nautical
miles, a cruising speed of approximately mach .85, and that uses fifteen to
twenty percent less fuel than other similar airplanes on the market.
Sec. 617. RCW 82.45.195 and 2007 c 48 s 7 are each amended to read as follows:
A sale of standing
timber is exempt from tax under this chapter if the gross income from such sale
is taxable under RCW 82.04.260(((12))) (11)(d).
Sec. 618. RCW 35.102.150 and 2009 c 461 s 4 are each amended to read as follows:
Notwithstanding RCW
35.102.130, a city that imposes a business and occupation tax must allocate a
person's gross income from the activities of printing, and of publishing
newspapers, periodicals, or magazines, to the principal place in this state
from which the taxpayer's business is directed or managed. As used in this
section, the activities of printing, and of publishing newspapers, periodicals,
or magazines are those activities to which the tax rates in RCW 82.04.260(((14)))
(13) and 82.04.280(1) apply.
Sec. 619. RCW 48.14.080 and 2009 c 535 s 1102 are each amended to read as follows:
(1) As to insurers,
other than title insurers and taxpayers under RCW 48.14.0201, the taxes imposed
by this title ((shall be)) are in lieu of all other taxes, except
as otherwise provided in this section.
(2) Subsection (1) of this section does not apply with respect to:
(a) Taxes on real and tangible personal property;
(b) Excise taxes on the sale, purchase, use, or possession of (i) real property; (ii) tangible personal property; (iii) extended warranties; (iv) services, including digital automated services as defined in RCW 82.04.192; and (v) digital goods and digital codes as those terms are defined in RCW 82.04.192; and
(c) The tax imposed in
RCW 82.04.260(((10))) (9), regarding public and nonprofit
hospitals.
(3) For the purposes of this section, the term "taxes" includes taxes imposed by the state or any county, city, town, municipal corporation, quasi‑municipal corporation, or other political subdivision.
PART VII
Suspending the Sales and Use Tax Exemption for Livestock Nutrient Equipment and Facilities
Sec. 701. RCW 82.08.890 and 2009 c 469 s 601 are each amended to read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to sales to eligible persons of:
(a) Qualifying livestock nutrient management equipment;
(b) Labor and services rendered in respect to installing, repairing, cleaning, altering, or improving qualifying livestock nutrient management equipment; and
(c)(i) Labor and services rendered in respect to repairing, cleaning, altering, or improving of qualifying livestock nutrient management facilities, or to tangible personal property that becomes an ingredient or component of qualifying livestock nutrient management facilities in the course of repairing, cleaning, altering, or improving of such facilities.
(ii) The exemption provided in this subsection (1)(c) does not apply to the sale of or charge made for: (A) Labor and services rendered in respect to the constructing of new, or replacing previously existing, qualifying livestock nutrient management facilities; or (B) tangible personal property that becomes an ingredient or component of qualifying livestock nutrient management facilities during the course of constructing new, or replacing previously existing, qualifying livestock nutrient management facilities.
(2) The exemption provided in subsection (1) of this section applies to sales made after the livestock nutrient management plan is: (a) Certified under chapter 90.64 RCW; (b) approved as part of the permit issued under chapter 90.48 RCW; or (c) approved as required under subsection (4)(c)(iii) of this section.
(3)(a) The department of revenue must provide an exemption certificate to an eligible person upon application by that person. The department of agriculture must provide a list of eligible persons, as defined in subsection (4)(c)(i) and (ii) of this section, to the department of revenue. Conservation districts must maintain lists of eligible persons as defined in subsection (4)(c)(iii) of this section to allow the department of revenue to verify eligibility. The application must be in a form and manner prescribed by the department and must contain information regarding the location of the dairy or animal feeding operation and other information the department may require.
(b) A person claiming an exemption under this section must keep records necessary for the department to verify eligibility under this section. The exemption is available only when the buyer provides the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files.
(4) The definitions in this subsection apply to this section and RCW 82.12.890 unless the context clearly requires otherwise:
(a) "Animal feeding operation" means a lot or facility, other than an aquatic animal production facility, where the following conditions are met:
(i) Animals, other than aquatic animals, have been, are, or will be stabled or confined and fed or maintained for a total of forty-five days or more in any twelve-month period; and
(ii) Crops, vegetation, forage growth, or postharvest residues are not sustained in the normal growing season over any portion of the lot or facility.
(b) "Conservation district" means a subdivision of state government organized under chapter 89.08 RCW.
(c) "Eligible person" means a person: (i) Licensed to produce milk under chapter 15.36 RCW who has a certified dairy nutrient management plan, as required by chapter 90.64 RCW; (ii) who owns an animal feeding operation and has a permit issued under chapter 90.48 RCW; or (iii) who owns an animal feeding operation and has a nutrient management plan approved by a conservation district as meeting natural resource conservation service field office technical guide standards and who possesses an exemption certificate under RCW 82.08.855.
(d) "Handling and treatment of livestock manure" means the activities of collecting, storing, moving, or transporting livestock manure, separating livestock manure solids from liquids, or applying livestock manure to the agricultural lands of an eligible person other than through the use of pivot or linear type traveling irrigation systems.
(e) "Permit" means either a state waste discharge permit or a national pollutant discharge elimination system permit, or both.
(f) "Qualifying livestock nutrient management equipment" means the following tangible personal property for exclusive use in the handling and treatment of livestock manure, including repair and replacement parts for such equipment: (i) Aerators; (ii) agitators; (iii) augers; (iv) conveyers; (v) gutter cleaners; (vi) hard-hose reel traveler irrigation systems; (vii) lagoon and pond liners and floating covers; (viii) loaders; (ix) manure composting devices; (x) manure spreaders; (xi) manure tank wagons; (xii) manure vacuum tanks; (xiii) poultry house cleaners; (xiv) poultry house flame sterilizers; (xv) poultry house washers; (xvi) poultry litter saver machines; (xvii) pipes; (xviii) pumps; (xix) scrapers; (xx) separators; (xxi) slurry injectors and hoses; and (xxii) wheelbarrows, shovels, and pitchforks.
(g) "Qualifying livestock nutrient management facilities" means the following structures and facilities for exclusive use in the handling and treatment of livestock manure: (i) Flush systems; (ii) lagoons; (iii) liquid livestock manure storage structures, such as concrete tanks or glass-lined steel tanks; and (iv) structures used solely for the dry storage of manure, including roofed stacking facilities.
(5) The exemption under this section does not apply to sales made from April 1, 2010, through June 30, 2013.
Sec. 702. RCW 82.12.890 and 2009 c 469 s 602 are each amended to read as follows:
(1) The provisions of this chapter do not apply with respect to the use by an eligible person of:
(a) Qualifying livestock nutrient management equipment;
(b) Labor and services rendered in respect to installing, repairing, cleaning, altering, or improving qualifying livestock nutrient management equipment; and
(c)(i) Tangible personal property that becomes an ingredient or component of qualifying livestock nutrient management facilities in the course of repairing, cleaning, altering, or improving of such facilities.
(ii) The exemption provided in this subsection (1)(c) does not apply to the use of tangible personal property that becomes an ingredient or component of qualifying livestock nutrient management facilities during the course of constructing new, or replacing previously existing, qualifying livestock nutrient management facilities.
(2)(a) To be eligible, the equipment and facilities must be used exclusively for activities necessary to maintain a livestock nutrient management plan.
(b) The exemption applies to the use of tangible personal property and labor and services made after the livestock nutrient management plan is: (i) Certified under chapter 90.64 RCW; (ii) approved as part of the permit issued under chapter 90.48 RCW; or (iii) approved as required under RCW 82.08.890(4)(c)(iii).
(3) The exemption certificate and recordkeeping requirements of RCW 82.08.890 apply to this section. The definitions in RCW 82.08.890 apply to this section.
(4) The exemption under this section does not apply to the use of tangible personal property and services if first use of the property or services occurs in this state from April 1, 2010, through June 30, 2013.
PART VIII
Ending the Preferential Business and Occupation Tax Treatment Received by Directors of Corporations
NEW SECTION. Sec. 801. (1) In adopting the state's business and occupation tax, the legislature intended to tax virtually all business activities carried on within the state. See Simpson Inv. Co. v. Dep't of Revenue, 141 Wn.2d 139, 149 (2000). The legislature recognizes that the business and occupation tax applies to all activities engaged in with the object of gain, benefit, or advantage to the taxpayer or to another person or class, directly or indirectly, unless a specific exemption applies.
(2) One of the major business and occupation tax exemptions is provided in RCW 82.04.360 for income earned as an employee or servant as distinguished from income earned as an independent contractor. The legislature's intent in providing this exemption was to exempt employee wages from the business and occupation tax but not to exempt income earned as an independent contractor.
(3) The legislature finds that corporate directors are not employees or servants of the corporation whose board they serve on and therefore are not entitled to a business and occupation tax exemption under RCW 82.04.360. The legislature further finds that there are no business and occupation tax exemptions for compensation received for serving as a member of a corporation's board of directors.
(4) The legislature also finds that there is a widespread misunderstanding among corporate directors that the business and occupation tax does not apply to the compensation they receive for serving as a director of a corporation. It is the legislature's expectation that the department of revenue will take appropriate measures to ensure that corporate directors understand and comply with their business and occupation tax obligations with respect to their director compensation. However, because of the widespread misunderstanding by corporate directors of their liability for business and occupation tax on director compensation, the legislature finds that it is appropriate in this unique situation to provide limited relief against the retroactive assessment of business and occupation taxes on corporate director compensation.
(5) The legislature also reaffirms its intent that all income of all independent contractors is subject to business and occupation tax unless specifically exempt under the Constitution or laws of this state or the United States.
Sec. 802. RCW 82.04.360 and 1991 c 324 s 19 and 1991 c 275 s 2 are each reenacted and amended to read as follows:
(1) This chapter ((shall))
does not apply to any person in respect to his or her employment in the
capacity of an employee or servant as distinguished from that of an independent
contractor. For the purposes of this section, the definition of employee ((shall))
includes those persons that are defined in section 3121(d)(3)(B) of the federal
internal revenue code of 1986, as amended through January 1,
1991.
(2) ((A booth renter,
as defined by RCW 18.16.020, is an independent contractor for purposes of this
chapter.)) Until April 1, 2010, this chapter does not apply to amounts
received by an individual from a corporation as compensation for serving as a
member of that corporation's board of directors. Beginning April 1, 2010, such
amounts are taxable under RCW 82.04.290(2).
Sec. 803. RCW 82.04.360 and 2010 c . . . (E2SHB 1597) s 207 are each amended to read as follows:
(1) This chapter does
not apply to any person in respect to his or her employment in the capacity of
an employee or servant as distinguished from that of an independent
contractor. For the purposes of this section, the definition of employee ((shall))
includes those persons that are defined in section 3121(d)(3)(B) of the federal
internal revenue code of 1986, as amended through January 1,
1991.
(2) Until April 1,
2010, this chapter does not apply to amounts received by an individual from a
corporation as compensation for serving as a member of that corporation's board
of directors. Beginning April 1, 2010, such amounts are taxable under
RCW 82.04.290(2).
(3) A booth renter is an independent contractor for purposes of
this chapter. For purposes of this ((sub))section, "booth
renter" means any person who:
(a) Performs cosmetology, barbering, esthetics, or manicuring services for which a license is required under chapter 18.16 RCW; and
(b) Pays a fee for the use of salon or shop facilities and receives no compensation or other consideration from the owner of the salon or shop for the services performed.
PART IX
Airplane Excise Tax
Sec. 901. 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)) is
as follows:
(a) Except as otherwise provided in this subsection, aircraft with a date of manufacture on or before December 31, 1970:
|
|
Type of aircraft |
((
|
||
|
|
Single engine fixed wing |
$ |
(( 100 |
|
|
|
Small multi-engine fixed wing |
(( |
|
|
|
|
Large multi-engine fixed wing |
(( |
|
|
|
|
Turboprop multi-engine fixed wing |
(( 6,750 |
|
|
|
|
(( |
|
|
|
|
|
Helicopter |
(( |
|
|
|
|
Sailplane |
(( |
|
|
|
|
Lighter than air |
(( |
|
|
|
|
Home built |
(( |
|
|
(b) Except as otherwise provided in this subsection, aircraft with a date of manufacture after December 31, 1970:
|
|
Type of aircraft |
Tax |
||
|
|
Single engine fixed wing |
$ |
338 |
|
|
|
Small multi-engine fixed wing |
439 |
|
|
|
|
Large multi-engine fixed wing |
540 |
|
|
|
|
Turboprop multi-engine fixed wing |
6,750 |
|
|
|
|
Helicopter |
338 |
|
|
|
|
Sailplane |
135 |
|
|
|
|
Lighter than air |
135 |
|
|
|
|
Home built |
135 |
|
|
(c) Turbojet multi-engine fixed wing aircraft:
|
|
Maximum Certificated Takeoff
|
|
Tax |
|
|
|
Up to 19,999 pounds |
$ |
13,500 |
|
|
|
20,000 to 24,999 pounds |
18,000 |
|
|
|
|
25,000 to 44,999 pounds |
22,500 |
|
|
|
|
45,000 to 84,999 pounds |
33,750 |
|
|
|
|
85,000 and over |
45,000 |
|
|
(2) The amount of tax
imposed under subsection (1) of this section for each calendar year ((shall))
must be divided into twelve parts corresponding to the months of the
calendar year and the excise tax upon an aircraft registered for the first time
in this state after the last day of any month ((shall)) may only
be levied for the remaining months of the calendar year including the month in
which the aircraft is being registered((: PROVIDED, That)).
However, the minimum amount payable ((shall be)) is three
dollars.
(3) An aircraft ((shall be)) is deemed
registered for the first time in this state when such aircraft was not
previously registered by this state for the year immediately preceding the year
in which application for registration is made.
(4) For the purposes of this section, "maximum certificated takeoff weight" means the maximum takeoff weight authorized by the terms of the aircraft airworthiness certificate.
Sec. 902. RCW 82.48.080 and 1995 c 170 s 2 are each amended to read as follows:
The secretary ((shall))
must regularly pay to the state treasurer the excise taxes collected
under this chapter, ((which shall be credited by the state treasurer as
follows: Ninety percent to the general fund and ten percent to the aeronautics
account in the transportation fund for administrative expenses)) for
deposit into the general fund.
PART X
Tax Debts
Sec. 1001. RCW 82.32.145 and 1995 c 318 s 2 are each amended to read as follows:
(1) ((Upon
termination, dissolution, or abandonment of a corporate or limited liability
company business, any officer, member, manager, or other person having control
or supervision of retail sales tax funds collected and held in trust under RCW
82.08.050, or who is charged with the responsibility for the filing of returns
or the payment of retail sales tax funds collected and held in trust under RCW
82.08.050, shall be personally liable for any unpaid taxes and interest and
penalties on those taxes, if such officer or other person wilfully fails to pay
or to cause to be paid any taxes due from the corporation pursuant to chapter
82.08 RCW. For the purposes of this section, any retail sales taxes that have
been paid but not collected shall be deductible from the retail sales taxes
collected but not paid.
For purposes of this subsection "wilfully fails to pay or to
cause to be paid" means that the failure was the result of an intentional,
conscious, and voluntary course of action.
(2) The officer, member or manager, or other person shall be liable
only for taxes collected which)) Whenever the department has issued a
warrant under RCW 82.32.210 for the collection of unpaid retail sales tax funds
collected and held in trust under RCW 82.08.050 from a limited liability
business entity and that business entity has been terminated, dissolved, or
abandoned, or is insolvent, the department may pursue collection of the
entity's unpaid sales taxes, including penalties and interest on those taxes,
against any or all of the responsible individuals. For purposes of this subsection,
"insolvent" means the condition that results when the sum of the
entity's debts exceeds the fair market value of its assets. The department may
presume that an entity is insolvent if the entity refuses to disclose to the
department the nature of its assets and liabilities.
(2) Personal liability under this section may be imposed for state and
local sales taxes.
(3)(a) For a responsible individual who is the current or a former
chief executive or chief financial officer, liability under this section applies
regardless of fault or whether the individual was or should have been aware of
the unpaid sales tax liability of the limited liability business entity.
(b) For any other responsible individual, liability under this section
applies only if he or she willfully fails to pay or to cause to be paid to the
department the sales taxes due from the limited liability business entity.
(4)(a) Except as provided in this subsection (4)(a), a responsible
individual who is the current or a former chief executive or chief financial
officer is liable under this section only for sales tax liability accrued
during the period that he or she was the chief executive or chief financial
officer. However, if the responsible individual had the responsibility or duty
to remit payment of the limited liability business entity's sales taxes to the
department during any period of time that the person was not the chief
executive or chief financial officer, that individual is also liable for sales
tax liability that became due during the period that he or she had the duty to
remit payment of the limited liability business entity's taxes to the
department but was not the chief executive or chief financial officer.
(b) All other responsible individuals are liable under this section only
for sales tax liability that became due during the period he or she had the
((control, supervision,)) responsibility((,)) or duty to ((act
for the corporation described in subsection (1) of this section, plus interest
and penalties on those taxes.
(3))) remit payment of the limited liability business entity's
taxes to the department.
(5) Persons ((liable under)) described in subsection
(((1))) (3)(b) of this section are exempt from liability under
this section in situations where nonpayment of the ((retail sales tax
funds held in trust)) limited liability business entity's sales taxes
is due to reasons beyond their control as determined by the department by rule.
(((4))) (6)
Any person having been issued a notice of assessment under this section is entitled
to the appeal procedures under RCW 82.32.160, 82.32.170, 82.32.180, 82.32.190,
and 82.32.200.
(((5) This section
applies only in situations where the department has determined that there is no
reasonable means of collecting the retail sales tax funds held in trust
directly from the corporation.
(6))) (7) This section does not relieve the ((corporation
or)) limited liability ((company)) business entity of ((other
tax liabilities)) its sales tax liability or otherwise impair other
tax collection remedies afforded by law.
(((7))) (8)
Collection authority and procedures prescribed in this chapter apply to
collections under this section.
(9) The definitions in this
subsection apply throughout this section unless the context clearly requires
otherwise.
(a) "Chief executive" means: The president of a
corporation; or for other entities or organizations other than corporations or
if the corporation does not have a president as one of its officers, the
highest ranking executive manager or administrator in charge of the management
of the company or organization.
(b) "Chief financial officer" means: The treasurer of a
corporation; or for entities or organizations other than corporations or if a
corporation does not have a treasurer as one of its officers, the highest
senior manager who is responsible for overseeing the financial activities of
the entire company or organization.
(c) "Limited liability business entity" means a type of
business entity that generally shields its owners from personal liability for
the debts, obligations, and liabilities of the entity, or a business entity
that is managed or owned in whole or in part by an entity that generally
shields its owners from personal liability for the debts, obligations, and
liabilities of the entity. Limited liability business entities include
corporations, limited liability companies, limited liability partnerships,
trusts, general partnerships and joint ventures in which one or more of the
partners or parties are also limited liability business entities, and limited
partnerships in which one or more of the general partners are also limited
liability business entities.
(d) "Manager" has the same meaning as in RCW 25.15.005.
(e) "Member" has the same meaning as in RCW 25.15.005,
except that the term only includes members of member-managed limited liability
companies.
(f) "Officer" means any officer or assistant officer of a
corporation, including the president, vice-president, secretary, and treasurer.
(g)(i) "Responsible individual" includes any current or
former officer, manager, member, partner, or trustee of a limited liability
business entity with an unpaid tax warrant issued by the department.
(ii) "Responsible individual" also includes any current or
former employee or other individual, but only if the individual had the
responsibility or duty to remit payment of the limited liability business
entity's unpaid sales tax liability reflected in a tax warrant issued by the
department.
(iii) Whenever any taxpayer has one or more limited liability business
entities as a member, manager, or partner, "responsible individual"
also includes any current and former officers, members, or managers of the
limited liability business entity or entities or of any other limited liability
business entity involved directly in the management of the taxpayer. For
purposes of this subsection (9)(g)(iii), "taxpayer" means a limited
liability business entity with an unpaid tax warrant issued against it by the
department.
(h) "Willfully fails to pay or to cause to be paid" means
that the failure was the result of an intentional, conscious, and voluntary
course of action.
PART XI
Repealing the Sales and Use Tax Exemptions
for Bottled Water
NEW SECTION. Sec. 1101. In order to preserve funding to protect Washington state's natural resources, it is the legislature's intent to use revenue generated from assessing a sales tax on bottled water on natural resource and environmental protection activities.
Sec. 1102. RCW 82.08.0293 and 2009 c 483 s 2 are each amended to read as follows:
(1) The tax levied by
RCW 82.08.020 ((shall)) does not apply to sales of food and food
ingredients. "Food and food ingredients" means substances, whether
in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are
sold for ingestion or chewing by humans and are consumed for their taste or
nutritional value. "Food and food ingredients" does not include:
(a) "Alcoholic beverages," which means beverages that are suitable for human consumption and contain one-half of one percent or more of alcohol by volume; and
(b) "Tobacco," which means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco.
(2) The exemption of
"food and food ingredients" provided for in subsection (1) of this
section ((shall)) does not apply to prepared food, soft drinks, bottled
water, or dietary supplements.
(a) "Prepared food" means:
(i) Food sold in a heated state or heated by the seller;
(ii) Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food; or
(iii) Two or more food ingredients mixed or combined by the seller for sale as a single item, except:
(A) Food that is only cut, repackaged, or pasteurized by the seller; or
(B) Raw eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the federal food and drug administration in chapter 3, part 401.11 of The Food Code, published by the food and drug administration, as amended or renumbered as of January 1, 2003, so as to prevent foodborne illness.
(b) "Prepared food" does not include the following food or food ingredients, if the food or food ingredients are sold without eating utensils provided by the seller:
(i) Food sold by a seller whose proper primary North American industry classification system (NAICS) classification is manufacturing in sector 311, except subsector 3118 (bakeries), as provided in the "North American industry classification system‑-United States, 2002";
(ii) Food sold in an unheated state by weight or volume as a single item; or
(iii) Bakery items. The term "bakery items" includes bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pies, tarts, muffins, bars, cookies, or tortillas.
(c) "Soft drinks" means nonalcoholic beverages that contain natural or artificial sweeteners. Soft drinks do not include beverages that contain: Milk or milk products; soy, rice, or similar milk substitutes; or greater than fifty percent of vegetable or fruit juice by volume.
(d) "Dietary supplement" means any product, other than tobacco, intended to supplement the diet that:
(i) Contains one or more of the following dietary ingredients:
(A) A vitamin;
(B) A mineral;
(C) An herb or other botanical;
(D) An amino acid;
(E) A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or
(F) A concentrate, metabolite, constituent, extract, or combination of any ingredient described in this subsection;
(ii) Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and
(iii) Is required to be labeled as a dietary supplement, identifiable by the "supplement facts" box found on the label as required pursuant to 21 C.F.R. Sec. 101.36, as amended or renumbered as of January 1, 2003.
(e) "Bottled water" means water that is placed in a sealed container or package for human consumption or other consumer uses. Bottled water is calorie free and does not contain sweeteners or other additives except that it may contain: (i) Antimicrobial agents; (ii) fluoride; (iii) carbonation; (iv) vitamins, minerals, and electrolytes; (v) oxygen; (vi) preservatives; and (vii) only those flavors, extracts, or essences derived from a spice or fruit. "Bottled water" includes water that is delivered to the buyer in a reusable container that is not sold with the water.
(3) Notwithstanding anything
in this section to the contrary, the exemption of "food and food
ingredients" provided in this section ((shall apply)) applies
to food and food ingredients that are furnished, prepared, or served as meals:
(a) Under a state administered nutrition program for the aged as provided for in the older Americans act (P.L. 95-478 Title III) and RCW 74.38.040(6);
(b) That are provided to senior citizens, individuals with disabilities, or low-income persons by a not-for-profit organization organized under chapter 24.03 or 24.12 RCW; or
(c) That are provided to residents, sixty-two years of age or older, of a qualified low-income senior housing facility by the lessor or operator of the facility. The sale of a meal that is billed to both spouses of a marital community or both domestic partners of a domestic partnership meets the age requirement in this subsection (3)(c) if at least one of the spouses or domestic partners is at least sixty-two years of age. For purposes of this subsection, "qualified low-income senior housing facility" means a facility:
(i) That meets the
definition of a qualified low-income housing project under ((Title)) 26
U.S.C. Sec. 42 of the federal internal revenue code, as existing on August 1,
2009;
(ii) That has been
partially funded under ((Title)) 42 U.S.C. Sec. 1485 ((of the federal
internal revenue code)); and
(iii) For which the
lessor or operator has at any time been entitled to claim a federal income tax
credit under ((Title)) 26 U.S.C. Sec. 42 of the federal internal revenue
code.
(4)(a) Subsection (1) of this section notwithstanding, the retail sale of food and food ingredients is subject to sales tax under RCW 82.08.020 if the food and food ingredients are sold through a vending machine, and in this case the selling price for purposes of RCW 82.08.020 is fifty-seven percent of the gross receipts.
(b) This subsection (4) does not apply to hot prepared food and food ingredients, other than food and food ingredients which are heated after they have been dispensed from the vending machine.
(c) For tax collected under this subsection (4), the requirements that the tax be collected from the buyer and that the amount of tax be stated as a separate item are waived.
Sec. 1103. RCW 82.08.0293 and 2010 c . . . (E2SHB 1597) s 216 are each amended to read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to sales of food and food ingredients. "Food and food ingredients" means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. "Food and food ingredients" does not include:
(a) "Alcoholic beverages," which means beverages that are suitable for human consumption and contain one-half of one percent or more of alcohol by volume; and
(b) "Tobacco," which means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco.
(2) The exemption of "food and food ingredients" provided for in subsection (1) of this section does not apply to prepared food, soft drinks, bottled water, or dietary supplements. For purposes of this subsection, the following definitions apply:
(a) "Dietary supplement" means any product, other than tobacco, intended to supplement the diet that:
(i) Contains one or more of the following dietary ingredients:
(A) A vitamin;
(B) A mineral;
(C) An herb or other botanical;
(D) An amino acid;
(E) A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or
(F) A concentrate, metabolite, constituent, extract, or combination of any ingredient described in this subsection;
(ii) Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and
(iii) Is required to be labeled as a dietary supplement, identifiable by the "supplement facts" box found on the label as required pursuant to 21 C.F.R. Sec. 101.36, as amended or renumbered as of January 1, 2003.
(b)(i) "Prepared food" means:
(A) Food sold in a heated state or heated by the seller;
(B) Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food; or
(C) Two or more food ingredients mixed or combined by the seller for sale as a single item, except:
(I) Food that is only cut, repackaged, or pasteurized by the seller; or
(II) Raw eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the federal food and drug administration in chapter 3, part 401.11 of The Food Code, published by the food and drug administration, as amended or renumbered as of January 1, 2003, so as to prevent foodborne illness.
(ii) "Prepared food" does not include the following food or food ingredients, if the food or food ingredients are sold without eating utensils provided by the seller:
(A) Food sold by a seller whose proper primary North American industry classification system (NAICS) classification is manufacturing in sector 311, except subsector 3118 (bakeries), as provided in the "North American industry classification system‑-United States, 2002";
(B) Food sold in an unheated state by weight or volume as a single item; or
(C) Bakery items. The term "bakery items" includes bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pies, tarts, muffins, bars, cookies, or tortillas.
(c) "Soft drinks" means nonalcoholic beverages that contain natural or artificial sweeteners. Soft drinks do not include beverages that contain: Milk or milk products; soy, rice, or similar milk substitutes; or greater than fifty percent of vegetable or fruit juice by volume.
(d) "Bottled water" means water that is placed in a sealed container or package for human consumption or other consumer uses. Bottled water is calorie free and does not contain sweeteners or other additives except that it may contain: (i) Antimicrobial agents; (ii) fluoride; (iii) carbonation; (iv) vitamins, minerals, and electrolytes; (v) oxygen; (vi) preservatives; and (vii) only those flavors, extracts, or essences derived from a spice or fruit. "Bottled water" includes water that is delivered to the buyer in a reusable container that is not sold with the water.
(3) Notwithstanding anything in this section to the contrary, the exemption of "food and food ingredients" provided in this section applies to food and food ingredients that are furnished, prepared, or served as meals:
(a) Under a state administered nutrition program for the aged as provided for in the older Americans act (P.L. 95-478 Title III) and RCW 74.38.040(6);
(b) That are provided to senior citizens, individuals with disabilities, or low-income persons by a not-for-profit organization organized under chapter 24.03 or 24.12 RCW; or
(c) That are provided to residents, sixty-two years of age or older, of a qualified low-income senior housing facility by the lessor or operator of the facility. The sale of a meal that is billed to both spouses of a marital community or both domestic partners of a domestic partnership meets the age requirement in this subsection (3)(c) if at least one of the spouses or domestic partners is at least sixty-two years of age. For purposes of this subsection, "qualified low-income senior housing facility" means a facility:
(i) That meets the definition of a qualified low-income housing project under 26 U.S.C. Sec. 42 of the federal internal revenue code, as existing on August 1, 2009;
(ii) That has been
partially funded under 42 U.S.C. Sec. 1485 ((of the federal internal revenue
code)); and
(iii) For which the lessor or operator has at any time been entitled to claim a federal income tax credit under 26 U.S.C. Sec. 42 of the federal internal revenue code.
(4)(a) Subsection (1) of this section notwithstanding, the retail sale of food and food ingredients is subject to sales tax under RCW 82.08.020 if the food and food ingredients are sold through a vending machine. Except as provided in (b) of this subsection, the selling price of food and food ingredients sold through a vending machine for purposes of RCW 82.08.020 is fifty-seven percent of the gross receipts.
(b) For soft drinks and hot prepared food and food ingredients, other than food and food ingredients which are heated after they have been dispensed from the vending machine, the selling price is the total gross receipts of such sales divided by the sum of one plus the sales tax rate expressed as a decimal.
(c) For tax collected under this subsection (4), the requirements that the tax be collected from the buyer and that the amount of tax be stated as a separate item are waived.
Sec. 1104. RCW 82.12.0293 and 2009 c 483 s 4 are each amended to read as follows:
(1) The provisions of
this chapter ((shall)) do not apply in respect to the use of food
and food ingredients for human consumption. "Food and food
ingredients" has the same meaning as in RCW 82.08.0293.
(2) The exemption of
"food and food ingredients" provided for in subsection (1) of this
section ((shall)) does not apply to prepared food, soft drinks, bottled
water, or dietary supplements. "Prepared food," "soft
drinks," ((and)) "dietary supplements," and
"bottled water" have the same meanings as in RCW 82.08.0293.
(3) Notwithstanding
anything in this section to the contrary, the exemption of "food and food
ingredients" provided in this section ((shall)) apply to food and
food ingredients which are furnished, prepared, or served as meals:
(a) Under a state administered nutrition program for the aged as provided for in the older Americans act (P.L. 95-478 Title III) and RCW 74.38.040(6);
(b) Which are provided to senior citizens, individuals with disabilities, or low-income persons by a not-for-profit organization organized under chapter 24.03 or 24.12 RCW; or
(c) That are provided to residents, sixty-two years of age or older, of a qualified low-income senior housing facility by the lessor or operator of the facility. The sale of a meal that is billed to both spouses of a marital community or both domestic partners of a domestic partnership meets the age requirement in this subsection (3)(c) if at least one of the spouses or domestic partners is at least sixty-two years of age. For purposes of this subsection, "qualified low-income senior housing facility" has the same meaning as in RCW 82.08.0293.
NEW SECTION. Sec. 1105. A new section is added to chapter 82.08 RCW to read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to sales of bottled water for human use dispensed or to be dispensed to patients, pursuant to a prescription for use in the cure, mitigation, treatment, or prevention of disease or medical condition.
(2) The definitions in this subsection apply to this section.
(a) "Bottled water" has the same meaning as provided in RCW 82.08.0293.
(b) "Prescription" means an order, formula, or recipe issued in any form of oral, written, electronic, or other means of transmission by a duly licensed practitioner authorized by the laws of this state to prescribe.
NEW SECTION. Sec. 1106. A new section is added to chapter 82.12 RCW to read as follows:
The provisions of this chapter do not apply in respect to the use of bottled water for human use dispensed or to be dispensed to patients, pursuant to a prescription for use in the cure, mitigation, treatment, or prevention of disease or medical condition. The definitions in section 1105 of this act apply to this section.
NEW SECTION. Sec. 1107. A new section is added to chapter 82.08 RCW to read as follows:
(1) The tax levied by RCW 82.08.020 does not apply to sales of bottled water for human use to persons who do not otherwise have a readily available source of potable water and who provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files.
(2) The department may waive the requirement for an exemption certificate in the event of disaster or similar circumstance.
NEW SECTION. Sec. 1108. A new section is added to chapter 82.12 RCW to read as follows:
The provisions of this chapter do not apply in respect to the use of bottled water for human use by persons who do not otherwise have a readily available source of potable water.
PART XII
Imposing Sales and Use Tax on Custom Software
NEW SECTION. Sec. 1201. In order to preserve funding for higher education, it is the legislature's intent to use revenue generated from assessing a sales and use tax on custom software to support the state's institutions of higher education and financial aid programs including the state need grant.
Sec. 1202. RCW 82.04.050 and 2009 c 563 s 301 and 2009 c 535 s 301 are each reenacted and 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 presents a seller's permit or uniform exemption certificate in conformity with RCW 82.04.470 and who:
(a) 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
(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
(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)) includes
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) of this subsection
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 (2) and (7), 82.04.290, and 82.04.2908; or
(f) 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.
(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 ((shall)) 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 may 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;
(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 ((shall be))
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)) through (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 ((shall))
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.
(4)(a) The term also includes:
(i) The renting or leasing of tangible personal property to consumers; and
(ii) 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 (4)(a)(ii), an operator must do more than maintain, inspect, or set up the tangible personal property.
(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 other than a sale to a person who presents a seller's permit or uniform exemption certificate in conformity with RCW 82.04.470, 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) 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.
(7)(a) The term also
includes the sale of or charge made for custom software and the customization
of prewritten computer software to a consumer, regardless of the method of
delivery to the consumer.
(b) The term also includes the charge made to consumers for the right
to access and use custom software and customized prewritten computer software,
where possession of the software is maintained by the seller or a third party.
(8) 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))) (9)(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))) (9) 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))) (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.
(((10))) (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 ((Title)) 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.
(((11))) (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.
(((12))) (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.
Sec. 1203. RCW 82.04.050 and 2010 c . . . (SHB 2758) s 14 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 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
(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
(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 includes 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) of this subsection 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 (2) and (7), 82.04.290, and 82.04.2908; or
(f) 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.
(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)) through (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.
(4)(a) The term also includes:
(i) The renting or leasing of tangible personal property to consumers; and
(ii) 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 (4)(a)(ii), an operator must do more than maintain, inspect, or set up the tangible personal property.
(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) 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.
(7)(a) The term also
includes the sale of or charge made for custom software and the customization
of prewritten computer software to a consumer, regardless of the method of delivery
to the consumer.
(b) The term also includes the charge made to consumers for the right
to access and use custom software and customized prewritten computer software,
where possession of the software is maintained by the seller or a third party.
(8) 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))) (9)(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))) (9) 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))) (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.
(((10))) (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 ((Title)) 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.
(((11))) (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 byproducts of weapons production and nuclear research and
development.
(((12))) (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.
Sec. 1204. RCW 82.04.050 and 2010 c . . . (SHB 2620) s 201 and 2010 c . . . (E2SHB 1597) 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 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 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 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)) through (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.
(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)(a) The term also
includes the sale of or charge made for custom software and the customization
of prewritten computer software to a consumer, regardless of the method of
delivery to the consumer.
(b) The term also includes the charge made to consumers for the right
to access and use custom software and customized prewritten computer software,
where possession of the software is maintained by the seller or a third party.
(8) 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))) (9)(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))) (9) 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))) (10)
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))) (10), an operator must do more than maintain, inspect, or
set up the tangible personal property.
(11) 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.
(((10))) (12)
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 Title 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.
(((11))) (13)
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.
(((12))) (14)
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.
(15) 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.
Sec. 1205. RCW 82.04.060 and 2009 c 535 s 403 are each amended to read as follows:
"Sale at wholesale" or "wholesale sale" means:
(1) Any sale, which is not a sale at retail, of:
(a) Tangible personal property;
(b) Services defined as a retail sale in RCW 82.04.050(2) (a) or (g);
(c) Amusement or recreation services as defined in RCW 82.04.050(3)(a);
(d) Prewritten computer software;
(e) Services described in RCW 82.04.050 (6)(b) or (7);
(f) Extended warranties as defined in RCW 82.04.050(7);
(g) Competitive telephone service, ancillary services, or telecommunications service as those terms are defined in RCW 82.04.065; or
(h) Digital goods, digital codes, or digital automated services; and
(2) Any charge made for labor and services rendered for persons who are not consumers, in respect to real or personal property, if such charge is expressly defined as a retail sale by RCW 82.04.050 when rendered to or for consumers. For the purposes of this subsection (2), "real or personal property" does not include any natural products named in RCW 82.04.100.
Sec. 1206. RCW 82.04.060 and 2010 c . . . (E2SHB 1597) s 203 are each amended to read as follows:
"Sale at wholesale" or "wholesale sale" means:
(1) Any sale, which is not a sale at retail, of:
(a) Tangible personal property;
(b) Services defined as a retail sale in RCW 82.04.050(2) (a) or (g);
(c) Amusement or recreation services as defined in RCW 82.04.050(3)(a);
(d) Prewritten computer software;
(e) Services described in RCW 82.04.050 (6)(b) or (7);
(f) Extended warranties as defined in RCW 82.04.050(7);
(g) Competitive telephone service, ancillary services, or telecommunications service as those terms are defined in RCW 82.04.065; or
(h) Digital goods, digital codes, or digital automated services;
(2) Any charge made for labor and services rendered for persons who are not consumers, in respect to real or personal property, if such charge is expressly defined as a retail sale by RCW 82.04.050 when rendered to or for consumers. For the purposes of this subsection (2), "real or personal property" does not include any natural products named in RCW 82.04.100; and
(3) The sale of any service for resale, if the sale is excluded from the definition of "sale at retail" and "retail sale" in RCW 82.04.050(14).
Sec. 1207. RCW 82.04.190 and 2009 c 535 s 302 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) 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) of satisfying the person's obligations under an extended warranty as defined in RCW 82.04.050(7), 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;
(2)(a) Any person engaged in any business activity taxable under RCW 82.04.290 or 82.04.2908; (b) any person who purchases, acquires, or uses any competitive telephone service, ancillary services, or telecommunications service as those terms are defined in RCW 82.04.065, other than for resale in the regular course of business; (c) any person who purchases, acquires, or uses any service defined in RCW 82.04.050(2) (a) or (g), other than for resale in the regular course of business or for the purpose of satisfying the person's obligations under an extended warranty as defined in RCW 82.04.050(7); (d) any person who purchases, acquires, or uses any amusement and recreation service defined in RCW 82.04.050(3)(a), other than for resale in the regular course of business; (e) any person who purchases or acquires an extended warranty as defined in RCW 82.04.050(7) other than for resale in the regular course of business; and (f) any person who is an end user of software. For purposes of this subsection (2)(f) and RCW 82.04.050(6), a person who purchases or otherwise acquires prewritten computer software, who provides services described in RCW 82.04.050(6)(b) and who will charge consumers for the right to access and use the prewritten computer software, is not an end user of the prewritten computer software;
(3) 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) 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) 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) 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)) is 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,
except that consumer does not include 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, or any instrumentality thereof, if the investment project would qualify
for sales and use tax deferral under chapter 82.63 RCW if undertaken by a
private entity;
(7) Any person who is a
lessor of machinery and equipment, the rental of which is exempt from the tax
imposed by RCW 82.08.020 under RCW 82.08.02565, with respect to the sale of or
charge made for tangible personal property consumed in respect to repairing the
machinery and equipment, if the tangible personal property has a useful life of
less than one year. Nothing contained in this or any other subsection of this
section ((shall)) may be construed to modify any other definition
of "consumer";
(8) Any person engaged in the business of cleaning up for the United States, or its instrumentalities, radioactive waste and other by-products of weapons production and nuclear research and development;
(9) Any person who is an owner, lessee, or has the right of possession of tangible personal property that, under the terms of an extended warranty as defined in RCW 82.04.050(7), has been repaired or is replacement property, but only with respect to the sale of or charge made for the repairing of the tangible personal property or the replacement property;
(10) Any person who purchases, acquires, or uses services described in RCW 82.04.050 (6)(b) or (7) other than for resale in the regular course of business; and
(11)(a) Any end user of a digital product or digital code.
(b)(i) For purposes of this subsection, "end user" means any taxpayer as defined in RCW 82.12.010 other than a taxpayer who receives by contract a digital product for further commercial broadcast, rebroadcast, transmission, retransmission, licensing, relicensing, distribution, redistribution or exhibition of the product, in whole or in part, to others. A person that purchases digital products or digital codes for the purpose of giving away such products or codes will not be considered to have engaged in the distribution or redistribution of such products or codes and will be treated as an end user;
(ii) If a purchaser of a digital code does not receive the contractual right to further redistribute, after the digital code is redeemed, the underlying digital product to which the digital code relates, then the purchaser of the digital code is an end user. If the purchaser of the digital code receives the contractual right to further redistribute, after the digital code is redeemed, the underlying digital product to which the digital code relates, then the purchaser of the digital code is not an end user. A purchaser of a digital code who has the contractual right to further redistribute the digital code is an end user if that purchaser does not have the right to further redistribute, after the digital code is redeemed, the underlying digital product to which the digital code relates.
Sec. 1208. RCW 82.04.190 and 2010 c . . . (E2SHB 1597) s 204 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 of:
(a) Resale as tangible personal property in the regular course of business;
(b) 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;
(c) Consuming such property in producing for sale as 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;
(d) 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) Satisfying the person's obligations under an extended warranty as defined in RCW 82.04.050(7), 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;
(2)(a) Any person engaged in any business activity taxable under RCW 82.04.290 or 82.04.2908; (b) any person who purchases, acquires, or uses any competitive telephone service, ancillary services, or telecommunications service as those terms are defined in RCW 82.04.065, other than for resale in the regular course of business; (c) any person who purchases, acquires, or uses any service defined in RCW 82.04.050(2) (a) or (g), other than for resale in the regular course of business or for the purpose of satisfying the person's obligations under an extended warranty as defined in RCW 82.04.050(7); (d) any person who purchases, acquires, or uses any amusement and recreation service defined in RCW 82.04.050(3)(a), other than for resale in the regular course of business; (e) any person who purchases or acquires an extended warranty as defined in RCW 82.04.050(7) other than for resale in the regular course of business; and (f) any person who is an end user of software. For purposes of this subsection (2)(f) and RCW 82.04.050(6), a person who purchases or otherwise acquires prewritten computer software, who provides services described in RCW 82.04.050(6)(b) and who will charge consumers for the right to access and use the prewritten computer software, is not an end user of the prewritten computer software;
(3) 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) 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) 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) 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 is 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, except that consumer does not include 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, or any instrumentality thereof, if the investment project would qualify for sales and use tax deferral under chapter 82.63 RCW if undertaken by a private entity;
(7) Any person who is a lessor of machinery and equipment, the rental of which is exempt from the tax imposed by RCW 82.08.020 under RCW 82.08.02565, with respect to the sale of or charge made for tangible personal property consumed in respect to repairing the machinery and equipment, if the tangible personal property has a useful life of less than one year. Nothing contained in this or any other subsection of this section may be construed to modify any other definition of "consumer";
(8) Any person engaged in the business of cleaning up for the United States, or its instrumentalities, radioactive waste and other by-products of weapons production and nuclear research and development;
(9) Any person who is an owner, lessee, or has the right of possession of tangible personal property that, under the terms of an extended warranty as defined in RCW 82.04.050(7), has been repaired or is replacement property, but only with respect to the sale of or charge made for the repairing of the tangible personal property or the replacement property;
(10) Any person who purchases, acquires, or uses services described in RCW 82.04.050 (6)(b) or (7) other than for resale in the regular course of business;
(11)(a) Any end user of a digital product or digital code.
(b)(i) For purposes of this subsection, "end user" means any taxpayer as defined in RCW 82.12.010 other than a taxpayer who receives by contract a digital product for further commercial broadcast, rebroadcast, transmission, retransmission, licensing, relicensing, distribution, redistribution or exhibition of the product, in whole or in part, to others. A person that purchases digital products or digital codes for the purpose of giving away such products or codes will not be considered to have engaged in the distribution or redistribution of such products or codes and will be treated as an end user;
(ii) If a purchaser of a digital code does not receive the contractual right to further redistribute, after the digital code is redeemed, the underlying digital product to which the digital code relates, then the purchaser of the digital code is an end user. If the purchaser of the digital code receives the contractual right to further redistribute, after the digital code is redeemed, the underlying digital product to which the digital code relates, then the purchaser of the digital code is not an end user. A purchaser of a digital code who has the contractual right to further redistribute the digital code is an end user if that purchaser does not have the right to further redistribute, after the digital code is redeemed, the underlying digital product to which the digital code relates; and
(12) Any person who provides services described in RCW 82.04.050(9). Any such person is a consumer with respect to the purchase, acquisition, or use of the tangible personal property that the person provides along with an operator in rendering services defined as a retail sale in RCW 82.04.050(9). Any such person may also be a consumer under other provisions of this section.
Sec. 1209. RCW 82.04.215 and 2003 c 168 s 601 are each amended to read as follows:
(1) "Computer" means an electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions.
(2) "Computer software" means a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task. All software is classified as either prewritten or custom. Consistent with this definition "computer software" includes only those sets of coded instructions intended for use by an end user and specifically excludes retained rights in software and master copies of software.
(3) "Custom software" means computer software created for a single person.
(4) "Customization of prewritten computer software" means any alteration, modification, or development of applications using or incorporating prewritten computer software for a specific person. "Customization of prewritten computer software" includes individualized configuration of software to work with other software and computer hardware but does not include routine installation. Customization of prewritten computer software does not change the underlying character or taxability of the original prewritten computer software.
(5) "Master copies" of software means copies of software from which a software developer, author, inventor, publisher, licensor, sublicensor, or distributor makes copies for sale or license.
(6) "Prewritten
computer software" means computer software, including prewritten upgrades,
that is not designed and developed by the author or other creator to the
specifications of a specific purchaser. The combining of two or more
prewritten computer software programs or prewritten portions thereof does not
cause the combination to be other than prewritten computer software.
Prewritten computer software includes software designed and developed by the
author or other creator to the specifications of a specific purchaser when it
is sold to a person other than such purchaser. Where a person modifies or
enhances computer software of which such persons is not the author or creator,
the person ((shall be)) is deemed to be the author or creator
only of the person's modifications or enhancements. Prewritten computer
software or a prewritten portion thereof that is modified or enhanced to any
degree, where such modification or enhancement is designed and developed to the
specifications of a specific purchaser, remains prewritten computer software;
however where there is a reasonable, separately stated charge or an invoice or other
statement of the price given to the purchaser for the modification or
enhancement, the modification or enhancement ((shall)) does not
constitute prewritten computer software.
(7) "Retained rights" means any and all rights, including intellectual property rights such as those rights arising from copyrights, patents, and trade secret laws, that are owned or are held under contract or license by a software developer, author, inventor, publisher, licensor, sublicensor, or distributor.
NEW SECTION. Sec. 1210. RCW 82.04.29001 (Creation and distribution of custom software‑-Customization of prewritten computer software‑-Taxable services) and 2003 c 168 s 602 & 1998 c 332 s 4 are each repealed.
Sec. 1211. RCW 82.08.02088 and 2009 c 535 s 701 are each amended to read as follows:
(1) The tax imposed by RCW 82.08.020 does not apply to the sale of digital goods, digital codes, digital automated services, prewritten computer software, or services defined as a retail sale in RCW 82.04.050 (6)(b) or (7) to a buyer that provides the seller with an exemption certificate claiming multiple points of use. An exemption certificate claiming multiple points of use must be in a form and contain such information as required by the department.
(2) A buyer is entitled to use an exemption certificate claiming multiple points of use only if the buyer is a business or other organization and the digital goods or digital automated services purchased, or the digital goods or digital automated services to be obtained by the digital code purchased, or the prewritten computer software or services defined as a retail sale in RCW 82.04.050 (6)(b) or (7) purchased will be concurrently available for use within and outside this state. A buyer is not entitled to use an exemption certificate claiming multiple points of use for digital goods, digital codes, digital automated services, prewritten computer software, or services defined as a retail sale in RCW 82.04.050(6)(b) purchased for personal use.
(3) A buyer claiming an exemption under this section must report and pay the tax imposed in RCW 82.12.020 and any local use taxes imposed under the authority of chapter 82.14 RCW and RCW 81.104.170 directly to the department in accordance with RCW 82.12.02088 and 82.14.457.
(4) For purposes of this section, "concurrently available for use within and outside this state" means that employees or other agents of the buyer may use the digital goods, digital automated services, prewritten computer software, or services defined as a retail sale in RCW 82.04.050 (6)(b) or (7) simultaneously from one or more locations within this state and one or more locations outside this state. A digital code is concurrently available for use within and outside this state if employees or other agents of the buyer may use the digital goods or digital automated services to be obtained by the code simultaneously at one or more locations within this state and one or more locations outside this state.
Sec. 1212. RCW 82.12.010 and 2009 c 535 s 304 are each amended to read as follows:
For the purposes of this chapter:
(1) "Purchase price" means the same as sales price as defined in RCW 82.08.010;
(2)(a) "Value of
the article used" ((shall be)) 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 ((shall)) must 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 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 ((shall))
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 ((shall)) must 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 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 ((shall))
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 ((shall)) must 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))
must be 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 ((shall be)) 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;
(3) "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 ((shall))
must be 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;
(4) "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 ((shall)) must be 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;
(5) "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;
(6) "Use," "used," "using," or "put to use" have their ordinary meaning, and mean:
(a) With respect to tangible personal property, 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) or (7), the
first act within this state by which the taxpayer, as a consumer, accesses the
((prewritten)) computer software; and
(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;
(7) "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;
(8)(a)(i) Except as provided in (a)(ii) of this subsection (8), "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), or (7) 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;
(9) "Extended warranty" has the same meaning as in RCW 82.04.050(7);
(10) The meaning
ascribed to words and phrases in chapters 82.04 and 82.08 RCW, insofar as
applicable, ((shall have)) 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, ((shall)) 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 (10), the use of the property ((shall be)) is deemed
to be by such consumer.
Sec. 1213. RCW 82.12.020 and 2009 c 535 s 305 are each amended to read as follows:
(1) There is ((hereby))
levied and ((there shall be)) collected from every person in this state
a tax or excise for the privilege of using within this state as a consumer any:
(a) Article of tangible personal property purchased at retail, or acquired by lease, gift, repossession, or bailment, or extracted or produced or manufactured by the person so using the same, or otherwise furnished to a person engaged in any business taxable under RCW 82.04.280 (2) or (7), including tangible personal property acquired at a casual or isolated sale, and including by-products used by the manufacturer thereof, except as otherwise provided in this chapter, irrespective of whether the article or similar articles are manufactured or are available for purchase within this state;
(b) Prewritten computer software, regardless of the method of delivery, but excluding prewritten computer software that is either provided free of charge or is provided for temporary use in viewing information, or both;
(c) Services defined as
a retail sale in RCW 82.04.050 (2)(a) or (g), (3)(a), ((or)) (6)(b),
or (7), excluding services defined as a retail sale in RCW 82.04.050(6)(b)
that are provided free of charge;
(d) Extended warranty; or
(e)(i) Digital good, digital code, or digital automated service, including the use of any services provided by a seller exclusively in connection with digital goods, digital codes, or digital automated services, whether or not a separate charge is made for such services.
(ii) With respect to the use of digital goods, digital automated services, and digital codes acquired by purchase, the tax imposed in this subsection (1)(e) applies in respect to:
(A) Sales in which the seller has granted the purchaser the right of permanent use;
(B) Sales in which the seller has granted the purchaser a right of use that is less than permanent;
(C) Sales in which the purchaser is not obligated to make continued payment as a condition of the sale; and
(D) Sales in which the purchaser is obligated to make continued payment as a condition of the sale.
(iii) With respect to digital goods, digital automated services, and digital codes acquired other than by purchase, the tax imposed in this subsection (1)(e) applies regardless of whether or not the consumer has a right of permanent use or is obligated to make continued payment as a condition of use.
(2) The provisions of
this chapter do not apply in respect to the use of any article of tangible
personal property, extended warranty, digital good, digital code, digital
automated service, or service taxable under RCW 82.04.050 (2)(a) or (g),
(3)(a), ((or)) (6)(b), or (7), 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.
PART XIII
PUD Privilege Tax Clarification
Sec. 1301. RCW 54.28.011 and 1957 c 278 s 12 are each amended to read as follows:
"Gross
revenue" ((shall)) means the amount received from the sale
of electric energy, which also includes any regularly recurring charge
billed to consumers as a condition of receiving electric energy, and
excluding any tax levied by a municipal corporation upon the district pursuant
to RCW 54.28.070.
PART XIV
Temporarily Increasing the Business and Occupation Tax on Service Businesses while Increasing the Small Business Credit for the Same Businesses
NEW SECTION. Sec. 1401. A new section is added to chapter 82.04 RCW to read as follows:
(1) Beginning May 1, 2010, through June 30, 2013, an additional rate of tax of .25 percent is added to the rate provided for in RCW 82.04.285 and 82.04.290(2)(a).
(2)(a) The additional rate in subsection (1) of this section does not apply to persons engaged in the business of scientific research and development services including but not limited to research and development in the physical, engineering, and life sciences (such as agriculture, bacteriological, biotechnology, chemical, life sciences, and physical science research and development laboratories or services) and research and development in the social sciences and humanities (such as archaeological, behavioral, cognitive, economic, language, and learning research or development services).
(b) The additional rate in subsection (1) of this section does not apply to persons engaging within this state in business as a hospital, as defined in RCW 70.41.020.
Sec. 1402. RCW 82.04.4451 and 1997 c 238 s 2 are each amended to read as follows:
(1) In computing the tax imposed under this chapter, a credit is allowed against the amount of tax otherwise due under this chapter, as provided in this section. The maximum credit for a taxpayer, except for taxpayers subject to tax under RCW 82.04.290(2)(a) and 82.04.285, for a reporting period is thirty-five dollars multiplied by the number of months in the reporting period, as determined under RCW 82.32.045. The maximum credit for a taxpayer, which reports at least fifty percent of its taxable income under RCW 82.04.290(2)(a) and 82.04.285, for a reporting period is seventy dollars multiplied by the number of months in the reporting period, as determined under RCW 82.32.045.
(2) When the amount of tax otherwise due under this chapter is equal to or less than the maximum credit, a credit is allowed equal to the amount of tax otherwise due under this chapter.
(3) When the amount of tax otherwise due under this chapter exceeds the maximum credit, a reduced credit is allowed equal to twice the maximum credit, minus the tax otherwise due under this chapter, but not less than zero.
(4) The department may
prepare a tax credit table consisting of tax ranges using increments of no more
than five dollars and a corresponding tax credit to be applied to those tax
ranges. The table shall be prepared in such a manner that no taxpayer will owe
a greater amount of tax by using the table than would be owed by performing the
calculation under subsections (1) through (3) of this section. A table
prepared by the department under this subsection ((shall)) must
be used by all taxpayers in taking the credit provided in this section.
Sec. 1403. RCW 82.32.045 and 2006 c 256 s 1 are each amended to read as follows:
(1) Except as otherwise provided in this chapter, payments of the taxes imposed under chapters 82.04, 82.08, 82.12, 82.14, and 82.16 RCW, along with reports and returns on forms prescribed by the department, are due monthly within twenty-five days after the end of the month in which the taxable activities occur.
(2) The department of revenue may relieve any taxpayer or class of taxpayers from the obligation of remitting monthly and may require the return to cover other longer reporting periods, but in no event may returns be filed for a period greater than one year. For these taxpayers, tax payments are due on or before the last day of the month next succeeding the end of the period covered by the return.
(3) The department of revenue may also require verified annual returns from any taxpayer, setting forth such additional information as it may deem necessary to correctly determine tax liability.
(4) Notwithstanding subsections (1) and (2) of this section, the department may relieve any person of the requirement to file returns if the following conditions are met:
(a) The person's value of products, gross proceeds of sales, or gross income of the business, from all business activities taxable under chapter 82.04 RCW, is less than twenty-eight thousand dollars per year, except for businesses paying at least fifty percent of their tax under RCW 82.04.290(2)(a) and 82.04.285, the amount of business activities taxable under chapter 82.04 RCW is less than fifty-six thousand dollars per year;
(b) The person's gross income of the business from all activities taxable under chapter 82.16 RCW is less than twenty-four thousand dollars per year; and
(c) The person is not required to collect or pay to the department of revenue any other tax or fee which the department is authorized to collect.
PART XV
Property Management Salaries
NEW SECTION. Sec. 1501. RCW 82.04.394 (Exemptions‑-Amounts received by property management company for on-site personnel) and 1998 c 338 s 2 are each repealed.
PART XVI
Convention Center Taxes
Sec. 1601. RCW 67.40.140 and 1995 c 386 s 2 are each amended to read as follows:
When remitting sales tax
receipts to the state under RCW 82.14.050, the city treasurer, or its designee,
((shall)) must at the same time remit the sales taxes collected
under RCW 67.40.130 for the municipality. ((The sum so collected and paid
over on behalf of the municipality shall be credited against the amount of the
tax otherwise due to the state from those same taxpayers under RCW
82.08.020(1).))
Sec. 1602. RCW 67.40.190 and 1995 c 386 s 7 are each amended to read as follows:
(1) Moneys received from any tax imposed under RCW 67.40.130 shall be used for the purpose of providing funds to the corporation for the costs associated with paying all or any part of the cost associated with: The financing, design, acquisition, construction, equipping, operating, maintaining, and reequipping of convention center facilities; the acquisition, construction, and relocation costs of replacement housing; and repayment of loans and advances from the state, including loans authorized previously under this chapter, or to pay or secure the payment of all or part of the principal of or interest on any state bonds issued for purposes authorized under this chapter.
(2) If any of the
revenue from any local sales tax authorized under RCW 67.40.130 ((shall have))
has been encumbered or pledged by the state to secure the payment of any
state bonds as authorized under RCW 67.40.030, then as long as that agreement
or pledge ((shall be)) is in effect, the legislature shall not
withdraw from the municipality the authority to levy and collect the tax ((or
the tax credit)) authorized under RCW 67.40.130 ((and 67.40.140)).
Sec. 1603. RCW 82.14.410 and 2001 c 6 s 1 are each amended to read as follows:
(1) A local sales and use tax change adopted after December 1, 2000, must provide an exemption for those sales of lodging for which, but for the exemption, the total sales tax rate imposed on sales of lodging would exceed the greater of:
(a) Twelve percent; or
(b) The total sales tax rate that would have applied to the sale of lodging if the sale were made on December 1, 2000.
(2) For the purposes of this section:
(a) "Local sales and use tax change" is defined as provided in RCW 82.14.055.
(b) "Sale of lodging" means the sale of or 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.
(c) "Total sales tax rate" means the combined rates of all state and local taxes imposed under this chapter and chapters 36.100, 67.28, 67.40, and 82.08 RCW, and any other tax authorized after March 29, 2001, if the tax is in the nature of a sales tax collected from the buyer, but excluding taxes imposed under RCW 81.104.170 before December 1, 2000, and taxes imposed under RCW 67.40.130.
Sec. 1604. RCW 67.28.181 and 2004 c 79 s 8 are each amended to read as follows:
(1) The legislative body
of any municipality may impose an excise tax on the sale of or charge made for
the furnishing of lodging that is subject to tax under chapter 82.08 RCW. The
rate of tax ((shall)) may not exceed the lesser of two percent or
a rate that, when combined with all other taxes imposed upon sales of lodging
within the municipality under this chapter and chapters 36.100, 67.40, 82.08,
and 82.14 RCW, equals twelve percent. A tax under this chapter ((shall))
may not be imposed in increments smaller than tenths of a percent.
(2) Notwithstanding subsection (1) of this section:
(a) If a municipality
was authorized to impose taxes under this chapter or RCW 67.40.100 or both with
a total rate exceeding four percent before July 27, 1997, such total
authorization ((shall)) must continue through January 31, 1999,
and thereafter the municipality may impose a tax under this section at a rate
not exceeding the rate actually imposed by the municipality on January 31,
1999.
(b) If a city or town, other than a municipality imposing a tax under (a) of this subsection, is located in a county that imposed taxes under this chapter with a total rate of four percent or more on January 1, 1997, the city or town may not impose a tax under this section.
(c) If a city has a
population of four hundred thousand or more and is located in a county with a
population of one million or more, the rate of tax imposed under this chapter
by the city ((shall)) may not exceed the lesser of four percent
or a rate that, when combined with all other taxes imposed upon sales of
lodging in the municipality under this chapter and chapters 36.100, 67.40,
82.08, and 82.14 RCW, equals ((fifteen)) seventeen and two-tenths
percent.
(d) If a municipality was authorized to impose taxes under this chapter or RCW 67.40.100, or both, at a rate equal to six percent before January 1, 1998, the municipality may impose a tax under this section at a rate not exceeding the rate actually imposed by the municipality on January 1, 1998.
(3) Any county ordinance
or resolution adopted under this section ((shall)) must contain a
provision allowing a credit against the county tax for the full amount of any
city or town tax imposed under this section upon the same taxable event.
PART XVII
Miscellaneous Provisions
NEW SECTION. Sec. 1701. (1) Except as provided in subsection (2) of this section, if any provision of Part I of this act or its application to any person or circumstance is held invalid, the remainder of Part I of this act or the application of the provision to other persons or circumstances is not affected.
(2) If a court of competent jurisdiction, in a final judgment not subject to appeal, adjudges any provision of section 104(1)(c) of this act unconstitutional or otherwise invalid, Part I of this act is null and void in its entirety.
NEW SECTION. Sec. 1702. Part I of this act applies with respect to gross income of the business, as defined in RCW 82.04.080, including gross income from royalties as defined in RCW 82.04.2907, generated on and after July 1, 2010. For purposes of calculating the thresholds in section 104(1)(c) of this act for the 2010 tax year, property, payroll, and receipts are based on the entire 2010 tax year.
NEW SECTION. Sec. 1703. Part II of this act must be construed liberally to effectuate the legislature's intent to ensure that all businesses and individuals pay their fair share of taxes.
NEW SECTION. Sec. 1704. Sections 502, 802, and 803 of this act apply both retroactively and prospectively.
NEW SECTION. Sec. 1705. In accordance with Article VIII, section 5 of the state Constitution, sections 802, 803, and 1704 of this act do not authorize refunds of business and occupation tax validly collected before April 1, 2010, on amounts received by an individual from a corporation as compensation for serving as a member of that corporation's board of directors.
NEW SECTION. Sec. 1706. Section 502 of this act does not affect any final judgments, not subject to appeal, entered by a court of competent jurisdiction before the effective date of this section.
NEW SECTION. Sec. 1707. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
NEW SECTION. Sec. 1708. Except as otherwise provided in this act, this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect April 1, 2010.
NEW SECTION. Sec. 1709. Part XIV of 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 May 1, 2010.
NEW SECTION. Sec. 1710. Sections 603, 605, 613, and 1202 of this act expire June 10, 2010.
NEW SECTION. Sec. 1711. Sections 604, 606, 614, and 1203 of this act take effect June 10, 2010.
NEW SECTION. Sec. 1712. Sections 106, 802, 1102, 1203, 1205, and 1207 of this act expire July 1, 2010.
NEW SECTION. Sec. 1713. Part III and sections 101 through 105, 107 through 111, 402, 803, 1103, 1204, 1206, and 1208 of this act take effect July 1, 2010.
NEW SECTION. Sec. 1714. Section 607 of this act expires July 1, 2011.
NEW SECTION. Sec. 1715. Section 608 of this act takes effect July 1, 2011.
NEW SECTION. Sec. 1716. Part IX of this act takes effect January 1, 2011.
NEW SECTION. Sec. 1717. Section 1301 of this act applies prospectively only."
Correct the title.
and the same are herewith transmitted.
BARBARA BAKER, Chief Clerk
MOTION
Senator Prentice moved that the Senate refuse to concur in the House amendment(s) to Second Engrossed Substitute Senate Bill No. 6143 and request of the House a conference thereon.
The President declared the question before the Senate to be motion by Senator Prentice that the Senate refuse to concur in the House amendment(s) to Second Engrossed Substitute Senate Bill No. 6143 and request a conference thereon.
The motion by Senator Prentice carried and the Senate refused to concur in the House amendment(s) to Second Engrossed Substitute Senate Bill No. 6143 and requested of the House a conference thereon.
APPOINTMENT OF CONFERENCE COMMITTEE
The President appointed as members of the Conference Committee on Second Engrossed Substitute Senate Bill No. 6143 and the House amendment(s) thereto: Senators Prentice, Murray and Zarelli.
MOTION
On motion of Senator Eide, the appointments to the conference committee were confirmed.
MESSAGE FROM THE HOUSE
March 22, 2010
MR. PRESIDENT:
The House passed SECOND SUBSTITUTE SENATE BILL NO. 6675 with the following amendment(s): 6675-S2 AMH FIN H5776.1
Strike everything after the enacting clause and insert the following:
"NEW SECTION. Sec. 1. The legislature finds that the global health sector develops new technologies and products for the improvement of health delivery locally and worldwide and that Washington is home to the world's richest collection of global health research and education programs creating new and innovative technologies on a daily basis. It is the intent of the legislature to stimulate the state's economy and foster job creation in the emerging field of global health while improving the health of people in Washington state and the world. The purpose of this act is to create a funding mechanism and a grant program to ensure that Washington remains competitive in global health innovation and to guarantee that the development, manufacture, and delivery of global health products will become an even more dynamic part of the state's economy.
NEW SECTION. Sec. 2. (1) The Washington global health technologies and product development competitiveness program is created.
(2)(a) The program must be administered by a nonprofit organization exempt from income taxation under 26 U.S.C. Sec. 501(c)(6) of the federal internal revenue code whose board of directors is appointed by the governor. The governor must make the appointments after consultation with a statewide alliance of global health research, nonprofit, and private entities. The board consists of the following members:
(i) Three members representing private companies engaged in the provision of global health products or services;
(ii) Three members representing nonprofit organizations supporting global health research or providing global health products or services;
(iii) Three members representing public research institutions engaged in global health research and education; and
(iv) One member who is a former elected official.
(b) The governor must appoint the chair of the board from among the members. The governor must appoint the members to staggered terms and each appointment may not last more than three years, but an appointee may serve more than one term.
(3) The board must contract with the department of commerce for management services to assist the board in implementing the program.
(4) The board must solicit and receive gifts, grants, bequests, royalty payments, licensing income, and other funds from businesses, foundations, and the federal government to promote the development and delivery of global health technologies and products. All federal funds received must be deposited in the Washington global health technologies and product development account created in section 3 of this act. All remaining nonstate funds received must be deposited in an account that the board creates and administers to carry out the purposes of this section. Expenditures from the account created by the board may be used only for funding activities of the program created in this section. Of the total amounts deposited into these accounts, no more than three percent of the total funds may be used for the department of commerce's management services and administrative expenses related to the program created in this section.
(5) The board must establish eligibility criteria for global health technologies and product development grants and adopt policies and procedures to facilitate the orderly process of grant application, review, and reward.
(6) In making grants to entities pursuant to contract for the development, production, promotion, and delivery of global health technologies and products, the board must consider the following:
(a) The quality of the proposed research or the proposed technical assistance in product development or production process design. Any grant funds awarded for research activities must be awarded for nonbasic research which will assist in commercialization or manufacture of global health technologies;
(b) The potential for the grant recipient to improve global health outcomes;
(c) The potential for the grant to leverage additional funding for the development of global health technologies and products;
(d) The potential for the grant to stimulate, or promote technical skills training for, employment in the development of global health technologies in the state;
(e) The willingness of the grant recipient, when appropriate, to enter into royalty or licensing income agreements with the board; and
(f) Any other factors, as the board determines.
(7) Grant contracts must specify that award recipients must conduct their research, development, and any subsequent production activities within Washington, with the exception of activities such as clinical trials that must be carried out in developing countries, and that a failure to comply with this requirement will obligate the recipient to return the amount of the award plus interest as determined by the board.
(8) Upon the recommendation of the Washington economic development commission, the board may provide funding for the recruitment and employment by public research institutions and global health nonprofit organizations in the state, of global health researchers with a history of commercialization of global health technologies.
(9) Each project receiving a grant under this section must report information to the board in the format and at the intervals as the board requires to provide accountability and to evaluate the effectiveness of the program. The information reported must include the amount of funding received; the funding, if any, leveraged by the grant; the number and types of jobs created as a result of the grant; and any other information that the board requires. The board must use the information to prepare an annual evaluation of the program for a report to the appropriate committees of the legislature and the governor, beginning December 1, 2012.
NEW SECTION. Sec. 3. The Washington global health technologies and product development account is created in the custody of the state treasurer. Only the board of directors of the Washington global health technologies and product development competitiveness program or the board's designee may authorize expenditures from the account. All federal moneys received from the solicitations required in section 2 of this act and all state funds appropriated for the specific purposes of the Washington global health technologies and product development competitiveness program must be deposited in the account. Expenditures from the account may be used only for funding activities of the Washington global health technologies and product development competitiveness program created in section 2 of this act. The account is subject to the allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.
Sec. 4. RCW 43.79A.040 and 2009 c 87 s 4 are each amended to read as follows:
(1) Money in the treasurer's trust fund may be deposited, invested, and reinvested by the state treasurer in accordance with RCW 43.84.080 in the same manner and to the same extent as if the money were in the state treasury.
(2) All income received from investment of the treasurer's trust fund shall be set aside in an account in the treasury trust fund to be known as the investment income account.
(3) The investment income account may be utilized for the payment of purchased banking services on behalf of treasurer's trust funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasurer or affected state agencies. The investment income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments shall occur prior to distribution of earnings set forth in subsection (4) of this section.
(4)(a) Monthly, the state treasurer shall distribute the earnings credited to the investment income account to the state general fund except under (b) and (c) of this subsection.
(b) The following accounts and funds shall receive their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The Washington promise scholarship account, the college savings program account, the Washington advanced college tuition payment program account, the agricultural local fund, the American Indian scholarship endowment fund, the foster care scholarship endowment fund, the foster care endowed scholarship trust fund, the students with dependents grant account, the basic health plan self-insurance reserve account, the contract harvesting revolving account, the Washington state combined fund drive account, the commemorative works account, the Washington international exchange scholarship endowment fund, the toll collection account, the developmental disabilities endowment trust fund, the energy account, the fair fund, the family leave insurance account, the food animal veterinarian conditional scholarship account, the fruit and vegetable inspection account, the future teachers conditional scholarship account, the game farm alternative account, the GET ready for math and science scholarship account, the Washington global health technologies and product development account, the grain inspection revolving fund, the juvenile accountability incentive account, the law enforcement officers' and firefighters' plan 2 expense fund, the local tourism promotion account, the pilotage account, the produce railcar pool account, the regional transportation investment district account, the rural rehabilitation account, the stadium and exhibition center account, the youth athletic facility account, the self-insurance revolving fund, the sulfur dioxide abatement account, the children's trust fund, the Washington horse racing commission Washington bred owners' bonus fund and breeder awards account, the Washington horse racing commission class C purse fund account, the individual development account program account, the Washington horse racing commission operating account (earnings from the Washington horse racing commission operating account must be credited to the Washington horse racing commission class C purse fund account), the life sciences discovery fund, the Washington state heritage center account, the reduced cigarette ignition propensity account, and the reading achievement account. However, the earnings to be distributed shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.
(c) The following accounts and funds shall receive eighty percent of their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The advanced right-of-way revolving fund, the advanced environmental mitigation revolving account, the city and county advance right-of-way revolving fund, the federal narcotics asset forfeitures account, the high occupancy vehicle account, the local rail service assistance account, and the miscellaneous transportation programs account.
(5) In conformance with Article II, section 37 of the state Constitution, no trust accounts or funds shall be allocated earnings without the specific affirmative directive of this section.
NEW SECTION. Sec. 5. Sections 1 through 3 of this act constitute a new chapter in Title 43 RCW."
Correct the title.
and the same are herewith transmitted.
BARBARA BAKER, Chief Clerk
MOTION
Senator Kastama moved that the Senate concur in the House amendment(s) to Second Substitute Senate Bill No. 6675.
Senator Kastama spoke in favor of the motion.
The President declared the question before the Senate to be the motion by Senator Kastama that the Senate concur in the House amendment(s) to Second Substitute Senate Bill No. 6675.
The motion by Senator Kastama carried and the Senate concurred in the House amendment(s) to Second Substitute Senate Bill No. 6675 by voice vote.
The President declared the question before the Senate to be the final passage of Second Substitute Senate Bill No. 6675, as amended by the House.
ROLL CALL
The Secretary called the roll on the final passage of Second Substitute Senate Bill No. 6675, as amended by the House, and the bill passed the Senate by the following vote: Yeas, 44; Nays, 0; Absent, 0; Excused, 5.
Voting yea: Senators Becker, Benton, Berkey, Brown, Carrell, Delvin, Eide, Fairley, Franklin, Fraser, Hargrove, Hatfield, Haugen, Hewitt, Hobbs, Honeyford, Jacobsen, Kastama, Kauffman, Keiser, Kilmer, King, Kline, Kohl-Welles, Marr, McAuliffe, McDermott, Murray, Oemig, Parlette, Pflug, Prentice, Pridemore, Ranker, Regala, Roach, Rockefeller, Schoesler, Sheldon, Shin, Stevens, Swecker, Tom and Zarelli
Excused: Senators Brandland, Gordon, Holmquist, McCaslin and Morton
SECOND SUBSTITUTE SENATE BILL NO. 6675, as amended by the House, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.
MESSAGE FROM THE HOUSE
March 22, 2010
MR. PRESIDENT:
The House passed SUBSTITUTE SENATE BILL NO. 6706 with the following amendment(s): 6706-S AMH ENGR H5761.E
Strike everything after the enacting clause and insert the following:
"NEW SECTION. Sec. 1. A new section is added to chapter 28B.10 RCW to read as follows:
(1) It is the intent of the legislature that state universities engage in the commercialization of research and other economic development and workforce development activities that benefit the intermediate and long-term economic vitality of Washington. State universities are expected to develop and strengthen university-industry relationships through the conduct of research, the support of company formation and job generation, and collaborative training. The state universities, using a collaborative process that may include both in-house resources and independent contractors with necessary technical expertise or innovative processes, must perform one or more of the following functions:
(a) Provide collaborative research and technology transfer opportunities;
(b) Publicize their commercialization processes and include an explanation of how to access commercialization resources at the universities;
(c) Develop mechanisms for pairing researchers, entrepreneurs, and investors. Such mechanisms are to include, but are not limited to, developing guides, web sites, or workshops on funding opportunities, on entrepreneurship and the process of starting a company, and on university-industry relations;
(d) Host events to connect researchers to entrepreneurs, investors, and individuals from the state's technology-based industries; and
(e) Provide opportunities for training undergraduate and graduate students through direct involvement in research and industry interactions.
(2) In carrying out the functions in this section, the universities may work with and through the higher education coordinating board.
NEW SECTION. Sec. 2. A new section is added to chapter 28B.10 RCW to read as follows:
To support the formation of companies created around the technologies developed at state universities, the state universities are authorized to establish and administer bridge-funding programs for start-up companies using funds from the federal government and the private sector."
Correct the title.
and the same are herewith transmitted.
BARBARA BAKER, Chief Clerk
MOTION
Senator Kastama moved that the Senate concur in the House amendment(s) to Substitute Senate Bill No. 6706.
Senator Kastama spoke in favor of the motion.
The President declared the question before the Senate to be the motion by Senator Kastama that the Senate concur in the House amendment(s) to Substitute Senate Bill No. 6706.
The motion by Senator Kastama carried and the Senate concurred in the House amendment(s) to Substitute Senate Bill No. 6706 by voice vote.
The President declared the question before the Senate to be the final passage of Substitute Senate Bill No. 6706, as amended by the House.
ROLL CALL
The Secretary called the roll on the final passage of Substitute Senate Bill No. 6706, as amended by the House, and the bill passed the Senate by the following vote: Yeas, 45; Nays, 0; Absent, 0; Excused, 4.
Voting yea: Senators Becker, Benton, Berkey, Brown, Carrell, Delvin, Eide, Fairley, Franklin, Fraser, Hargrove, Hatfield, Haugen, Hewitt, Hobbs, Holmquist, Honeyford, Jacobsen, Kastama, Kauffman, Keiser, Kilmer, King, Kline, Kohl-Welles, Marr, McAuliffe, McDermott, Murray, Oemig, Parlette, Pflug, Prentice, Pridemore, Ranker, Regala, Roach, Rockefeller, Schoesler, Sheldon, Shin, Stevens, Swecker, Tom and Zarelli
Excused: Senators Brandland, Gordon, McCaslin and Morton
SUBSTITUTE SENATE BILL NO. 6706, as amended by the House, having received the constitutional majority, was declared passed. There being no objection, the title of the bill was ordered to stand as the title of the act.
MESSAGE FROM THE HOUSE
March 25, 2010
MR. PRESIDENT:
The Speaker has signed:
SECOND ENGROSSED SENATE BILL 6221,
SUBSTITUTE SENATE BILL 6712,
ENGROSSED SUBSTITUTE SENATE BILL 6737.
and the same are herewith transmitted.
BARBARA BAKER, Chief Clerk
MOTION
At 12:14 p.m., on motion of Senator Eide, the Senate adjourned until 10:00 a.m. Friday, March 26, 2010.
BRAD OWEN, President of the Senate
THOMAS HOEMANN, Secretary of the Senate
3014-S
Messages................................................................................ 2
Other Action.......................................................................... 6
Other Action.......................................................................... 3
Second Reading...................................................................... 3
Third Reading Final Passage.................................................. 6
6143-S
Messages................................................................................ 7
6221
Speaker Signed..................................................................... 47
6675-S2
Final Passage as amended by House.................................... 46
Messages.............................................................................. 44
Other Action........................................................................ 46
6706-S
Final Passage as amended by House.................................... 47
Messages.............................................................................. 46
Other Action........................................................................ 46
6712-S
Speaker Signed..................................................................... 47
6737-S
Speaker Signed..................................................................... 47
8409-S
Other Action.......................................................................... 2
Third Reading......................................................................... 2
Third Reading Final Passage.................................................. 2
9204 Shaunta Hyde
Confirmed.............................................................................. 1
9256 Ryland P. Davis
Confirmed.............................................................................. 1
PRESIDENT OF THE SENATE
Reply by the President.......................................................... 1
WASHINGTON STATE SENATE
Personal Privilege, Senator Sheldon....................................... 1
Remarks by Senator Sheldon................................................. 1