5967-S

AN ACT Relating to taxation; amending RCW 82.04.050, 82.04.190, 82.04.4282, 82.04.460, 82.04.060, 82.08.020, 82.12.020, 82.04.480, 82.08.090, 82.12.0252, 82.12.0255, 82.12.0259, 82.12.035, 82.12.060, 82.08.100, 82.14.020, 82.60.050, 82.61.010, 82.61.040, 82.61.070, 82.62.040, 82.32.030, 70.95E.020, 82.45.010, 82.45.030, 82.45.032, 82.45.060, 82.45.090, 82.45.100, 82.45.150, 82.45.180, 43.84.092, 83.100.010, 83.100.020, 83.100.030, 83.100.040, 83.100.045, 83.100.050, 83.100.070, 83.100.080, 83.100.090, 83.100.130, 83.100.150, 82.03.190, 48.32A.090, 82.04.470, 82.08.050, and 67.40.090; reenacting and amending RCW 82.12.010; adding new sections to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; adding new sections to chapter 82.32 RCW; adding new sections to chapter 82.04 RCW; adding a new section to chapter 82.45 RCW; adding new sections to chapter 83.100 RCW; adding new sections to chapter 48.14 RCW; creating new sections; repealing RCW 82.04.300, 82.45A.010, 82.45A.020, 82.45A.030, 82.45.120, 83.100.160, 83.100.170, 83.100.180, 83.100.190, 48.32.050, and 82.04.417; repealing 1991 sp.s. c 22 s 1 (uncodified); prescribing penalties; providing effective dates; and declaring an emergency.

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

PART I

RETAIL SALES TAXATION OF BUSINESS SERVICES

Sec. 101. RCW 82.04.050 and 1988 c 253 s 1 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 presents a resale certificate as defined in 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((,)); 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 include every sale of tangible personal property which is used or consumed or to be used or consumed in the performance of any activity classified as a "sale at retail" or "retail sale" even though such property is resold or utilized as provided in (a), (b), (c), (d), or (e) above following such use. The term also means every sale of tangible personal property to persons engaged in any business which is taxable under RCW 82.04.280, subsections (2) and (7) and RCW 82.04.290.

(2) The term "sale at retail" or "retail sale" shall include the sale of or charge made for tangible personal property consumed and/or for labor and services rendered in respect to the following:

(a) The installing, repairing, cleaning, altering, imprinting, or improving of tangible personal property of or for consumers, including charges made for the mere use of facilities in respect thereto, but ((excluding charges made for the use of coin operated laundry facilities when such facilities are situated in an apartment house, hotel, motel, rooming house, trailer camp or tourist camp for the exclusive use of the tenants thereof, and also excluding sales of laundry service to members by nonprofit associations composed exclusively of nonprofit hospitals, and)) excluding services rendered in respect to live animals, birds and insects;

(b) The constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, and shall also include the sale of services or charges made for the clearing of land and the moving of earth excepting the mere leveling of land used in commercial farming or agriculture;

(c) The charge for labor and services rendered in respect to constructing, repairing, or improving 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 sale of or charge made for labor and services rendered in respect to the cleaning, fumigating, razing or moving of existing buildings or structures, but shall not include the charge made for janitorial services; and for purposes of this section the term "janitorial services" shall mean those cleaning and caretaking services ordinarily performed by commercial janitor service businesses including, but not limited to, wall and window washing, floor cleaning and waxing, and the cleaning in place of rugs, drapes and upholstery. The term "janitorial services" does not include painting, papering, repairing, furnace or septic tank cleaning, snow removal or sandblasting;

(e) The sale of or charge made for labor and services rendered in respect to automobile towing and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16 RCW;

(f) The sale of and charge made for the furnishing of lodging and all other services by a hotel, rooming house, tourist court, motel, trailer camp, and the granting of any similar license to use real property, as distinguished from the renting or leasing of real property, and it shall be presumed that the occupancy of real property for a continuous period of one month or more constitutes a rental or lease of real property and not a mere license to use or enjoy the same;

(g) The sale of or charge made for tangible personal property, labor and services to persons taxable under (a), (b), (c), (d), (e), and (f) above when such sales or charges are for property, labor and services which are used or consumed in whole or in part by such persons in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property, labor and services may be resold after such use or consumption. Nothing contained in this paragraph shall be construed to modify the first paragraph of this section and nothing contained in the first paragraph of this section shall be construed to modify this paragraph.

(3) The term "sale at retail" or "retail sale" shall include the sale of or charge made for personal business or professional services ((~~including~~)) designated in this subsection as "retail services." Retail services include amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities, unless purchased or licensed for the purpose of resale in the regular course of business. The following shall be designated as retail services:

(a) ((~~Amusement and recreation businesses including but not limited to golf, pool, billiards, skating, bowling, ski lifts and tows and others;~~

~~(b)~~)) Abstract, title insurance and escrow ((~~businesses~~)) services;

((~~(c)~~)) (b) Credit bureau ((~~businesses~~)) services;

((~~(d) automobile parking and storage garage businesses.~~

~~(4)~~)) (c) Collection agencies or services;

(d) Stenographic, secretarial, and clerical services;

(e) Computer services, including but not limited to computer programming, software modification, software installation, software and/or hardware maintenance, and/or repair and software update services;

(f) Data processing services, including but not limited to word processing, data entry, data retrieval, data search, information compilation, payroll and business accounting, data production, and other computerized data and information storage or manipulation. Data processing services also includes the use of a computer or computer time for data processing whether the processing is performed by the provider of the computer or by the purchaser or other beneficiary of the service;

(g) Information services, including but not limited to electronic data retrieval or research that entails furnishing financial or legal information, data or research, general or specialized news, or current information unless furnished to a newspaper or to a radio or television station licensed by the federal communications commission;

(h) Legal services, arbitration and mediation services, including but not limited to paralegal services, legal research services and court reporting services, but not including charges for indigent criminal defense or legal services for which no charge is made;

(i) Accounting, auditing, bookkeeping, tax preparation, and similar services;

(j) Engineering, including but not limited to industrial, civil, electrical, mechanical, petroleum, marine, nuclear, and design engineering, as well as machine tool designing;

(k) Architectural services, including but not limited to structural or landscape design or architecture;

(l) Business consulting services, including but not limited to administrative management, business management, construction management, motel management, office management, human resource consulting, management engineering consulting, management information systems consulting, manufacturing management consulting, marketing consulting, operations research consulting, personnel management consulting, physical distribution consultants, site location consultants, and lobbying;

(m) Protective services, including but not limited to detective agency services and private investigating services, armored car services, guard or protective services, lie detection or polygraph services, and security system, burglar, or fire alarm monitoring and maintenance services;

(n) Public relations or advertising services, including but not limited to layout, art direction, graphic design, copy writing, mechanical preparation or production supervision, but not including any amounts paid for actual broadcast or print advertising;

(o) The rental of heavy equipment with an operator;

(p) Boat, railroad, and air services such as sightseeing excursions and tours;

(q) Surveying;

(r) Miscellaneous consulting services, including but not limited to geological consulting, entomological consulting, and commercial testing services;

(s) Financial management or consulting services, but not including charges for trading in shares or consulting services performed for a collective investment fund such as: (i) A mutual fund or other regulated investment company as defined in section 851(a) of the Internal Revenue Code of 1986, as amended; (ii) an "investment company" as that term is used in section 3(a) of the Investment Company Act of 1940 as well as an entity that would be an investment company under section 3(a) of the Investment Company Act of 1940 except for the section 3(c)(1) or (11) exemptions, or except that it is a foreign investment company organized under laws of a foreign country; (iii) an "employee benefit plan," which includes any plan, trust, commingled employee benefit trusts, or custodial arrangement that is subject to the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. Sec. 1001 et seq., or that is described in sections 125, 401, 403, 408, 457, and 501(c)(9) and (17) through (23) of the Internal Revenue Code of 1986, as amended, or similar plan maintained by state or local governments, or plans, trusts, or custodial arrangements established to self-insure benefits required by federal, state, or local law; (iv) a fund maintained by a nonprofit organization as defined in section 501(c)(3) of the Internal Revenue Code of 1986, as amended, for operating, quasi-endowment, or endowment purposes; or (v) funds that are established for the benefit of such nonprofit organization such as charitable remainder trusts, charitable lead trusts, charitable annuity trusts, or other similar trusts; and

(t) Residential or commercial landscape maintenance and horticultural services.

(4) The term "retail services" does not include:

(a) The provision of either permanent or temporary employees;

(b) Charges made between affiliated corporations for the sharing of overhead expenses. "Affiliated corporations" means an affiliated group of corporations as defined in section 1504(a) of the Internal Revenue Code of 1986, as amended, whose members are includable under section 1504(b), (c), or (d), and are eligible to file a consolidated tax return for federal corporate income tax purposes, and includes foreign affiliates that would otherwise be disqualified under section 1504(b)(4). "Overhead expenses" means costs for items such as taxes, rents, insurance, and similar items, but does not include the provision of actual services to an affiliate;

(d) Services donated to a public benefit nonprofit organization, as defined in RCW 82.04.366;

(e) Services donated to the state of Washington, its political subdivisions, municipal corporations, or quasi-municipal corporations;

(f) Services provided by a public benefit nonprofit organization, as defined in RCW 82.04.366, to the state of Washington, its political subdivisions, municipal corporations, or quasi-municipal corporations;

(g) Nonenterprise services provided by the state of Washington, its political subdivisions, municipal corporations, or quasi-municipal corporations, to the state of Washington, its political subdivisions, municipal corporations, or quasi-municipal corporations;

(h) Services related to the cleanup of hazardous wastes from sites designated as hazardous waste sites under federal or state law, whether on land or water.

(5) The term "sale at retail" or "retail sale" shall include the sale of or charge made for the following consumer services:

(a) Amusement and recreation services, including but not limited to golf, pool, billiards, skating, bowling, ski lifts and tows, admissions to sporting events and theatrical and cultural productions, carnival and amusement park rides, and others;

(b) Automobile parking and storage garage businesses;

(d) Miscellaneous personal services, including but not limited to beauty and barber services, tanning salons, massage services, turkish baths, escort and dating services, and health clubs or spa services, but not including day-care services or babysitting services.

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

((~~(5)~~)) (7) The term shall also include the providing of telephone service, as defined in RCW 82.04.065, to consumers.

((~~(6)~~)) (8) The term shall not include the sale of or charge made for labor and services rendered in respect to the building, repairing, or improving of any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind. The term shall also not include sales of feed, seed, seedlings, fertilizer, and spray materials to persons who participate in the federal conservation reserve program or its successor administered by the United States department of agriculture, or to persons for the purpose of producing for sale any agricultural product whatsoever, including plantation Christmas trees and milk, eggs, wool, fur, meat, honey, or other substances obtained from animals, birds, or insects but only when such production and subsequent sale are exempt from tax under RCW 82.04.330, nor shall it include sales of chemical sprays or washes to persons for the purpose of post-harvest treatment of fruit for the prevention of scald, fungus, mold, or decay.

((~~(7)~~)) (9) The term shall not include the sale of or charge made for labor and services rendered in respect to the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing, or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation. Nor shall the term include the sale of services or charges made for the clearing of land and the moving of earth of or for the United States, any instrumentality thereof, or a county or city housing authority.

Sec. 102. RCW 82.04.190 and 1986 c 231 s 2 are each amended to read as follows:

"Consumer" means the following:

(1) Any person who purchases, acquires, owns, holds, or uses any article of tangible personal property irrespective of the nature of the person's business and including, among others, without limiting the scope hereof, persons who install, repair, clean, alter, improve, construct, or decorate real or personal property of or for consumers other than for the purpose (a) of resale as tangible personal property in the regular course of business or (b) of incorporating such property as an ingredient or component of real or personal property when installing, repairing, cleaning, altering, imprinting, improving, constructing, or decorating such real or personal property of or for consumers or (c) of consuming such property in producing for sale a new article of tangible personal property or a new substance, of which such property becomes an ingredient or component or as a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale or (d) purchases for the purpose of consuming the property purchased in producing ferrosilicon which is subsequently used in producing magnesium for sale, if the primary purpose of such property is to create a chemical reaction directly through contact with an ingredient of ferrosilicon;

(2) Any person who purchases, acquires, uses, or receives the benefit of any service included within the definition of retail sale in RCW 82.04.050, unless the person can demonstrate with regularly kept books and records, or by other methods approved by rules of the department, that the service was purchased or licensed for resale in the regular course of business without intervening use by the person;

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

((~~(3)~~)) (4) Any person engaged in the business of contracting for the building, repairing or improving of any street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state of Washington or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind as defined in RCW 82.04.280, in respect to tangible personal property or retail services, when such person incorporates such property as an ingredient or component of such publicly owned street, place, road, highway, easement, right of way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle by installing, placing or spreading the property in or upon the right of way of such street, place, road, highway, easement, bridge, tunnel, or trestle or in or upon the site of such mass public transportation terminal or parking facility;

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

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

((~~(6)~~)) (7) Any person engaged in the business of constructing, repairing, decorating, or improving new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation; also, any person engaged in the business of clearing land and moving earth of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW. Any such person shall be a consumer within the meaning of this subsection in respect to the receipt of the benefit of any retail service or to tangible personal property incorporated into, installed in, or attached to such building or other structure by such person.

Sec. 103. RCW 82.04.4282 and 1989 c 392 s 1 are each amended to read as follows:

In computing tax there may be deducted from the measure of tax amounts derived from (1) bona fide initiation fees, (2) dues, (3) contributions, (4) donations, (5) tuition fees, (6) charges made by a nonprofit trade or professional organization for attending or occupying space at a trade show, convention, or educational seminar sponsored by the nonprofit trade or professional organization, which trade show, convention, or educational seminar is not open to the general public, (7) charges made for operation of privately operated kindergartens, and (8) endowment funds. This paragraph shall not be construed to exempt any person, association, or society from tax liability upon selling tangible personal property or services defined as retail sale or upon providing facilities or services for which a special charge is made to members or others. If dues are in exchange for any significant amount of goods or services rendered by the recipient thereof to members without any additional charge to the member, or if the dues are graduated upon the amount of goods or services rendered, the value of such goods or services shall not be considered as a deduction hereunder.

Sec. 104. RCW 82.04.460 and 1985 c 7 s 154 are each amended to read as follows:

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

((~~(2)~~)) (b) Notwithstanding the provision of subsection (1)(a) of this section, persons doing business both within and without the state who receive gross income from service charges, as defined in RCW 63.14.010 (relating to amounts charged for granting the right or privilege to make deferred or installment payments) or who receive gross income from engaging in business as financial institutions within the scope of chapter 82.14A RCW (relating to city taxes on financial institutions) shall apportion or allocate gross income taxable under RCW 82.04.290 to this state pursuant to rules promulgated by the department consistent with uniform rules for apportionment or allocation developed by the states.

((~~(3)~~)) (c) The department shall by rule provide a method or methods of apportioning or allocating gross income derived from sales of telephone services taxed under this chapter, 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.

(2) For purposes of determining the business and occupation tax liability of the seller of a retail service, the sale of a service is made in this state when the benefit of the retail service is received in this state. For purposes of determining where the benefit is received, the following presumptions shall apply:

(a) If the service directly relates to real property, the benefit of the service shall be presumed to be received where the real property is located; or

(b) If the service directly relates to tangible personal property, the benefit of the service shall be presumed to be received where the property is listed on the tax rolls or has otherwise acquired a situs; or

(c) If the service involves enhancing a buyer's ability to maintain or establish a local market, the benefit of the service shall be presumed to be received where the buyer's local market exists; or

(d) If the provisions of (a), (b), or (c) of this subsection are not applicable, the benefit of the service shall be presumed to be received in the state where the buyer resides or where the buyer is exclusively doing business; or

(e) If (a), (b), (c), or (d) of this subsection are not applicable, and the seller of the service is doing business both inside and outside of this state, the service shall be presumed to be received in this state to the extent that the seller is doing business in this state. For purposes of determining the extent of the seller's business in this state, the following apportionment formula shall be used:

(i) The gross income of the seller shall be apportioned by an apportionment fraction composed of a sales factor representing fifty percent of the fraction, a property factor representing twenty-five percent of the fraction, and a payroll factor representing twenty-five percent of the fraction. If the denominator for any one of the factors is zero or is insignificant, the weighted percentage for the other denominators shall be increased proportionately; if the denominator for any two of the factors are zero or are insignificant, the weighted percentage for the other denominator shall be one hundred percent;

(ii) The property factor is a fraction the numerator of which is the average value of the seller's real and tangible personal property owned or rented and used in this state during the taxable year or period and the denominator of which is the average value of such property owned or rented and used everywhere;

(A) Real and tangible personal property owned by the seller shall be valued at original cost. Real and tangible personal property rented by the taxpayer shall be valued at eight times the net annual rental rate paid by the taxpayer less any annual rental rate received from subrentals;

(B) The average value of real and tangible personal property shall be determined by averaging the value at the beginning and the end of the taxable year or period, unless the department determines that an averaging of monthly values during the taxable year or period is reasonably required to properly reflect the average value of the taxpayer's real and tangible personal property;

(iii) The payroll factor is a fraction the numerator of which is the total amount paid in this state during the taxable year or period by the taxpayer for compensation and the denominator of which is the total compensation paid everywhere during the taxable year or period;

(A) As used in this subsection, the term "compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services;

(B) Compensation is paid in this state if:

(I) The employee's service is performed entirely within this state; or

(II) The employee's service is performed both within and without the state, but the service performed without the state is incidental to the employee's service within the state; or

(III) Some of the employee's service is performed in the state and the base of operations or the place from which the service is directed or controlled is within this state, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed and the employee's residence is in any state;

(iv) The sales factor is a fraction the numerator of which is the total sales of the taxpayer in this state during the taxable year or period and the denominator of which is the total sales of the taxpayer everywhere during the taxable year or period.

Sec. 105. RCW 82.04.060 and 1983 2nd ex.s. c 3 s 26 are each amended to read as follows:

"Sale at wholesale" or "wholesale sale" means any sale of tangible personal property((~~, or any sale of telephone service as defined in RCW 82.04.065, which~~)) that is not a sale at retail and means any sale of or charge made for labor and services, including services defined as retail sales, rendered for persons who are not consumers, ((~~in respect to real or personal property,~~)) if such sale or charge is expressly defined as a retail sale by RCW 82.04.050 when rendered to or for consumers((~~: PROVIDED, That~~)). The term ((~~"real or personal property" as used in this section~~)) "sale at wholesale" or "wholesale sale" shall not include any sale of or charge made for services in respect to any natural products named in RCW 82.04.100.

Sec. 106. RCW 82.08.020 and 1992 c 194 s 9 are each amended to read as follows:

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

(2) There is levied and there shall be collected an additional tax on each retail car rental, regardless of whether the vehicle is licensed in this state, equal to five and nine-tenths percent of the selling price. Ninety-one percent of the revenue collected under this subsection shall be deposited and distributed in the same manner as motor vehicle excise tax revenue collected under RCW 82.44.020(1). Nine percent of the revenue collected under this subsection shall be deposited in the transportation fund and distributed in the same manner as motor vehicle excise tax revenue collected under RCW 82.44.020(2).

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

(4) The rates provided in this section apply to taxes imposed under chapter 82.12 RCW as provided in RCW 82.12.020.

NEW SECTION. Sec. 107. A new section is added to chapter 82.08 RCW to read as follows:

(1) A seller of a retail service shall collect the retail sales tax on the sale of a retail service if the sale is made in this state. The sale is made in this state for purposes of this chapter:

(a) If the service directly relates to real property, the benefit of the service shall be presumed to be received where the real property is located; or

(c) If the service involves enhancing a buyer's ability to maintain or establish a local market, the benefit of the service shall be presumed to be received where the buyer's local market exists; or

(d) If the provisions of (a), (b), or (c) of this subsection are not applicable, the benefit of the service shall be presumed to be received in the state where the buyer resides or is exclusively doing business.

(2) When none of the provisions of subsection (1) of this section apply, and the buyer is doing business both inside and outside of this state, the buyer may elect to pay deferred sales tax on the portion of the retail service that will be taxable in Washington under the formula provided by section 110 of this act. If the buyer makes this election, it must provide the seller with a certificate stating that it has made this election. The department shall adopt rules providing the form and information required to be on the certificates.

(3) Notwithstanding the provisions of subsection (1) or (2) of this section, if the buyer can demonstrate to the satisfaction of the department that the benefit of the service was received outside of this state, the service shall be deemed to have been received outside of this state.

(4) If a transaction involves both the sale of a retail service taxable under this chapter and the provision of a service not taxable under this chapter, the charges shall be separately identified and stated with respect to the taxable and nontaxable portions of the transaction. Failure to separately state the charges shall create a presumption that the entire transaction is subject to the retail sales tax.

Sec. 108. RCW 82.12.010 and 1985 c 222 s 1 and 1985 c 132 s 1 are each reenacted and amended to read as follows:

For the purposes of this chapter:

(1) "Value of the article used" shall mean the consideration, whether money, credit, rights, or other property except trade-in property of like kind, expressed in terms of money, paid or given or contracted to be paid or given by the purchaser to the seller for the article of tangible personal property, the use of which is taxable under this chapter. The term includes, in addition to the consideration paid or given or contracted to be paid or given, the amount of any tariff or duty paid with respect to the importation of the article used. In case the article used is acquired by lease or by gift or is extracted, produced, or manufactured by the person using the same or is sold under conditions wherein the purchase price does not represent the true value thereof, the value of the article used shall be determined as nearly as possible according to the retail selling price at place of use of similar products of like quality and character under such rules and regulations as the department of revenue may prescribe.

In case the articles used are acquired by bailment, the value of the use of the articles so used shall be in an amount representing a reasonable rental for the use of the articles so bailed, determined as nearly as possible according to the value of such use at the places of use of similar products of like quality and character under such rules and regulations as the department of revenue may prescribe: PROVIDED, That in case any such articles of tangible personal property are used in respect to the construction, repairing, decorating, or improving of, and which become or are to become an ingredient or component of, new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing or attaching of any such articles therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation, then the value of the use of such articles so used shall be determined according to the retail selling price of such articles, or in the absence of such a selling price, as nearly as possible according to the retail selling price at place of use of similar products of like quality and character or, in the absence of either of these selling price measures, such value may be determined upon a cost basis, in any event under such rules and regulations as the department of revenue may prescribe.

In the case of articles owned by a user engaged in business outside the state which are brought into the state for no more than ninety days in any period of three hundred sixty-five consecutive days and which are temporarily used for business purposes by the person in this state, the value of the article used shall be an amount representing a reasonable rental for the use of the articles, unless the person has paid tax under this chapter or chapter 82.08 RCW upon the full value of the article used, as defined in the first paragraph of this subsection.

In the case of articles manufactured or produced by the user and used in the manufacture or production of products sold or to be sold to the department of defense of the United States, the value of the articles used shall be determined according to the value of the ingredients of such articles.

In the case of an article manufactured or produced for purposes of serving as a prototype for the development of a new or improved product, the value of the article used shall be determined by: (a) The retail selling price of such new or improved product when first offered for sale; or (b) the value of materials incorporated into the prototype in cases in which the new or improved product is not offered for sale.

(2) "Value of the retail service used" shall mean the consideration, whether money, credit, rights, or other property, expressed in terms of money, paid or given or contracted to be paid or given by the purchaser to the seller for the retail service, the use of which is taxable under this chapter. If the retail service is received by gift or under conditions wherein the purchase price does not represent the true value of the retail service, the value of the retail services used shall be determined as nearly as possible according to the retail selling price at the place of use of similar services under rules prescribed by the department of revenue;

(3) "Use," "used," "using," or "put to use" shall have their ordinary meaning, and shall 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, or any other act preparatory to subsequent actual use or consumption within this state; and

(b) With respect to a service defined as a retail sale, the receipt in this state by the taxpayer of any part of the benefit afforded by the retail service as defined in RCW 82.04.050;

((~~(3)~~)) (4) "Taxpayer" and "purchaser" include all persons included within the meaning of the word "buyer" and the word "consumer" as defined in chapters 82.04 and 82.08 RCW;

((~~(4)~~)) (5) "Retailer" means every seller as defined in RCW 82.08.010 and every person engaged in the business of selling tangible personal property at retail and every person required to collect from purchasers the tax imposed under this chapter;

((~~(5)~~)) (6) The meaning ascribed to words and phrases in chapters 82.04 and 82.08 RCW, insofar as applicable, shall have full force and effect with respect to taxes imposed under the provisions of this chapter. "Consumer," in addition to the meaning ascribed to it in chapters 82.04 and 82.08 RCW insofar as applicable, shall also mean any person who distributes or displays, or causes to be distributed or displayed, any article of tangible personal property, except newspapers, the primary purpose of which is to promote the sale of products or services.

Sec. 109. RCW 82.12.020 and 1983 c 7 s 7 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 receiving the benefit of any service defined as a retail sale or of using within this state as a consumer any 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, subsections (2) or (7). ((This tax will not apply with respect to the use of any article of tangible personal property purchased, extracted, produced or manufactured outside this state until the transportation of such article has finally ended or until such article has become commingled with the general mass of property in this state.))

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

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

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

NEW SECTION. Sec. 110. A new section is added to chapter 82.12 RCW to read as follows:

The receipt of any part of the benefit of a retail service in this state occurs:

(1) If the retail service directly relates to real property, the benefit of the retail service shall be presumed to be received in this state when the real property is located in this state; or

(2) If the retail service directly relates to tangible personal property, the benefit of the retail service shall be presumed to be received in this state when the tangible personal property is listed on the property tax rolls or has otherwise acquired a situs in this state; or

(3) If the retail service directly involves sales to a buyer's local market, the benefit of the retail service shall be presumed to be received in this state when the buyer's local market is in this state; or

(4) If the provisions of subsection (1), (2), or (3) of this section are not applicable, the benefit of the retail service shall be presumed to be received in the state where the buyer resides or is exclusively doing business; or

(5) If subsection (1), (2), (3), or (4) of this section are not applicable, and the buyer of the retail service is doing business both inside and outside of this state, the retail service shall be presumed to be received in this state to the extent that the buyer is doing business in this state. The amount of the retail service that is taxable in this state shall be determined by multiplying the price of the retail service by a percentage that represents the extent of the buyer's business in this state. For purposes of determining the extent of the buyer's business in this state, the following apportionment formula shall be used:

(a) The value of the retail service shall be apportioned by an apportionment fraction composed of a sales factor representing fifty percent of the fraction, a property factor representing twenty-five percent of the fraction, and a payroll factor representing twenty-five percent of the fraction. If the denominator for any one of the factors is zero or are insignificant, the weighted percentage for the other denominators shall be increased proportionately; if the denominator for any two of the factors are zero or are insignificant, the weighted percentage for the other denominator shall be one hundred percent;

(b) The property factor is a fraction the numerator of which is the average value of the buyer's real and tangible personal property owned or rented and used in this state during the taxable year or period and the denominator of which is the average value of such property owned or rented and used everywhere;

(i) Real and tangible personal property owned by the seller shall be valued at original cost. Real and tangible personal property rented by the taxpayer shall be valued at eight times the net annual rental rate paid by the taxpayer less any annual rental rate received from subrentals;

(ii) The average value of real and tangible personal property shall be determined by averaging the value at the beginning and the end of the taxable year or period, unless the department determines that an averaging of monthly values during the taxable year or period is reasonably required to properly reflect the average value of the taxpayer's real and tangible personal property;

(c) The payroll factor is a fraction the numerator of which is the total amount paid in this state during the taxable year or period by the taxpayer for compensation and the denominator of which is the total compensation paid everywhere during the taxable year or period;

(i) As used in this subsection, the term "compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services;

(ii) Compensation is paid in this state if:

(A) The employee's service is performed entirely within this state; or

(B) The employee's service is performed both within and without the state, but the service performed without the state is incidental to the employee's service within the state; or

(C) Some of the employee's service is performed in the state and the base of operations or the place from which the service is directed or controlled is within this state, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed and the employee's residence is in any state;

(d) The sales factor is a fraction the numerator of which is the total sales of the taxpayer in this state during the taxable year or period and the denominator of which is the total sales of the taxpayer everywhere during the taxable year; or

(6) Notwithstanding the provisions of subsection (1), (2), (3), (4), or (5) of this section, if the buyer can demonstrate to the satisfaction of the department that the benefit of the service was received outside of this state, the service shall be deemed to have been received outside of this state.

NEW SECTION. Sec. 111. A new section is added to chapter 82.32 RCW to read as follows:

If a retail service is initially taxable as of the effective date of this section, and the retail service is received prior to that date, it is not subject to tax under chapter 82.08, 82.12, or 82.14 RCW, notwithstanding that compensation for the service is paid or payable on or after that date. If the retail service is received on or after the effective date of this section, the service shall be taxed unless it was paid in full before April 1, 1993. If the retail service is received over a period of time beginning prior to the effective date of this section and ending after that date, and full payment for the service has not been made before April 1, 1993, the service shall be taxed only upon that portion of the service received on or after the effective date of this section. If the retail service is performed under a contract signed prior to the effective date of this section, and such contract does not allow the seller to add the retail sales taxes imposed under chapter 82.08, 82.12, or 82.14 RCW to the contract price, the retail sales taxes imposed on retail services may not be imposed on that contract.

Sec. 112. RCW 82.04.480 and 1975 1st ex.s. c 278 s 44 are each amended to read as follows:

Every consignee, bailee, factor, or auctioneer having either actual or constructive possession of tangible personal property, or having possession of the documents of title thereto, with power to sell such tangible personal property in his or its own name and actually so selling, and every agent with power to sell services defined as retail sales in the agent's own name and actually so selling, shall be deemed the seller of such tangible personal property or services within the meaning of this chapter; and further, the consignor, bailor, principal, or owner shall be deemed a seller of such property or services to the consignee, bailee, factor, ((or)) auctioneer, or agent.

The burden shall be upon the taxpayer in every case to establish the fact that he or she is not engaged in the business of selling tangible personal property or services but is acting merely as broker or agent in promoting sales for a principal. Such claim will be allowed only when the taxpayer's accounting records are kept in such manner as the department of revenue shall by general regulation provide.

Sec. 113. RCW 82.08.090 and 1975 1st ex.s. c 278 s 49 are each amended to read as follows:

In the case of installment sales and leases of personal property or services defined as retail sales, the department of revenue, by regulation, may provide for the collection of taxes upon the installments of the purchase price, or amount of rental, as of the time the same fall due.

Sec. 114. RCW 82.12.0252 and 1980 c 37 s 52 are each amended to read as follows:

The provisions of this chapter shall not apply in respect to the use of any article of tangible personal property or service defined as a retail sale purchased at retail or acquired by lease, gift or bailment if the sale thereof to, or the use thereof by, the present user or ((~~his~~)) the user's bailor or donor has already been subjected to the tax under chapter 82.08 or 82.12 RCW and such tax has been paid by the present user or by his bailor or donor; or in respect to the use of property acquired by bailment and such tax has once been paid based on reasonable rental as determined by RCW 82.12.060 measured by the value of the article or service at time of first use multiplied by the tax rate imposed by chapter 82.08 or 82.12 RCW as of the time of first use; or in respect to the use of any article of tangible personal property acquired by bailment, if the property was acquired by a previous bailee from the same bailor for use in the same general activity and such original bailment was prior to June 9, 1961.

Sec. 115. RCW 82.12.0255 and 1980 c 37 s 55 are each amended to read as follows:

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

Sec. 116. RCW 82.12.0259 and 1980 c 37 s 59 are each amended to read as follows:

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

Sec. 117. RCW 82.12.035 and 1987 c 27 s 2 are each amended to read as follows:

A credit shall be allowed against the taxes imposed by this chapter upon the use of tangible personal property or services defined as retail sales in the state of Washington in the amount that the present user thereof or his or her bailor or donor has paid a retail sales or use tax with respect to such property or service to any other state of the United States, any political subdivision thereof, the District of Columbia, and any foreign country or political subdivision thereof, prior to the use of such property or service in Washington.

Sec. 118. RCW 82.12.060 and 1975 1st ex.s. c 278 s 54 are each amended to read as follows:

(1) In the case of installment sales and leases of personal property or services defined as retail sales, the department, by regulation, may provide for the collection of taxes upon the installments of the purchase price, or amount of rental, as of the time the same fall due.

(2) In the case of property acquired by bailment, the department, by regulation, may provide for payment of the tax due in installments based on the reasonable rental for the property as determined under RCW 82.12.010(1).

Sec. 119. RCW 82.08.100 and 1982 1st ex.s. c 35 s 37 are each amended to read as follows:

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

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

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

Sec. 120. RCW 82.14.020 and 1983 2nd ex.s. c 3 s 31 are each amended to read as follows:

For purposes of this chapter:

(1) A retail sale consisting solely of the sale of tangible personal property shall be deemed to have occurred at the retail outlet at or from which delivery is made to the consumer;

(2) A retail sale consisting essentially of the performance of personal business or professional services shall be deemed to have occurred at the place at which such services were primarily performed. A retail sale of a service defined as a retail sale shall be considered to have occurred at the place where the benefit is received;

(3) A retail sale consisting of the rental of tangible personal property shall be deemed to have occurred (a) in the case of a rental involving periodic rental payments, at the primary place of use by the lessee during the period covered by each payment, or (b) in all other cases, at the place of first use by the lessee;

(4) A retail sale within the scope of the second paragraph of RCW 82.04.050, and a retail sale of taxable personal property to be installed by the seller shall be deemed to have occurred at the place where the labor and services involved were primarily performed;

(5) A retail sale consisting of the providing to a consumer of telephone service, as defined in RCW 82.04.065, other than a sale of tangible personal property under subsection (1) of this section or a rental of tangible personal property under subsection (3) of this section, shall be deemed to have occurred at the situs of the telephone or other instrument through which the telephone service is rendered;

(6) "City" means a city or town;

(7) The meaning ascribed to words and phrases in chapters 82.04, 82.08 and 82.12 RCW, as now or hereafter amended, insofar as applicable, shall have full force and effect with respect to taxes imposed under authority of this chapter;

(8) "Taxable event" shall mean any retail sale, or any use of an article of tangible personal property, upon which a state tax is imposed pursuant to chapter 82.08 or 82.12 RCW, as they now exist or may hereafter be amended: PROVIDED, HOWEVER, That the term shall not include a retail sale taxable pursuant to RCW 82.08.150, as now or hereafter amended;

(9) "Treasurer or other legal depository" shall mean the treasurer or legal depository of a county or city.

(End of part)

PART II

SALES TAX DEFERRAL PROGRAMS

Sec. 201. RCW 82.60.050 and 1988 c 41 s 5 are each amended to read as follows:

RCW 82.60.030 and 82.60.040 shall expire July 1, ((~~1994~~)) 1998.

Sec. 202. RCW 82.61.010 and 1988 c 41 s 1 are each amended to read as follows:

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

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

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

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

(4) "Eligible investment project" means:

(a) Construction of new buildings and the acquisition of new related machinery and equipment when the buildings, machinery, and equipment are to be used for either manufacturing or research and development activities, which construction is commenced prior to December 31, ((~~1994~~)) 1998; or

(b) Acquisition prior to December 31, ((~~1994~~)) 1998, of new machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or

(c) Acquisition of all new or used machinery, equipment, or other personal property for use in the production or casting of aluminum at an aluminum smelter or at facilities related to an aluminum smelter, if the plant was in operation prior to 1975 and has ceased operations or is in imminent danger of ceasing operations for economic reasons, as determined by the department, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represented employees of the plant pursuant to a collective bargaining agreement that was in effect either immediately prior to the time the plant ceased operations or during the period when the plant was in imminent danger of ceasing operations, on the proposed operation of the plant and on the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter; or

(d) Modernization projects involving construction, acquisition, or upgrading of equipment or machinery, including services and labor, which are commenced after May 19, 1987, and are intended to increase the operating efficiency of existing plants which are either aluminum smelters or aluminum rolling mills or of facilities related to such plants, if the plant was in operation prior to 1975, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represents employees of the plant on the proposed operation of the plant and the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter.

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

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

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

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

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

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

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

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

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

Sec. 203. RCW 82.61.040 and 1988 c 41 s 2 are each amended to read as follows:

RCW 82.61.020 and 82.61.030 shall expire July 1, ((~~1994~~)) 1998.

Sec. 204. RCW 82.61.070 and 1988 c 41 s 3 are each amended to read as follows:

The department and the department of trade and economic development shall jointly report to the legislature about the effects of this chapter on new manufacturing and research and development activities in this state. The report shall contain information concerning the number of deferral certificates granted, the amount of sales tax deferred, the number of jobs created and other information useful in measuring such effects. Reports shall be submitted by January 1, 1986, and by January 1 of each year through ((~~1995~~)) 1999.

Sec. 205. RCW 82.62.040 and 1988 c 41 s 4 are each amended to read as follows:

RCW 82.62.020 and 82.62.030 shall expire July 1, ((~~1994~~)) 1998.

(End of part)

PART III

BUSINESS AND OCCUPATION TAX DEDUCTION BASED ON

THRESHOLD AMOUNTS

NEW SECTION. Sec. 301. A new section is added to chapter 82.04 RCW to read as follows:

(1) As used in this section:

(a) "Combined measure of tax" means the total of the value of products, gross proceeds of sales, and gross income of the business for all activities upon which business and occupation taxes are imposed under this chapter.

(b) "New taxpayer" means a person who did not engage in taxable business activities during the calendar year preceding the reporting period, but does not include a person who has succeeded by merger, consolidation, incorporation, or any other form or change of identity to the business of a person engaged in business activities during the calendar year preceding the reporting period.

(i) Twelve thousand dollars for a new taxpayer.

(ii) Twelve thousand dollars for taxpayers for whom at least eighty percent of the combined measure of tax for the calendar year preceding the reporting period is attributable to the business of making sales at retail.

(iii) Four thousand dollars for taxpayers for whom at least eighty percent of the combined measure of tax for the calendar year preceding the reporting period is attributable to the business of rendering any type of service that does not constitute a sale at retail.

(iv) Seven thousand dollars for all other taxpayers.

(2) In computing the tax imposed under this chapter, there may be deducted from the combined measure of tax an amount equal to the product of the threshold amount multiplied by the number of months in the reporting period, as determined under RCW 82.32.045, reduced by the amount computed under subsection (3) of this section.

(3) For each taxpayer the amount under subsection (2) of this section shall be reduced, but not below zero, by the amount by which the combined measure of tax for a reporting period exceeds the product of the threshold amount multiplied by the number of months in the reporting period.

(4) If a taxpayer engages in more than one business activity only a single deduction using a single threshold amount applied against the combined measures of tax is allowed under this section. The taxpayer may specify how the deduction is to be divided among the measures of tax.

Sec. 302. RCW 82.32.030 and 1992 c 206 s 8 are each amended to read as follows:

(1) Except as provided in subsection (2) of this section, if any person engages in any business or performs any act upon which a tax is imposed by the preceding chapters, he or she shall, under such rules as the department of revenue shall prescribe, apply for and obtain from the department a registration certificate ((~~upon payment of fifteen dollars~~)). Such registration certificate shall be personal and nontransferable and shall be valid as long as the taxpayer continues in business and pays the tax accrued to the state. In case business is transacted at two or more separate places by one taxpayer, a separate registration certificate for each place at which business is transacted with the public shall be required((~~, but, for such additional certificates no additional payment shall be required~~)). Each certificate shall be numbered and shall show the name, residence, and place and character of business of the taxpayer and such other information as the department of revenue deems necessary and shall be posted in a conspicuous place at the place of business for which it is issued. Where a place of business of the taxpayer is changed, the taxpayer must return to the department the existing certificate, and a new certificate will be issued for the new place of business ((~~free of charge~~)). No person required to be registered under this section shall engage in any business taxable hereunder without first being so registered. The department, by rule, may provide for the issuance of certificates of registration((~~, without requiring payment,~~)) to temporary places of business ((~~or to persons who are exempt from tax under RCW 82.04.300~~)).

(2) Registration under this section is not required if the following conditions are met:

(a) A person's value of products, gross proceeds of sales, or gross income of the business ((~~is below the tax reporting threshold provided in RCW 82.04.300~~)), from all business activities, is less than one thousand dollars per month;

(b) The person is not required to collect or pay to the department of revenue any other tax which the department is authorized to collect; and

(c) The person is not otherwise required to obtain a license subject to the master application procedure provided in chapter 19.02 RCW.

Sec. 303. RCW 70.95E.020 and 1990 c 114 s 12 are each amended to read as follows:

A fee is imposed for the privilege of generating or potentially generating hazardous waste in the state. The annual amount of the fee shall be thirty-five dollars upon every known generator or potential generator doing business in Washington in the current calendar year or any part thereof. This fee shall be collected by the department of revenue. A potential generator shall be exempt from the fee imposed under this section if the ((~~potential generator is entitled to the exemption in RCW 82.04.300~~)) value of products, gross proceeds of sales, or gross income of the business, from all business activities of the potential generator, is less than twelve thousand dollars in the current calendar year. The department shall, subject to appropriation, use the funds collected from the fees assessed in this subsection to support the activities of the office of waste reduction as specified in RCW 70.95C.030. The fee imposed pursuant to this section shall be first due on July 31, 1990, for any generator or potential generator operating in Washington from March 21, 1990, to December 31, 1990, or any part thereof.

NEW SECTION. Sec. 304. RCW 82.04.300 and 1992 c 206 s 7, 1983 c 3 s 213, 1979 ex.s. c 196 s 4, 1975 1st ex.s. c 278 s 41, 1961 c 293 s 3, & 1961 c 15 s 82.04.300 are each repealed.

(End of part)

PART IV

REAL ESTATE EXCISE TAX

NEW SECTION. Sec. 401. (1) The legislature finds that transfers of ownership of entities may be essentially equivalent to the sale of real property held by the entity. The legislature further finds that all transfers of possession or use of real property should be subject to the same excise tax burdens.

(2) The legislature intends to apply the real estate excise tax of chapter 82.45 RCW to transfers of entity ownership when the transfer of entity ownership is comparable to the sale of real property. This act intends to equate the excise tax burdens on all sales of real property and transfers of entity ownership essentially equivalent to a sale of real property under chapter 82.45 RCW.

Sec. 402. RCW 82.45.010 and 1981 c 93 s 1 are each amended to read as follows:

(1) As used in this chapter, the term "sale" shall have its ordinary meaning and shall include 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 ((~~by his~~)) at the purchaser's direction, ((~~which~~)) 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) 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 purposes of this subsection, all acquisitions of persons acting in concert shall be aggregated for purposes of determining whether a transfer or acquisition of a controlling interest has taken place. The department of revenue shall adopt standards by rule to determine when persons are acting in concert. In adopting a rule for this purpose, the department shall consider the following:

(a) Persons shall 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) When persons are not commonly owned or controlled, they shall 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 considered separate acquisitions.

(3) The term "sale" shall not include:

(a) A transfer by gift((,)) to a family member or to a public benefit nonprofit organization which is exempt from property tax by chapter 84.36 RCW. For purposes of this section: "Family member" means the transferor, the transferor's spouse, grandparents, parents, children, grandchildren, or great-grandchildren; and a "public benefit nonprofit organization" means an organization defined in RCW 82.04.366.

(b) A transfer by devise((,)) or inheritance((,)).

(d) 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 ((or the assumption by a grantee of the balance owing on an obligation which is secured by a mortgage or deed in lieu of forfeiture of the vendee's interest in a contract of sale where no consideration passes otherwise or)).

(e) The partition of property by tenants in common by agreement or as the result of a court decree((~~, any transfer, conveyance, or~~)).

(f) The assignment of property or interest in property from one spouse to the other in accordance with the terms of a decree of divorce or in fulfillment of a property settlement agreement ((~~incident thereto,~~)).

(g) 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((,)).

(h) Transfers by appropriation or decree in condemnation proceedings brought by the United States, the state or any political subdivision thereof, or a municipal corporation((,)).

(i) A mortgage or other transfer of an interest in real property merely to secure a debt, or the assignment thereof((,)).

(j) Any transfer or conveyance made pursuant to an order of sale by the court in any mortgage or lien foreclosure proceeding or upon execution of a judgment, or deed in lieu of foreclosure to satisfy a mortgage((,)).

(k) 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((~~, nor~~)).

(l) 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((~~, nor~~)).

(m) The sale of any grave or lot in an established cemetery((~~, nor~~)).

(n) A sale by ((~~or to~~)) the United States, this state or any political subdivision thereof, or a municipal corporation of this state.

((~~The term sale shall further not include~~)) (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 children: PROVIDED, That if thereafter such transferee corporation or partnership voluntarily transfers such real property, or such transferor, spouse, or children voluntarily transfer stock in the transferee corporation or interest in the transferee partnership capital, as the case may be, to other than (1) the transferor and/or the transferor's spouse or children, (2) a trust having the transferor and/or the transferor's spouse or children as the only beneficiaries at the time of the transfer to the trust, or (3) a corporation or partnership wholly owned by the original transferor and/or the transferor's spouse or children, within ((~~five~~)) 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.

(4) The department shall adopt rules to implement this section and the department shall be guided in the adoption of such rules defining when a mere change in identity or form of ownership without a change in beneficial ownership has occurred by the nonrecognition of gain principles for entity formation, liquidation or dissolution, and reorganization provided in the Internal Revenue Code of 1986, as amended or renumbered.

Sec. 403. RCW 82.45.030 and 1969 ex.s. c 223 s 28A.45.030 are each amended to read as follows:

(1) As used in this chapter, the term "selling price" means the ((~~consideration, including~~)) true and fair value of the property conveyed. If property has been conveyed in an arm's length transaction between unrelated persons for a valuable consideration, a rebuttable presumption exists that the selling price is equal to the total consideration paid or contracted to be paid to the transferor, or to another for the transferor's benefit.

(2) If the sale is a transfer of a controlling interest in an entity with an interest in real property located in this state, the selling price shall be determined as follows:

(a) If the controlling interest is acquired in an arm's-length transaction between unrelated persons for a valuable consideration, the selling price equals the total consideration paid or contracted to be paid to the transferor, or to another for the transferor's benefit, multiplied by a fraction. The numerator of the fraction is the fair market value of the real property owned by the entity and located in Washington. The denominator of the fraction is the fair market value of all of the assets of the entity, exclusive of goodwill.

(b) If the controlling interest is acquired in a transaction other than as described in (a) of this subsection, the selling price equals the true and fair value of the real property owned by the entity and located in this state. If the true and fair value of the real property located in this state cannot reasonably be determined, the selling price shall be determined according to subsection (4) of this section.

(3) As used in this section, "total consideration paid or contracted to be paid" includes money or anything of value, paid or delivered or contracted to be paid or delivered in return for the ((~~transfer of the real property or estate or interest in real property~~)) sale, and shall include the amount of any lien, mortgage, contract indebtedness, or other incumbrance, either given to secure the purchase price, or any part thereof, or remaining unpaid on such property at the time of sale.

((~~The term~~)) Total consideration shall not include the amount of any outstanding lien or incumbrance in favor of the United States, the state, or a municipal corporation for ((~~the~~)) taxes, special benefits, or improvements.

(4) If the total consideration for the sale cannot be ascertained or the true and fair value of the property to be valued at the time of the sale cannot reasonably be determined, the market value assessment for the property maintained on the county property tax rolls at the time of the sale shall be used as the selling price.

Sec. 404. RCW 82.45.032 and 1986 c 211 s 1 are each amended to read as follows:

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

(1) "Real estate" or "real property" means ((~~real property but includes~~)) any interest, estate, or beneficial interest in land or anything affixed to land, including the ownership interest or beneficial interest in any entity which itself owns land or anything affixed to land. The term includes used mobile homes ((~~and~~)), used floating homes, and improvements constructed upon leased land.

(2) "Used mobile home" means a mobile home which has been previously sold at retail and has been subjected to tax under chapter 82.08 RCW, or which has been previously used and has been subjected to tax under chapter 82.12 RCW, and which has substantially lost its identity as a mobile unit at the time of sale by virtue of its being fixed in location upon land owned or leased by the owner of the mobile home and placed on a foundation (posts or blocks) with fixed pipe connections with sewer, water, and other utilities.

(3) "Mobile home" means a mobile home as defined by RCW 46.04.302, as now or hereafter amended.

(4) "Used floating home" means a floating home in respect to which tax has been paid under chapter 82.08 or 82.12 RCW.

(5) "Floating home" means a building on a float used in whole or in part for human habitation as a single-family dwelling, which is not designed for self propulsion by mechanical means or for propulsion by means of wind, and which is on the property tax rolls of the county in which it is located.

NEW SECTION. Sec. 405. A new section is added to chapter 82.45 RCW to read as follows:

As used in this chapter, the term "controlling interest" has the following meaning:

(1) 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) 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.

Sec. 406. RCW 82.45.060 and 1987 c 472 s 14 are each amended to read as follows:

((~~(1)~~)) There is imposed an excise tax upon each sale of real property at the rate of one and twenty-eight one-hundredths percent on that portion of the selling price that is less than or equal to five hundred thousand dollars and one and forty-eight one-hundredths percent on that portion of the selling price that is over this amount. An amount equal to seven and seven-tenths percent of the proceeds of this tax remitted to the state treasurer shall be deposited in the public works assistance account created in RCW 43.155.050.

(((2) There is imposed an additional excise tax through June 30, 1989, upon each sale of real property at the rate of six one-hundredths of one percent of the selling price. The tax imposed under this subsection shall be deposited in the conservation area account under RCW 79.71.110.))

Sec. 407. RCW 82.45.090 and 1991 c 327 s 6 are each amended to read as follows:

(1) Except for a sale of a beneficial interest in real property where no instrument evidencing the sale is recorded in the official real property records of the county in which the property is located, the tax imposed by this chapter shall be paid to and collected by the treasurer of the county within which is located the real property which was sold((~~, said~~)). In collecting the tax the treasurer ((~~acting~~)) shall act as agent for the state. The county treasurer shall cause a stamp evidencing satisfaction of the lien to be affixed to the instrument of sale or conveyance prior to its recording or to the real estate excise tax affidavit in the case of used mobile home sales and used floating home sales. A receipt issued by the county treasurer for the payment of the tax imposed under this chapter shall be evidence of the satisfaction of the lien imposed hereunder and may be recorded in the manner prescribed for recording satisfactions of mortgages. No instrument of sale or conveyance evidencing a sale subject to the tax shall be accepted by the county auditor for filing or recording until the tax shall have been paid and the stamp affixed thereto; in case the tax is not due on the transfer, the instrument shall not be so accepted until suitable notation of such fact has been made on the instrument by the treasurer.

(2) For a sale of a beneficial interest in real property where no instrument is recorded in the official real property records of the county in which the property is located, the sale shall be reported to the department of revenue within five days from the date of the sale on such returns or forms and according to such procedures as the department may prescribe. Such forms or returns shall be signed by both the transferor and the transferee and shall be accompanied by payment of any tax due. Any person who intentionally makes a false statement on any return or form required to be filed with the department under this chapter shall be guilty of perjury.

Sec. 408. RCW 82.45.100 and 1988 c 286 s 5 are each amended to read as follows:

(1) The tax imposed under this chapter is due and payable immediately at the time of sale, and if not paid within thirty days thereafter shall bear interest at the rate of one percent per month from the time of sale until the date of payment.

(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 thirty days of the date due, there shall be assessed a penalty of five percent of the amount of the tax; if the tax is not received within sixty days of the date due, there shall be assessed a total penalty of ten percent of the amount of the tax; and if the tax is not received within ninety days of the date due, there shall 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 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 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 miscellaneous tax division of 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 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. If the department finds that all or any part of the deficiency resulted from an intent to evade the tax payable under this chapter, an additional penalty of fifty percent of the additional tax found to be due shall be added.

((~~(4)~~)) (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 ((of)) misrepresentation of a material fact by the taxpayer ((or));

(b) A failure by the taxpayer to record documentation of a sale or otherwise report the sale to the county treasurer; or

((~~(5)~~)) (6) Penalties collected pursuant to subsection (2) of this section shall be deposited in the housing trust fund as described in chapter 43.185 RCW.

NEW SECTION. Sec. 409. Any ordinance imposing a tax under chapter 82.46 RCW which is in effect on the effective date of this section shall apply to all sales taxable under chapter 82.45 RCW on the effective date of this section at the rate specified in the ordinance, until such time as the ordinance is otherwise amended or repealed.

Sec. 410. RCW 82.45.150 and 1981 c 167 s 1 are each amended to read as follows:

All of chapter 82.32 RCW, except RCW 82.32.030, 82.32.040, 82.32.050, 82.32.140, and 82.32.270 and except for the penalties and the limitations thereon imposed by RCW 82.32.090, applies to the tax imposed by this chapter, in addition to any other provisions of law for the payment and enforcement of the tax imposed by this chapter. The department of revenue shall by rule provide for the effective administration of this chapter. The rules shall ((~~also include a manual which defines transactions which are taxable under~~)) prescribe and furnish a real estate excise tax affidavit form verified by both the seller and the buyer, or agents of each, to be used by each county, or the department, as the case may be, in the collection of the tax imposed by this chapter. The department of revenue shall annually conduct audits of transactions and affidavits filed under this chapter.

Sec. 411. RCW 82.45.180 and 1991 c 245 s 15 are each amended to read as follows:

(1) For taxes collected by the county under this chapter, the county treasurer shall collect a two-dollar fee on all transactions required by this chapter where the transaction does not require the payment of tax. The county treasurer shall place one percent of the proceeds of the tax imposed by this chapter and the treasurer's fee in the county current expense fund to defray costs of collection and shall pay over to the state treasurer and account to the department of revenue for the remainder of the proceeds at the same time the county treasurer remits funds to the state under RCW 84.56.280. ((The proceeds of the tax on any sale occurring prior to September 1, 1981, when the proceeds have not been certified by an educational service district superintendent for school districts prior to September 1, 1981, shall be included in the amount remitted to the state treasurer.)) The state treasurer shall deposit the proceeds in the general fund for the support of the common schools.

(2) For taxes collected by the department of revenue under this chapter, the department shall remit the tax to the state treasurer who shall deposit the proceeds of any state tax in the general fund for the support of the common schools. The state treasurer shall deposit the proceeds of any local taxes imposed under chapter 82.46 RCW in the local real estate excise tax account hereby created in the state treasury. Moneys in the local real estate excise tax account may be spent only for distribution to counties, cities, and towns imposing a tax under chapter 82.46 RCW. Except as provided in RCW 43.08.190, all earnings of investments of balances in the local real estate excise tax account shall be credited to the local real estate excise tax account and distributed to the counties, cities, and towns monthly. Monthly the state treasurer shall make distribution from the local real estate excise tax account to the counties, cities, and towns the amount of tax collected on behalf of each taxing authority. The state treasurer shall make the distribution under this subsection without appropriation.

Sec. 412. RCW 43.84.092 and 1993 c 4 s 9 are each amended to read as follows:

(1) All earnings of investments of surplus balances in the state treasury shall be deposited to the treasury income account, which account is hereby established in the state treasury.

(2) Monthly, the state treasurer shall distribute the earnings credited to the treasury income account. The state treasurer shall credit the general fund with all the earnings credited to the treasury income account except:

(a) The following accounts and funds shall receive their proportionate share of earnings based upon each account's and fund's average daily balance for the period: The capitol building construction account, the Cedar River channel construction and operation account, the Central Washington University capital projects account, the charitable, educational, penal and reformatory institutions account, the common school construction fund, the county criminal justice assistance account, the county sales and use tax equalization account, the data processing building construction account, the deferred compensation administrative account, the deferred compensation principal account, the department of retirement systems expense account, the Eastern Washington University capital projects account, the federal forest revolving account, the industrial insurance premium refund account, the judges' retirement account, the judicial retirement administrative account, the judicial retirement principal account, the local leasehold excise tax account, the local real estate excise tax account, the local sales and use tax account, the medical aid account, the municipal criminal justice assistance account, the municipal sales and use tax equalization account, the natural resources deposit account, the perpetual surveillance and maintenance account, the public employees' retirement system plan I account, the public employees' retirement system plan II account, the Puyallup tribal settlement account, the resource management cost account, the site closure account, the special wildlife account, the state employees' insurance account, the state employees' insurance reserve account, the state investment board expense account, the state investment board commingled trust fund accounts, the supplemental pension account, the teachers' retirement system plan I account, the teachers' retirement system plan II account, the University of Washington bond retirement fund, the University of Washington building account, the volunteer fire fighters' relief and pension principal account, the volunteer fire fighters' relief and pension administrative account, the Washington judicial retirement system account, the Washington law enforcement officers' and fire fighters' system plan I retirement account, the Washington law enforcement officers' and fire fighters' system plan II retirement account, the Washington state patrol retirement account, the Washington State University building account, the Washington State University bond retirement fund, and the Western Washington University capital projects account. Earnings derived from investing balances of the agricultural permanent fund, the normal school permanent fund, the permanent common school fund, the scientific permanent fund, and the state university permanent fund shall be allocated to their respective beneficiary accounts. All earnings to be distributed under this subsection (2)(a) shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.

(b) 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 central Puget Sound public transportation account, the city hardship assistance account, the county arterial preservation account, the economic development account, the essential rail assistance account, the essential rail banking account, the ferry bond retirement fund, the grade crossing protective fund, the high capacity transportation account, the highway bond retirement fund, the highway construction stabilization account, the highway safety account, the marine operating fund, the motor vehicle fund, the motorcycle safety education account, the pilotage account, the public transportation systems account, the Puget Sound capital construction account, the Puget Sound ferry operations account, the recreational vehicle account, the rural arterial trust account, the special category C account, the state patrol highway account, the transfer relief account, the transportation capital facilities account, the transportation equipment fund, the transportation fund, the transportation improvement account, and the urban arterial trust account.

(3) In conformance with Article II, section 37 of the state Constitution, no treasury accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

NEW SECTION. Sec. 413. The following acts or parts of acts are each repealed:

(1) 1991 sp.s. c 22 s 1 (uncodified);

(2) RCW 82.45A.010 and 1991 sp.s. c 22 s 2;

(3) RCW 82.45A.020 and 1991 sp.s. c 22 s 3;

(4) RCW 82.45A.030 and 1991 sp.s. c 22 s 4; and

(5) RCW 82.45.120 and 1981 c 167 s 5, 1980 c 134 s 1, & 1969 ex.s. c 223 s 28A.45.120.

NEW SECTION. Sec. 414. The repeals in section 413 of this act shall not be construed as affecting any existing right acquired or liability or obligation incurred under the sections repealed or under any rule or order adopted under those sections, nor as affecting any proceeding instituted under those sections.

(End of part)

PART V

WASHINGTON ESTATE AND TRANSFER TAX

Sec. 501. RCW 83.100.010 and 1988 c 64 s 1 are each amended to read as follows:

This chapter may be cited as the "Estate and Transfer Tax Act of ((~~1988~~)) 1993."

Sec. 502. RCW 83.100.020 and 1990 c 224 s 1 are each amended to read as follows:

As used in this chapter:

(1) "Decedent" means a deceased individual;

(2) "Department" means the department of revenue, the director of that department, or any employee of the department exercising authority lawfully delegated to him by the director;

(3) (("Federal credit" means (a) for a transfer, the maximum amount of the credit for state taxes allowed by section 2011 of the United States Internal Revenue Code of 1986, as amended or renumbered; and (b) for a generation-skipping transfer, the maximum amount of the credit for state taxes allowed by section 2604 of the United States Internal Revenue Code of 1986, as amended or renumbered;

~~(4)~~)) "Federal return" means any tax return required by chapter 11 or 13 of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered~~)), and any regulations thereunder;

((~~(5)~~)) (4) "Federal tax" means: (a) For a transfer, a tax under chapter 11 of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered~~)); and (b) for a generation-skipping transfer, the tax under chapter 13 of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered~~));

((~~(6)~~)) (5) "Generation-skipping transfer" means a "generation‑skipping transfer" as defined and used in section 2611 of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered~~));

((~~(7)~~)) (6) "Gross estate" means "gross estate" as defined and used in section 2031 of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered~~));

(7) "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as amended or renumbered;

(8) "Nonresident" means a decedent who was domiciled outside Washington at his or her death;

(9) "Person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, joint venture, syndicate, or other entity and, to the extent permitted by law, any federal, state, or other governmental unit or subdivision or agency, department, or instrumentality thereof;

(10) "Person required to file the federal return" and "taxpayer" means any person required to file a return required by chapter 11 or 13 of the Internal Revenue Code ((~~of 1986, as amended or renumbered~~)), such as the personal representative of an estate; or a transferor, trustee, or beneficiary of a generation-skipping transfer; or a qualified heir with respect to qualified real property, as defined and used in section 2032A(c) of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered~~));

(11) "Property" means (a) for a transfer, property included in the gross estate; and (b) for a generation-skipping transfer, all real and personal property subject to the federal tax;

(12) "Resident" means a decedent who was domiciled in Washington at time of death;

(13) "Transfer" means "transfer" as used in section 2001 of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered,~~)) or a disposition or cessation of qualified use as defined and used in section 2032A(c) of the ((~~United States~~)) Internal Revenue Code ((~~of 1986, as amended or renumbered; and~~));

(14) "Trust" means "trust" under Washington law and any arrangement described in section 2652 of the Internal Revenue Code ((~~of 1986, as amended or renumbered.~~));

(15) "Washington estate and transfer tax" means: (a) For a transfer, the maximum amount of tax provided in section 506(1) of this act; and (b) for a generation‑skipping transfer, the maximum amount of tax provided in section 506(2) of this act; and

((~~(15)~~)) (16) References in this chapter to the United States Internal Revenue Code of 1986, to a section or chapter of the code, and to regulations under the code are to the code, sections, chapters, and regulations in effect on ((~~June 7, 1990~~)) the effective date of this section.

Sec. 503. RCW 83.100.030 and 1988 c 64 s 3 are each amended to read as follows:

(1) A tax in an amount equal to the ((~~federal credit~~)) Washington estate and transfer tax is imposed on every transfer of property of a resident.

(2) If the transfer is subject to a similar tax imposed by another state ((~~for which the federal credit is allowed~~)), and if the tax imposed by the other state is not qualified by a reciprocal provision allowing the transfer to be taxed only in this state, the amount of the tax due under this section shall be credited with the lesser of:

(a) The amount of the death tax paid the other state ((~~and credited against the federal tax~~)); or

(b) An amount computed by multiplying the ((~~federal credit~~)) Washington estate and transfer tax by a fraction, the numerator of which is the value of the property subject to the tax imposed by the other state, and the denominator of which is the value of the decedent's gross estate.

Sec. 504. RCW 83.100.040 and 1988 c 64 s 4 are each amended to read as follows:

(1) A tax in an amount computed as provided in this section is imposed on every transfer of property located in Washington of every nonresident.

(2) The tax shall be computed by multiplying the ((~~federal credit~~)) Washington estate and transfer tax by a fraction, the numerator of which is the value of the property located in Washington, and the denominator of which is the value of the decedent's gross estate.

(3) The transfer of the property of a nonresident is exempt from the tax imposed by this section to the extent that the property of residents is exempt from taxation under the laws of the state in which the nonresident is domiciled.

Sec. 505. RCW 83.100.045 and 1988 c 64 s 5 are each amended to read as follows:

(1) A tax in an amount equal to the ((~~federal credit~~)) Washington estate and transfer tax is imposed on every generation‑skipping transfer, if real or tangible personal property subject to the federal tax is located in this state or if the trust has its principal place of administration in this state at the time of the generation-skipping transfer.

(2) If the generation-skipping transfer is subject to a similar tax imposed by another state ((~~for which the federal credit is allowed~~)), the amount of the tax due under this section shall be credited with the lesser of:

(a) The amount of the tax paid to the other state ((~~and credited against the federal tax~~)); or

(b) An amount computed by multiplying the ((~~federal credit~~)) Washington estate and transfer tax by a fraction, the numerator of which is the value of the property subject to the generation-skipping transfer tax imposed by the other state, and the denominator of which is the value of all property subject to the federal tax.

NEW SECTION. Sec. 506. A new section is added to chapter 83.100 RCW to read as follows:

(1) The Washington estate and transfer tax for an estate shall be the tax determined under subsection (3) of this section based on the amount upon which the tentative tax for federal estate tax purposes is computed under section 2001(b) of the Internal Revenue Code. However:

(a) No tax is imposed when the credits allowable to the decedent, except the credit allowed by section 2011 of the Internal Revenue Code, but including the credit allowed by section 2010 of the Internal Revenue Code, equals or exceeds the tentative tax as provided in section 2001(b) of the Internal Revenue Code for federal estate tax purposes; and

(b) The tax imposed by this section shall not exceed the amount of the taxable estate, as defined in section 2051 of the Internal Revenue Code, reduced by the net federal estate tax payable.

(2) The Washington estate and transfer tax for a generation- skipping transfer shall be the greater of:

(a) Ten percent of the taxable amount as provided in section 2602(1) of the Internal Revenue Code; or

(b) The tax determined under subsection (3) of this section based on the taxable amount as provided in section 2602(1) of the Internal Revenue Code.

(3) Rate schedule:

If the tentative taxable The Washington estate and

amount or generation-skipping transfer tax is:

taxable amount is:

Not over $90,000............................................................................................................................................................... 1.6% of the excess

over $40,000.

Over $90,000 but........................................................................................................................................................ $800 plus 3.2% of the

not over $140,000 excess over $90,000.

Over $140,000 but............................................................................................................................................................... $2,400 plus 4.8%

not over $240,000 of the excess

over $140,000.

Over $240,000 but............................................................................................................................................................... $7,200 plus 6.4%

not over $440,000 of the excess

over $240,000.

Over $440,000 but................................................................................................................................................................ $20,000 plus 8%

not over $640,000 of the excess

over $440,000.

Over $640,000 but............................................................................................................................................................. $36,000 plus 9.6%

not over $840,000 of the excess

over $640,000.

Over $840,000 but........................................................................................................................................................... $55,200 plus 11.2%

not over $1,040,000 of the excess

over $840,000.

Over $1,040,000 but........................................................................................................................................................ $77,600 plus 12.8%

not over $1,540,000 of the excess

over $1,040,000.

Over $1,540,000 but...................................................................................................................................................... $141,600 plus 14.4%

not over $2,040,000 of the excess

over $1,540,000.

Over $2,040,000 but......................................................................................................................................................... $213,600 plus 16%

not over $2,540,000 of the excess

over $2,040,000.

Over $2,540,000 but...................................................................................................................................................... $293,600 plus 17.6%

not over $3,040,000 of the excess

over $2,540,000.

Over $3,040,000 but...................................................................................................................................................... $381,600 plus 19.2%

not over $3,540,000 of the excess

over $3,040,000.

Over $3,540,000 but...................................................................................................................................................... $477,600 plus 20.8%

not over $4,040,000 of the excess

over $3,540,000.

Over $4,040,000 but...................................................................................................................................................... $581,600 plus 22.4%

not over $5,040,000 of the excess

over $4,040,000.

Over $5,040,000 but......................................................................................................................................................... $805,600 plus 24%

not over $6,040,000 of the excess

over $5,040,000.

Over $6,040,000 but................................................................................................................................................... $1,045,600 plus 25.6%

not over $7,040,000 of the excess

over $6,040,000.

Over $7,040,000 but................................................................................................................................................... $1,301,600 plus 27.2%

not over $8,040,000 of the excess

over $7,040,000.

Over $8,040,000 but................................................................................................................................................... $1,573,600 plus 28.8%

not over $9,040,000 of the excess

over $8,040,000.

Over $9,040,000 but................................................................................................................................................... $1,861,600 plus 30.4%

not over $10,040,000 of the excess

over $9,040,000.

Over $10,040,000........................................................................................................................................................... $2,165,600 plus 32%

of the excess

over $10,040,000.

Sec. 507. RCW 83.100.050 and 1988 c 64 s 6 are each amended to read as follows:

(1) The person required to file the federal return shall file with the department on or before the date the federal return is required to be filed, including any extension of time for filing the federal return:

(a) A Washington return for the tax due under this chapter upon such forms and with such attachments as the department may prescribe; and

(b) A copy of the federal return, complete with attachments and accompanying documents.

(2) No Washington return need be filed if no federal return is required. A Washington return delivered to the department by United States mail shall be considered to have been received by the department on the date of the United States postmark stamped on the cover in which the return is mailed, if the postmark date is within the time allowed for filing the Washington return, including extensions.

((~~(2)~~)) (3) If the person required to file the federal return has obtained an extension of time for filing the federal return, the person shall file the Washington return within the same time period and in the same manner as provided for the federal return. A copy of the federal extension shall be filed with the department on or before the date the Washington return is due, not including any extension of time for filing, or within thirty days of issuance, whichever is later.

Sec. 508. RCW 83.100.070 and 1988 c 64 s 8 are each amended to read as follows:

(1) Any tax due under this chapter which is not paid by the due date under RCW 83.100.060(1) shall bear interest at the rate ((~~of twelve percent per annum~~)) provided in RCW 82.32.050(2) from the date the tax is due until paid.

(2) ((If the Washington return is not filed when due under RCW 83.100.050, then the person required to file the federal return shall pay, in addition to interest, a penalty equal to five percent of the tax due for each month after the date the return is due until filed. No penalty may exceed twenty-five percent of the tax.)) If payment of any tax due on a return to be filed by a taxpayer is not received by the department of revenue by the due date, including extensions, if any, the department shall assess a penalty of five percent of the amount of the tax; and if the tax is not received within thirty days after the due date, including extensions, if any, the department shall assess a total penalty of ten percent of the amount of the tax; and if the tax is not received within sixty days after the due date, including extensions, if any, the department shall assess a total penalty of twenty percent of the amount of the tax.

(3) If payment of any tax assessed by the department of revenue is not received by the department by the due date specified in the notice, or any extension, the department shall add a penalty of ten percent of the amount of the additional tax found due.

(4) If a warrant is issued by the department of revenue for the collection of taxes, increases, and penalties, the department shall add a penalty of five percent of the amount of the tax, but not less than ten dollars.

(5) If the department finds that all or part of the deficiency resulted from an intent to evade the tax payable under this chapter, the department shall add a further penalty of fifty percent of the additional tax found to be due.

(6) The aggregate penalties imposed under subsections (2) through (4) of this section may not exceed twenty-five percent of the tax due, or twenty dollars, whichever is greater.

(7) If the department of revenue finds that the payment by a taxpayer of a tax is less than that properly due, and the failure of a taxpayer to pay any tax by the due date was the result of circumstances beyond the control of the taxpayer, the department of revenue shall waive or cancel any interest or penalties imposed under this chapter with respect to the tax. The department of revenue shall prescribe rules for the waiver or cancellation of interest or penalties imposed by this chapter.

Sec. 509. RCW 83.100.080 and 1988 c 64 s 9 are each amended to read as follows:

Upon request of the person who has filed a Washington return, the department shall issue a release when the tax due under this chapter has been paid. Upon issuance of a release, all property subject to the tax shall be free of any claim for the tax by the state.

Sec. 510. RCW 83.100.090 and 1988 c 64 s 10 are each amended to read as follows:

(1) If upon examination of any return or from other information obtained by the department it appears that a tax or penalty has been paid less than that properly due, or that the return is not correct, the department shall assess against the taxpayer such additional amount found to be due, or correct the return, and shall add to the amount found to be due interest at the rate provided in RCW 82.32.050(2).

(a) The department shall notify the taxpayer by mail of the additional amount and the same shall become due and shall be paid within thirty days from the date of the notice, or within such further time as the department may provide.

(b) The department in its examination of returns under this chapter shall coordinate its activities with the United States internal revenue service and shall avoid a duplication of effort whenever possible. The department shall cooperate with the United States internal revenue service and provide valuation or other assistance when such assistance is requested and may be efficiently provided. The department shall enter into such information sharing agreements with the United States internal revenue service as are necessary to efficiently implement this chapter.

(2) No assessment or correction of an assessment for additional taxes due may be made by the department more than three years after the date the return was due, including extensions, if any, except:

(a) Against a taxpayer who has not filed a return as required by this chapter;

(b) Upon a showing of fraud or of misrepresentation of a material fact by the taxpayer;

(d) Where an adjustment in, or final determination of, the amount of federal tax is made more than three years after the date the return was due, including extensions, if any. No assessment or correction of assessment shall be made more than three years after the date of the adjustment in, or final determination of, the amount of federal tax.

(3) If the person required to file the federal return files an amended federal return, that person shall ((~~immediately~~)), at the time the amended federal return is filed, file with the department an amended Washington return with a copy of the amended federal return and all accompanying documents. If the amended Washington return requires payment of an additional tax under this chapter, the tax shall be paid in accordance with RCW 83.100.060 and interest and penalties, if any, shall be paid in accordance with RCW 83.100.070.

((~~(2)~~)) (4) Upon any adjustment in, or final determination of, the amount of federal tax due, the person required to file the federal return shall notify the department in writing within sixty days after the adjustment or final determination. If the adjustment or final determination requires payment of an additional tax under this chapter, the tax shall be paid in accordance with RCW 83.100.060 and interest and penalties, if any, shall be paid in accordance with RCW 83.100.070.

NEW SECTION. Sec. 511. A new section is added to chapter 83.100 RCW to read as follows:

If the value of a transfer has been determined under this chapter and the same transfer is examined and valued for federal tax purposes with the new value becoming fixed under federal law either by agreement with the taxpayer or through final determination in the federal court, then the value as fixed under this chapter shall be increased or decreased to the federal tax value.

NEW SECTION. Sec. 512. A new section is added to chapter 83.100 RCW to read as follows:

(1) If a person fails or refuses to make a return or to make available for examination the records required by this chapter, the department shall proceed, in such manner as it may deem best, to obtain facts and information on which to base its estimate of the tax. To this end, the department may examine the books, records, and papers of the person and may take evidence, on oath, of the person, relating to the subject of inquiry.

(2) As soon as the department procures such facts and information as it is able to obtain upon which to base the assessment of a tax payable by a person who has failed or refused to make a return, it shall proceed to determine and assess against the person the tax and penalties due, but such action may not deprive the person from appealing the assessment as provided in this chapter. The department shall add to the assessment the interest and penalties provided in this chapter. The department shall notify the taxpayer by mail of the total amount of the tax, penalties, and interest, and the total amount shall become due and shall be paid within thirty days from the date of the notice.

NEW SECTION. Sec. 513. A new section is added to chapter 83.100 RCW to read as follows:

(1) A person having paid a tax, original assessment, or corrected assessment, or having been issued a notice of additional taxes, correction of a return, delinquent taxes, interest, or penalties assessed by the department, may petition the department in writing for a correction of the amount of the assessment or a review of the tax liability, and a conference for examination and review of the assessment or tax liability. The petition shall set forth the reasons why the correction should be granted and the amount of the tax, interest, or penalties that the petitioner believes is due. The department shall promptly consider the petition and may grant or deny it. If denied, the petitioner shall be notified by mail of the denial forthwith. If a conference is granted, the department shall fix the time and place for the conference and notify the petitioner by mail. After the conference, the department may make a determination as may appear to it to be just and lawful and shall mail a copy of its determination to the petitioner.

(2) A petition for correction of assessment shall be made within thirty days after the issuance of the original notice of the assessment amount or within the period covered by an extension of the due date granted by the department. If no such petition is filed within the thirty-day period, the assessment covered by the notice shall become final.

(3) A petition for a review of a tax liability that has been paid may be made any time within the period for payment of refunds.

NEW SECTION. Sec. 514. A new section is added to chapter 83.100 RCW to read as follows:

(1) Any person having paid any tax as required by this chapter and feeling aggrieved by the amount of the tax may appeal to the superior court of Thurston county, within the time limitation for a refund provided in this chapter or, if an application for refund has been made to the department within that time limitation, then within thirty days after rejection of the application, whichever time limitation is later. In the appeal the taxpayer shall set forth the amount of the tax imposed upon the taxpayer that the taxpayer concedes to be the correct tax and the reason why the tax should be reduced or abated. The appeal shall be perfected by serving a copy of the notice of appeal upon the department within the time specified in this section and by filing the original thereof with proof of service with the clerk of the superior court of Thurston county.

(2) The trial in the superior court on appeal is de novo and without the necessity of pleadings other than the notice of appeal. The burden rests upon the taxpayer to prove that the tax as paid by the taxpayer is incorrect, either in whole or in part, and to establish the correct amount of the tax. In the proceeding the taxpayer is deemed the plaintiff, and the state, the defendant, and both parties are entitled to subpoena the attendance of witnesses as in other civil actions and to produce evidence that is competent, relevant, and material to determine the correct amount of the tax that should be paid by the taxpayer. Either party may seek appellate review in the same manner as other civil actions are appealed to the appellate courts.

(3) It is not necessary for the taxpayer to protest against the payment of a tax or to make a demand to have the tax refunded or to petition the department or the director for a hearing in order to appeal to the superior court, but no court action or proceeding of any kind may be maintained by the taxpayer to recover a tax or a part of a tax paid, except as provided in this section.

(4) The provisions of this section do not apply to a tax payment that has been the subject of an appeal to the board of tax appeals with respect to which appeal a formal hearing has been elected.

Sec. 515. RCW 83.100.130 and 1988 c 64 s 12 are each amended to read as follows:

((Whenever the department determines that a person required to file the federal return has overpaid the tax due under this chapter, the department shall refund the amount of the overpayment, together with interest at the then existing rate under RCW 83.100.070(1). If the application for refund, with supporting documents, is filed within four months after an adjustment or final determination of federal tax liability, the department shall pay interest until the date the refund is mailed. If the application for refund, with supporting documents, is filed after four months after the adjustment or final determination, the department shall pay interest only until the end of the four-month period.))

(1) If, upon receipt of an application by a taxpayer for a refund or for an audit of the taxpayer's return, or upon an examination of the return of a taxpayer, it is determined by the department that within the statutory period for assessment of taxes prescribed by RCW 83.100.090 a tax has been paid in excess of that properly due, the excess amount paid within such period shall be refunded to the taxpayer. No refund may be made for taxes paid more than three years prior to the date that the refund application is made or examination of records is completed, except taxes may be refunded after an adjustment in, or final determination of, the federal tax liability has been made, but such refund may not be made for taxes paid more than three years prior to the date the refund application is made or the adjustment, or final determination of, the federal tax liability is made.

(2) A judgment for which a recovery is granted by a court of competent jurisdiction, not appealed from, for tax, penalties, and interest that were paid by the taxpayer, and costs, in a suit by a taxpayer shall be paid in like manner, upon the filing with the department of a certified copy of the order or judgment of the court.

(3) Interest at the rate provided in RCW 82.32.060 shall be allowed by the department and by a court on the amount of a refund or recovery allowed to a taxpayer for taxes, penalties, or interest paid by the taxpayer.

Sec. 516. RCW 83.100.150 and 1988 c 64 s 14 are each amended to read as follows:

((~~(1)~~)) The department may collect the ((~~estate tax~~)) taxes imposed under ((~~RCW 83.100.030 and 83.100.040~~)) this chapter, including interest and penalties, and shall represent this state in all matters pertaining to the same, either before courts or in any other manner. ((At any time after the Washington return is due, the department may file its findings regarding the amount of the tax, the federal credit, the person required to file the federal return, and all persons having an interest in property subject to the tax with the clerk of the superior court in the matter of the estate of the decedent or, if no probate or administration proceedings have been commenced in any court of this state, of the superior court for the county in which the decedent was a resident, if the resident was a domiciliary, or, if the decedent was a nondomiciliary, of any superior court which has jurisdiction over the property. Such a court first acquiring jurisdiction shall retain jurisdiction to the exclusion of every other court.

(2) The department may collect the generation‑skipping transfer tax under RCW 83.100.045, including interest and penalties, and shall represent this state in all matters pertaining to the same, either before courts or in any other manner. At any time after the Washington return is due, the department may file its findings regarding the amount of the tax, the federal credit, the person required to file the federal return, and all persons having an interest in property subject to the tax with the clerk of the superior court in the matter of the trust or the estate of the decedent, if any, or, if no trust, probate or administration proceedings have been commenced in any court of this state, of any superior court which has jurisdiction over the property. Such a court first acquiring jurisdiction shall retain jurisdiction to the exclusion of every other court.)) The provisions, methods, and processes provided in chapter 82.32 RCW relating to the collection of taxes apply to the collection of taxes imposed by this chapter.

Sec. 517. RCW 82.03.190 and 1989 c 378 s 5 are each amended to read as follows:

Any person having received notice of a denial of a petition or a notice of determination made under RCW 82.32.160, 82.32.170, 82.34.110, ((or)) 82.49.060, or section 513 of this act may appeal, within thirty days after the mailing of the notice of such denial or determination, to the board of tax appeals. In the notice of appeal the taxpayer shall set forth the amount of the tax which the taxpayer contends should be reduced or refunded and the reasons for such reduction or refund, in accordance with rules of practice and procedure prescribed by the board. A copy of the notice of appeal shall be provided to the department within the time specified in the rules of practice and procedure prescribed by the board. However, if the notice of appeal relates to an application made to the department under chapter 82.34 RCW, the taxpayer shall set forth the amount to which the taxpayer claims the credit or exemption should apply, and the grounds for such contention, in accordance with rules of practice and procedure prescribed by the board. If the taxpayer intends that the hearing before the board be held pursuant to the administrative procedure act (chapter 34.05 RCW), the notice of appeal shall also so state. In the event that the notice of appeal does not so state, the department may, within thirty days from the date of its receipt of the notice of appeal, file with the board notice of its intention that the hearing be held pursuant to the administrative procedure act.

NEW SECTION. Sec. 518. The following acts or parts of acts are each repealed:

(1) RCW 83.100.160 and 1988 c 64 s 15;

(2) RCW 83.100.170 and 1988 c 64 s 16;

(3) RCW 83.100.180 and 1988 c 64 s 17; and

(4) RCW 83.100.190 and 1988 c 64 s 18.

NEW SECTION. Sec. 519. Sections 501 through 518, chapter . . ., Laws of 1993 (sections 501 through 518 of this act) shall apply to all returns required to be filed on or after the effective date of sections 501 through 518, chapter . . ., Laws of 1993 (sections 501 through 518 of this act), including amended or adjusted returns, regardless, in the case of a decedent, if the date of death of the decedent occurred prior to the effective date of sections 501 through 518, chapter . . ., Laws of 1993 (sections 501 through 518 of this act).

(End of part)

PART VI

INSURANCE PREPAYMENTS TAXES

NEW SECTION. Sec. 601. A new section is added to chapter 82.04 RCW to read as follows:

This chapter does not apply to any health maintenance organization in respect to copayments or prepayments for health care services that are taxable under section 602 of this act, or to any health care service contractor in respect to copayments or prepayments for health care services that are taxable under section 603 of this act.

NEW SECTION. Sec. 602. A new section is added to chapter 48.14 RCW to read as follows:

(1) Each health maintenance organization, as defined in RCW 48.46.020, shall pay a tax on or before the first day of March of each year to the state treasurer through the insurance commissioner's office on amounts received or collected by the health maintenance organization during the preceding calendar year as copayments and prepayments for comprehensive health care services.

(2) The amount of the tax shall be equal to the total amount of all copayments and prepayments for comprehensive health care services received by the health maintenance organization during the calendar year multiplied by the rate of two percent. The tax on prepayments for health care services established by this section shall not be applied to amounts received or collected by a health maintenance organization from the United States or any instrumentality of the United States as prepayments for comprehensive health care services provided under Title XVIII, medicare, of the social security act or the federal employees benefits plan.

(3) Health maintenance organizations shall prepay their tax liability. The minimum amount of the prepayments shall be percentages of the health maintenance organization's tax obligation for the preceding calendar year recomputed using the rate in effect for the current year. For the prepayment of taxes due during calendar year 1994, the minimum amount of the prepayments shall be percentages of the health maintenance organization's tax obligation that would have been due had the tax been in effect during calendar year 1993. The tax prepayments shall be paid to the state treasurer through the commissioner's office by the due dates and in the following amounts:

(a) On or before June 15, forty-five percent;

(b) On or before September 15, twenty-five percent;

For good cause demonstrated in writing, the commissioner may approve an amount smaller than the preceding calendar year's tax obligation as recomputed for calculating the health maintenance organization's prepayment obligations for the current tax year.

(4) One hundred percent of the moneys collected under this section shall be deposited in the general fund.

NEW SECTION. Sec. 603. A new section is added to chapter 48.14 RCW to read as follows:

(1) Each health care service contractor, as defined in RCW 48.44.010, shall pay a tax on or before the first day of March of each year to the state treasurer through the insurance commissioner's office on amounts received or collected by the health care service contractor during the preceding calendar year as copayments and prepayments for health care services.

(2) The amount of the tax shall be equal to the total amount of all copayments and prepayments for health care services received by the health care service contractor during the calendar year multiplied by the rate of two percent. The tax on prepayments for health care services established by this section shall not be applied to amounts received or collected by a health care service contractor from the United States or any instrumentality of the United States as prepayments for comprehensive health care services provided under Title XVIII, medicare, of the social security act or the federal employees benefits plan.

(3) Health care service contractors shall prepay their tax liability. The minimum amount of the prepayments shall be percentages of the health care service contractor's tax obligation for the preceding calendar year recomputed using the rate in effect for the current year. For the prepayment of taxes due during calendar year 1994, the minimum amount of the prepayments shall be percentages of the health care service contractor's tax obligation that would have been due had the tax been in effect during calendar year 1993. The tax prepayments shall be paid to the state treasurer through the commissioner's office by the due dates and in the following amounts:

(a) On or before June 15, forty-five percent;

(b) On or before September 15, twenty-five percent;

For good cause demonstrated in writing, the commissioner may approve an amount smaller than the preceding calendar year's tax obligation as recomputed for calculating the health care service contractor's prepayment obligations for the current tax year.

(4) One hundred percent of the moneys collected under this section shall be deposited in the general fund.

(End of part)

PART VII

INSURANCE PREMIUMS TAX CREDIT REPEAL

Sec. 701. RCW 48.32A.090 and 1990 c 51 s 6 are each amended to read as follows:

(1) The association shall issue to each insurer paying an assessment under this chapter certificates of contribution, in appropriate form and terms as prescribed or approved by the commissioner, for the amounts so paid into the respective funds. All outstanding certificates against a particular fund shall be of equal dignity and priority without reference to amounts or dates of issue.

(2) ((An outstanding certificate of contribution shall be shown by the insurer in its financial statements as an admitted asset for such amount and period of time as the commissioner may approve: PROVIDED, That unless a longer period has been allowed by the commissioner the insurer shall in any event at its option have the right to so show a certificate of contribution as an admitted asset at percentages of original face amount for calendar years as follows:

~~100% for the calendar year of issuance;~~

~~80% for the first calendar year after the year of issuance;~~

~~60% for the second calendar year after the year of issuance;~~

~~40% for the third calendar year after the year of issuance;~~

~~20% for the fourth calendar year after the year of issuance; and~~

~~0% for the fifth and subsequent calendar years after the year of issuance.~~

~~Notwithstanding the foregoing, if the value of a certificate of contribution is or becomes less than one thousand dollars, the entire amount may be written off by the insurer in that year.~~

(3) The insurer shall offset the amount written off by it in a calendar year under subsection (2) of this section against its premium tax liability to this state accrued with respect to business transacted in such year.

~~(4)~~)) Any sums recovered by the association representing sums which have theretofore been written off by contributing insurers and offset against premium taxes ((~~as provided in subsection (3) of this section,~~)) before the effective date of this section shall be paid by the association to the commissioner and ((~~by him~~)) then deposited with the state treasurer for credit to the general fund of the state of Washington.

((~~(5)~~)) (3) No distribution to stockholders, if any, of a liquidating insurer shall be made unless and until the total amount of assessments levied by the association with respect to such insurer have been fully recovered by the association.

NEW SECTION. Sec. 702. RCW 48.32.050 and 1975-'76 2nd ex.s. c 109 s 5 & 1971 ex.s. c 265 s 5 are each repealed.

(End of part)

PART VIII

RESALE CERTIFICATES

Sec. 801. RCW 82.04.470 and 1983 2nd ex.s. c 3 s 29 are each amended to read as follows:

(1) Unless a seller has taken from the purchaser a resale certificate ((signed by, and bearing the name and address and registration number of the purchaser to the effect that the property or service was purchased for resale, or unless the nature of the transaction is clearly shown as a sale at wholesale by the books and records of the taxpayer in such other manner as the department of revenue shall by regulation provide)), the burden of proving that a sale of tangible personal property, or of telephone service as defined in RCW 82.04.065, was not a sale at retail shall be upon the person who made it.

(2) A resale certificate shall be presented to the seller either at the time of sale or be on file with the seller before a purchase can be made without payment of sales tax. If the seller does not have a resale certificate on file, the seller is liable for the tax unless the seller obtains a resale certificate from the buyer.

(3) Resale certificates shall be valid for a period of four years from the date the certificate is provided to the seller.

(4) The department may provide by rule for suggested forms for resale certificates and the other documents containing the information that will be accepted as resale certificates. The department shall provide by rule the categories of items that must be specified on resale certificates and the business classifications that may use a blanket resale certificate.

(5) As used in this section, "resale certificate" means a document provided by a buyer to a seller at the time of sale stating that the purchase is for resale in the regular course of business, or that the buyer is exempt from retail sales tax, and containing the following information:

(a) The name and address of the buyer;

(b) The uniform business identifier or revenue registration number of the buyer;

(d) The categories of items to be purchased for resale or that are exempt, unless the buyer is in a business classification that may present a blanket resale certificate as provided by the department by rule;

(e) The date on which the certificate was provided;

(f) A statement that the items purchased either: (i) Are purchased for resale in the regular course of business; or (ii) are exempt from tax pursuant to statute;

(g) A statement that the buyer acknowledges that misuse of the certificate subjects him or her to a penalty of fifty percent of the tax due, in addition to the tax, interest, and any other penalties imposed;

(h) The name of the individual authorized to sign the certificate, printed in a legible fashion;

(i) The signature of the authorized individual; and

(j) The name of the seller.

NEW SECTION. Sec. 802. A new section is added to chapter 82.08 RCW to read as follows:

If a buyer normally is engaged in both consuming and reselling certain types of articles of tangible personal property and is not able to determine at the time of purchase whether the particular property acquired will be consumed or resold, the buyer may use a resale certificate for the entire purchase if the buyer principally resells the articles according to the general nature of the buyer's business. The buyer shall account for the value of any articles purchased with a resale certificate that are used by the buyer and remit the sales tax on the articles to the department.

A buyer who pays a tax on all purchases and subsequently resells an article at retail, without intervening use by the buyer, shall collect the tax from the purchaser as otherwise provided by law and is entitled to a deduction on the buyer's tax return equal to the cost to the buyer of the property resold. The deduction is allowed only if the taxpayer keeps and preserves records that show the names of the persons from whom the articles were purchased, the date of the purchase, the type of articles, the amount of the purchase, and the tax that was paid. The department shall provide by rule for the refund or credit of retail sales tax paid by a buyer for purchases that are later sold at wholesale without intervening use by the buyer.

NEW SECTION. Sec. 803. A new section is added to chapter 82.32 RCW to read as follows:

Any person who uses a resale certificate to purchase items without payment of sales tax and who is not entitled to use the certificate for the purchase shall be assessed a penalty of fifty percent of the tax due, in addition to all other taxes, penalties, and interest due, on the improperly purchased item. The department may waive the penalty imposed under this section if it finds that the use of the certificate was due to circumstances beyond the taxpayer's control or if the certificate was used for purchases for dual purposes. The department shall define by rule what circumstances are considered to be beyond the taxpayer's control.

Sec. 804. RCW 82.08.050 and 1992 c 206 s 2 are each amended to read as follows:

The tax hereby imposed shall be paid by the buyer to the seller, and each seller shall collect from the buyer the full amount of the tax payable in respect to each taxable sale in accordance with the schedule of collections adopted by the department pursuant to the provisions of RCW 82.08.060. The tax required by this chapter, to be collected by the seller, shall be deemed to be held in trust by the seller until paid to the department, and any seller who appropriates or converts the tax collected to his or her own use or to any use other than the payment of the tax to the extent that the money required to be collected is not available for payment on the due date as prescribed in this chapter shall be guilty of a gross misdemeanor.

In case any seller fails to collect the tax herein imposed or having collected the tax, fails to pay it to the department in the manner prescribed by this chapter, whether such failure is the result of his or her own acts or the result of acts or conditions beyond his or her control, he or she shall, nevertheless, be personally liable to the state for the amount of the tax, unless the seller has taken from the buyer in good faith a properly executed retail certificate as provided in RCW 82.04.470.

The amount of tax, until paid by the buyer to the seller or to the department, shall constitute a debt from the buyer to the seller and any seller who fails or refuses to collect the tax as required with intent to violate the provisions of this chapter or to gain some advantage or benefit, either direct or indirect, and any buyer who refuses to pay any tax due under this chapter shall be guilty of a misdemeanor. The tax required by this chapter to be collected by the seller shall be stated separately from the selling price in any sales invoice or other instrument of sale. On all retail sales through vending machines, the tax need not be stated separately from the selling price or collected separately from the buyer. For purposes of determining the tax due from the buyer to the seller and from the seller to the department it shall be conclusively presumed that the selling price quoted in any price list, sales document, contract or other agreement between the parties does not include the tax imposed by this chapter, but if the seller advertises the price as including the tax or that the seller is paying the tax, the advertised price shall not be considered the selling price.

Where a buyer has failed to pay to the seller the tax imposed by this chapter and the seller has not paid the amount of the tax to the department, the department may, in its discretion, proceed directly against the buyer for collection of the tax, in which case a penalty of ten percent may be added to the amount of the tax for failure of the buyer to pay the same to the seller, regardless of when the tax may be collected by the department; and all of the provisions of chapter 82.32 RCW, including those relative to interest and penalties, shall apply in addition; and, for the sole purpose of applying the various provisions of chapter 82.32 RCW, the twenty-fifth day of the month following the tax period in which the purchase was made shall be considered as the due date of the tax.

(End of part)

PART IX

CONTRIBUTIONS IN AID OF CONSTRUCTION

NEW SECTION. Sec. 901. RCW 82.04.417 and 1969 ex.s. c 156 s 1 are each repealed.

(End of part)

PART X

STATE TRADE AND CONVENTION CENTER

Sec. 1001. RCW 67.40.090 and 1991 c 2 s 3 are each amended to read as follows:

(1) ((~~Commencing April 1, 1982,~~)) There is imposed, and the department of revenue shall collect, in King county a special excise tax on the sale of or charge made for the furnishing of lodging by a hotel, rooming house, tourist court, motel, or trailer camp, and the granting of any similar license to use real property, as distinguished from the renting or leasing of real property, except that no such tax may be levied on any premises having fewer than sixty lodging units. It shall be presumed that the occupancy of real property for a continuous period of one month or more constitutes rental or lease of real property and not a mere license to use or enjoy the same. The legislature on behalf of the state pledges to maintain and continue this tax until the bonds authorized by this chapter are fully redeemed, both principal and interest.

(2) The rate of the tax ((~~imposed under this section~~)) shall be as ((~~provided in this subsection.~~)) follows:

(a) ((~~From April 1, 1982, through December 31, 1982, inclusive, the rate shall be three percent in the city of Seattle and two percent in King county outside the city of Seattle.~~

~~(b) From January 1, 1983, through June 30, 1988, inclusive, the rate shall be five percent in the city of Seattle and two percent in King county outside the city of Seattle.~~

~~(c) From July 1, 1988, through December 31, 1992, inclusive, the rate shall be six percent in the city of Seattle and two and four-tenths percent in King county outside the city of Seattle.~~

~~(d) From January 1, 1993,~~)) Until the change date, the rate shall be seven percent in the city of Seattle and two and eight-tenths percent in King county outside the city of Seattle.

((~~(e)~~)) (b) On and after the change date, the rate shall be six percent in the city of Seattle and two and four-tenths percent in King county outside the city of Seattle.

((~~(f)~~)) (c) As used in this section, "change date" means the October 1st next occurring after certification occurs under ((~~(g)~~)) (d) of this subsection.

((~~(g)~~)) (d) On August 1st of 1998 and of each year thereafter until certification occurs under this subsection, the state treasurer shall determine whether seventy-one and forty-three one-hundredths percent of the revenues actually collected and deposited with the state treasurer for the tax imposed under this section during the twelve months ending June 30th of that year, excluding penalties and interest, exceeds the amount actually paid in debt service during the same period for bonds issued under RCW 67.40.030 by at least two million dollars. If so, the state treasurer shall so certify to the department of revenue.

(3) An additional tax is imposed for the period July 1, 1993, through June 30, 1995, equal to the tax payable under subsection (2) of this section multiplied by twenty percent.

(4) The proceeds of the special excise tax shall be deposited as ((~~provided in this subsection.~~)) follows:

(a) ((~~Through June 30, 1988, inclusive, all proceeds shall be deposited in the state convention and trade center account.~~

(b) From July 1, 1988, through December 31, 1992, inclusive, eighty-three and thirty-three one-hundredths percent of the proceeds shall be deposited in the state convention and trade center account. The remainder shall be deposited in the state convention and trade center operations account.

~~(c) From January 1, 1993,~~)) Until the change date, eighty-five and seventy-one-hundredths percent of the proceeds of the tax imposed under subsection (2) of this section shall be deposited in the state convention and trade center account. The remainder of the tax imposed under subsection (2) of this section shall be deposited in the state convention and trade center operations account.

((~~(d)~~)) (b) On and after the change date, eighty-three and thirty-three one-hundredths percent of the proceeds of the tax imposed under subsection (2) of this section shall be deposited in the state convention and trade center account. The remainder of the tax imposed under subsection (2) of this section shall be deposited in the state convention and trade center operations account.

(c) One hundred percent of the proceeds of the additional tax imposed under subsection (3) of this section shall be deposited in the state convention and trade center operations account.

((~~(4)~~)) (5) Chapter 82.32 RCW applies to the tax imposed under this section.

(End of part)

PART XI

MISCELLANEOUS

NEW SECTION. Sec. 1101. 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. 1102. 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 shall take effect as follows:

(1) Sections 101 through 205 of this act shall take effect July 1, 1993.

(2) Sections 301 through 304 of this act shall take effect July 1, 1993.

(3) Sections 401 through 414 of this act shall take effect immediately.

(4) Sections 501 through 519 of this act shall take effect July 1, 1993.

(5) Sections 601 through 603 of this act shall take effect January 1, 1994.

(6) Sections 701 and 702 of this act shall take effect immediately.

(7) Sections 801 through 1001 of this act shall take effect July 1, 1993.

NEW SECTION. Sec. 1103. Part headings as used in this act constitute no part of the law.