CHAPTER 25
BUSINESS AND OCCUPATION TAX CODE
SECTION:
5-25-1: Exercise Of Revenue License Power
5-25-3: Agency – Sales And Services By Agent, Consignee, Bailee, Factor Or Auctioneer
5-25-4: Imposition Of The Tax – Tax Or Fee Levied; Business License Fee Exemption
5-25-7: Assignment Of Gross Income Derived From Intangibles
5-25-12: New Business Tax Credit
5-25-14: Administrative Provisions
5-25-1 EXERCISE OF REVENUE LICENSE POWER:
The provisions of this chapter shall be deemed an exercise of the power of the City to license for revenue. The provisions of this chapter are subject to periodic statutory or administrative rule changes or judicial interpretations of the ordinances or rules. The responsibility rests solely with the licensee or taxpayer to reconfirm tax computation procedures and remain in compliance with the City code. (Ord. 5734, 11-3-14)
5-25-2 DEFINITIONS:
In construing the provisions of this chapter, the following definitions shall be applied. Words in the singular number shall include the plural, and the plural shall include the singular. In the event that a word, term or phrase defined in this section shall conflict with a word, term or phrase as defined in this title, this chapter shall control to the extent of the conflict.
A. “Administrator” shall mean the Finance Administrator or designee, unless otherwise specified.
B. “Artistic or cultural organization,” as used in this chapter means the following:
1. The organization is organized and operated exclusively for the purpose of providing artistic or cultural exhibitions, presentations, or performances or cultural or art education programs, as defined in subsection 10 of this section, for viewing or attendance by the general public.
2. The organization must be a not-for-profit corporation under RCW Chapter 24.03.
3. The organization must be managed by a governing board of not less than eight (8) individuals none of whom is a paid employee of the organization or by a corporation under RCW Chapter 24.12.
4. No part of its income may be paid directly or indirectly to its members, stockholders, officers, directors, or trustees except in the form of services rendered by the corporation in accordance with its purposes and bylaws.
5. Salary or compensation paid to its officers and executives must be only for actual services rendered, and at levels comparable to the salary or compensation of like positions within the state.
6. Assets of the corporation must be irrevocably dedicated to the activities for which the exemption is granted and, on the liquidation, dissolution, or abandonment by the corporation, may not inure directly or indirectly to the benefit of any member or individual except a non-profit organization, association, or corporation which also would be entitled to the exemption.
7. The corporation must be duly licensed or certified when licensing or certification is required by law or regulation.
8. The amounts received that qualify for exemption must be used for the activities for which the exemption is granted.
9. Services must be available regardless of race, color, national origin, ancestry, religion, age, sex, marital status, sexual orientation, or the presence of any mental or physical disability.
10. The term “artistic or cultural exhibitions, presentations, or performances or cultural or art education programs” is limited to:
a. An exhibition or presentation of works of art or objects of cultural or historical significance, such as those commonly displayed in art or history museums;
b. A musical or dramatic performance or series of performances; or
c. An educational seminar or program, or series of such programs, offered by the organization to the general public on an artistic, cultural, or historical subject.
C. “Business” includes all activities engaged in with the purpose of gain, benefit, or advantage to the taxpayer or to another person or class, directly or indirectly.
D. “Business and occupation tax” or “gross receipts tax” means a tax imposed on or measured by the value of products, the gross income of the business, or the gross proceeds of sales, as the case may be, and that is the legal liability of the business.
E. “Commercial or industrial use” means the following uses of products, including by-products, by the extractor or manufacturer of the products:
1. Any use as a consumer; and
2. The manufacturing of products including articles, substances or commodities.
F. “Delivery” means the transfer of possession of tangible personal property between the seller and the buyer or the buyer’s representative. Delivery to an employee of a buyer is considered delivery to the buyer. Transfer of possession of tangible personal property occurs when the buyer or the buyer’s representative first takes physical control of the property or exercises dominion and control over the property. Dominion and control means the buyer has the ability to possess, use, convey or dispose the property as the buyer chooses. It means the buyer or the buyer’s representative has made the final decision to accept or reject the property, and the seller has no further right to possession of the property and the buyer has no right to return the property to the seller, other than under a warranty contract. A buyer does not exercise dominion and control over tangible personal property merely by arranging for shipment of the property from the seller to itself. A buyer’s representative is a person, other than an employee of the buyer, who has the buyer’s written authorization to receive tangible personal property and take dominion and control by making the final decision to accept or reject the property. Neither a shipping company nor a seller can serve as a buyer’s representative. It is immaterial where the contract of sale is negotiated or where the buyer obtains title to the property. Delivery terms and other provisions of the Uniform Commercial Code (RCW Title 62A) do not determine when or where delivery of tangible personal property occurs for purposes of taxation.
G. “Digital automated service,” “digital code,” and “digital goods” have the same meaning as in RCW 82.04.192, Digital products definitions.
H. “Digital products” means digital goods, digital codes, digital automated services, and the services described in RCW 82.04.050(2)(g) and (6)(b), “Sale at retail,” “retail sale.”
I. Eligible gross receipts tax:
The term “eligible gross receipts tax” means a tax which:
1. Is imposed on the act or privilege of engaging in business activities within section RMC 5-25-4; and
2. Is measured by the gross volume of business, in terms of gross receipts and is not an income tax or value-added tax (VAT); and
3. Is not, pursuant to law or custom, separately stated from the sales price; and
4. Is not a sales or use tax, business license fee, franchise fee, royalty or severance tax measured by volume or weight, or concession charge, or payment for the use and enjoyment of property, property right or a privilege; and
5. Is a tax imposed by a local jurisdiction, whether within or without the State of Washington, and not by a country, state, province, or any other non-local jurisdiction above the county level.
J. Engaging in business:
1. The term “engaging in business” means commencing, conducting, or continuing in business, and also the exercise of corporate or franchise powers, as well as liquidating a business when the liquidators hold themselves out to the public as conducting such business.
2. This section sets forth examples of activities that constitute engaging in business in the City, and establishes safe harbors for certain activities so that a person who meets the criteria may engage in de minimis business activities in the City without having to register and obtain a business license or pay City business and occupation taxes. The activities listed in this section are illustrative only and are not intended to narrow the definition of “engaging in business” in subsection 1. If an activity is not listed, whether it constitutes engaging in business in the City shall be determined by considering all the facts and circumstances and applicable law.
3. Without being all-inclusive, any one of the following activities conducted within the City by a person, or its employee, agent, representative, independent contractor, broker or another person acting on its behalf constitutes engaging in business and requires a person to register and obtain a business license:
a. Owning, renting, leasing, maintaining, or having the right to use, or using, tangible personal property, intangible personal property, or real property permanently or temporarily located in the City.
b. Owning, renting, leasing, using, or maintaining, an office, place of business, or other establishment in the City.
c. Soliciting sales.
d. Making repairs or providing maintenance or service to real or tangible personal property, including warranty work and property maintenance.
e. Providing technical assistance or service, including quality control, product inspections, warranty work, or similar services on or in connection with tangible personal property sold by the person or on its behalf.
f. Installing, constructing, or supervising installation or construction of, real or tangible personal property.
g. Soliciting, negotiating, or approving franchise, license, or other similar agreements.
h. Collecting current or delinquent accounts.
i. Picking up and transporting tangible personal property, solid waste, construction debris, or excavated materials.
j. Providing disinfecting and pest control services, employment and labor pool services, home nursing care, janitorial services, appraising, landscape architectural services, security system services, surveying, and real estate services including the listing of homes and managing real property.
k. Rendering professional services such as those provided by accountants, architects, attorneys, auctioneers, consultants, engineers, professional athletes, barbers, baseball clubs and other sports organizations, chemists, consultants, psychologists, court reporters, dentists, doctors, detectives, laboratory operators, teachers, veterinarians.
l. Meeting with customers or potential customers, even when no sales or orders are solicited at the meetings.
m. Training or recruiting agents, representatives, independent contractors, brokers or others, domiciled or operating on a job in the City, acting on its behalf, or for customers or potential customers.
n. Investigating, resolving, or otherwise assisting in resolving customer complaints.
o. In-store stocking or manipulating products or goods, sold to and owned by a customer, regardless of where sale and delivery of the goods took place.
p. Delivering goods in vehicles owned, rented, leased, used, or maintained by the person or another person acting on its behalf.
4. If a person, or its employee, agent, representative, independent contractor, broker or another person acting on the person’s behalf, engages in no other activities in or with the City but the following, it need not register and obtain a business license and pay tax:
a. Meeting with suppliers of goods and services as a customer.
b. Meeting with government representatives in their official capacity, other than those performing contracting or purchasing functions.
c. Attending meetings, such as board meetings, retreats, seminars, and conferences, or other meetings wherein the person does not provide training in connection with tangible personal property sold by the person or on its behalf. This provision does not apply to any board of director member or attendee engaging in business such as a member of a board of directors who attends a board meeting.
d. Renting tangible or intangible property as a customer when the property is not used in the City.
e. Attending, but not participating in a “trade show” or “multiple vendor events”. Persons participating at a trade show shall review RMC Chapter 5-22, Special Event Permits.
f. Conducting advertising through the mail.
g. Soliciting sales by phone from a location outside the City.
5. A seller located outside the City merely delivering goods into the City by means of common carrier is not required to register and obtain a business license, provided that it engages in no other business activities in the City. Such activities do not include those in subsection 4. The City expressly intends that engaging in business includes any activity sufficient to establish nexus for purposes of applying the tax under the law and the constitutions of the United States and the State of Washington. Nexus is presumed to continue as long as the taxpayer benefits from the activity that constituted the original nexus generating contact or subsequent contacts.
K. “Extracting” is the activity engaged in by an extractor and is reportable under the extracting classification.
L. “Extractor” means every person who from that person’s land or from the land of another under a right or license granted by lease or contract, either directly or by contracting with others for the necessary labor or mechanical services, for sale or for commercial or industrial use, mines, quarries, takes or produces coal, oil, natural gas, ore, stone, sand, gravel, clay, mineral or other natural resource product; or fells, cuts or takes timber, Christmas trees, other than plantation Christmas trees, or other natural products; or takes fish, shellfish, or other sea or inland water foods or products. “Extractor” does not include persons performing under contract the necessary labor or mechanical services for others; or persons meeting the definition of farmer.
M. “Extractor for hire” means a person who performs under contract necessary labor or mechanical services for an extractor.
N. “Gross income of the business” means the value proceeding or accruing by reason of the transaction of the business engaged in and includes gross proceeds of sales, compensation for the rendition of services, gains realized from trading in stocks, bonds, or other evidences of indebtedness, interest, discount, rents, royalties, fees, commissions, dividends, and other emoluments however designated, all without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.
O. “Gross proceeds of sales” means the value proceeding or accruing from the sale of tangible personal property, digital goods, digital codes, digital automated services or for other services rendered, without any deduction on account of the cost of property sold, the cost of materials used, labor costs, interest, discount paid, delivery costs, taxes, or any other expense paid or accrued and without any deduction on account of losses.
P. Reserved. (Ord. 6038, 11-22-21)
Q. “Manufacturing” means the activity conducted by a manufacturer and is reported under the manufacturing classification.
R. Manufacture, to manufacture:
1. “Manufacturer” means every person who, either directly or by contracting with others for the necessary labor or mechanical services, manufactures for sale or for commercial or industrial use from the person’s own materials or ingredients any products. When the owner of equipment or facilities furnishes, or sells to the customer prior to manufacture, materials or ingredients equal to less than twenty percent (20%) of the total value of all materials or ingredients that become a part of the finished product, the owner of the equipment or facilities will be deemed to be a processor for hire, and not a manufacturer. A business not located in this City that is the owner of materials or ingredients processed for it in this City by a processor for hire shall be deemed to be engaged in business as a manufacturer in this City.
2. “To manufacture” means all activities of a commercial or industrial nature requiring the use of labor or skill, by hand or machinery, to materials or ingredients resulting in a new, different or useful product for sale or commercial or industrial use, and shall include:
a. The production of special made or custom made articles;
b. The production of dental appliances, devices, restorations, substitutes, or other dental laboratory products by a dental laboratory or dental technician;
c. Crushing and/or blending of rock, sand, stone, gravel, or ore; and
d. The producing of articles for sale, or for commercial or industrial use from raw materials or prepared materials by giving such materials, articles, and substances of trade or commerce new forms, qualities, properties or combinations including, but not limited to, such activities as making, fabricating, processing, refining, mixing, slaughtering, packing, aging, curing, mild curing, preserving, canning, and the preparing and freezing of fresh fruits and vegetables.
“To manufacture” shall not include the production of digital goods or the production of computer software if the computer software is delivered from the seller to the purchaser by means other than tangible storage media, including the delivery by use of a tangible storage media where the tangible storage media is not physically transferred to the purchaser.
S. “Non-profit organization” means a corporation or organization in which no part of the income can be distributed to its members, directors, or officers and that holds a current tax exempt status as provided under Internal Revenue Code Sec. 501(c), or is specifically exempted from the requirement to apply for tax exempt status under Internal Revenue Code Sec. 501(c). Where the term “non-profit organization” is used, it is meant to include a non-profit corporation.
T. “Person” means any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, co-partnership, joint venture, club, company, joint stock company, business trust, municipal corporation, political subdivision of the State of Washington, corporation, limited liability company, association, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, non-profit, or otherwise and the United States of America or any of its instrumentalities.
U. “Processor for hire” means the performance of labor and mechanical services upon materials or ingredients belonging to others so that as a result a new, different or useful product is produced for sale, or commercial or industrial use. A processor for hire is any person who would be a manufacturer if that person were performing the labor and mechanical services upon that person’s own materials or ingredients. If a person furnishes, or sells to the customer prior to manufacture, materials or ingredients equal to twenty percent (20%) or more of the total value of all materials or ingredients that become part of the finished product the person will be deemed the manufacturer and not a processor for hire.
V. “Retailing” means the activity of engaging in making sales at retail and is reported under the retailing classification.
W. “Retail service” shall include the sale of or charge made for personal, business, or professional services including amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities:
1. Amusement and recreation services including but not limited to golf, pool, billiards, skating, bowling, swimming, bungee jumping, ski lifts and tows, basketball, racquet ball, handball, squash, tennis, batting cages, day trips for sightseeing purposes, and others, when provided to consumers. “Amusement and recreation services” also include the provision of related facilities such as basketball courts, tennis courts, handball courts, swimming pools, and charges made for providing the opportunity to dance. The term “amusement and recreation services” does not include instructional lessons to learn a particular activity such as tennis lessons, swimming lessons, or archery lessons.
2. Abstract, title insurance, and escrow services;
3. Credit bureau services;
4. Automobile parking and storage garage services;
5. Landscape maintenance and horticultural services but excluding (a) horticultural services provided to farmers and (b) pruning, trimming, repairing, removing, and clearing of trees and brush near electric transmission or distribution lines or equipment, if performed by or at the direction of an electric utility;
6. Service charges associated with tickets to professional sporting events; and
7. The following personal services: Physical fitness services, tanning salon services, tattoo parlor services, steam bath services, Turkish bath services, escort services, and dating services.
8. The term shall also include the renting or leasing of tangible personal property to consumers and the rental of equipment with an operator.
X. Sale, casual or isolated sale:
1. “Sale” means any transfer of the ownership of, title to, right to control, or possession of, property for a valuable consideration and includes any activity classified as a “sale at retail,” “retail sale,” or “retail service.” It includes renting or leasing, conditional sale contracts, leases with option to purchase, and any contract under which possession of the property is given to the purchaser but title is retained by the vendor as security for the payment of the purchase price. It also includes the furnishing of food, drink, or meals for compensation whether consumed upon the premises or not.
2. “Casual or isolated sale” means a sale made by a person who is not engaged in the business of selling the type of property involved on a routine or continuous basis.
Y. Sale at retail, retail sale:
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 but not limited to, 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 under RCW 82.04.470, Wholesale sale – Reseller permit – Exemption certificates – Burden of proof – Tax liability, 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 through e of this subsection following such use.
f. Purchases for the purpose of satisfying the person’s obligations under an extended warranty as defined in subsection 7 of this section, if such tangible personal property replaces or becomes an ingredient or component of property covered by the extended warranty without intervening use by such person.
2. “Sale at retail” or “retail sale” also means every sale of tangible personal property to persons engaged in any business activity which is taxable under this chapter.
3. “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, but excluding charges made for the use of coin-operated laundry facilities when such facilities are situated in and for the exclusive use of tenants of an apartment house, rooming house, or mobile home park, and also excluding sales of laundry service to nonprofit health care facilities, and excluding services rendered in respect to live animals, birds and insects;
b. The constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, including the installing or attaching of any tangible personal property, 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 RCW Chapter 82.16, Public Utility Tax;
f. The sale of and charge made for the furnishing of lodging and all other services, except telephone business and cable service, 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 (1) month or more constitutes a rental or lease of real property and not a mere license to use or enjoy the same. For the purposes of this subsection, it shall be presumed that the sale of and charge made for the furnishing of lodging for a continuous period of one (1) month or more to a person is a rental or lease of real property and not a mere license to enjoy the same;
g. The installing, repairing, altering, or improving of digital goods for consumers;
h. The sale of or charge made for tangible personal property, labor and services to persons taxable under a through g of this subsection when such sales or charges are for property, labor and services which are used or consumed in whole or in part by such persons in the performance of any activity defined as a “sale at retail” or “retail sale” even though such property, labor and services may be resold after such use or consumption. Nothing contained in this subsection shall be construed to modify subsection 1 of this section and nothing contained in subsection 1 of this section shall be construed to modify this subsection.
4. “Sale at retail” or “retail sale” shall also include the providing of competitive telephone service to consumers.
5. “Sale at retail” or “retail sale”:
a. shall also include the sale of prewritten software other than a sale to a person who presents a resale certificate under RCW 82.04.470, regardless of the method of delivery to the end user. For purposes of this subsection 5.a the sale of prewritten computer software includes the sale of or charge made for a key or an enabling or activation code, where the key or code is required to activate prewritten computer software and use the software. There is no separate sale of the key or code from the prewritten computer software, regardless of how the sale may characterized by the vendor or by the purchaser.
The term “sale at retail” or “retail sale” does not include the sale of or charge made for:
i. Custom software; or
ii. The customization of prewritten software.
b. i. The term also includes the charge made to consumers for the right to access and use prewritten computer software, where possession of the software is maintained by the seller or a third-party, regardless of whether the charge for the service is on a per use, per user, per license, subscription, or some other basis.
ii. (a) The service described in b.i of this subsection 5 includes the right to access and use prewritten software to perform data processing.
(b) For purposes of this subsection b.ii “data processing” means the systematic performance of operations on data to extract the required information in an appropriate form or to convert the data to usable information. Data processing includes check processing, image processing, form processing, survey processing, payroll processing, claim processing, and similar activities.
6. “Sale at retail” or “retail sale” shall also 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, the State of Washington, or the United States of America and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind (public road construction).
7. “Sale at retail” or “retail sale” shall also include the sale of or charge made for an extended warranty to a consumer. For purposes of this subsection, “extended warranty” means an agreement for a specified duration to perform the replacement or repair of tangible personal property at no additional charge or a reduced charge for tangible personal property, labor, or both, or to provide indemnification for the replacement or repair of tangible personal property, based on the occurrence of specified events. The term “extended warranty” does not include an agreement, otherwise meeting the definition of extended warranty in this subsection, if no separate charge is made for the agreement and the value of the agreement is included in the sales price of the tangible personal property covered by the agreement.
8. “Sale at retail” or “retail sale” shall also 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 RCW Chapter 35.82, including the installing, or attaching of any article of tangible personal property, whether or not such personal property becomes a part of the real property by virtue of installation (government contracting).
9. “Sale at retail” or “retail sale” shall not include the sale of services or charges made for the clearing of land and the moving of earth of or for the United States of America, or any of its instrumentality, or a county or city housing authority. The term does not include the sale of services or charges made for cleaning up for the United States of America, or any of its instrumentalities, radioactive waste and other byproducts of weapons production and nuclear research and development. (This should be reported under the service and other classification as defined under 5-25-4.A.7.)
10. “Sale at retail” or “retail sale” shall not include the sale of or charge made for labor and services rendered for environmental remedial action. (This should be reported under the service and other classification as defined under 5-25-4.A.7.)
11. “Sale at retail” or “retail sale” shall also include the following sales to consumers of digital goods, digital codes, and digital automated services:
a. Sales in which the seller has granted the purchaser the right of permanent use;
b. Sales in which the seller has granted the purchaser a right of use that is less than permanent;
c. Sales in which the purchaser is not obligated to make continued payment as a condition of the sale; and
d. Sales in which the purchaser is obligated to make continued payment as a condition of the sale.
A retail sale of digital goods, digital codes, or digital automated services under this subsection Y.11 includes any services provided by the seller exclusively in connection with the digital goods, digital codes, or digital automated services, whether or not a separate charge is made for such services.
For purposes of this subsection, “permanent” means perpetual or for an indefinite or unspecified length of time. A right of permanent use is presumed to have been granted unless the agreement between the seller and the purchaser specifies or the circumstances surrounding the transaction suggest or indicate that the right to use terminates on the occurrence of a condition subsequent.
12. “Sale at retail” or “retail sale” shall also include the installing, repairing, altering, or improving of digital goods for consumers.
Z. Sale at wholesale, wholesale sale.
“Sale at wholesale” or “wholesale sale” means any sale of tangible personal property, digital goods, digital codes, digital automated services, prewritten computer software, or services described in subsection Y.5.b.i, “Sale at retail”, which is not a retail sale, and any charge made for labor and services rendered for persons who are not consumers, in respect to real or personal property and retail services, if such charge is expressly defined as a retail sale or retail service when rendered to or for consumers. Sale at wholesale also includes the sale of telephone business to another telecommunications company as defined in RCW 80.04.010 for the purpose of resale, as contemplated by RCW 35.21.715, Taxes on network telephone services.
AA. “Service” means any sale or charge made for personal, business or professional service, including amounts designated as rents, fees, or admissions, not otherwise included within any other tax classification defined herein; provided that, the term “service” excludes retail or wholesale services.
BB. “Taxpayer” means any “person”, as defined in subsection T, required to have a business license under this chapter or liable for the collection of any tax or fee under this chapter, or who engages in any business or who performs any act for which a tax or fee is imposed by this chapter.
CC. “Value proceeding or accruing” means the consideration, whether money, credits, rights, or other property expressed in terms of money, a person is entitled to receive or which is actually received or accrued. The term shall be applied, in each case, on a cash receipts or accrual basis according to which method of accounting is regularly employed in keeping the books of the taxpayer.
DD. Value of products:
1. The value of products, including by-products, extracted or manufactured, shall be determined by the gross proceeds derived from the sale of those products, whether such sale is at wholesale or at retail, to which shall be added all subsidies and bonuses received from the purchaser or from any other person with respect to the extraction, manufacture, or sale of such products or by-products by the seller.
2. Where such products, including by-products, are extracted or manufactured for commercial or industrial use; and where such products, including by-products, are shipped, transported or transferred out of the City, or to another person, without prior sale or are sold under circumstances such that the gross proceeds from the sale are not indicative of the true value of the subject matter of the sale; the value shall correspond as nearly as possible to the gross proceeds from sales in this state of similar products of like quality and character, and in similar quantities by other taxpayers, plus the amount of subsidies or bonuses ordinarily payable by the purchaser or by any third person with respect to the extraction, manufacture, or sale of such products. In the absence of sales of similar products as a guide to value, such value may be determined upon a cost basis. In such cases, there shall be included every item of cost attributable to the particular article or article extracted or manufactured, including direct and indirect overhead costs. The Administrator may prescribe rules for the purpose of ascertaining such values.
3. Notwithstanding subsection 2 above, the value of a product manufactured or produced for purposes of serving as a prototype for the development of a new or improved product shall correspond to (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.
EE. “Wholesaling” means engaging in the activity of making sales at wholesale, and is reported under the wholesaling classification. (Ord. 5734, 11-3-14; Ord. 5771, 10-5-15; Ord. 5945, 11-18-19)
5-25-3 AGENCY – SALES AND SERVICES BY AGENT, CONSIGNEE, BAILEE, FACTOR OR AUCTIONEER:
A. Sales in Own Name – Sales or Purchases as Agent: Consistent with RCW 82.04.480, every person, including agents, consignees, bailees, factors or auctioneers having either actual or constructive possession of tangible personal property or having possession of the documents of title, with power to sell such tangible personal property in the person’s own name and actually so selling, shall be deemed the seller of such tangible personal property within the meaning of this chapter. Furthermore, the consignor, bailor, principal, or owner is deemed a seller of such property to the consignee, bailee, factor, or auctioneer.
The burden shall be solely upon the taxpayer in every case to establish the fact that such taxpayer is not engaged in the business of selling tangible personal property but is acting merely as broker or agent in promoting sales or making purchases for a principal. Such claim will be recognized only when the contract or agreement between such persons clearly establishes the relationship of principal and agent and when the following conditions are complied with:
1. The books and records of the broker or agent show the transactions were made in the name and for the account of the principal, and show the name of the actual owner of the property for whom the sale was made, or the actual buyer for whom the purchase was made.
2. The books and records show the amount of the principal’s gross sales, the amount of commissions and any other incidental income derived by the broker or agent from such sales. The principal’s gross sales must not be reflected as the agent’s income on any of the agent’s books and records. Commissions must be computed according to a set percentage or amount, which is agreed upon in the agency agreement.
3. No ownership rights may be conferred to the agent unless the principal refuses to pay, or refuses to abide by the agency agreement. Sales or purchases of any goods by a person who has any ownership rights in such goods shall be taxed as retail or wholesale sales.
4. Bulk goods sold or purchased on behalf of a principal must not be commingled with goods belonging to another principal or lose their identity as belonging to the particular principal. Sales or purchases of any goods which have been commingled or lost their identity as belonging to the principal shall be taxed as retail or wholesale sales.
B. If the above requirements are not met the consignor, bailor, principal or other shall be deemed a seller of such property to the agent, consignee, bailee, factor or auctioneer.
C. Services in Own Name – Procuring Services as Agent: For purposes of this subsection, an agent is a person who acts under the direction and control of the principal in procuring services on behalf of the principal that the person could not itself render or supply. Amounts received by an agent for the account of its principal as advances or reimbursements are exempted from the measure of the tax only when the agent is not primarily or secondarily liable to pay for the services procured.
Any person who claims to be acting merely as agent in obtaining services for a principal will have such claim recognized only when the contract or agreement between such persons clearly establishes the relationship of principal and agent and when the following conditions are complied with:
1. The books and records of the agent show that the services were obtained in the name and for the account of the principal, and show the actual principal for whom the purchase was made.
2. The books and records show the amount of the service that was obtained for the principal, the amount of commissions and any other income derived by the agent for acting as such. Amounts received from the principal as advances and reimbursements must not be reflected as the agent’s income on any of the agent’s books and records. Commissions must be computed according to a set percentage or amount, which is agreed upon in the agency agreement.
D. A consignee, bailee, factor, agent or auctioneer, as used in this section, refers to one who has either actual or constructive possession of tangible personal property, the actual ownership of such property being in another, or one calling for bids on such property. The term “constructive possession” means possession of the power to pass title to tangible personal property of others. (Ord. 5734, 11-3-14)
5-25-4 IMPOSITION OF THE TAX – TAX OR FEE LEVIED; BUSINESS LICENSE FEE EXEMPTION:
A. Except as provided in RMC 5-25-4.B (Tax Thresholds) and 5-25-4.C (Annual Tax Cap and Rate Reduction), effective January 1, 2016 at 12:01 a.m. there is levied upon and shall be collected from every person a tax for the act or privilege of engaging in business activities in the City of Renton, whether the person’s office or place of business be within or without the City. The tax shall be in amounts to be determined by application of rates against gross proceeds of sale, gross income of business, or value of products, including by-products, as the case may be, as follows:
1. Upon every person engaging within the City in business as an extractor; as to such persons, the amount of the tax with respect to such business shall be equal to the value of the products, including by-products, extracted within the City for sale or for commercial or industrial use, multiplied by the rate of .121 of one percent (.00121). The measure of the tax is the value of the products, including by-products, so extracted, regardless of the place of sale or the fact that deliveries may be made to points outside the City.
2. Upon every person engaging within the City in business as a manufacturer; as to such persons, the amount of the tax with respect to such business shall be equal to the value of the products, including by-products, manufactured within the City, multiplied by the rate of .121 of one percent (.00121). The measure of the tax is the value of the products, including by-products, so manufactured, regardless of the place of sale or the fact that deliveries may be made to points outside the City.
3. Upon every person engaging within the City in the business of making sales at wholesale; as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of such sales of the business without regard to the place of delivery of articles, commodities or merchandise sold, multiplied by the rate of .121 of one percent (.00121).
4. Upon every person engaging within the City in the business of making sales at retail; as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of such sales of the business, without regard to the place of delivery of articles, commodities or merchandise sold, multiplied by the rate of .070 of one percent (.00070).
5. Upon every person engaging within the City in the business of (a) printing, (b) both printing and publishing newspapers, magazines, periodicals, books, music, and other printed items, (c) publishing newspapers, magazines and periodicals, (d) extracting for hire, and (e) processing for hire; as to such persons, the amount of tax on such business shall be equal to the gross income of the business multiplied by the rate of .121 of one percent (.00121).
6. Upon every person engaging within the City in the business of sales of retail services; as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales multiplied by the rate of .121 of one percent (.00121).
7. Upon every other person engaging within the City in any business activity other than or in addition to those enumerated in the above subsections; as to such persons, the amount of tax on account of such activities shall be equal to the gross income of the business multiplied by the rate of .121 of one percent (.00121). This subsection includes, among others, and without limitation whether or not title to material used in the performance of such business passes to another by accession, merger or other than by outright sale, persons engaged in the business of developing, or producing custom software or of customizing canned software, producing royalties or commissions, and persons engaged in the business of rendering any type of service which does not constitute a sale at retail, a sale at wholesale, or a retail service.
B. Tax Thresholds: This chapter shall not apply to any person engaging in any one (1) or more business activities which are otherwise taxable pursuant to RMC 5-25-4.A, whose value of products, including by-products, gross proceeds of sales, and gross income of the business, less any deductions, as the case may be, from all activities conducted during any calendar year, is less than or equal to the threshold amount of five hundred thousand dollars ($500,000).
C. Annual Tax Cap and Rate Reduction: For the calendar years 2022-2024, the tax imposed under this chapter for a single taxpayer shall not exceed the following maximum tax amounts for each respective year according to the following schedule: 2022 – seven million dollars ($7,000,000); 2023 – nine million dollars ($9,000,000); 2024 – eleven million dollars ($11,000,000). Starting in 2025 and for each subsequent year thereafter, once a taxpayer has paid twelve million dollars ($12,000,000) in taxes imposed under this chapter in the given year, the rates specified in RMC 5-25-4.A shall be discounted by seventy-five percent (75%) for remaining gross proceeds of sale, gross income of business, or value of products, including by-products, as the case may be. (Ord. 5734, 11-3-14; Ord. 5866, 12-4-17; Ord. 6038, 11-22-21; Ord. 6071, 6-27-22)
5-25-5 MULTIPLE ACTIVITIES CREDIT WHEN ACTIVITIES TAKE PLACE IN ONE OR MORE CITIES WITH ELIGIBLE GROSS RECEIPT TAXES:
A. Persons who engage in business activities that are within the purview of two (2) or more subsections of RMC 5-25-4.A shall be taxable under each applicable subsection.
B. Notwithstanding any provision to the contrary, if the Administrator finds that the imposition of the City’s tax would place an undue burden upon interstate commerce or violate constitutional requirements, a taxpayer shall be allowed a credit to the extent necessary to preserve the validity of the City’s tax, and still apply the City tax to as much of the taxpayer’s activities as may be subject to the City’s taxing authority.
C. To take the credit authorized by this section, a taxpayer must be able to document that the amount of tax sought to be credited was paid upon the same gross receipts used in computing the tax against which the credit is applied.
D. Credit for Persons That Sell in the City Products That They Extract or Manufacture. Persons taxable under the retailing or wholesaling classification with respect to selling products in this City shall be allowed a credit against those taxes for any eligible gross receipts taxes paid (1) with respect to the manufacturing of the products sold in the City, and (2) with respect to the extracting of the products, or the ingredients used in the products, sold in the City. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the sale of those products.
E. Credit for persons that manufacture products in the City using ingredients they extract. Persons taxable under the manufacturing classification with respect to manufacturing products in this City shall be allowed a credit against those taxes for any eligible gross receipts tax paid with respect to extracting the ingredients of the products manufactured in the City. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the manufacturing of those products.
F. Credit for persons that sell within the City products that they print, or publish and print. Persons taxable under the retailing or wholesaling classification with respect to selling products in this City shall be allowed a credit against those taxes for any eligible gross receipts taxes paid with respect to the printing, or the printing and publishing, of the products sold within the City. The amount of the credit shall not exceed the tax liability arising under this chapter with respect to the sale of those products. (Ord. 5734, 11-3-14)
5-25-6 DEDUCTIONS TO PREVENT MULTIPLE TAXATION OF MANUFACTURING ACTIVITIES AND PRIOR TO JANUARY 1, 2008, TRANSACTIONS INVOLVING MORE THAN ONE CITY WITH AN ELIGIBLE GROSS RECEIPTS TAX:
A. Amounts Subject to an Eligible Gross Receipts Tax in Another City That Also Maintains Nexus Over the Same Activity: For taxes due prior to January 1, 2008, a taxpayer that is subject to an eligible gross receipts tax on the same activity in more than one (1) jurisdiction may be entitled to a deduction as follows:
1. A taxpayer that has paid an eligible gross receipts tax, with respect to a sale of goods or services, to a jurisdiction in which the goods are delivered or the services are provided may deduct an amount equal to the gross receipts used to measure that tax from the measure of the tax owed to the City.
2. Notwithstanding the above, a person that is subject to an eligible gross receipts tax in more than one (1) jurisdiction on the gross income derived from intangibles such as royalties, trademarks, patents, or goodwill shall assign those gross receipts to the jurisdiction where the person is domiciled (its headquarters is located).
3. A taxpayer that has paid an eligible gross receipts tax on the privilege of accepting or executing a contract with another city may deduct an amount equal to the contract price used to measure the tax due to the other city from the measure of the tax owed to the City.
B. Person Manufacturing Products Within and Without: A person manufacturing products within the City using products manufactured by the same person outside the City may deduct from the measure of the manufacturing tax the value of products manufactured outside the City and included in the measure of an eligible gross receipts tax paid to the other jurisdiction with respect to manufacturing such products. (Ord. 5734, 11-3-14)
5-25-7 ASSIGNMENT OF GROSS INCOME DERIVED FROM INTANGIBLES:
Gross income derived from the sale of intangibles such as royalties, trademarks, patents, or goodwill shall be assigned to the jurisdiction where the person is domiciled (its headquarters is located). (Ord. 5734, 11-3-14)
5-25-8 ALLOCATION AND APPORTIONMENT OF INCOME WHEN ACTIVITIES TAKE PLACE IN MORE THAN ONE JURISDICTION:
Gross income, other than persons subject to the provisions of RCW Chapter 82.14A, shall be allocated and apportioned as follows:
A. Gross income derived from all activities other than those taxed as service or royalties under RMC 5-25-4.A.7 shall be allocated to the location where the activity takes place.
B. In the case of sales of tangible personal property, the activity takes place where delivery to the buyer occurs.
C. In the case of sales of digital products, the activity takes place where delivery to the buyer occurs. The delivery of digital products will be deemed to occur at:
1. The seller’s place of business if the purchaser receives the digital product at the seller’s place of business;
2. If not received at the seller’s place of business, the location where the purchaser or the purchaser’s donee, designated as such by the purchaser, receives the digital product, including the location indicated by instructions for delivery to the purchaser or donee, known to the seller;
3. If the location where the purchaser or the purchaser’s donee receives the digital product is not known, the purchaser’s address maintained in the ordinary course of the seller’s business when use of this address does not constitute bad faith;
4. If no address for the purchaser is maintained in the ordinary course of the seller’s business, the purchaser’s address obtained during the consummation of the sale, including the address of a purchaser’s payment instrument, if no other address is available, when use of this address does not constitute bad faith; and
5. If no address for the purchaser is obtained during the consummation of the sale, the address where the digital good or digital code is first made available for transmission by the seller or the address from which the digital automated service or service described in RCW 82.04.050(2)(g) or (6)(b) was provided, disregarding for these purposes any location that merely provided the digital transfer of the product sold.
D. If none of the methods in RMC 5-25-8.C for determining where the delivery of digital products occurs are available after a good faith effort by the taxpayer to apply the methods provided in RMC 5-25-8.C.1 through 5, then the City and the taxpayer may mutually agree to employ any other method to effectuate an equitable allocation of income from the sale of digital products. The taxpayer will be responsible for petitioning the City to use an alternative method under RMC 5-25-8.D. The City may employ an alternative method for allocating the income from the sale of digital products if the methods provided in RMC 5-25-8.C.1 through 5 are not available and the taxpayer and the City are unable to mutually agree on an alternative method to effectuate an equitable allocation of income from the sale of digital products.
E. For purposes of RMC 5-25-8.C.1 through 5, the following definitions apply:
1. “Digital automated services,” “digital codes,” and “digital goods” have the same meaning as in RCW 82.04.192;
2. “Digital products” means digital goods, digital codes, digital automated services, and the services described in RCW 82.04.050 (2)(g) and (6)(c); and
3. “Receive” has the same meaning as in RCW 82.32.730.
F. Effective January 1, 2020, gross income derived from activities taxed as services and other activities taxed under RMC 5-25-4.A.7 shall be apportioned to the City by multiplying apportionable income by a fraction, the numerator of which is the payroll factor plus the service-income factor and the denominator of which is two (2).
1. The payroll factor is a fraction, the numerator of which is the total amount paid in the City during the tax period by the taxpayer for compensation and the denominator of which is the total compensation paid everywhere during the tax period. Compensation is paid in the City if:
a. The individual is primarily assigned within the City;
b. The individual is not primarily assigned to any place of business for the tax period and the employee performs fifty percent (50%) or more of his or her service for the tax period in the City; or
c. The individual is not primarily assigned to any place of business for the tax period, the individual does not perform fifty percent (50%) or more of his or her service in any city and the employee resides in the City.
2. The service income factor is a fraction, the numerator of which is the total service income of the taxpayer in the City during the tax period, and the denominator of which is the total service income of the taxpayer everywhere during the tax period. Service income is in the City if the customer location is in the City.
3. Gross income of the business from engaging in an apportionable activity must be excluded from the denominator of the service income factor if, in respect to such activity, at least some of the activity is performed in the City, and the gross income is attributable under subsection F.2 to a city or unincorporated area of a county within the United States or to a foreign country in which the taxpayer is not taxable. For purposes of this subsection F.3, "not taxable" means that the taxpayer is not subject to a business activities tax by that city or county within the United States or by that foreign country, except that a taxpayer is taxable in a city or county within the United States or in a foreign country in which it would be deemed to have a substantial nexus with the city or county within the United States or with the foreign country under the standards in RCW 35.102.050 regardless of whether that city or county within the United States or that foreign country imposes such a tax.
4. If the allocation and apportionment provisions of this subsection F do not fairly represent the extent of the taxpayer’s business activity in the City , the taxpayer may petition for or the tax administrator may require, in respect to all or any part of the taxpayer’s business activity, if reasonable:
a. Separate accounting;
b. The exclusion of any one (1) or more of the factors;
c. The inclusion of one (1) or more additional factors that will fairly represent the taxpayer’s business activity in the City; or
d. The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer’s income.
5. The party petitioning for, or the tax administrator requiring, the use of any method to effectuate an equitable allocation and apportionment of the taxpayer’s income pursuant to subsection F.4 must prove by a preponderance of the evidence:
a. That the allocation and apportionment provisions of this subsection F do not fairly represent the extent of the taxpayer’s business activity in the City; and
b. That the alternative to such provisions is reasonable.
The same burden of proof shall apply whether the taxpayer is petitioning for, or the tax administrator is requiring, the use of an alternative, reasonable method to effectuate an equitable allocation and apportionment of the taxpayer’s income.
6. If the tax administrator requires any method to effectuate an equitable allocation and apportionment of the taxpayer’s income, the tax administrator cannot impose any civil or criminal penalty with reference to the tax due that is attributable to the taxpayer’s reasonable reliance solely on the allocation and apportionment provisions of this subsection F.
7. A taxpayer that has received written permission from the tax administrator to use a reasonable method to effectuate an equitable allocation and apportionment of the taxpayer’s income shall not have that permission revoked with respect to transactions and activities that have already occurred unless there has been a material change in, or a material misrepresentation of, the facts provided by the taxpayer upon which the tax administrator reasonably relied in approving a reasonable alternative method.
G. The definitions in this subsection apply throughout this section:
1. “Apportionable income” means the gross income of the business taxable under the service classifications of a city’s gross receipts tax, including income received from activities outside the City if the income would be taxable under the service classification if received from activities within the City, less any exemptions or deductions available.
2. “Business activities tax” means a tax measured by the amount of, or economic results of, business activity conducted in a city or county within the United States or within a foreign country. The term includes taxes measured in whole or in part on net income or gross income or receipts. “Business activities tax” does not include a sales tax, use tax, or a similar transaction tax, imposed on the sale or acquisition of goods or services, whether or not denominated a gross receipts tax or a tax imposed on the privilege of doing business.
3. “Compensation” means wages, salaries, commissions, and any other form of remuneration paid to individuals for personal services that are or would be included in the individual’s gross income under the federal internal revenue code.
4. “Customer” means a person or entity to whom the taxpayer makes a sale or renders services or from whom the taxpayer otherwise receives gross income of the business.
5. “Customer location” means the following:
a. For a customer not engaged in business, if the service requires the customer to be physically present, where the service is performed.
b. For a customer not engaged in business, if the service does not require the customer to be physically present:
i. The customer’s residence; or
ii. If the customer’s residence is not known, the customer’s billing/mailing address.
c. For a customer engaged in business:
i. Where the services are ordered from;
ii. At the customer’s billing/mailing address if the location from which the services are ordered is not known; or
iii. At the customer’s commercial domicile if none of the above are known.
6. “Individual” means any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee of that taxpayer.
7. “Primarily assigned” means the business location of the taxpayer where the individual performs his or her duties.
8. “Service-taxable income” or “service income” means gross income of the business subject to tax under either the service or royalty classification.
9. “Tax period” means the calendar year during which tax liability is accrued. If taxes are reported by a taxpayer on a basis more frequent than once per year, taxpayers shall calculate the factors for the previous calendar year for reporting in the current calendar year and correct the reporting for the previous year when the factors are calculated for that year, but not later than the end of the first quarter of the following year.
H. Assignment or apportionment of revenue under this section shall be made in accordance with and in full compliance with the provisions of the interstate commerce clause of the United States Constitution where applicable. (Ord. 5734, 11-3-14; Ord. 5945, 11-18-19)
5-25-9 ALLOCATION AND APPORTIONMENT OF PRINTING AND PUBLISHING INCOME WHEN ACTIVITIES TAKE PLACE IN MORE THAN ONE JURISDICTION:
Notwithstanding RCW 35.102.130, effective January 1, 2008, gross income from the activities of printing, and of publishing newspapers, periodicals, or magazines, shall be allocated to the principal place in this state from which the taxpayer’s business is directed or managed. As used in this section, the activities of printing, and of publishing newspapers, periodicals, or magazines, have the same meanings as attributed to those terms in RCW 82.04.280(1) by the Department of Revenue. (Ord. 5734, 11-3-14)
5-25-10 EXEMPTIONS:
A. Adult Family Homes: This chapter does not apply to adult family homes which are licensed as such, or which are specifically exempt from licensing, under rules of the Washington State Department of Social and Health Services.
B. Day Care Provided By Churches: This chapter shall not apply to amounts derived by a church that is exempt from property tax under RCW 84.36.020 from the provision of care for children for periods of less than twenty-four (24) hours.
C. Child Care Resource and Referral Services by Nonprofit Organizations: This chapter does not apply to nonprofit organizations in respect to amounts derived from the provision of child-care resource and referral services.
D. Non-Profit Organizations That are Guarantee Agencies, Issue Debt, or Provide Guarantees for Student Loans: This chapter does not apply to gross income received by non-profit organizations exempt from federal income tax under Internal Revenue Code Section 501(c)(3), that:
1. Are guarantee agencies under the federal guaranteed student loan program or that issue debt to provide or acquire student loans; or
2. Provide guarantees for student loans made through programs other than the federal guaranteed student loan program.
E. Nonprofit Organizations—Credit and Debt Services: This chapter does not apply to nonprofit organizations in respect to amounts derived from provision of the following services:
1. Presenting individual and community credit education programs including credit and debt counseling;
2. Obtaining creditor cooperation allowing a debtor to repay debt in an orderly manner;
3. Establishing and administering negotiated repayment programs for debtors; or
4. Providing advice or assistance to a debtor with regard to 1, 2, or 3, above, of this subsection E.
F. Certain fraternal and beneficiary organizations: This chapter shall not apply to fraternal benefit societies or fraternal fire insurance associations, as described in Title 48 RCW; nor to beneficiary corporations or societies organized under and existing by virtue of RCW Title 24, if such beneficiary corporations or societies provide in their bylaws for the payment of death benefits. This exemption is limited, however, to gross income from premiums, fees, assessments, dues or other charges directly attributable to the insurance or death benefits provided by such societies, associations, or corporations.
G. Certain Corporations Furnishing Aid and Relief: This chapter shall not apply to the gross sales or the gross income received by corporations which have been incorporated under any act of the congress of the United States of America and whose principal purposes are to furnish volunteer aid to the United States of America armed force members 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, floods, and other national calamities and to devise and carry on measures for preventing the same.
H. Operation of Sheltered Workshops: This chapter shall not apply to income received from the Department of Social and Health Services for the cost of care, maintenance, support and training of persons with developmental disabilities at nonprofit group training homes as defined by RCW Chapter 71A.22 or to the business activities of nonprofit organizations from the operation of sheltered workshops. For the purposes of this subsection, RMC 5-25-10.H, “the operation of sheltered workshops” means performance of business activities of any kind on or off the premises of such nonprofit organizations which are performed for the primary purpose of:
1. Providing gainful employment or rehabilitation services to the handicapped or disabled as an interim step in the rehabilitation process for those who cannot be readily absorbed in the competitive labor market or during such time as employment opportunities for them in the competitive labor market do not exist; or
2. Providing evaluation and work adjustment services for handicapped or disabled individuals.
I. Investments—Dividends From Subsidiary Corporations: This chapter shall not apply to amounts derived by persons, other than those engaging in banking, loan, security or other financial businesses, from investments or the use of money as such, and also amounts derived as dividends by a parent from its subsidiary corporations.
J. The City of Renton is exempt from the tax levied by this chapter.
K. Gross Receipts Taxed Under Other Renton Municipal Code (RMC) Sections: This chapter shall not apply to:
1. Any person in respect to a business activity with respect to which tax liability is specifically imposed under the provisions of RMC Chapter 5-11 (Utility Tax); or
2. Any person in respect to a business activity with respect to which tax liability is specifically imposed under the provisions of RMC Chapter 5-8 (Gambling Tax).
L. Credit Unions: This chapter shall not apply to the gross income of credit unions organized under the laws of this state, any other state, or the United States.
M. International Banking Facilities: This chapter shall not apply to the gross receipts of an international banking facility. As used in this subsection, RMC 5-25-10.M, an “international banking facility” means a facility represented by a set of asset and liability accounts segregated on the books and records of a commercial bank, the principal office of which is located in this state, and which is incorporated and doing business under the laws of the United States of America or of this state, a United States branch or agency of a foreign bank, an Edge corporation organized under Section 25(A) of the Federal Reserve Act, 12 United States Code 611-631, or an Agreement corporation having an agreement or undertaking with the Board of Governors of the Federal Reserve System under Section 25 of the Federal Reserve Act, 12 United States Code 11 601-604(a), that includes only international banking facility time deposits (as defined in subsection (a)(2) of Section 204.8 of Regulation D (12 CFR Part 204), as promulgated by the Board of Governors of the Federal Reserve System), and international banking facility extensions of credit (as defined in subsection (a)(3) of Section 204.8 of Regulation D).
N. Insurance Business: This chapter shall not apply to amounts received by any person who is an insurer or their appointed insurance producer upon which a tax based on gross premiums is paid to the state pursuant to RCW 48.14.020, and provided further, that the provisions of this subsection shall not exempt any bonding company from tax with respect to gross income derived from the completion of any contract as to which it is a surety, or as to any liability as successor to the liability of the defaulting contractor.
O. Farmers – Agriculture: This chapter shall not apply to any farmer in respect to amounts received from selling fruits, vegetables, berries, butter, eggs, fish, milk, poultry, meats or any other agricultural product that is raised, caught, produced or manufactured by such persons. “Agricultural product” does not include animals intended to be pets, marijuana, or marijuana infused products as defined by RCW 69.50.101(t) and (x). “Farmer” does not include any person engaged in the business of growing, producing, processing, selling or distributing marijuana.
P. Athletic Exhibitions: This chapter shall not apply to any person in respect to the business of conducting boxing contests and sparring or wrestling matches and exhibitions for the conduct of which a license must be secured from the State Boxing Commission.
Q. Racing: This chapter shall not apply to any person in respect to the business of conducting race meets for the conduct of which a license must be secured from the Washington State Horse Racing Commission.
R. Ride Sharing: This chapter does not apply to any funds received in the course of commuter ride sharing or ride sharing for persons with special transportation needs in accordance with RCW 46.74.010.
S. Employees: This chapter shall not apply to any person in respect to his or her employment in the capacity as an employee or servant as distinguished from that of an independent contractor. For the purposes of this subsection, RMC 5-25-10.S the definition of employee shall include those persons that are defined in section 3121(d)(3)(B) of the Internal Revenue Code, as hereafter amended. For purposes of this chapter, a booth renter, as defined by RCW 18.16.020, is an independent contractor.
T. Amounts Derived from Sale of Real Estate: This chapter shall not apply to gross proceeds derived from the sale of real estate. This, however, shall not be construed to allow an exemption of amounts received as commissions from the sale of real estate, nor as fees, handling charges, discounts, interest or similar financial charges resulting from, or relating to, real estate transactions. This chapter shall also not apply to amounts received for the rental of real estate if the rental income is derived from a contract to rent for a continuous period of thirty (30) calendar days or longer.
U. Mortgage Brokers’ Third-Party Provider Services Trust Accounts: This chapter shall not apply to amounts received from trust accounts to mortgage brokers for the payment of third-party costs if the accounts are operated in a manner consistent with RCW 19.146.050 and any rules adopted by the director of financial institutions.
V. Amounts Derived From Manufacturing, Selling or Distributing Motor Vehicle Fuel: This chapter shall not apply to the manufacturing, selling or distributing motor vehicle fuel, as the term “motor vehicle fuel” is defined in RCW 82.38.020 and exempt under RCW 82.38.280, provided that any fuel not subjected to the state fuel excise tax, or any other applicable deduction or exemption, will be taxable under this chapter.
W. Amounts Derived From Liquor, and the Sale or Distribution of Liquor: This chapter shall not apply to liquor as defined in RCW 66.04.010 and exempted in RCW 66.08.120.
X. Casual and Isolated Sales: This chapter shall not apply to the gross proceeds derived from casual or isolated sales.
Y. Accommodation Sales: This chapter shall not apply to sales for resale by persons regularly engaged in the business of making retail sales of the type of property so sold to other persons similarly engaged in the business of selling such property where:
1. The amount paid by the buyer does not exceed the amount paid by the seller to his vendor in the acquisition of the article; and
2. The sale is made as an accommodation to the buyer to enable the buyer to fill a bona fide existing order of a customer or is made within fourteen (14) calendar days to reimburse in kind a previous accommodation sale by the buyer to the seller.
Provided, that where the seller holds himself or herself out as being regularly engaged in the business of making sales at wholesale of such property, such sales shall be included in his principal business activity, and not exempt from tax.
Z. Real Estate Brokers and Associated Brokers, Agents, or Salesmen: This chapter does not apply to that portion of a real estate commission assigned to another brokerage office pursuant to the division of revenue between the originating brokerage office and a cooperating brokerage office on a particular transaction. Each brokerage office shall pay the tax upon its respective revenue share of the transaction. Furthermore, where a brokerage office has paid the business and occupation tax on the gross commission earned by that brokerage office, associate brokers, salesmen or agents within the same office shall not be required to pay the tax upon their share of the commission from the same transaction.
AA. Taxes Collected as Trust Funds: This chapter shall not apply to amounts collected by the taxpayer from third-parties to satisfy third party obligations to pay taxes such as the retail sales tax, use tax, commercial parking tax, and admission tax.
BB. Health Maintenance Organization, Health Care Service Contractor, Certified Health Plan: This chapter does not apply to any health maintenance organization, health care service contractor, or certified health plan with respect to premiums or prepayments that are taxable under RCW 48.14.0201. (Ord. 5734, 11-3-14; Ord. 5771, 10-5-15; Ord. 5866, 12-4-17; Ord. 5892, 11-5-18; Ord. 5945, 11-18-19)
5-25-11 DEDUCTIONS:
In computing the license fee or tax, there may be deducted from the measure of tax the following items:
A. Membership Fees and Certain Service Fees By Non-Profit Youth Organization: For purposes of this subsection, “non-profit youth organization” means a non-profit organization engaged in character building of youth which is exempt from property tax under RCW 84.36.030. In computing tax due under this chapter, there may be deducted from the measure of tax all amounts received by a non-profit youth organization:
1. As membership fees or dues, irrespective of the fact that the payment of the membership fees or dues to the organization may entitle its members, in addition to other rights or privileges, to receive services from the organization or to use the organization’s facilities; or
2. From members of the organization for camping and recreational services provided by the organization or for the use of the organization’s camping and recreational facilities.
B. Bona-Fide Initiation Fees, Dues, and Certain Charges Received by Non-Profit Organizations: In computing tax, a non-profit organization may deduct from the measure of tax amounts derived from bona-fide:
1. Initiation fees;
2. Dues;
3. Contributions;
4. Donations;
5. Tuition fees or charges made for operation of non-profit kindergartens;
6. Charges made by a non-profit trade or professional organization for attending or occupying space at a trade show, convention, or educational seminar sponsored by the non-profit trade or professional organization, which trade show, convention, or educational seminar is not open to the general public; and
7. Endowment funds.
Except as specified in subsection A above, this subsection shall not be construed to exempt any non-profit organization, association, or society from tax liability upon selling tangible personal property 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 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 under this subsection.
C. Artistic and Cultural Organizations - Income From Business Activities: In computing tax, there may be deducted from the measure of tax those amounts received by artistic or cultural organizations, as defined in this chapter, which represent:
1. Income derived from business activities conducted by the organization, provided that this deduction does not apply to retail sales made by artistic and cultural organizations;
2. Amounts received from the United States of America or any of its instrumentalities or from the State of Washington or any municipal corporation or subdivision thereof as compensation for; or to support, artistic or cultural exhibitions, performances, or programs provided by an artistic or cultural organization for attendance or viewing by the general public; or
3. Amounts received as tuition charges collected for the privilege of attending artistic or cultural education programs.
D. Artistic or Cultural Organization - Deduction For Tax Under the Manufacturing Classification - Value of Articles For Use In Displaying Art Objects or Presenting Artistic or Cultural Exhibitions, Performances, or Programs: In computing tax, there may be deducted from the measure of tax by persons subject to payment of the tax under the manufacturing classification, the value of articles to the extent manufacturing activities are undertaken by an artistic or cultural organization, as defined in this chapter, solely for the purpose of manufacturing articles for use by the organization in displaying art objects or presenting artistic or cultural exhibitions, performances, or programs for attendance or viewing by the general public.
E. Day Care Activities: In computing tax, there may be deducted from the measure of tax amounts derived from day care activities by any organization organized and operated for charitable, educational, or other purposes which is exempt from taxation pursuant to Internal Revenue Code Section 501(c)(3), provided, however, that amounts derived from selling, altering or repairing tangible personal property shall not be deductible.
F. Interest on Obligations of the State, its Political Subdivisions, and Municipal Corporations: In computing tax, there may be deducted from the measure of tax by those engaged in banking, loan, security or other financial businesses, amounts derived from interest paid on all obligations of the State of Washington, its political subdivisions, and municipal corporations.
G. Interest on Loans to Farmers and Ranchers, Producers or Harvesters of Aquatic Products, or Their Cooperatives: In computing tax, there may be deducted from the measure of tax amounts derived as interest on loans to bona fide farmers and ranchers, producers or harvesters of aquatic products, or their cooperatives by a lending institution which is owned exclusively by its borrowers or members and which is engaged solely in the business of making loans and providing finance-related services to bona fide farmers and ranchers, producers or harvesters of aquatic products, their cooperatives, rural residents for housing, or persons engaged in furnishing farm-related or aquatic-related services to these individuals or entities.
H. Receipts From Tangible Personal Property Delivered Outside the State: In computing tax, there may be deducted from the measure of tax under retailing or wholesaling amounts derived from the sale of tangible personal property that is delivered by the seller to the buyer or the buyer’s representative at a location outside the state of Washington.
I. Cash Discount Taken by Purchaser: In computing tax, there may be deducted from the measure of tax the cash discount amounts actually taken by the purchaser. This deduction is not allowed in arriving at the taxable amount under the extracting or manufacturing classifications with respect to articles produced or manufactured, the reported values of which, for the purposes of this tax, have been computed according to the “value of product” provisions.
J. Credit Losses of Accrual Basis Taxpayers: In computing tax, there may be deducted from the measure of tax the amount of credit losses actually sustained by taxpayers whose regular books of account are kept upon an accrual basis.
K. Repair, Maintenance, Replacement, Etc., of Residential Structures and Commonly Held Property – Eligible Organizations:
1. In computing tax, there may be deducted from the measure of tax amounts used solely for repair, maintenance, replacement, management, or improvement of the residential structures and commonly held property, but excluding property where fees or charges are made for use by the public who are not guests accompanied by a member, which are derived by:
a. A cooperative housing association, corporation, or partnership from a person who resides in a structure owned by the cooperative housing association, corporation, or partnership;
b. An association of owners of property as defined in RCW 64.32.010, as now or hereafter amended, from a person who is an apartment owner as defined in RCW 64.32.010; or
c. An association of owners of residential property from a person who is a member of the association. “Association of owners of residential property” means any organization of all the owners of residential property in a defined area who all hold the same property in common within the area.
2. For the purposes of this subsection “commonly held property” includes areas required for common access such as reception areas, halls, stairways, parking, etc., and may include recreation rooms, swimming pools and small parks or recreation areas; but is not intended to include more grounds than are normally required in a residential area, or to include such extensive areas as required for golf courses, campgrounds, hiking and riding areas, boating areas, etc.
3. To qualify for the deductions under this subsection:
a. The salary or compensation paid to officers, managers, or employees must be only for actual services rendered and at levels comparable to the salary or compensation of like positions within the county wherein the property is located;
b. Dues, fees, or assessments in excess of amounts needed for the purposes for which the deduction is allowed must be refunded to the members of the association;
c. Assets of the association or organization must be distributable to all members and must not inure to the benefit of any single member or group of members.
L. Radio and Television Broadcasting - Advertising Agency Fees - National, Regional, and Network Advertising - Interstate Allocations: In computing tax, there may be deducted from the measure of tax by radio and television broadcasters amounts representing the following:
1. Advertising agencies’ fees when such fees or allowances are shown as a discount or price reduction in the billing or that the billing is on a net basis, i.e., less the discount;
2. Actual gross receipts from national network, and regional advertising or a “standard deduction” as provided by RCW 82.04.280; and
3. Local advertising revenue that represent advertising which is intended to reach potential customers of the advertiser who are located outside the State of Washington. The Administrator may issue a rule that provides detailed guidance as to how these deductions are to be calculated.
M. Constitutional and Statutory Prohibitions: In computing tax, there may be deducted from the measure of the tax amounts derived from business which the City is prohibited from taxing under the Constitution or laws of the State of Washington or the United States of America.
N. Receipts From The Sale of Tangible Personal Property and Retail Services Delivered Outside the City But Within Washington: Effective January 1, 2008, amounts included in the gross receipts reported on the tax return derived from the sale of tangible personal property delivered to the buyer or the buyer’s representative outside the City but within the State of Washington may be deducted from the measure of tax under the retailing, retail services, or wholesaling classification.
O. Professional Employer Services: In computing the tax, a professional employer organization may deduct from the calculation of gross income the gross income of the business derived from performing professional employer services that is equal to the portion of the fee charged to a client that represents the actual cost of wages and salaries, benefits, workers’ compensation, payroll taxes, withholding, or other assessments paid to or on behalf of a covered employee by the professional employer organization under a professional employer agreement.
P. Interest on Investments or Loans Secured By Mortgages or Deeds of Trust: In computing tax, to the extent permitted by RCW Chapter 82.14A, there may be deducted from the measure of tax by those engaged in banking, loan, security or other financial businesses, amounts derived from interest received on investments or loans primarily secured by first mortgages or trust deeds on non-transient residential properties.
Q. Compensation from Public Entities for Health or Social Welfare Services—Deduction: In computing tax, there may be deducted from the measure of tax amounts received from the United States or any instrumentality thereof or from the State of Washington or any municipal corporation or political subdivision thereof as compensation for, or to support, health or social welfare services rendered by a health or social welfare organization (as defined in RCW 82.04.431) or by a municipal corporation or political subdivision, except deductions are not allowed under this section for amounts that are received under an employee benefit plan. For purposes of this subsection, “employee benefit plan” does not include the military benefits program authorized in 10 U.S.C. Sec. 1071 et seq., as amended (CHAMPUS), or amounts payable. (Ord. 5734, 11-3-14; Ord. 5771, 10-5-15)
5-25-12 NEW BUSINESS TAX CREDIT:
A. Purpose: The City believes that providing a temporary tax credit relating to new businesses is a meaningful method of fostering such new businesses to establish a solid financial foundation during its start-up process. Further, the City finds that a credit related to the creation of fifty (50) or more new full-time equivalent (“FTE”) employees within the City will benefit other local businesses. Therefore, considering situations particular and unique to the City, the City finds that it is appropriate to differ from the business and occupation tax model ordinance in providing for a new business tax credit as described in this section.
B. There may be credited against the tax imposed by this chapter, the amount up to one thousand dollars ($1,000) per FTE position in the City of Renton.
C. To take the credit authorized by this section, a taxpayer must be able to document all of the following:
1. The taxpayer has not, for any period of time, engaged in business in the City of Renton for a period of ten (10) or more years prior to application for the tax credit;
2. The taxpayer employs fifty (50) or more full-time equivalent positions in Renton. An FTE position is defined as each one thousand nine hundred and twenty (1,920) worker hours per calendar year; and
3. The taxpayer may be required to submit its payroll information and/or other documentation in support of such employee hours worked in the City.
4. The taxpayer must report, on each return filed, the taxpayer’s total number of full-time employment positions created and positions currently filled.
D. The tax credit can be taken for the first twelve (12) consecutive reporting quarters or three (3) reporting years.
E. This credit is not considered a payment of taxes for purposes of seeking a refund of overpayment of tax pursuant to the provisions contained in RMC Chapter 5-26, Tax Administrative Code, or any other purpose. As such, unused credit amounts will not be refunded, carried over from reporting period(s) to reporting period(s), and will not accrue interest.
F. The Administrator is authorized to promulgate rules implementing, interpreting, and enforcing the provisions of this section. (Ord. 5734, 11-3-14; Ord. 5771, 10-5-15; Ord. 5892, 11-5-18)
5-25-13 TAX PART OF OVERHEAD:
It is not the intention of this chapter that the taxes or fees herein levied upon persons engaging in business be construed as taxes or fees upon the purchasers or customer, but that such taxes or fees shall be levied upon, and collectible from, the person engaging in the business activities herein designated and that such taxes or fees shall constitute a part of the cost of doing business of such persons. (Ord. 5734, 11-3-14)
5-25-14 ADMINISTRATIVE PROVISIONS
The provisions contained in chapter 5-26, Tax Administrative Code, shall be fully applicable to the provisions of this chapter except as expressly stated to the contrary herein. (Ord. 5734, 11-3-14; Ord. 5756, 5-18-15)
5-25-15 SEVERABILITY CLAUSE:
If any provision of this chapter or its application to any person or circumstance is held invalid, the remainder of the chapter or the application of the provision to other persons or circumstances shall not be affected. (Ord. 5734, 11-3-14)