SB 5794 — Adopting recommendations from the tax preference performance review process, eliminating obsolete tax preferences, clarifying legislative intent, and addressing changes in constitutional law.

(b) As used in this subsection, "agricultural commodity" has the same meaning as agricultural product in RCW 82.04.213;

(11))) (8) Amounts derived from the production, sale, or transfer of electrical energy for resale within or outside the state or for consumption outside the state;

(((12))) (9) Amounts derived from the distribution of water by a nonprofit water association and used for capital improvements by that nonprofit water association;

(((13))) (10) Amounts paid by a sewerage collection business taxable under RCW 82.16.020(1)(a) to a person taxable under chapter 82.04 RCW for the treatment or disposal of sewage;

(((14))) (11) Amounts derived from fees or charges imposed on persons for transit services provided by a public transportation agency.

For the purposes of this subsection, "public transportation agency" means a municipality, as defined in RCW 35.58.272, and urban public transportation systems, as defined in RCW 47.04.082.

Public transportation agencies must spend an amount equal to the reduction in tax provided by this tax deduction solely to adjust routes to improve access for citizens using food banks and senior citizen p.

5 SB 5794 services or to extend or add new routes to assist low-income citizens and seniors.

Sec.

102.

as to such persons the tax imposed is equal to the value of the p.products manufactured or the gross proceeds derived from such sales multiplied by the rate of 0.138 percent.

3 ESSB 5794 products manufactured or the gross proceeds derived from such sales multiplied by the rate of 0.138 percent.

(ii)p. For the purposes of this subsection (1)(c), "dairy products" means:

6 SB 5794 (ii) For the purposes of this subsection (1)(c), "dairy products" means:

For the p.purposes of this section, "wood biomass fuel" means a liquid or gaseous fuel that is produced from lignocellulosic feedstocks, including wood, forest, or field residue and dedicated energy crops, and that does not include wood treated with chemical preservations such as creosote, pentachlorophenol, or copper-chrome-arsenic.

4 ESSB 5794 purposes of this section, "wood biomass fuel" means a liquid or gaseous fuel that is produced from lignocellulosic feedstocks, including wood, forest, or field residue and dedicated energy crops, and that does not include wood treated with chemical preservations such as creosote, pentachlorophenol, or copper-chrome-arsenic.

as to such persons the amount ofp. tax with respect to such business is equal to the value of the peas split or processed, multiplied by the rate of 0.138 percent.

(3)7 UponSB every5794 nonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the amount of tax with respect to such activitiesbusiness is equal to the grossvalue incomeof derivedthe frompeas suchsplit activitiesor processed, multiplied by the rate of 0.4840.138 percent.

(4)(3) Upon((Upon every personnonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the businessamount of slaughtering,tax breakingwith and/orrespect processingto perishablesuch meatactivities productsis and/orequal sellingto the samegross atincome wholesalederived onlyfrom andsuch notactivities atmultiplied retail;by the rate of 0.484 percent.

(4))) Upon every person engaging within this state in the business of slaughtering, breaking and/or processing perishable meat products and/or selling the same at wholesale only and not at retail;

(5)(a)(((5)(a))) (4) Upon every person engaging within this state in the business of acting as a travel agent or tour operator and whose annual taxable amount for the prior calendar year from such business was $250,000 or less;

(b)(((b) Upon every person engaging within this state in the business of acting as a travel agent or tour operator and whose annual taxable amount for the prior calendar year from such business was more than $250,000;

p.(7) Upon every person engaging within this state in the business of stevedoring and associated activities pertinent to the movement of goods and commodities in waterborne interstate or foreign commerce;

5 ESSB 5794 (7) Upon every person engaging within this state in the business of stevedoring and associated activities pertinent to the movement of goods and commodities in waterborne interstate or foreign commerce;

Persons subject to taxation under this subsection are exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of their business subject to taxation under this subsection.p.

8 SB 5794 subsection.

(8)(a)(8))) (5)(a) Upon every person engaging within this state in the business of disposing of low-level waste, as defined in RCW 70A.380.010;

p.(((9) Upon every person engaging within this state as an insurance producer or title insurance agent licensed under chapter 48.17 RCW or a surplus line broker licensed under chapter 48.15 RCW;

6 ESSB 5794 (9) ((Upon every person engaging within this state as an insurance producer or title insurance agent licensed under chapter 48.17 RCW or a surplus line broker licensed under chapter 48.15 RCW;

(10))) (6) Upon every person engaging within this state in business as a hospital, as defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by the state or any of its politicalp. subdivisions, as to such persons, the amount of tax with respect to such activities is equal to the gross income of the business multiplied by the rate of 0.75 percent through June 30, 1995, and 1.5 percent thereafter.

(((11)))9 (10)(a)SB Beginning5794 Octoberpolitical 1,subdivisions, 2005, upon every person engaging within this state in the business of manufacturing commercial airplanes, or components of such airplanes, or making sales, at retail or wholesale, of commercial airplanes or components of such airplanes, manufactured by the seller, as to such personspersons, the amount of tax with respect to such businessactivities is,is in the case of manufacturers, equal to the value of the product manufactured and the gross proceedsincome of sales of the productbusiness manufactured,multiplied orby in the caserate of processors0.75 forpercent hire,through equalJune to30, the1995, grossand income1.5 ofpercent thethereafter. business, multiplied by the rate of:

(((11))) (7)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of manufacturing commercial airplanes, or components of such airplanes, or making sales, at retail or wholesale, of commercial airplanes or components of such airplanes, manufactured by the seller, as to such persons the amount of tax with respect to such business is, in the case of manufacturers, equal to the value of the product manufactured and the gross proceeds of sales of the product manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of:

and (iii) Beginning April 1, 2020, 0.484 percent, subject to any reduction required under (e) of this subsection (((11))) (10).(7).

The tax rate in this subsection (((11))) (10)(a)(iii)(7)(a)(iii) applies to all business activities described in this subsection (((11))) (10)(a).(7)(a).

(b) Beginning July 1, 2008, upon every person who is not eligible to report under the provisions of (a) of this subsection (((11))) (10)(7) and is engaging within this state in the business of manufacturing tooling specifically designed for use in manufacturing commercial airplanes or components of such airplanes, or making sales, at retail or wholesale, of such tooling manufactured by the seller, as to such persons the amount of tax with respect to such business is, in the case of manufacturers, equal to the value of the product manufactured and the gross proceeds of sales of the product p.manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of:

7 ESSB 5794 manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of:

and (ii) Beginning April 1, 2020, the following rates, which are subject to any reduction required under (e) of this subsection (((11))) (10):(7):

and (B)p. 0.484 percent on all other business activities described in this subsection (((11))) (10)(b).

(c)10 ForSB the5794 purposes(B) of0.484 thispercent subsectionon (((11)))all (10),other "commercialbusiness airplane"activities anddescribed "component"in havethis thesubsection same(((11))) meanings(7)(b). as provided in RCW 82.32.550.

(d)(i)(c) InFor addition to all other requirements under this title, a person reporting under the taxpurposes rateof provided in this subsection (((11))) (10)(7), must"commercial fileairplane" aand complete"component" annualhave taxthe performancesame reportmeanings withas theprovided departmentin under RCW 82.32.534.82.32.550.

However,(d)(i) thisIn requirementaddition does not apply to personsall reportingother requirements under the tax rate in (a)(iii) of this subsectiontitle, (((11)))a (10),person soreporting long as that rate remains 0.484 percent, or under any of the tax ratesrate provided in (b)(ii)(A) and (B) of this subsection (((11))) (10),(7) somust longfile asa thosecomplete annual tax ratesperformance remainreport with the ratedepartment imposedunder pursuant to RCW 82.04.250(1)82.32.534. and 0.484 percent, respectively.

(ii)However, Nothingthis requirement does not apply to persons reporting under the tax rate in (d)(i)(a)(iii) of this subsection (((11))) (10)(7), mayso belong construed as affectingthat therate obligationremains of0.484 apercent, personor reporting under aany taxof ratethe providedtax rates in (b)(ii)(A) and (B) of this subsection (((11))) (10)(7), toso filelong aas completethose annual tax performancerates reportremain with the departmentrate underimposed pursuant to RCW 82.32.534:82.04.250(1) and 0.484 percent, respectively.

(ii) Nothing in (d)(i) of this subsection (((11))) (7) may be construed as affecting the obligation of a person reporting under a tax rate provided in this subsection (((11))) (7) to file a complete annual tax performance report with the department under RCW 82.32.534:

or (B) pursuant to (d)(i) of this subsection (((11))) (10)(7) as a result of claiming the tax rates in (a)(ii) or (b)(i) of this subsection (((11))) (10)(7) for periods ending before April 1, 2020.

(e)(i) After March 31, 2021, the tax rates under (a)(iii) and (b)(ii) of this subsection (((11))) (10)(7) must be reduced to 0.357 percent provided the conditions in RCW 82.04.2602 are met.

The effective date of the rates authorized under this subsection (((11))) (10)(e)(7)(e) must occur on the first day of the next calendar quarter that is at least 60 days after the department receives the last of the two written notices pursuant to RCW 82.04.2602 (3) and (4).

(ii) Both a significant commercial airplane manufacturer separately and the rest of the aerospace industry as a whole, receiving the rate of 0.357 percent under this subsection (((11))) (7)(e) are subject to the aerospace apprenticeship utilization rates required under RCW 49.04.220 by April 1, 2026, or five years after the effective date of the 0.357 percent rate authorized under this subsection (((11))) (7)(e), whichever is later, as determined by the department of labor and industries.

(iii) The provisions of RCW 82.32.805 and 82.32.808 do not apply to this subsection (((11))) (7)(e).

811 ESSBSB 5794 (ii)(f)(i) BothExcept a significant commercial airplane manufacturer separately and the rest of the aerospace industry as aprovided whole,in receiving(f)(ii) the rate of 0.357 percent under this subsection (((11))) (10)(e)(7), are subject to the aerospace apprenticeship utilization rates required under RCW 49.04.220 by April 1, 2026, or five years after the effective date of the 0.357 percent rate authorized under this subsection (((11))) (10)(e),(7) whicheverdoes isnot later,apply ason determinedand byafter theJuly department1, of2040. labor and industries.

(iii)(ii) TheWith provisionsrespect to the manufacturing of RCWcommercial 82.32.805airplanes andor 82.32.808making dosales, notat applyretail toor wholesale, of commercial airplanes, this subsection (((11))) (10)(e).(7) does not apply on and after July 1st of the year in which the department makes a determination that any final assembly or wing assembly of any version or variant of a commercial airplane that is the basis of a siting of a significant commercial airplane manufacturing program in the state under RCW 82.32.850 has been sited outside the state of Washington.

(f)(i)This Exceptsubsection as(((11))) provided(7)(f)(ii) inonly (f)(ii)applies to the manufacturing or sale of thiscommercial subsectionairplanes (((11)))that (10),are thisthe subsectionbasis (((11)))of (10)a doessiting notof applya onsignificant andcommercial afterairplane Julymanufacturing 1,program 2040.in the state under RCW 82.32.850.

(ii)This With respect to the manufacturing of commercial airplanes or making sales, at retail or wholesale, of commercial airplanes, this subsection (((11))) (10)(7)(f)(ii) doescontinues notto apply onduring and after July 1st of the yeartime in which the department makes a determination that any final assembly or wing assembly of any version or variant of a commercialperson airplaneis thatsubject isto the basistax ofrate ain siting(a)(iii) of athis significantsubsection commercial(((11))) airplane(7). manufacturing program in the state under RCW 82.32.850 has been sited outside the state of Washington.

This subsection (((11))) (10)(f)(ii) only applies to the manufacturing or sale of commercial airplanes that are the basis of a siting of a significant commercial airplane manufacturing program in the state under RCW 82.32.850.

This subsection (((11))) (10)(f)(ii) continues to apply during the time that a person is subject to the tax rate in (a)(iii) of this subsection (((11))) (10).

(((12))) (11)(a)(8)(a) Until July 1, 2045, upon every person engaging within this state in the business of extracting timber or extracting for hire timber;

p.(b) Until July 1, 2045, upon every person engaging within this state in the business of manufacturing or processing for hire:

9 ESSB 5794 (b) Until July 1, 2045, upon every person engaging within this state in the business of manufacturing or processing for hire:

as to such persons the amount of the tax with respect to the business is, in the case of manufacturers, equal to the value of products, including by-products, manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of 0.4235 percent from July 1, 2006, throughp. June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2045.

12 SB 5794 through June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2045.

For purposes of this subsection (((12))) (11)(d),(8)(d), "selling standing timber" means the sale of timber apart from the land, where the buyer is required to sever the timber within 30 months from the date of the original contract, regardless of the method of payment for the timber and whether title to the timber transfers before, upon, or after severance.

"Paper p.and paper products" includes newsprint;

10 ESSB 5794 and paper products" includes newsprint;

"Paper and paper products" does not include books, newspapers, magazines, periodicals,p. and other printed publications, advertising materials, calendars, and similar types of printed materials.

13 SB 5794 periodicals, and other printed publications, advertising materials, calendars, and similar types of printed materials.

For purposes of this subsection (((12))) (11)(e)(iii),(8)(e)(iii), "postconsumer waste" means a finished material that would normally be disposed of as solid waste, having completed its life cycle as a consumer item.

(f) Except for small harvesters as defined in RCW 84.33.035, a person reporting under the tax rate provided in this subsection (((12))) (11)(8) must file a complete annual tax performance report with the department under RCW 82.32.534.

(g) Nothing in this subsection (((12))) (11)(8) may be construed to affect the taxation of any activity defined as a retail sale in RCW 82.04.050(2) (b) or (c), defined as a wholesale sale in RCW 82.04.060(2), or taxed under RCW 82.04.280(1)(g).

p.(((13))) (9) Upon every person engaging within this state in inspecting, testing, labeling, and storing canned salmon owned by another person, as to such persons, the amount of tax with respect to such activities is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.

11 ESSB 5794 (((13))) (12) Upon every person engaging within this state in inspecting, testing, labeling, and storing canned salmon owned by another person, as to such persons, the amount of tax with respect to such activities is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.

102.103.

(1)p. Upon every person engaging within this state in the business of manufacturing:

14 SB 5794 (1) Upon every person engaging within this state in the business of manufacturing:

Sellers must keep and preserve records for the period required by RCW 82.32.070 establishing that the goods were transported by the purchaser in the ordinary course of business out of this state or sold to a p.manufacturer for use as an ingredient or component in the manufacturing of a dairy product.

12 ESSB 5794 manufacturer for use as an ingredient or component in the manufacturing of a dairy product.

and (B)p. Products comprised of not less than 70 percent dairy products that qualify under (c)(ii)(A) of this subsection, measured by weight or volume.

15 SB 5794 (B) Products comprised of not less than 70 percent dairy products that qualify under (c)(ii)(A) of this subsection, measured by weight or volume.

p.(2) Upon every person engaging within this state in the business of splitting or processing dried peas;

13 ESSB 5794 (2) Upon every person engaging within this state in the business of splitting or processing dried peas;

(3) Upon((Upon every nonprofit corporation and nonprofit association engaging within this state in research and development, as to such corporations and associations, the amount of tax with respect to such activitiesp. is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.

(4)16 UponSB every5794 personactivities engagingis withinequal thisto state in the businessgross ofincome slaughtering,derived breakingfrom and/orsuch processingactivities perishablemultiplied meatby products and/or selling the samerate atof wholesale0.484 onlypercent. and not at retail;

(4))) Upon every person engaging within this state in the business of slaughtering, breaking and/or processing perishable meat products and/or selling the same at wholesale only and not at retail;

(5)(a)(((5)(a))) (4) Upon every person engaging within this state in the business of acting as a travel agent or tour operator and whose annual taxable amount for the prior calendar year from such business was $250,000 or less;

(b)(((b) Upon every person engaging within this state in the business of acting as a travel agent or tour operator and whose annual taxable amount for the prior calendar year from such business was more than $250,000;

Persons subject to taxation under this p.subsection are exempt from payment of taxes imposed by chapter 82.16 RCW for that portion of their business subject to taxation under this subsection.

14Stevedoring ESSBand 5794associated subsectionactivities arepertinent exemptto fromthe paymentconduct of taxesgoods imposedand bycommodities chapterin 82.16waterborne RCWinterstate foror thatforeign portioncommerce are defined as all activities of theira businesslabor, subjectservice or transportation nature whereby cargo may be loaded or unloaded to taxationor from vessels or barges, passing over, onto or under thisa subsection.wharf, pier, or p.

Stevedoring17 andSB associated5794 activities pertinent to the conduct of goods and commodities in waterborne interstate or foreign commerce are defined as all activities of a labor, service or transportation nature whereby cargo may be loaded or unloaded to or from vessels or barges, passing over, onto or under a wharf, pier, or similar structure;

(8)(a)(8))) (5)(a) Upon every person engaging within this state in the business of disposing of low-level waste, as defined in RCW 70A.380.010;

(9)(((9) ((UponUpon every person engaging within this state as an insurance producer or title insurance agent licensed under chapter 48.17 RCW or a surplus line broker licensed under chapter 48.15 RCW;

(10))) (6) Upon every person engaging within this state in business as a hospital, as defined in chapter 70.41 RCW, that is operated as a nonprofit corporation or by the state or any of its political subdivisions, as to such persons, the amount of tax with respect to such activities is equal to the gross income of the business multiplied by the rate of 0.75 percent through June 30, 1995, and 1.5 percent thereafter.

1518 ESSBSB 5794 (10)))(((11))) Upon(7)(a) Beginning October 1, 2005, upon every person engaging within this state in the business asof amanufacturing hospital,commercial asairplanes, definedor incomponents chapterof 70.41such RCW,airplanes, thator ismaking operatedsales, asat aretail nonprofit corporation or bywholesale, theof statecommercial airplanes or anycomponents of itssuch politicalairplanes, subdivisions,manufactured by the seller, as to such persons,persons the amount of tax with respect to such activitiesbusiness isis, in the case of manufacturers, equal to the value of the product manufactured and the gross incomeproceeds of sales of the businessproduct multipliedmanufactured, byor in the ratecase of 0.75processors percentfor throughhire, Juneequal 30,to 1995,the andgross 1.5income percentof thereafter.the business, multiplied by the rate of:

(((11))) (10)(a) Beginning October 1, 2005, upon every person engaging within this state in the business of manufacturing commercial airplanes, or components of such airplanes, or making sales, at retail or wholesale, of commercial airplanes or components of such airplanes, manufactured by the seller, as to such persons the amount of tax with respect to such business is, in the case of manufacturers, equal to the value of the product manufactured and the gross proceeds of sales of the product manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of:

and (iii) Beginning April 1, 2020, 0.484 percent, subject to any reduction required under (e) of this subsection (((11))) (10).(7).

The tax rate in this subsection (((11))) (10)(a)(iii)(7)(a)(iii) applies to all business activities described in this subsection (((11))) (10)(a).(7)(a).

(b) Beginning July 1, 2008, upon every person who is not eligible to report under the provisions of (a) of this subsection (((11))) (10)(7) and is engaging within this state in the business of manufacturing tooling specifically designed for use in manufacturing commercial airplanes or components of such airplanes, or making sales, at retail or wholesale, of such tooling manufactured by the seller, as to such persons the amount of tax with respect to such business is, in the case of manufacturers, equal to the value of the product manufactured and the gross proceeds of sales of the product manufactured, or in the case of processors for hire, be equal to the gross income of the business, multiplied by the rate of:

and (ii) Beginning April 1, 2020, the following rates, which are subject to any reduction required under (e) of this subsection (((11))) (10):(7):

(A) The rate under RCW 82.04.250(1) on the business of making retail sales of tooling specifically designed for use in manufacturing commercial airplanes or components of such airplanes;

and (B) 0.484 percent on all other business activities described in this subsection (((11))) (7)(b).

1619 ESSBSB 5794 (A)(c) TheFor rate under RCW 82.04.250(1) on the businesspurposes of makingthis retailsubsection sales(((11))) of(7), tooling"commercial specificallyairplane" designedand for"component" usehave inthe manufacturingsame commercialmeanings airplanesas orprovided componentsin ofRCW such82.32.550. airplanes;

and(d)(i) (B)In 0.484addition percentto on all other businessrequirements activitiesunder describedthis title, a person reporting under the tax rate provided in this subsection (((11))) (10)(b).(7) must file a complete annual tax performance report with the department under RCW 82.32.534.

(c)However, Forthis requirement does not apply to persons reporting under the purposestax rate in (a)(iii) of this subsection (((11))) (10),(7), "commercialso airplane"long andas "component"that haverate remains 0.484 percent, or under any of the sametax meaningsrates in (b)(ii)(A) and (B) of this subsection (((11))) (7), so long as providedthose intax rates remain the rate imposed pursuant to RCW 82.32.550.82.04.250(1) and 0.484 percent, respectively.

(ii) Nothing in (d)(i) Inof additionthis tosubsection all(((11))) other(7) requirementsmay underbe thisconstrued title,as affecting the obligation of a person reporting under thea tax rate provided in this subsection (((11))) (10)(7) mustto file a complete annual tax performance report with the department under RCW 82.32.534.82.32.534:

However, this requirement does not apply to persons reporting under the tax rate in (a)(iii) of this subsection (((11))) (10), so long as that rate remains 0.484 percent, or under any of the tax rates in (b)(ii)(A) and (B) of this subsection (((11))) (10), so long as those tax rates remain the rate imposed pursuant to RCW 82.04.250(1) and 0.484 percent, respectively.

(ii) Nothing in (d)(i) of this subsection (((11))) (10) may be construed as affecting the obligation of a person reporting under a tax rate provided in this subsection (((11))) (10) to file a complete annual tax performance report with the department under RCW 82.32.534:

or (B) pursuant to (d)(i) of this subsection (((11))) (10)(7) as a result of claiming the tax rates in (a)(ii) or (b)(i) of this subsection (((11))) (10)(7) for periods ending before April 1, 2020.

(e)(i) After March 31, 2021, the tax rates under (a)(iii) and (b)(ii) of this subsection (((11))) (10)(7) must be reduced to 0.357 percent provided the conditions in RCW 82.04.2602 are met.

The effective date of the rates authorized under this subsection (((11))) (10)(e)(7)(e) must occur on the first day of the next calendar quarter that is at least 60 days after the department receives the last of the two written notices pursuant to RCW 82.04.2602 (3) and (4).

(ii) Both a significant commercial airplane manufacturer separately and the rest of the aerospace industry as a whole, receiving the rate of 0.357 percent under this subsection (((11))) (10)(e)(7)(e) are subject to the aerospace apprenticeship utilization rates required under RCW 49.04.220 by April 1, 2026, or five years after the effective date of the 0.357 percent rate authorized under this p.subsection (((11))) (7)(e), whichever is later, as determined by the department of labor and industries.

17(iii) ESSBThe 5794provisions subsectionof (((11)))RCW (10)(e),82.32.805 whicheverand is82.32.808 later,do asnot determinedapply byto thethis departmentsubsection of(((11))) labor(7)(e). and industries.

(iii)p. The provisions of RCW 82.32.805 and 82.32.808 do not apply to this subsection (((11))) (10)(e).

20 SB 5794 (f)(i) Except as provided in (f)(ii) of this subsection (((11))) (10),(7), this subsection (((11))) (10)(7) does not apply on and after July 1, 2040.

(ii) With respect to the manufacturing of commercial airplanes or making sales, at retail or wholesale, of commercial airplanes, this subsection (((11))) (10)(7) does not apply on and after July 1st of the year in which the department makes a determination that any final assembly or wing assembly of any version or variant of a commercial airplane that is the basis of a siting of a significant commercial airplane manufacturing program in the state under RCW 82.32.850 has been sited outside the state of Washington.

This subsection (((11))) (10)(f)(ii)(7)(f)(ii) only applies to the manufacturing or sale of commercial airplanes that are the basis of a siting of a significant commercial airplane manufacturing program in the state under RCW 82.32.850.

This subsection (((11))) (10)(f)(ii)(7)(f)(ii) continues to apply during the time that a person is subject to the tax rate in (a)(iii) of this subsection (((11))) (10).(7).

(((12))) (11)(a)(8)(a) Until July 1, 2045, upon every person engaging within this state in the business of extracting timber or extracting for hire timber;

as to such persons the amount of the tax with respect to the business is, in the case of manufacturers, equal to the value of products, including by-products, manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of 0.4235 percent from July 1, 2006, p.

1821 ESSBSB 5794 to the value of products, including by-products, manufactured, or in the case of processors for hire, equal to the gross income of the business, multiplied by the rate of 0.4235 percent from July 1, 2006, through June 30, 2007, and 0.2904 percent from July 1, 2007, through June 30, 2045.

For purposes of this subsection (((12))) (11)(d),(8)(d), "selling standing timber" means the sale of timber apart from the land, where the buyer is required to sever the timber within 30 months from the date of the original contract, regardless of the method of payment for the timber and whether title to the timber transfers before, upon, or after severance.

and related types of cellulosic products containing p.primarily, by weight or volume, cellulosic materials.

19"Paper ESSBand 5794paper primarily,products" bydoes weightnot orinclude volume,books, cellulosicnewspapers, materials.magazines, p.

"Paper22 andSB paper5794 products" does not include books, newspapers, magazines, periodicals, and other printed publications, advertising materials, calendars, and similar types of printed materials.

For purposes of this subsection (((12))) (11)(e)(iii),(8)(e)(iii), "postconsumer waste" means a finished material that would normally be disposed of as solid waste, having completed its life cycle as a consumer item.

(f) Except for small harvesters as defined in RCW 84.33.035, a person reporting under the tax rate provided in this subsection (((12))) (11)(8) must file a complete annual tax performance report with the department under RCW 82.32.534.

(g) Nothing in this subsection (((12))) (11)(8) may be construed to affect the taxation of any activity defined as a retail sale in RCW 82.04.050(2) (b) or (c), defined as a wholesale sale in RCW 82.04.060(2), or taxed under RCW 82.04.280(1)(g).

(((13))) (12)(9) Upon every person engaging within this state in inspecting, testing, labeling, and storing canned salmon owned by another person, as to such persons, the amount of tax with respect to such activities is equal to the gross income derived from such activities multiplied by the rate of 0.484 percent.

(((14))) (10)(a) Upon every person engaging within this state in the business of printing a newspaper, publishing a newspaper, or both, the amount of tax on such business is equal to the gross income p.

2023 ESSBSB 5794 (((14))) (13)(a) Upon every person engaging within this state in the business of printing a newspaper, publishing a newspaper, or both, the amount of tax on such business is equal to the gross income of the business multiplied by the rate of 0.35 percent until July 1, 2024, and 0.484 percent thereafter.

(b) A person reporting under the tax rate provided in this subsection (((14))) (13)(10) must file a complete annual tax performance report with the department under RCW 82.32.534.

103.104.

(1) Upon((Upon every person engaging within this state in the business of providing qualifying international investment management services, as to such persons, the amount of tax with respect to such business is equal to the gross income or gross proceeds of sales of the business multiplied by a rate of ((0.275))0.275 1.75 percent.

(2)(a)(2)))(a) Upon every person engaging within this state in any business activity other than or in addition to an activity taxed explicitly under another section in this chapter or subsection (1)(((1) or (3)(3))) (2) of this section;

(B) Any person whose gross income of the business subject to the tax imposed under this subsection (2),(((2))) (1), for the immediately preceding calendar year, was less than ((one million dollars)) $1,000,000, unless (I) the person is affiliated with one or more other persons, and (II) the aggregate gross income of the business subject to the tax imposed under this subsection (2)(((2))) (1) for all affiliated persons was greater than or equal to ((one million dollars)) $1,000,000 for the immediately preceding calendar year;

This subsection (2)(a)(ii)(C)(((2))) (1) (a)(ii)(C) must not be construed as modifying RCW 82.04.260(((10))) (9).(6).

(b) This subsection (2)(((2))) (1) includes, among others, and without limiting the scope hereof (whether or not title to materials used in the performance of such business passes to another by accession, confusion or other than by outright sale), persons engaged p.

2124 ESSBSB 5794 the performance of such business passes to another by accession, confusion or other than by outright sale), persons engaged in the business of rendering any type of service which does not constitute a "sale at retail" or a "sale at wholesale." The value of advertising, demonstration, and promotional supplies and materials furnished to an agent by his or her principal or supplier to be used for informational, educational, and promotional purposes is not considered a part of the agent's remuneration or commission and is not subject to taxation under this section.

(c) 14.3 percent of the revenues collected under (a)(i) of this subsection (2)(((2))) (1) must be deposited into the workforce education investment account created in RCW 43.79.195.

(d)(i) To aid in the effective administration of this subsection (2),(((2))) (1), the department may require a person claiming to be subject to the 1.5 percent tax rate under (a)(ii)(B) of this subsection (2)(((2))) (1) to identify all of the person's affiliates, including their department tax registration number or unified business identifier number, as may be applicable, or to certify that the person is not affiliated with any other person.

Requests under this subsection (2)(d)(i)(((2))) (1)(d)(i) must be in writing and may be made electronically.

(ii) If the department establishes, by clear, cogent, and convincing evidence, that a person, with intent to evade the additional taxes due under the 1.75 percent tax rate in (a)(i) of this subsection (2),(((2))) (1), failed to provide the department with complete and accurate information in response to a written request under (d)(i) of this subsection (2)(((2))) (1) within ((thirty)) 30 days of such request, the person is ineligible for the 1.5 percent tax rate in (a)(ii) of this subsection (2)(((2))) (1) for the entire current calendar year and the following four calendar years.

However, the department must waive the provisions of this subsection (2)(d)(ii)(((2))) (1) (d)(ii) for any tax reporting period that the person is otherwise eligible for the 1.5 percent tax rate in (a)(ii) of this subsection (2)(((2))) (1) if (A) the department has not previously determined that the person failed to fully comply with (d)(i) of this subsection (2),(((2))) (1), and (B) within ((thirty)) 30 days of the notice of additional tax due as a result of the person's failure to fully comply with (d)(i) of this subsection (2)(((2))) (1) the department determines that the person has come into full compliance with (d)(i) of this subsection (2).(((2))) (1).

This subsection (2)(d)(((2))) (1)(d) applies only with respect to persons claiming entitlement to the 1.5 p.

2225 ESSBSB 5794 percent tax rate solely by reason of (a)(ii)(B) of this subsection (2).(((2))) (1).

(e) For the purposes of (a)(ii)(B) of this subsection (2),(((2))) (1), if a taxpayer is subject to the reconciliation provisions of RCW 82.04.462(4), and calculates gross income of the business subject to the tax imposed under this subsection (2)(((2))) (1) for the immediately preceding calendar year, or aggregate gross income of the business subject to the tax imposed under this subsection (2)(((2))) (1) for the immediately preceding calendar year for all affiliated persons, based on incomplete information, the taxpayer must correct the reporting for the current calendar year when complete information for the immediately preceding calendar year is available.

(f) For purposes of this subsection (2),(((2))) (1), the definitions in this subsection (2)(f)(((2))) (1)(f) apply:

(3)(a)(((3))) (2)(a) Until July 1, 2040, upon every person engaging within this state in the business of performing aerospace product development for others, as to such persons, the amount of tax with respect to such business is equal to the gross income of the business multiplied by a rate of 0.9 percent.

(b) A person reporting under the tax rate provided in this subsection (3)(((3))) (2) must file a complete annual report with the department under RCW 82.32.534.

104.105.

2326 ESSBSB 5794 commissioner's office.

2427 ESSBSB 5794 (i) The medical care services program as provided in RCW 74.09.035;

2528 ESSBSB 5794 (b) If there has not been a final determination of the legality of these taxes, then beginning on the earlier of (i) the date the fourth multiple employer welfare arrangement has been certified by the insurance commissioner, or (ii) April 1, 2006, the arrangement must deposit the taxes imposed by this section into an interest bearing escrow account maintained by the arrangement.

105.106.

RCW 82.04.40582.04.050 and 19982021 c 311296 s 48 and 2021 c 143 s 2 are each reenacted and amended to read as follows:

((This))(1)(a) (1)"Sale Exceptat asretail" providedor in"retail subsectionsale" (2)means every sale of thistangible section,personal thisproperty chapter(including shallarticles notproduced, applyfabricated, or imprinted) to theall grosspersons incomeirrespective of creditthe unionsnature organizedof undertheir business and including, among others, without limiting the lawsscope hereof, persons who install, repair, clean, alter, improve, construct, or decorate real or personal property of thisor state,for anyconsumers other state,than ora thesale Unitedto States.a person who:

(2)(a)(i) BeginningPurchases Octoberfor 1, 2025, if a credit union organized under the lawspurpose of thisresale stateas mergestangible orpersonal acquiresproperty ain bankthe thatregular iscourse regulatedof bybusiness thewithout departmentintervening ofuse financialby institutions,such theperson, creditbut uniona nopurchase longer qualifies for the exemptionpurpose fromof businessresale andby occupationa taxregional intransit subsectionauthority (1)under ofRCW this81.112.300 section and is subjectnot toa taxsale equalfor toresale; the gross income of the credit union, multiplied by 1.2 percent.

(b)or This(ii) subsectionInstalls, (2)repairs, doescleans, notalters, applyimprints, toimproves, transactionsconstructs, foror whichdecorates anreal applicationor haspersonal beenproperty submittedof or for regulatoryconsumers, approvalif priorsuch totangible thepersonal effectiveproperty datebecomes an ingredient or component of thissuch section.real or personal property without intervening use by such person;

or (iii) Purchases for the purpose of consuming the property purchased in producing for sale as a new article of tangible personal p.

29 SB 5794 property or substance, of which such property becomes an ingredient or component or is a chemical used in processing, when the primary purpose of such chemical is to create a chemical reaction directly through contact with an ingredient of a new article being produced for sale;

or (iv) ((Purchases for the purpose of consuming the property purchased in producing ferrosilicon which is subsequently used in producing magnesium for sale, if the primary purpose of such property is to create a chemical reaction directly through contact with an ingredient of ferrosilicon;

or (v))) Purchases for the purpose of providing the property to consumers as part of competitive telephone service, as defined in RCW 82.04.065;

or (((vi))) (v) Purchases for the purpose of satisfying the person's obligations under an extended warranty as defined in subsection (7) of this section, if such tangible personal property replaces or becomes an ingredient or component of property covered by the extended warranty without intervening use by such person.

(b) The term includes every sale of tangible personal property that is used or consumed or to be used or consumed in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property is resold or used as provided in (a)(i) through (((vi))) (v) of this subsection following such use.

(c) The term also means every sale of tangible personal property to persons engaged in any business that is taxable under RCW 82.04.280(1) (a), (b), and (g), 82.04.290, and 82.04.2908.

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

(a) The installing, repairing, cleaning, altering, imprinting, or improving of tangible personal property of or for consumers, including charges made for the mere use of facilities in respect thereto, but excluding charges made for the use of self-service laundry facilities, and also excluding sales of laundry service to nonprofit health care facilities, and excluding services rendered in respect to live animals, birds and insects;

(b) The constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for consumers, including the installing or attaching of any article of tangible personal property therein or thereto, p.

30 SB 5794 whether or not such personal property becomes a part of the realty by virtue of installation, and also includes the sale of services or charges made for the clearing of land and the moving of earth excepting the mere leveling of land used in commercial farming or agriculture;

(c) The constructing, repairing, or improving of any structure upon, above, or under any real property owned by an owner who conveys the property by title, possession, or any other means to the person performing such construction, repair, or improvement for the purpose of performing such construction, repair, or improvement and the property is then reconveyed by title, possession, or any other means to the original owner;

(d) The cleaning, fumigating, razing, or moving of existing buildings or structures, but does not include the charge made for janitorial services;

and for purposes of this section the term "janitorial services" means those cleaning and caretaking services ordinarily performed by commercial janitor service businesses including, but not limited to, wall and window washing, floor cleaning and waxing, and the cleaning in place of rugs, drapes and upholstery.

The term "janitorial services" does not include painting, papering, repairing, furnace or septic tank cleaning, snow removal or sandblasting;

(e) Automobile towing and similar automotive transportation services, but not in respect to those required to report and pay taxes under chapter 82.16 RCW;

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

For the purposes of this subsection, it is presumed that the sale of and charge made for the furnishing of lodging for a continuous period of one month or more to a person is a rental or lease of real property and not a mere license to enjoy the same.

For the purposes of this section, it is presumed that the sale of and charge made for the furnishing of lodging offered regularly for public occupancy for periods of less than a month constitutes a license to use or enjoy the property subject to sales and use tax and not a rental or lease of property;

p.

31 SB 5794 (g) The installing, repairing, altering, or improving of digital goods for consumers;

(h) Persons taxable under (a), (b), (c), (d), (e), (f), and (g) of this subsection when such sales or charges are for property, labor and services which are used or consumed in whole or in part by such persons in the performance of any activity defined as a "sale at retail" or "retail sale" even though such property, labor and services may be resold after such use or consumption.

Nothing contained in this subsection may be construed to modify subsection (1) of this section and nothing contained in subsection (1) of this section may be construed to modify this subsection.

(3) The term "sale at retail" or "retail sale" includes the sale of or charge made for personal, business, or professional services including amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities:

(a) Abstract, title insurance, and escrow services;

(b) Credit bureau services;

(c) Automobile parking and storage garage services;

(d) Landscape maintenance and horticultural services but excluding (i) horticultural services provided to farmers and (ii) pruning, trimming, repairing, removing, and clearing of trees and brush near electric transmission or distribution lines or equipment, if performed by or at the direction of an electric utility;

(e) Service charges associated with tickets to professional sporting events;

(f) The following personal services:

Tanning salon services, tattoo parlor services, steam bath services, turkish bath services, escort services, and dating services;

and (g)(i) Operating an athletic or fitness facility, including all charges for the use of such a facility or for any associated services and amenities, except as provided in (g)(ii) of this subsection.

(ii) Notwithstanding anything to the contrary in (g)(i) of this subsection (3), the term "sale at retail" and "retail sale" under this subsection does not include:

(A) Separately stated charges for the use of an athletic or fitness facility where such use is primarily for a purpose other than engaging in or receiving instruction in a physical fitness activity;

(B) Separately stated charges for the use of a discrete portion of an athletic or fitness facility, other than a pool, where such p.

32 SB 5794 discrete portion of the facility does not by itself meet the definition of "athletic or fitness facility" in this subsection;

(C) Separately stated charges for services, such as advertising, massage, nutritional consulting, and body composition testing, that do not require the customer to engage in physical fitness activities to receive the service.

The exclusion in this subsection (3)(g)(ii)(C) does not apply to personal training services and instruction in a physical fitness activity;

(D) Separately stated charges for physical therapy provided by a physical therapist, as those terms are defined in RCW 18.74.010, or occupational therapy provided by an occupational therapy practitioner, as those terms are defined in RCW 18.59.020, when performed pursuant to a referral from an authorized health care practitioner or in consultation with an authorized health care practitioner.

For the purposes of this subsection (3)(g)(ii)(D), an authorized health care practitioner means a health care practitioner licensed under chapter 18.83, 18.25, 18.36A, 18.57, 18.71, or 18.71A RCW, or, until July 1, 2022, chapter 18.57A RCW;

(E) Rent or association fees charged by a landlord or residential association to a tenant or residential owner with access to an athletic or fitness facility maintained by the landlord or residential association, unless the rent or fee varies depending on whether the tenant or owner has access to the facility;

(F) Services provided in the regular course of employment by an employee with access to an athletic or fitness facility maintained by the employer for use without charge by its employees or their family members;

(G) The provision of access to an athletic or fitness facility by an educational institution to its students and staff.

However, charges made by an educational institution to its alumni or other members of the public for the use of any of the educational institution's athletic or fitness facilities are a retail sale under this subsection (3)(g).

For purposes of this subsection (3)(g)(ii)(G), "educational institution" has the same meaning as in RCW 82.04.170;

(H) Yoga, chi gong, or martial arts classes, training, or events held at a community center, park, school gymnasium, college or university, hospital or other medical facility, private residence, or any other facility that is not operated within and as part of an athletic or fitness facility.

p.

33 SB 5794 (iii) Nothing in (g)(ii) of this subsection (3) may be construed to affect the taxation of sales made by the operator of an athletic or fitness facility, where such sales are defined as a retail sale under any provision of this section other than this subsection (3).

(iv) For the purposes of this subsection (3)(g), the following definitions apply:

(A) "Athletic or fitness facility" means an indoor or outdoor facility or portion of a facility that is primarily used for:

Exercise classes;

strength and conditioning programs;

personal training services;

tennis, racquetball, handball, squash, or pickleball;

or other activities requiring the use of exercise or strength training equipment, such as treadmills, elliptical machines, stair climbers, stationary cycles, rowing machines, pilates equipment, balls, climbing ropes, jump ropes, and weightlifting equipment.

(B) "Martial arts" means any of the various systems of training for physical combat or self-defense.

"Martial arts" includes, but is not limited to, karate, kung fu, tae kwon do, Krav Maga, boxing, kickboxing, jujitsu, shootfighting, wrestling, aikido, judo, hapkido, Kendo, tai chi, and mixed martial arts.

(C) "Physical fitness activities" means activities that involve physical exertion for the purpose of improving or maintaining the general fitness, strength, flexibility, conditioning, or health of the participant.

"Physical fitness activities" includes participating in yoga, chi gong, or martial arts.

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

(b) The term does not include the renting or leasing of tangible personal property where the lease or rental is for the purpose of sublease or subrent.

(5) The term also includes the providing of "competitive telephone service," "telecommunications service," or "ancillary services," as those terms are defined in RCW 82.04.065, to consumers.

(6)(a) The term also includes the sale of prewritten computer software to a consumer, regardless of the method of delivery to the end user.

For purposes of (a) and (b) of this subsection, the sale of prewritten computer software includes the sale of or charge made for a key or an enabling or activation code, where the key or code is required to activate prewritten computer software and put the software into use.

There is no separate sale of the key or code from p.

34 SB 5794 the prewritten computer software, regardless of how the sale may be characterized by the vendor or by the purchaser.

(b) The term "retail sale" does not include the sale of or charge made for:

(i) Custom software;

or (ii) The customization of prewritten computer software.

(c)(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 (c)(i) of this subsection (6) includes the right to access and use prewritten computer software to perform data processing.

(B) For purposes of this subsection (6)(c)(ii), "data processing" means the systematic performance of operations on data to extract the required information in an appropriate form or to convert the data to usable information.

Data processing includes check processing, image processing, form processing, survey processing, payroll processing, claim processing, and similar activities.

(7) The term also includes the sale of or charge made for an extended warranty to a consumer.

For purposes of this subsection, "extended warranty" means an agreement for a specified duration to perform the replacement or repair of tangible personal property at no additional charge or a reduced charge for tangible personal property, labor, or both, or to provide indemnification for the replacement or repair of tangible personal property, based on the occurrence of specified events.

The term "extended warranty" does not include an agreement, otherwise meeting the definition of extended warranty in this subsection, if no separate charge is made for the agreement and the value of the agreement is included in the sales price of the tangible personal property covered by the agreement.

For purposes of this subsection, "sales price" has the same meaning as in RCW 82.08.010.

(8)(a) The term also includes the following sales to consumers of digital goods, digital codes, and digital automated services:

(i) Sales in which the seller has granted the purchaser the right of permanent use;

(ii) Sales in which the seller has granted the purchaser a right of use that is less than permanent;

p.

35 SB 5794 (iii) Sales in which the purchaser is not obligated to make continued payment as a condition of the sale;

and (iv) Sales in which the purchaser is obligated to make continued payment as a condition of the sale.

(b) A retail sale of digital goods, digital codes, or digital automated services under this subsection (8) includes any services provided by the seller exclusively in connection with the digital goods, digital codes, or digital automated services, whether or not a separate charge is made for such services.

(c) For purposes of this subsection, "permanent" means perpetual or for an indefinite or unspecified length of time.

A right of permanent use is presumed to have been granted unless the agreement between the seller and the purchaser specifies or the circumstances surrounding the transaction suggest or indicate that the right to use terminates on the occurrence of a condition subsequent.

(9) The term also includes the charge made for providing tangible personal property along with an operator for a fixed or indeterminate period of time.

A consideration of this is that the operator is necessary for the tangible personal property to perform as designed.

For the purpose of this subsection (9), an operator must do more than maintain, inspect, or set up the tangible personal property.

(10) The term does not include the sale of or charge made for labor and services rendered in respect to the building, repairing, or improving of any street, place, road, highway, easement, right-of- way, mass public transportation terminal or parking facility, bridge, tunnel, or trestle which is owned by a municipal corporation or political subdivision of the state or by the United States and which is used or to be used primarily for foot or vehicular traffic including mass transportation vehicles of any kind.

(11) The term also does not include sales of chemical sprays or washes to persons for the purpose of postharvest treatment of fruit for the prevention of scald, fungus, mold, or decay, nor does it include sales of feed, seed, seedlings, fertilizer, agents for enhanced pollination including insects such as bees, and spray materials to:

(a) Persons who participate in the federal conservation reserve program, the environmental quality incentives program, the wetlands reserve program, and the wildlife habitat incentives program, or their successors administered by the United States department of agriculture;

(b) farmers for the purpose of producing for sale any agricultural product;

(c) farmers for the purpose of p.

36 SB 5794 providing bee pollination services;

and (d) farmers acting under cooperative habitat development or access contracts with an organization exempt from federal income tax under 26 U.S.C.

Sec.

501(c)(3) of the federal internal revenue code or the Washington state department of fish and wildlife to produce or improve wildlife habitat on land that the farmer owns or leases.

(12) The term does not include the sale of or charge made for labor and services rendered in respect to the constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property of or for the United States, any instrumentality thereof, or a county or city housing authority created pursuant to chapter 35.82 RCW, including the installing, or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation.

Nor does the term include the sale of services or charges made for the clearing of land and the moving of earth of or for the United States, any instrumentality thereof, or a county or city housing authority.

Nor does the term include the sale of services or charges made for cleaning up for the United States, or its instrumentalities, radioactive waste and other by-products of weapons production and nuclear research and development.

(13) The term does not include the sale of or charge made for labor, services, or tangible personal property pursuant to agreements providing maintenance services for bus, rail, or rail fixed guideway equipment when a regional transit authority is the recipient of the labor, services, or tangible personal property, and a transit agency, as defined in RCW 81.104.015, performs the labor or services.

(14) The term does not include the sale for resale of any service described in this section if the sale would otherwise constitute a "sale at retail" and "retail sale" under this section.

(15)(a) The term "sale at retail" or "retail sale" includes amounts charged, however labeled, to consumers to engage in any of the activities listed in this subsection (15)(a), including the furnishing of any associated equipment or, except as otherwise provided in this subsection, providing instruction in such activities, where such charges are not otherwise defined as a "sale at retail" or "retail sale" in this section:

(i)(A) Golf, including any variant in which either golf balls or golf clubs are used, such as miniature golf, hitting golf balls at a p.

37 SB 5794 driving range, and golf simulators, and including fees charged by a golf course to a player for using his or her own cart.

However, charges for golf instruction are not a retail sale, provided that if the instruction involves the use of a golfing facility that would otherwise require the payment of a fee, such as green fees or driving range fees, such fees, including the applicable retail sales tax, must be separately identified and charged by the golfing facility operator to the instructor or the person receiving the instruction.

(B) Notwithstanding (a)(i)(A) of this subsection (15) and except as otherwise provided in this subsection (15)(a)(i)(B), the term "sale at retail" or "retail sale" does not include amounts charged to participate in, or conduct, a golf tournament or other competitive event.

However, amounts paid by event participants to the golf facility operator are retail sales under this subsection (15)(a)(i).

Likewise, amounts paid by the event organizer to the golf facility are retail sales under this subsection (15)(a)(i), if such amounts vary based on the number of event participants;

(ii) Ballooning, hang gliding, indoor or outdoor sky diving, paragliding, parasailing, and similar activities;

(iii) Air hockey, billiards, pool, foosball, darts, shuffleboard, ping pong, and similar games;

(iv) Access to amusement park, theme park, and water park facilities, including but not limited to charges for admission and locker or cabana rentals.

Discrete charges for rides or other attractions or entertainment that are in addition to the charge for admission are not a retail sale under this subsection (15)(a)(iv).

For the purposes of this subsection, an amusement park or theme park is a location that provides permanently affixed amusement rides, games, and other entertainment, but does not include parks or zoos for which the primary purpose is the exhibition of wildlife, or fairs, carnivals, and festivals as defined in (b)(i) of this subsection;

(v) Batting cage activities;

(vi) Bowling, but not including competitive events, except that amounts paid by the event participants to the bowling alley operator are retail sales under this subsection (15)(a)(vi).

Likewise, amounts paid by the event organizer to the operator of the bowling alley are retail sales under this subsection (15)(a)(vi), if such amounts vary based on the number of event participants;

p.

38 SB 5794 (vii) Climbing on artificial climbing structures, whether indoors or outdoors;

(viii) Day trips for sightseeing purposes;

(ix) Bungee jumping, zip lining, and riding inside a ball, whether inflatable or otherwise;

(x) Horseback riding offered to the public, where the seller furnishes the horse to the buyer and providing instruction is not the primary focus of the activity, including guided rides, but not including therapeutic horseback riding provided by an instructor certified by a nonprofit organization that offers national or international certification for therapeutic riding instructors;

(xi) Fishing, including providing access to private fishing areas and charter or guided fishing, except that fishing contests and license fees imposed by a government entity are not a retail sale under this subsection;

(xii) Guided hunting and hunting at game farms and shooting preserves, except that hunting contests and license fees imposed by a government entity are not a retail sale under this subsection;

(xiii) Swimming, but only in respect to (A) recreational or fitness swimming that is open to the public, such as open swim, lap swimming, and special events like kids night out and pool parties during open swim time, and (B) pool parties for private events, such as birthdays, family gatherings, and employee outings.

Fees for swimming lessons, to participate in swim meets and other competitions, or to join a swim team, club, or aquatic facility are not retail sales under this subsection (15)(a)(xiii);

(xiv) Go-karting, bumper cars, and other motorized activities where the seller provides the vehicle and the premises where the buyer will operate the vehicle;

(xv) Indoor or outdoor playground activities, such as inflatable bounce structures and other inflatables;

mazes;

trampolines;

slides;

ball pits;

games of tag, including laser tag and soft-dart tag;

and human gyroscope rides, regardless of whether such activities occur at the seller's place of business, but not including playground activities provided for children by a licensed child day care center or licensed family day care provider as those terms are defined in RCW 43.216.010;

(xvi) Shooting sports and activities, such as target shooting, skeet, trap, sporting clays, "5" stand, and archery, but only in respect to discrete charges to members of the public to engage in p.

39 SB 5794 these activities, but not including fees to enter a competitive event, instruction that is entirely or predominately classroom based, or to join or renew a membership at a club, range, or other facility;

(xvii) Paintball and airsoft activities;

(xviii) Skating, including ice skating, roller skating, and inline skating, but only in respect to discrete charges to members of the public to engage in skating activities, but not including skating lessons, competitive events, team activities, or fees to join or renew a membership at a skating facility, club, or other organization;

(xix) Nonmotorized snow sports and activities, such as downhill and cross-country skiing, snowboarding, ski jumping, sledding, snow tubing, snowshoeing, and similar snow sports and activities, whether engaged in outdoors or in an indoor facility with or without snow, but only in respect to discrete charges to the public for the use of land or facilities to engage in nonmotorized snow sports and activities, such as fees, however labeled, for the use of ski lifts and tows and daily or season passes for access to trails or other areas where nonmotorized snow sports and activities are conducted.

However, fees for the following are not retail sales under this subsection (15)(a)(xix):

(A) Instructional lessons;

(B) permits issued by a governmental entity to park a vehicle on or access public lands;

and (C) permits or leases granted by an owner of private timberland for recreational access to areas used primarily for growing and harvesting timber;

and (xx) Scuba diving;

snorkeling;

river rafting;

surfing;

kiteboarding;

flyboarding;

water slides;

inflatables, such as water pillows, water trampolines, and water rollers;

and similar water sports and activities.

(b) Notwithstanding anything to the contrary in this subsection (15), the term "sale at retail" or "retail sale" does not include charges:

(i) Made for admission to, and rides or attractions at, fairs, carnivals, and festivals.

For the purposes of this subsection, fairs, carnivals, and festivals are events that do not exceed 21 days and a majority of the amusement rides, if any, are not affixed to real property;

(ii) Made by an educational institution to its students and staff for activities defined as retail sales by (a)(i) through (xx) of this subsection.

However, charges made by an educational institution to p.

40 SB 5794 its alumni or other members of the general public for these activities are a retail sale under this subsection (15).

For purposes of this subsection (15)(b)(ii), "educational institution" has the same meaning as in RCW 82.04.170;

(iii) Made by a vocational school for commercial diver training that is licensed by the workforce training and education coordinating board under chapter 28C.10 RCW;

or (iv) Made for day camps offered by a nonprofit organization or state or local governmental entity that provide youth not older than age 18, or that are focused on providing individuals with disabilities or mental illness, the opportunity to participate in a variety of supervised activities.

(16)(a) The term "sale at retail" or "retail sale" includes the purchase or acquisition of tangible personal property and specified services by a person who receives either a qualifying grant exempt from tax under RCW 82.04.767 or 82.16.320 or a grant deductible under RCW 82.04.4339, except for transactions excluded from the definition of "sale at retail" or "retail sale" by any other provision of this section.

Nothing in this subsection (16) may be construed to limit the application of any other provision of this section to purchases by a recipient of either a qualifying grant exempt from tax under RCW 82.04.767 or a grant deductible under RCW 82.04.4339, or by any other person.

(b) For purposes of this subsection (16), "specified services" means:

(i) The constructing, repairing, decorating, or improving of new or existing buildings or other structures under, upon, or above real property, including the installing or attaching of any article of tangible personal property therein or thereto, whether or not such personal property becomes a part of the realty by virtue of installation;

(ii) The clearing of land or the moving of earth, whether or not associated with activities described in (b)(i) of this subsection (16);

(iii) The razing or moving of existing buildings or structures;

and (iv) Landscape maintenance and horticultural services.

Sec.

107.

RCW 82.04.110 and 2009 c 535 s 405 are each amended to read as follows:

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41 SB 5794 (1) Except as otherwise provided in this section, "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 his or her own materials or ingredients any articles, substances, or commodities.

(2)(((a))) When the owner of equipment or facilities furnishes, or sells to the customer prior to manufacture, all or a portion of the materials that become a part or whole of the manufactured article, the department shall prescribe equitable rules for determining tax liability.

(((b) A person who produces aluminum master alloys is a processor for hire rather than a manufacturer, regardless of the portion of the aluminum provided by that person's customer.

For the purposes of this subsection (2)(b), "aluminum master alloy" means an alloy registered with the aluminum association as a grain refiner or a hardener alloy using the American national standards institute designating system H35.3.)) (3) A nonresident of this state who is the owner of materials processed for it in this state by a processor for hire shall not be deemed to be engaged in business in this state as a manufacturer because of the performance of such processing work for it in this state.

(4) The owner of materials from which a nuclear fuel assembly is made for it by a processor for hire shall not be subject to tax under this chapter as a manufacturer of the fuel assembly.

(5) For purposes of this section, the terms "articles," "substances," "materials," "ingredients," and "commodities" do not include digital goods.

Sec.

108.

RCW 82.04.120 and 2019 c 202 s 3 are each amended to read as follows:

(1) "To manufacture" embraces all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different or useful substance or article of tangible personal property is produced for sale or commercial or industrial use, and includes:

(a) The production or fabrication of special made or custom made articles;

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42 SB 5794 (b) The production or fabrication of dental appliances, devices, restorations, substitutes, or other dental laboratory products by a dental laboratory or dental technician;

(c) Cutting, delimbing, and measuring of felled, cut, or taken trees;

(d) Crushing and/or blending of rock, sand, stone, gravel, or ore;

(e) The production of compressed natural gas or liquefied natural gas for use as a transportation fuel as defined in RCW 82.16.310;

and (f) The production or processing of renewable natural gas.

(2) "To manufacture" does not include:

(a) Conditioning of seed for use in planting;

cubing hay or alfalfa;

(b) Activities which consist of cutting, grading, or ice glazing seafood which has been cooked, frozen, or canned outside this state;

(c) The growing, harvesting, or producing of agricultural products;

(d) ((Packing of agricultural products, including sorting, washing, rinsing, grading, waxing, treating with fungicide, packaging, chilling, or placing in controlled atmospheric storage;

(e))) The production of digital goods;

(((f))) (e) 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;

and (((g))) (f) Except as provided in subsection (1)(((e))) (d) of this section, any activity that is integral to any public service business as defined in RCW 82.16.010 and with respect to which the gross income associated with such activity:

(i) Is subject to tax under chapter 82.16 RCW;

or (ii) would be subject to tax under chapter 82.16 RCW if such activity were conducted in this state or if not for an exemption or deduction.

(3) With respect to wastewater treatment facilities:

(a) "To manufacture" does not include the treatment of wastewater, the production of reclaimed water, and the production of class B biosolids;

and (b) "To manufacture" does include the production of class A or exceptional quality biosolids, but only with respect to the p.

43 SB 5794 processing activities that occur after the biosolids have reached class B standards.

Sec.

109.

RCW 82.04.43395 and 2023 c 313 s 1 are each amended to read as follows:

(1) An accountable community of health may deduct from the measure of tax delivery system reform incentive payments, medicaid transformation project funding, or both, distributed by the Washington state health care authority, as described in Sec.

1115 medicaid demonstration project number 11-W-00304/0, as approved by the centers for medicare and medicaid services in accordance with Sec.

1115(a) of the social security act.

(2) A hospital that is owned by a municipal corporation or political subdivision, or a hospital that is affiliated with a state institution, may deduct from the measure of tax ((either or both of the following:

(a) Incentive)) incentive payments received through the medicaid quality improvement program established through 42 C.F.R.

438.6(b)(2) ((;

(b) Delivery system reform incentive payments, medicaid transformation project funding, or both, received through the project described in Sec.

1115 medicaid demonstration project number 11- W-00304/0, approved by the centers for medicare and medicaid services in accordance with Sec.

1115(a) of the social security act)).

(3) Managed care organizations may deduct from the measure of tax the incentive payments received for achieving quality performance standards established through 42 C.F.R.

438.6(b)(2), as existing on July 28, 2019.

(4) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.

(a) "Accountable community of health" means a regional nonprofit designated by the health care authority to work together with the health care delivery system, health plans, public health, social services, community-based organizations, the justice system, schools, tribal partners, and local government leaders to improve the health equity of their communities as part of Sec.

1115 medicaid demonstration project number 11-W-00304/0.

(b) "Managed care organization" has the same meaning as provided in RCW 74.60.010.

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44 SB 5794 Sec.

110.

RCW 82.12.022 and 2017 3rd sp.s.

c 37 s 707 are each amended to read as follows:

(1) A use tax is levied on every person in this state for the privilege of using natural gas or manufactured gas, including compressed natural gas and liquefied natural gas, within this state as a consumer.

(2) The tax must be levied and collected in an amount equal to the value of the article used by the taxpayer multiplied by the rate in effect for the public utility tax on gas distribution businesses under RCW 82.16.020.

The "value of the article used" does not include any amounts that are paid for the hire or use of a gas distribution business as defined in RCW 82.16.010(2) in transporting the gas subject to tax under this subsection if those amounts are subject to tax under that chapter.

(3) ((The tax levied in this section does not apply to the use of natural or manufactured gas delivered to the consumer by other means than through a pipeline.

(4))) The tax levied in this section does not apply to the use of natural or manufactured gas if the person who sold the gas to the consumer has paid a tax under RCW 82.16.020 with respect to the gas for which exemption is sought under this subsection.

(((5)(a) The tax levied in this section does not apply to the use of natural or manufactured gas by an aluminum smelter as that term is defined in RCW 82.04.217 before January 1, 2027.

(b) A person claiming the exemption provided in this subsection (5) must file a complete annual tax performance report with the department under RCW 82.32.534.

(6))) (4) The tax imposed by this section does not apply to the use of natural gas, compressed natural gas, or liquefied natural gas, if the consumer uses the gas for transportation fuel as defined in RCW 82.16.310.

(((7) The tax levied in this section does not apply to the use of natural or manufactured gas by a silicon smelter as that term is defined in RCW 82.16.315.

(8))) (5) There is a credit against the tax levied under this section in an amount equal to any tax paid by:

(a) The person who sold the gas to the consumer when that tax is a gross receipts tax similar to that imposed pursuant to RCW 82.16.020 by another state with respect to the gas for which a credit is sought under this subsection;

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45 SB 5794 (b) The person consuming the gas upon which a use tax similar to the tax imposed by this section was paid to another state with respect to the gas for which a credit is sought under this subsection.

(((9))) (6) The use tax imposed in this section must be paid by the consumer to the department.

(((10))) (7) There is imposed a reporting requirement on the person who delivered the gas to the consumer to make a quarterly report to the department.

Such report must contain the volume of gas delivered, name of the consumer to whom delivered, and such other information as the department may require by rule.

(((11))) (8) The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of sections 1 through 6, chapter 384, Laws of 1989.

Sec.

111.

RCW 82.12.022 and 2017 c 135 s 27 are each amended to read as follows:

(1) A use tax is levied on every person in this state for the privilege of using natural gas or manufactured gas, including compressed natural gas and liquefied natural gas, within this state as a consumer.

(2) The tax must be levied and collected in an amount equal to the value of the article used by the taxpayer multiplied by the rate in effect for the public utility tax on gas distribution businesses under RCW 82.16.020.

The "value of the article used" does not include any amounts that are paid for the hire or use of a gas distribution business as defined in RCW 82.16.010(2) in transporting the gas subject to tax under this subsection if those amounts are subject to tax under that chapter.

(3) ((The tax levied in this section does not apply to the use of natural or manufactured gas delivered to the consumer by other means than through a pipeline.

(4))) The tax levied in this section does not apply to the use of natural or manufactured gas if the person who sold the gas to the consumer has paid a tax under RCW 82.16.020 with respect to the gas for which exemption is sought under this subsection.

(((5)(a) The tax levied in this section does not apply to the use of natural or manufactured gas by an aluminum smelter as that term is defined in RCW 82.04.217 before January 1, 2027.

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46 SB 5794 (b) A person claiming the exemption provided in this subsection (5) must file a complete annual tax performance report with the department under RCW 82.32.534.

(6))) (4) The tax imposed by this section does not apply to the use of natural gas, compressed natural gas, or liquefied natural gas, if the consumer uses the gas for transportation fuel as defined in RCW 82.16.310.

(((7))) (5) There is a credit against the tax levied under this section in an amount equal to any tax paid by:

(a) The person who sold the gas to the consumer when that tax is a gross receipts tax similar to that imposed pursuant to RCW 82.16.020 by another state with respect to the gas for which a credit is sought under this subsection;

or (b) The person consuming the gas upon which a use tax similar to the tax imposed by this section was paid to another state with respect to the gas for which a credit is sought under this subsection.

(((8))) (6) The use tax imposed in this section must be paid by the consumer to the department.

(((9))) (7) There is imposed a reporting requirement on the person who delivered the gas to the consumer to make a quarterly report to the department.

Such report must contain the volume of gas delivered, name of the consumer to whom delivered, and such other information as the department may require by rule.

(((10))) (8) The department may adopt rules under chapter 34.05 RCW for the administration and enforcement of sections 1 through 6, chapter 384, Laws of 1989.

Sec.

112.

RCW 82.21.040 and 2024 c 241 s 1 are each amended to read as follows:

The following are exempt from the tax imposed in this chapter:

(1) Any successive possession of a previously taxed hazardous substance.

If tax due under this chapter has not been paid with respect to a hazardous substance, the department may collect the tax from any person who has had possession of the hazardous substance.

If the tax is paid by any person other than the first person having taxable possession of a hazardous substance, the amount of tax paid shall constitute a debt owed by the first person having taxable possession to the person who paid the tax.

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47 SB 5794 (2) Any possession of a hazardous substance by a natural person under circumstances where the substance is used, or is to be used, for a personal or domestic purpose (and not for any business purpose) by that person or a relative of, or person residing in the same dwelling as, that person.

(3) Any possession of a hazardous substance amount which is determined as minimal by the department of ecology and which is possessed by a retailer for the purpose of making sales to ultimate consumers.

This exemption does not apply to pesticide or petroleum products.

(4) ((Any possession of alumina or natural gas.

(5)))(a) Until January 1, 2028, any possession of a hazardous substance as defined in RCW 82.21.020(1)(c) that is solely for use by a farmer or certified applicator as an agricultural crop protection product and warehoused in this state or transported to or from this state, provided that the person possessing the substance does not otherwise use, manufacture, package for sale, or sell the substance in this state.

(b) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.

(i) "Agricultural crop protection product" means a chemical regulated under the federal insecticide, fungicide, and rodenticide act, 7 U.S.C.

Sec.

136 as amended as of September 1, 2015, when used to prevent, destroy, repel, mitigate, or control predators, diseases, weeds, or other pests.

(ii) "Certified applicator" has the same meaning as provided in RCW 17.21.020.

(iii) "Farmer" has the same meaning as in RCW 82.04.213.

(iv) "Manufacturing" includes mixing or combining agricultural crop protection products with other chemicals or other agricultural crop protection products.

(v) "Package for sale" includes transferring agricultural crop protection products from one container to another, including the transfer of fumigants and other liquid or gaseous chemicals from one tank to another.

(vi) "Use" has the same meaning as in RCW 82.12.010.

(((6))) (5) Persons or activities which the state is prohibited from taxing under the United States Constitution.

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48 SB 5794 Sec.

113.

RCW 82.23A.030 and 1989 c 383 s 17 are each amended to read as follows:

The following are exempt from the tax imposed in this chapter:

(1) Any successive possession of a previously taxed petroleum product.

If tax due under this chapter has not been paid with respect to a petroleum product, the department may collect the tax from any person who has had possession of the petroleum product.

If the tax is paid by any person other than the first person having taxable possession of a petroleum product, the amount of tax paid shall constitute a debt owed by the first person having taxable possession to the person who paid the tax.

(2) Any possession of a petroleum product by a natural person under circumstances where the substance is used, or is to be used, for a personal or domestic purpose (and not for any business purpose) by that person or a relative of, or person residing in the same dwelling as, that person.

(3) Persons or activities which the state is prohibited from taxing under the United States Constitution.

(4) ((Any persons possessing a petroleum product where such possession first occurred before July 1, 1989.

(5))) Any possession of (a) natural gas, (b) petroleum coke, or (c) liquid fuel or fuel gas used in petroleum processing.

(((6))) (5) Any possession of petroleum products that are exported for use or sale outside this state as fuel.

(((7))) (6) Any possession of petroleum products packaged for sale to ultimate consumers.

Sec.

114.

RCW 82.29A.130 and 2023 c 343 s 2 are each amended to read as follows:

The following leasehold interests are exempt from taxes imposed pursuant to RCW 82.29A.030 and 82.29A.040:

(1) All leasehold interests constituting a part of the operating properties of any public utility that is assessed and taxed as a public utility pursuant to chapter 84.12 RCW.