RCW 82.04.360
Exemptions
—
Employees
—
Independent contractors
—
Booth renters.
(1) This chapter does not apply to any person in respect to his or her employment in the capacity of an employee or servant as distinguished from that of an independent contractor. For the purposes of this section, the definition of employee includes those persons that are defined in section 3121(d)(3)(B) of the federal internal revenue code of 1986, as amended through January 1, 1991.
(2) Until July 1, 2010, this chapter does not apply to amounts received by an individual from a corporation as compensation for serving as a member of that corporation's board of directors. Beginning on July 1, 2010, such amounts are taxable under RCW 82.04.290
(2).
(3) A booth renter is an independent contractor for purposes of this chapter. For purposes of this section, "booth renter" means any person who:
(a) Performs cosmetology, barbering, esthetics, or manicuring services for which a license is required under chapter
18.16
RCW; and
(b) Pays a fee for the use of salon or shop facilities and receives no compensation or other consideration from the owner of the salon or shop for the services performed.
[
2010 1st sp.s. c 23 s 702
;
2010 c 106 s 207
. Prior:
1991 c 324 s 19
;
1991 c 275 s 2
;
1961 c 15 s 82.04.360
; prior:
1959 c 197 s 20
; prior: 1945 c 249, s 2, part; 1943 c 156 s 4, part; 1941 c 178 s 6, part; 1939 c 225 s 5, part; 1937 c 227 s 4, part; 1935 c 180 s 11, part; Rem. Supp. 1945 s 8370-11, part.]
NOTES:
Application
—
Refunds
—
2010 1st sp.s. c 23 ss 702 and 1704:
"In accordance with Article VIII, section 5 of the state Constitution, sections 702 and 1704 of this act do not authorize refunds of business and occupation tax validly collected before July 1, 2010, on amounts received by an individual from a corporation as compensation for serving as a member of that corporation's board of directors." [
2010 1st sp.s. c 23 s 1705
.]
Intent
—
Findings
—
2010 1st sp.s. c 23:
"(1) In adopting the state's business and occupation tax, the legislature intended to tax virtually all business activities carried on within the state. See Simpson Inv. Co. v. Dep't of Revenue, 141 Wn.2d 139, 149 (2000). The legislature recognizes that the business and occupation tax applies to all activities engaged in with the object of gain, benefit, or advantage to the taxpayer or to another person or class, directly or indirectly, unless a specific exemption applies.
(2) One of the major business and occupation tax exemptions is provided in RCW 82.04.360
for income earned as an employee or servant as distinguished from income earned as an independent contractor. The legislature's intent in providing this exemption was to exempt employee wages from the business and occupation tax but not to exempt income earned as an independent contractor.
(3) The legislature finds that corporate directors are not employees or servants of the corporation whose board they serve on and therefore are not entitled to a business and occupation tax exemption under RCW 82.04.360
. The legislature further finds that there are no business and occupation tax exemptions for compensation received for serving as a member of a corporation's board of directors.
(4) The legislature also finds that there is a widespread misunderstanding among corporate directors that the business and occupation tax does not apply to the compensation they receive for serving as a director of a corporation. It is the legislature's expectation that the department of revenue will take appropriate measures to ensure that corporate directors understand and comply with their business and occupation tax obligations with respect to their director compensation. However, because of the widespread misunderstanding by corporate directors of their liability for business and occupation tax on director compensation, the legislature finds that it is appropriate in this unique situation to provide limited relief against the retroactive assessment of business and occupation taxes on corporate director compensation.
(5) The legislature also reaffirms its intent that all income of all independent contractors is subject to business and occupation tax unless specifically exempt under the Constitution or laws of this state or the United States." [
2010 1st sp.s. c 23 s 701
.]
Effective date
—
2010 1st sp.s. c 23 ss 107, 601, 602, 702, 902, 1202, and 1401-1405:
See note following RCW 82.04.2907
.
Retroactive application
—
2010 1st sp.s. c 23 ss 402 and 702:
See note following RCW 82.04.423
.
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
Effective date
—
2010 c 106:
See note following RCW 35.102.145
.
Finding
—
Intent
—
1991 c 275:
"(1) The legislature finds:
(a) The existing state policy is to exempt employees from the business and occupation tax.
(b) It has been difficult to distinguish, for business and occupation tax purposes, between independent contractors and employees who are in the business of selling life insurance. The tests commonly used by the department of revenue to determine tax status have not successfully differentiated employees from independent contractors when applied to the life insurance industry.
(2) The intent of this act is to apply federal tax law and rules to distinguish between employees and independent contractors for business and occupation tax purposes, solely for the unique business of selling life insurance." [
1991 c 275 s 1
.]
Effective date
—
1991 c 275:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect July 1, 1991." [
1991 c 275 s 3
.]
RCW 82.04.363
Exemptions
—
Camp or conference center
—
Items sold or furnished by nonprofit organization.
This chapter does not apply to amounts received by a nonprofit organization from the sale or furnishing of the following items at a camp or conference center conducted on property exempt from property tax under RCW 84.36.030
(1), (2), or (3):
(1) Lodging, conference and meeting rooms, camping facilities, parking, and similar licenses to use real property;
(2) Food and meals;
(3) Books, tapes, and other products, including books and other products that are transferred electronically, that are available exclusively to the participants at the camp, conference, or meeting and are not available to the public at large.
[
2009 c 535 s 409
;
1997 c 388 s 1
.]
NOTES:
Intent
—
Construction
—
2009 c 535:
See notes following RCW 82.04.192
.
Effective date
—
1997 c 388:
"This act takes effect October 1, 1997." [
1997 c 388 s 3
.]
RCW 82.04.3651
Exemptions
—
Amounts received by nonprofit organizations for fund-raising activities.
(1) This chapter does not apply to amounts received from fund-raising activities by nonprofit organizations, as defined in subsection (2) of this section, and libraries as defined in RCW 27.12.010
.
(2) As used in this section, a "nonprofit organization" means:
(a) An organization exempt from tax under section 501(c) (3), (4), or (10) of the federal internal revenue code (26 U.S.C. Sec. 501(c) (3), (4), or (10));
(b) A nonprofit organization that would qualify under (a) of this subsection except that it is not organized as a nonprofit corporation; or
(c) A nonprofit organization that meets all of the following criteria:
(i) The members, stockholders, officers, directors, or trustees of the organization do not receive any part of the organization's gross income, except as payment for services rendered;
(ii) The compensation received by any person for services rendered to the organization does not exceed an amount reasonable under the circumstances; and
(iii) The activities of the organization do not include a substantial amount of political activity, including but not limited to influencing legislation and participation in any campaign on behalf of any candidate for political office.
(3) As used in this section, the term "fund-raising activity" means soliciting or accepting contributions of money or other property or activities involving the anticipated exchange of goods or services for money between the soliciting organization and the organization or person solicited, for the purpose of furthering the goals of the nonprofit organization. "Fund-raising activity" does not include the operation of a regular place of business in which sales are made during regular hours such as a bookstore, thrift shop, restaurant, or similar business or the operation of a regular place of business from which services are provided or performed during regular hours such as the provision of retail, personal, or professional services. The sale of used books, used videos, used sound recordings, or similar used information products in a library, as defined in RCW 27.12.010, is not the operation of a regular place of business for the purposes of this section, if the proceeds of the sales are used to support the library.
[
2010 c 106 s 208
;
1999 c 358 s 3
;
1998 c 336 s 2
.]
NOTES:
Effective date
—
2010 c 106:
See note following RCW 35.102.145
.
Effective date
—
1999 c 358 ss 1 and 3-21:
"Sections 1 and 3 through 21 of this act take effect August 1, 1999." [
1999 c 358 s 22
.]
Findings
—
1998 c 336:
"The legislature finds that nonprofit educational, charitable, religious, scientific, and social welfare organizations provide many public benefits to the people of the state of Washington. Therefore, the legislature finds that it is in the best interests of the state of Washington to provide a limited excise tax exemption for fund-raising activities for certain nonprofit organizations." [
1998 c 336 s 1
.]
Sales tax exemptions: RCW 82.08.02573
.
RCW 82.04.367
Exemptions
—
Nonprofit organizations that are guarantee agencies, issue debt, or provide guarantees for student loans.
This chapter does not apply to gross income received by nonprofit organizations exempt from federal income tax under section 501(c)(3) of the internal revenue code of 1954, as amended, 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.
[
1998 c 324 s 1
;
1987 c 433 s 1
.]
RCW 82.04.368
Exemptions
—
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 subsection (1), (2), or (3) of this section.
[
1993 c 390 s 1
.]
RCW 82.04.370
Exemptions
—
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 Title
24
RCW, if such beneficiary corporations or societies provide in their bylaws for the payment of death benefits. 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.
[
1961 c 293 s 4
;
1961 c 15 s 82.04.370
. Prior:
1959 c 197 s 21
; prior: 1945 c 249 s 2, part; 1943 c 156 s 4, part; 1941 c 178 s 6, part; 1939 c 225 s 5, part; 1937 c 227 s 4, part; 1935 c 180 s 11, part; Rem. Supp. 1945 s 8370-11, part.]
RCW 82.04.380
Exemptions
—
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 members of the armed forces of the United States and also to carry on a system of national and international relief and to apply the same in mitigating the sufferings caused by pestilence, famine, fire, floods, and other national calamities and to devise and carry on measures for preventing the same.
[
1961 c 15 s 82.04.380
. Prior:
1959 c 197 s 22
; prior: 1945 c 249 s 2, part; 1943 c 156 s 4, part; 1941 c 178 s 6, part; 1939 c 225 s 5, part; 1937 c 227 s 4, part; 1935 c 180 s 11, part; Rem. Supp. 1945 s 8370-11, part.]
RCW 82.04.385
Exemptions
—
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 chapter
71A.22
RCW or to the business activities of nonprofit organizations from the operation of sheltered workshops. For the purposes of this section, "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 persons with disabilities 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 persons with disabilities.
[
2020 c 274 s 68
. Prior:
1988 c 176 s 915
;
1988 c 13 s 1
;
1972 ex.s. c 134 s 1
;
1970 ex.s. c 81 s 3
.]
RCW 82.04.390
Exemptions
—
Amounts derived from sale of real estate.
(Effective until April 1, 2026.)
This chapter shall not apply to gross proceeds derived from the sale of real estate. This however, shall not be construed to allow a deduction 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.
[
1961 c 15 s 82.04.390
. Prior:
1959 ex.s. c 5 s 8
;
1959 c 197 s 23
; prior: 1945 c 249 s 2, part; 1943 c 156 s 4, part; 1941 c 178 s 6, part; 1939 c 225 s 5, part; 1937 c 227 s 4, part; 1935 c 180 s 11, part; Rem. Supp. 1945 s 8370-11, part.]
PDF
RCW 82.04.390
Exemptions
—
Amounts derived from sale of real estate.
(Effective April 1, 2026.)
This chapter shall not apply to gross proceeds derived from the sale of real estate. A sale of real estate does not include the gross proceeds derived from individual storage space rentals or individual storage space leases for 30 days or longer at a self-service storage facility as defined in RCW 19.150.010
. This however, shall not be construed to allow a deduction 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.
[
2025 c 423 s 302
;
1961 c 15 s 82.04.390
. Prior:
1959 ex.s. c 5 s 8
;
1959 c 197 s 23
; prior: 1945 c 249 s 2, part; 1943 c 156 s 4, part; 1941 c 178 s 6, part; 1939 c 225 s 5, part; 1937 c 227 s 4, part; 1935 c 180 s 11, part; Rem. Supp. 1945 s 8370-11, part.]
NOTES:
Effective date
—
2025 c 423 ss 301 and 302:
See note following RCW 82.04.290
.
Finding
—
Intent
—
Necessity of act
—
2025 c 423:
See notes following RCW 82.04.260
.
RCW 82.04.392
Exemptions
—
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.
[
1998 c 311 s 3
;
1997 c 106 s 21
.]
NOTES:
Intent
—
Retroactive application
—
1998 c 311 ss 1 and 3:
See note following RCW 19.146.050
.
Severability
—
1997 c 106:
See note following RCW 19.146.010
.
RCW 82.04.399
Exemptions
—
Sales of academic transcripts.
This chapter does not apply to amounts received from sales of academic transcripts by educational institutions.
[
1996 c 272 s 1
.]
NOTES:
Effective date
—
1996 c 272:
"This act shall take effect July 1, 1996." [
1996 c 272 s 4
.]
RCW 82.04.405
Exemptions
—
Credit unions.
(Effective until January 1, 2026.)
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.
[
1998 c 311 s 4
;
1970 ex.s. c 101 s 3
.]
NOTES:
Severability
—
Effective date
—
1970 ex.s. c 101:
See notes following RCW 33.28.040
.
PDF
RCW 82.04.405
Credit unions
—
Tax
—
Exemptions.
(Effective January 1, 2026.)
(1) Except as provided in subsection (2) of this section, 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.
(2)(a) Beginning October 1, 2025, if a credit union organized under the laws of this state merges or acquires a bank that is regulated by the department of financial institutions, the credit union no longer qualifies for the exemption from business and occupation tax in subsection (1) of this section and is subject to tax equal to the gross income of the credit union, multiplied by 1.2 percent.
(b) This subsection (2) does not apply to transactions for which an application has been submitted for regulatory approval prior to January 1, 2026.
[
2025 c 423 s 104
;
1998 c 311 s 4
;
1970 ex.s. c 101 s 3
.]
NOTES:
Effective date
—
2025 c 423 ss 101, 103, 104, 105, 201, and 202:
See note following RCW 82.04.260
.
Finding
—
Intent
—
Necessity of act
—
2025 c 423:
See notes following RCW 82.04.260
.
Severability
—
Effective date
—
1970 ex.s. c 101:
See notes following RCW 33.28.040
.
RCW 82.04.408
Exemptions
—
Housing finance commission.
This chapter does not apply to income received by the state housing finance commission under chapter
43.180
RCW.
[
1983 c 161 s 25
.]
NOTES:
Effective dates
—
1983 c 161:
See RCW 43.180.904
.
RCW 82.04.410
Exemptions
—
Hatching eggs and poultry.
This chapter shall not apply to amounts derived by persons engaged in the production and sale of hatching eggs or poultry for use in the production for sale of poultry or poultry products.
[
1967 ex.s. c 149 s 15
;
1961 c 15 s 82.04.410
. Prior:
1959 c 197 s 25
; prior: 1945 c 249 s 2, part; 1943 c 156 s 4, part; 1941 c 178 s 6, part; 1939 c 225 s 5, part; 1937 c 227 s 4, part; 1935 c 180 s 11, part; Rem. Supp. 1945 s 8370-11, part.]
RCW 82.04.415
Exemptions
—
Sand, gravel and rock taken from county or city pits or quarries, processing and handling costs.
This chapter shall not apply to:
(1) The cost of or charges made for labor and services performed in respect to the mining, sorting, crushing, screening, washing, hauling, and stockpiling of sand, gravel, and rock, when such sand, gravel, or rock is taken from a pit or quarry which is owned by or leased to a county or city and such sand, gravel, or rock is either stockpiled in said pit or quarry for placement or is placed on the street, road, place, or highway of the county or city by the county or city itself; or
(2) The cost of or charges for such labor and services if any such sand, gravel, or rock is sold by the county or city to a county, or a city at actual cost for placement on a publicly owned street, road, place, or highway.
The exemption provided for in this section shall not apply to the cost of or charges for such labor and services if the sand, gravel, or rock is used for other than public road purposes or is sold otherwise than as provided for in this section.
[
1965 ex.s. c 173 s 10
.]
NOTES:
Effective date
—
1965 ex.s. c 173:
See note following RCW 82.04.050
.
RCW 82.04.416
Exemptions
—
Operation of state route No. 16.
This chapter does not apply to amounts received from operating state route number 16 corridor transportation systems and facilities constructed and operated under chapter
47.46
RCW.
[
1998 c 179 s 3
.]
NOTES:
Finding
—
1998 c 179:
See note following RCW 35.21.718
.
RCW 82.04.418
Exemptions
—
Grants by United States government to municipal corporations or political subdivisions.
The provisions of this chapter shall not apply to grants received from the state or the United States government by municipal corporations or political subdivisions of the state of Washington.
[
1983 1st ex.s. c 66 s 2
.]
RCW 82.04.419
Exemptions
—
County, city, town, school district, or fire district activity.
This chapter shall not apply to any county, city, town, school district, or fire district activity, regardless of how financed, other than a utility or enterprise activity as defined by the state auditor pursuant to RCW 35.33.111
and
36.40.220
and upon which the tax imposed pursuant to this chapter had previously applied. Nothing contained in this section shall limit the authority of the legislature to authorize the imposition of such tax prospectively upon such activities as the legislature shall specifically designate.
[
1983 1st ex.s. c 66 s 3
.]
RCW 82.04.4201
Exemptions
—
Sales/leasebacks by regional transit authorities.
This chapter does not apply to amounts received as lease payments paid by a seller/lessee to a lessor under a sale/leaseback agreement under RCW 81.112.300
in respect to tangible personal property used by the seller/lessee, or to the purchase amount paid by the lessee under an option to purchase at the end of the lease term.
[
2000 2nd sp.s. c 4 s 24
.]
NOTES:
Findings
—
Construction
—
2000 2nd sp.s. c 4 ss 18-30:
See notes following RCW 81.112.300
.
RCW 82.04.421
Exemptions
—
Out-of-state membership sales in discount programs.
(1) For the purposes of this section, "qualifying discount program" means a membership program, club, or plan that entitles the member to discounts on services or products sold by others. The term does not include any discount program which in part or in total entitles the member to discounts on services or products sold by the seller of the membership or an affiliate of the seller of the membership. "Affiliate," for the purposes of this section, means any person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the seller.
(2) Persons selling memberships in a qualifying discount program are not subject to tax under this chapter on that portion of the membership sales where the seller delivers the membership materials to the purchaser who receives them at a point outside this state.
[
1997 c 408 s 1
.]
NOTES:
Effective date
—
1997 c 408:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 1997." [
1997 c 408 s 2
.]
RCW 82.04.422
Exemptions
—
Wholesale sales of motor vehicles.
(1) This chapter does not apply to amounts received by a motor vehicle dealer licensed under chapter
46.70
RCW, or a dealer licensed by any other state, for the wholesale sale of used motor vehicles at auctions to licensed dealers.
(2) This chapter does not apply to amounts derived by a new car dealer from wholesale sales of new motor vehicles to other new car dealers making sales of new motor vehicles of the same make. This exemption does not apply to amounts derived by a manufacturer, distributor, or factory branch as defined in chapter
46.70
RCW.
[
2004 c 81 s 1
;
2001 c 258 s 1
.]
NOTES:
Effective date
—
2004 c 81:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [March 22, 2004]." [
2004 c 81 s 2
.]
Effective date
—
2001 c 258:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2001." [
2001 c 258 s 3
.]
RCW 82.04.423
Exemptions
—
Sales by certain out-of-state persons to or through direct seller's representatives.
(1) Prior to May 1, 2010, this chapter does not apply to any person in respect to gross income derived from the business of making sales at wholesale or retail if such person:
(a) Does not own or lease real property within this state; and
(b) Does not regularly maintain a stock of tangible personal property in this state for sale in the ordinary course of business; and
(c) Is not a corporation incorporated under the laws of this state; and
(d) Makes sales in this state exclusively to or through a direct seller's representative.
(2) For purposes of this section, the term "direct seller's representative" means a person who buys only consumer products on a buy-sell basis or a deposit-commission basis for resale, by the buyer or any other person, in the home or otherwise than in a permanent retail establishment, or who sells at retail, or solicits the sale at retail of, only consumer products in the home or otherwise than in a permanent retail establishment; and
(a) Substantially all of the remuneration paid to such person, whether or not paid in cash, for the performance of services described in this subsection is directly related to sales or other output, including the performance of services, rather than the number of hours worked; and
(b) The services performed by the person are performed pursuant to a written contract between such person and the person for whom the services are performed and such contract provides that the person will not be treated as an employee with respect to such purposes for federal tax purposes.
(3) Nothing in this section may be construed to imply that a person exempt from tax under this section was engaged in a business activity taxable under this chapter prior to August 23, 1983.
[
2010 1st sp.s. c 23 s 402
;
1983 1st ex.s. c 66 s 5
.]
NOTES:
Retroactive application
—
2010 1st sp.s. c 23 ss 402 and 702:
"Sections 402 and 702 of this act apply both retroactively and prospectively." [
2010 1st sp.s. c 23 s 1704
.]
Application
—
Refunds
—
2010 1st sp.s. c 23 ss 702 and 1704:
See note following RCW 82.04.360
.
Application
—
Final judgments
—
2010 1st sp.s. c 23 s 402:
"Section 402 of this act does not affect any final judgments, not subject to appeal, entered by a court of competent jurisdiction before May 1, 2010." [
2010 1st sp.s. c 23 s 1706
.]
Intent
—
Findings
—
2010 1st sp.s. c 23:
"(1) A business and occupation tax exemption is provided in RCW 82.04.423
for certain out-of-state sellers that sell consumer products exclusively to or through a direct seller's representative. The intent of the legislature in enacting this exemption was to provide a narrow exemption for out-of-state businesses engaged in direct sales of consumer products, typically accomplished through in-home parties or door-to-door selling.
(2) In
Dot Foods, Inc. v. Dep't of Revenue
, Docket No. 81022-2 (September 10, 2009), the Washington supreme court held that the exemption in RCW 82.04.423
applied to a taxpayer: (a) That sold nonconsumer products through its representative in addition to consumer products; and (b) whose consumer products were ultimately sold at retail in permanent retail establishments.
(3) The legislature finds that most out-of-state businesses selling consumer products in this state will either be eligible for the exemption under RCW 82.04.423
or could easily restructure their business operations to qualify for the exemption. As a result, the legislature expects that the broadened interpretation of the direct sellers' exemption will lead to large and devastating revenue losses. This comes at a time when the state's existing budget is facing a two billion six hundred million dollar shortfall, which could grow, while at the same time the demand for state and state-funded services is also growing. Moreover, the legislature further finds that RCW 82.04.423
provides preferential tax treatment for out-of-state businesses over their in-state competitors and now creates a strong incentive for in-state businesses to move their operations outside Washington.
(4) Therefore, the legislature finds that it is necessary to reaffirm the legislature's intent in establishing the direct sellers' exemption and prevent the loss of revenues resulting from the expanded interpretation of the exemption by amending RCW 82.04.423
retroactively to conform the exemption to the original intent of the legislature and by prospectively ending the direct sellers' exemption as of May 1, 2010." [
2010 1st sp.s. c 23 s 401
.]
Effective date
—
2010 1st sp.s. c 23:
See note following RCW 82.32.655
.
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
RCW 82.04.425
Exemptions
—
Accommodation sales.
This chapter shall not apply to sales for resale by persons regularly engaged in the business of making 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 or her vendor in the acquisition of the article and (2) the sale is made as an accommodation to the buyer to enable him or her to fill a bona fide existing order of a customer or is made within fourteen days to reimburse in kind a previous accommodation sale by the buyer to the seller; nor to sales by a wholly owned subsidiary of a person making sales at retail which are exempt under RCW 82.08.0262
when the parent corporation shall have paid the tax imposed under this chapter.
[
2013 c 23 s 315
;
1980 c 37 s 78
;
1965 ex.s. c 173 s 9
;
1961 c 15 s 82.04.425
. Prior:
1955 c 95 s 1
.]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
Effective date
—
1965 ex.s. c 173:
See note following RCW 82.04.050
.
RCW 82.04.4251
Exemptions
—
Convention and tourism promotion.
This chapter does not apply to amounts received by a nonprofit corporation organized under chapter
24.03A
RCW as payments or contributions from the state or any county, city, town, municipal corporation, quasi-municipal corporation, federally recognized Indian tribe, port district, or public corporation for the promotion of conventions and tourism.
[
2021 c 176 s 5244
;
2006 c 310 s 1
.]
NOTES:
Effective date
—
2021 c 176:
See note following RCW 24.03A.005
.
RCW 82.04.426
Exemptions
—
Semiconductor microchips.
(Contingent effective date; contingent expiration date.)
(1) The tax imposed by RCW 82.04.241
does not apply to any person in respect to the manufacturing of semiconductor microchips.
(2) For the purposes of this section:
(a) "Manufacturing semiconductor microchips" means taking raw polished semiconductor wafers and embedding integrated circuits on the wafers using processes such as masking, etching, and diffusion; and
(b) "Integrated circuit" means a set of microminiaturized, electronic circuits.
(3) A person reporting under the tax rate provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(4) Pursuant to RCW 82.32.790, this section is contingent on the siting and commercial operation of a significant semiconductor microchip fabrication facility in the state of Washington.
(5) Any person who has claimed the exemption under this section must reimburse the department for 50 percent of the amount of the tax preference under this section if the number of persons employed by the person claiming the tax preference is less than 90 percent of the person's three-year employment average for the three years immediately preceding the year in which the exemption is claimed.
(6) This section expires January 1, 2034, unless the contingency in RCW 82.32.790
(2) occurs.
[
2024 c 261 s 3
. Prior:
2017 3rd sp.s. c 37 s 524
; (2017 3rd sp.s. c 37 s 523 expired January 1, 2018);
2017 c 135 s 13
;
2010 c 114 s 110
;
2003 c 149 s 2
.]
NOTES:
Tax preference performance statement exemption
—
Effective date
—
2024 c 261 ss 2-9:
See notes following RCW 82.04.241
.
Effective date
—
2017 3rd sp.s. c 37 ss 101-104, 403, 503, 506, 508, 510, 512, 514, 516, 518, 520, 522, 524, 526, 703, 705, 707, and 801-803:
See note following RCW 82.04.2404
.
Expiration date
—
2017 3rd sp.s. c 37 ss 502, 505, 507, 509, 511, 513, 515, 517, 519, 521, 523, and 525:
See note following RCW 82.04.2404
.
Effective date
—
2017 c 135:
See note following RCW 82.32.534
.
Finding
—
Intent
—
2010 c 114:
See note following RCW 82.32.534
.
Findings
—
Intent
—
2003 c 149:
"The legislature finds that the welfare of the people of the state of Washington is positively impacted through the encouragement and expansion of family wage employment in the state's manufacturing industries. The legislature further finds that targeting tax incentives to focus on key industry clusters is an important business climate strategy. The Washington competitiveness council has recognized the semiconductor industry, which includes the design and manufacture of semiconductor materials, as one of the state's existing key industry clusters. Businesses in this cluster in the state of Washington are facing increasing pressure to expand elsewhere. The sales and use tax exemptions for manufacturing machinery and equipment enacted by the 1995 legislature improved Washington's ability to compete with other states for manufacturing investment. However, additional incentives for the semiconductor cluster need to be put in place in recognition of the unique forces and global issues involved in business decisions that key businesses in this cluster face.
Therefore, the legislature intends to enact comprehensive tax incentives for the semiconductor cluster that address activities of the lead product industry and its suppliers and customers. Tax incentives for the semiconductor cluster are important in both retention and expansion of existing business and attraction of new businesses, all of which will strengthen this cluster. The legislature also recognizes that the semiconductor industry involves major investment that results in significant construction projects, which will create jobs and bring many indirect benefits to the state during the construction phase." [
2003 c 149 s 1
.]
RCW 82.04.4261
Exemptions
—
Federal small business innovation research program.
This chapter does not apply to amounts received by any person for research and development under the federal small business innovation research program (114 Stat. 2763A; 15 U.S.C. Sec. 638 et seq.).
[
2004 c 2 s 9
.]
NOTES:
Effective date
—
2004 c 2 ss 9 and 10:
"Sections 9 and 10 of this act take effect July 1, 2004." [
2004 c 2 s 11
.]
RCW 82.04.4262
Exemptions
—
Federal small business technology transfer program.
This chapter does not apply to amounts received by any person for research and development under the federal small business technology transfer program (115 Stat. 263; 15 U.S.C. Sec. 638 et seq.).
[
2004 c 2 s 10
.]
NOTES:
Effective date
—
2004 c 2 ss 9 and 10:
See note following RCW 82.04.4261
.
RCW 82.04.4263
Exemptions
—
Income received by the life sciences discovery fund authority.
This chapter does not apply to income received by the life sciences discovery fund authority under *chapter
43.350
RCW.
[
2005 c 424 s 11
.]
NOTES:
*Reviser's note:
Chapter
43.350
RCW was repealed and/or recodified by 2019 c 83 ss 5 and 6.
RCW 82.04.4264
Exemptions
—
Nonprofit assisted living facilities
—
Room and domiciliary care.
(1) This chapter does not apply to amounts received by a nonprofit assisted living facility licensed under chapter
18.20
RCW for providing room and domiciliary care to residents of the assisted living facility.
(2) As used in this section:
(a) "Domiciliary care" has the meaning provided in RCW 18.20.020
.
(b) "Nonprofit assisted living facility" means an assisted living facility that is operated as a religious or charitable organization, is exempt from federal income tax under 26 U.S.C. Sec. 501(c)(3), is incorporated under chapter
24.03A
RCW, is operated as part of a nonprofit hospital, or is operated as part of a public hospital district.
[
2021 c 176 s 5245
;
2012 c 10 s 71
;
2005 c 514 s 301
.]
NOTES:
Effective date
—
2021 c 176:
See note following RCW 24.03A.005
.
Application
—
2012 c 10:
See note following RCW 18.20.010
.
Effective date
—
2005 c 514:
See note following RCW 83.100.230
.
Part headings not law
—
Severability
—
2005 c 514:
See notes following RCW 82.12.808
.
RCW 82.04.4265
Exemptions
—
Comprehensive cancer centers.
(1) This chapter does not apply to amounts received by a comprehensive cancer center to the extent the amounts are exempt from federal income tax.
(2) For the purposes of this section, "comprehensive cancer center" means a cancer center that has written confirmation that it is recognized by the national cancer institute as a comprehensive cancer center and that qualifies as an exempt organization under 26 U.S.C. Sec. 501(c)(3) as existing on July 1, 2006.
[
2005 c 514 s 401
.]
NOTES:
Effective date
—
2005 c 514 ss 401-403:
"Sections 401 through 403 of this act take effect July 1, 2006." [
2005 c 514 s 1304
.]
Part headings not law
—
Severability
—
2005 c 514:
See notes following RCW 82.12.808
.
RCW 82.04.4266
Exemptions
—
Fruit and vegetable businesses.
(Expires July 1, 2035.)
(1) This chapter does not apply to the value of products or the gross proceeds of sales derived from:
(a) Manufacturing fruits or vegetables by canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables; or
(b) Selling at wholesale fruits or vegetables manufactured by the seller by canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables and sold to purchasers who transport in the ordinary course of business the goods out of this state. A person taking an exemption under this subsection (1)(b) must keep and preserve records for the period required by RCW 82.32.070
establishing that the goods were transported by the purchaser in the ordinary course of business out of this state.
(2) For purposes of this section, "fruits" and "vegetables" do not include cannabis, useable cannabis, or cannabis-infused products.
(3) A person claiming the exemption provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(4) This section expires July 1, 2035.
[
2023 c 422 s 3
;
2022 c 16 s 142
;
2020 c 139 s 5
;
2015 3rd sp.s. c 6 s 202
;
2014 c 140 s 9
;
2012 2nd sp.s. c 6 s 201
;
2011 c 2 s 202
(Initiative Measure No. 1107, approved November 2, 2010);
2010 1st sp.s. c 23 s 504
; (2010 1st sp.s. c 23 s 503 expired June 10, 2010);
2010 c 114 s 111
;
2006 c 354 s 3
;
2005 c 513 s 1
.]
NOTES:
Tax preference performance statement
—
2023 c 422 ss 2-5:
See note following RCW 82.04.4268
.
Intent
—
Finding
—
2022 c 16:
See note following RCW 69.50.101
.
Effective dates
—
2020 c 272; 2017 c 323; 2015 3rd sp.s. c 6:
"(1) Except as provided otherwise in this part, this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2015.
(2) Parts IV, VI, VIII, and XIX of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect September 1, 2015.
(3) Part X of this act takes effect October 1, 2016.
(4) Section 1105 of this act takes effect January 1, 2016.
(5) Except for section 2004 of this act, Part XX of this act takes effect January 1, 2019." [
2020 c 272 s 5
;
2017 c 323 s 301
;
2015 3rd sp.s. c 6 s 2301
.]
Tax preference performance statement
—
2015 3rd sp.s. c 6 ss 202-205:
"This section is the tax preference performance statement for the agricultural processor tax exemptions in sections 202 through 205 of this act. The performance statement is only intended to be used for subsequent evaluation of the tax preference. It is not intended to create a private right of action by any party or be used to determine eligibility for preferential tax treatment.
(1) The legislature categorizes this tax preference as one intended to accomplish the general purposes indicated in RCW 82.32.808
(2) (c) and (e).
(2) It is the legislature's specific public policy objective to create and retain jobs and continue providing tax relief to the food processing industry.
(3) To measure the effectiveness of the exemptions in sections 202 through 205 of this act in achieving the public policy objectives described in subsection (2) of this section, the joint legislative audit and review committee must evaluate the following:
(a) The number of businesses that claim the exemptions in sections 202 through 205 of this act;
(b) The change in total taxable income for taxpayers claiming the exemptions under sections 202 through 205 of this act;
(c) The change in total employment for taxpayers claiming the exemptions under sections 202 through 205 of this act; and
(d) For each calendar year, the total amount of exemptions claimed under sections 202 through 205 of this act as a percentage of total taxable income for taxpayers within taxable income categories.
(4) The information provided in the annual survey submitted by the taxpayers under *RCW 82.32.585, tax data collected by the department of revenue, and data collected by the employment security department is intended to provide the informational basis for the evaluation under subsection (3) of this section.
(5) In addition to the data sources described under subsection (4) of this section, the joint legislative audit and review committee may use any other data it deems necessary in performing the evaluation under subsection (3) of this section." [
2015 3rd sp.s. c 6 s 201
.]
*Reviser's note:
RCW 82.32.585
was repealed by 2017 c 135 s 2, effective January 1, 2018.
Existing rights, liabilities, or obligations
—
Effective dates
—
Contingent effective dates
—
2012 2nd sp.s. c 6:
See notes following RCW 82.04.29005
.
Findings
—
Construction
—
2011 c 2 (Initiative Measure No. 1107):
See notes following RCW 82.08.0293
.
Expiration date
—
2010 1st sp.s. c 23 ss 503, 505, and 514:
"Sections 503, 505, and 514 of this act expire June 10, 2010." [
2010 1st sp.s. c 23 s 1711
.]
Effective date
—
2010 1st sp.s. c 23 ss 504, 506, and 515:
"Sections 504, 506, and 515 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect June 10, 2010." [
2010 1st sp.s. c 23 s 1712
.]
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
Effective date
—
2010 1st sp.s. c 23:
See note following RCW 82.04.4292
.
Application
—
Finding
—
Intent
—
2010 c 114:
See notes following RCW 82.32.534
.
Effective dates
—
2006 c 354:
See note following RCW 82.04.4268
.
Effective dates
—
2005 c 513:
"This act takes effect July 1, 2007, except for sections 1 through 3 of this act which are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect July 1, 2005, and section 5, chapter 513, Laws of 2005, which takes effect April 30, 2007." [
2007 c 243 s 1
;
2005 c 513 s 14
.]
RCW 82.04.4267
Exemptions
—
Operation of parking/business improvement areas.
This chapter does not apply to amounts received by a chamber of commerce or other similar business association for administering the operation of a parking and business improvement area as defined in RCW 35.87A.110
.
[
2005 c 476 s 1
.]
RCW 82.04.4268
Exemptions
—
Dairy product businesses.
(Expires July 1, 2035.)
(1)(a) In computing tax there may be deducted from the measure of tax, the value of products or the gross proceeds of sales derived from:
(i) Manufacturing dairy products; or
(ii) Except as provided otherwise in (b) of this subsection, selling dairy products manufactured by the seller to purchasers who either transport in the ordinary course of business the goods out of this state or purchasers who use such dairy products as an ingredient or component in the manufacturing of a dairy product. A person taking an exemption under this subsection (1)(a)(ii) 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 manufacturer for use as an ingredient or component in the manufacturing of a dairy product.
(b) The exemption provided under (a)(ii) of this subsection does not apply to the sales of dairy products on or after July 1, 2025, where a dairy product is used by the purchaser as an ingredient or component in the manufacturing in Washington of a dairy product.
(2) "Dairy products" has the same meaning as provided in RCW 82.04.260
.
(3) A person claiming the exemption provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(4) This section expires July 1, 2035.
[
2023 c 422 s 2
;
2020 c 139 s 6
;
2015 3rd sp.s. c 6 s 203
;
2013 2nd sp.s. c 13 s 204
;
2012 2nd sp.s. c 6 s 202
;
2010 c 114 s 112
;
2006 c 354 s 1
.]
NOTES:
Tax preference performance statement
—
2023 c 422 ss 2-5:
"(1) This section is the tax preference performance statement for the tax preferences contained in sections 2 through 5, chapter 422, Laws of 2023. This performance statement is only intended to be used for subsequent evaluation of the tax preferences. It is not intended to create a private right of action by any party or be used to determine eligibility for preferential tax treatment.
(2) The legislature categorizes these tax preferences as ones intended to create or retain jobs and provide tax relief for certain businesses or individuals as indicated in RCW 82.32.808
(2) (c) and (e).
(3) It is the legislature's specific public policy objective to create and retain jobs and continue providing tax relief to the food processing industry.
(4) To measure the effectiveness of the exemptions in sections 2 through 5 of this act in achieving the public policy objectives described in subsection (3) of this section, the joint legislative audit and review committee must evaluate the following:
(a) The number of businesses that claim the exemptions in sections 2 through 5 of this act;
(b) The change in total taxable income for taxpayers claiming the exemptions under sections 2 through 5 of this act;
(c) The change in total employment for taxpayers claiming the exemptions under sections 2 through 5 of this act; and
(d) For each calendar year, the total amount of exemptions claimed under sections 2 through 5 of this act as a percentage of total taxable income for taxpayers within taxable income categories.
(5) The information provided in the annual report submitted by the taxpayers under RCW 82.32.534, tax data collected by the department of revenue, and data collected by the employment security department is intended to provide the informational basis for the evaluation under subsection (4) of this section.
(6) In addition to the data sources described under subsection (5) of this section, the joint legislative audit and review committee may use any other data it deems necessary in performing the evaluation under subsection (4) of this section." [
2023 c 422 s 1
.]
Effective dates
—
2015 3rd sp.s. c 6:
See note following RCW 82.04.4266
.
Tax preference performance statement
—
2015 3rd sp.s. c 6 ss 202-205:
See note following RCW 82.04.4266
.
Intent
—
2013 2nd sp.s. c 13:
See note following RCW 82.04.260
.
Effective date
—
2013 2nd sp.s. c 13:
See note following RCW 82.04.43393
.
Existing rights, liabilities, or obligations
—
Effective dates
—
Contingent effective dates
—
2012 2nd sp.s. c 6:
See notes following RCW 82.04.29005
.
Application
—
Finding
—
Intent
—
2010 c 114:
See notes following RCW 82.32.534
.
Effective dates
—
2006 c 354:
"(1) Except as otherwise provided in this section, this act takes effect July 1, 2006.
(2) Sections 6 through 9 and 11 of this act take effect July 1, 2007.
(3) Sections 12 and 13 of this act take effect July 1, 2012." [
2006 c 354 s 18
.]
RCW 82.04.4269
Exemptions
—
Seafood product businesses.
(Expires July 1, 2035.)
(1) This chapter does not apply to the value of products or the gross proceeds of sales derived from:
(a) Manufacturing seafood products that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; or
(b) Selling manufactured seafood products that remain in a raw, raw frozen, or raw salted state to purchasers who transport in the ordinary course of business the goods out of this state. A person taking an exemption under this subsection (1)(b) must keep and preserve records for the period required by RCW 82.32.070
establishing that the goods were transported by the purchaser in the ordinary course of business out of this state.
(2) A person claiming the exemption provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(3) This section expires July 1, 2035.
[
2023 c 422 s 4
;
2020 c 139 s 7
;
2015 3rd sp.s. c 6 s 204
;
2012 2nd sp.s. c 6 s 203
;
2010 c 114 s 113
;
2006 c 354 s 2
.]
NOTES:
Tax preference performance statement
—
2023 c 422 ss 2-5:
See note following RCW 82.04.4268
.
Effective dates
—
2015 3rd sp.s. c 6:
See note following RCW 82.04.4266
.
Tax preference performance statement
—
2015 3rd sp.s. c 6 ss 202-205:
See note following RCW 82.04.4266
.
Existing rights, liabilities, or obligations
—
Effective dates
—
Contingent effective dates
—
2012 2nd sp.s. c 6:
See notes following RCW 82.04.29005
.
Application
—
Finding
—
Intent
—
2010 c 114:
See notes following RCW 82.32.534
.
Effective dates
—
2006 c 354:
See note following RCW 82.04.4268
.
RCW 82.04.427
Exemptions and credits
—
Pollution control facilities.
See chapter
82.34
RCW.
RCW 82.04.4271
Deductions
—
Membership fees and certain service fees by nonprofit youth organization.
In computing tax due under this chapter, there may be deducted from the measure of tax all amounts received by a nonprofit 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.
For purposes of this section: "Nonprofit youth organization" means a nonprofit organization engaged in character building of youth which is exempt from property tax under RCW 84.36.030
.
[
1981 c 74 s 1
.]
RCW 82.04.4272
Deductions
—
Direct mail delivery charges.
(1) In computing tax there may be deducted from the measure of tax, amounts derived from delivery charges made for the delivery of direct mail if the charges are separately stated on an invoice or similar billing document given to the purchaser.
(2) "Delivery charges" and "direct mail" have the same meanings as in RCW 82.08.010
.
[
2005 c 514 s 114
.]
NOTES:
Effective date
—
2005 c 514:
"Sections 110(5), 114 through 116, 1001, 1003, 1004, 1201, 1311, and 1312 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect immediately [May 17, 2005]." [
2005 c 514 s 1303
.]
Part headings not law
—
Severability
—
2005 c 514:
See notes following RCW 82.12.808
.
RCW 82.04.4274
Deductions
—
Nonprofit management companies
—
Personnel performing on-site functions.
(1) In computing tax due under this chapter, there may be deducted from the measure of tax all amounts received by:
(a) A nonprofit property management company from the owner of property for gross wages, benefits, and payroll taxes paid to, or for, personnel performing on-site functions;
(b) A property management company from a housing authority for gross wages, benefits, and payroll taxes paid to, or for, personnel performing on-site functions; or
(c) A property management company from a limited liability company or limited partnership of which the sole managing member or sole general partner is a housing authority for gross wages, benefits, and payroll taxes paid to, or for, personnel performing on-site functions.
(2) The definitions in this subsection apply to this section.
(a) "Personnel performing on-site functions" means a person who meets all of the following conditions:
(i) The person works at the owner's property or centrally performs on-site functions for the property;
(ii) The person's duties include leasing property units, maintaining the property, preparing tenant income certification paperwork or other compliance documents required to lease the unit, collecting rents, recording rents, or performing similar activities; and
(iii) The property management company, for whom the personnel performing on-site functions works, operates under a written property management agreement.
(b) "Nonprofit property management company" means a property management company that:
(i) Is exempt from the tax under 26 U.S.C. Sec. 501(c) of the federal internal revenue code, as it exists on January 1, 2010, but only when such organization is providing property management services for low-income housing that has qualified for the property tax exemption under RCW 84.36.560
; or
(ii) Is a public corporation established under RCW 35.21.730
.
(c) "Housing authority" means a housing authority created pursuant to chapter
35.82
RCW.
[
2011 1st sp.s. c 26 s 1
.]
NOTES:
Affect on existing rights, liabilities, obligations, and proceedings
—
2011 1st sp.s. c 26:
"This act does not affect any existing right acquired or liability or obligation incurred under the sections amended or repealed in this act or under any rule or order adopted under those sections, nor does it affect any proceeding instituted under those sections." [
2011 1st sp.s. c 26 s 3
.]
RCW 82.04.4275
Deductions
—
Child welfare services.
(1) A health or social welfare organization may deduct from the measure of tax amounts received as compensation for providing child welfare services under a government-funded program.
(2) A person may deduct from the measure of tax amounts received from the state of Washington for distribution to a health or social welfare organization that is eligible to deduct the distribution under subsection (1) of this section.
(3) The following definitions apply to this section:
(a) "Child welfare services" has the same meaning as provided in RCW 74.13.020
; and
(b) "Health or social welfare organization" has the meaning provided in RCW 82.04.431
.
[
2011 c 163 s 1
.]
NOTES:
Application
—
2011 c 163:
"This act applies to amounts received by a taxpayer on or after August 1, 2011." [
2011 c 163 s 2
.]
RCW 82.04.4276
Deductions
—
Loans to rural electric cooperatives.
(Expires January 1, 2034.)
(1) In computing tax there may be deducted from the measure of tax, amounts received by a cooperative finance organization where the amounts are derived from loans to rural electric cooperatives or other nonprofit or governmental providers of utility services organized under the laws of this state.
(2) For the purposes of this section, the following definitions apply:
(a) "Cooperative finance organization" means a nonprofit organization with the primary purpose of providing, securing, or otherwise arranging financing for rural electric cooperatives.
(b) "Rural electric cooperative" means a nonprofit, customer-owned organization that provides utility services to rural areas.
(3) This section expires January 1, 2034.
[
2023 c 317 s 2
.]
NOTES:
Tax preference performance statement
—
2023 c 317 s 2:
"(1) This section is the tax preference performance statement for the tax preference contained in section 2, chapter 317, Laws of 2023. This performance statement is only intended to be used for subsequent evaluation of the tax preference. It is not intended to create a private right of action by any party or to be used to determine eligibility for preferential tax treatment.
(2) The legislature categorizes this tax preference as one intended to provide tax relief for certain businesses or individuals, as indicated in RCW 82.32.808
(2)(e).
(3) It is the legislature's specific public policy objective to reduce the tax burden on individuals and businesses imposed by the existing business and occupation tax rates.
(4) If the review finds that at least one cooperative finance organization in this state used the deduction, then the legislature intends to extend the expiration date of this tax deduction.
(5) In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may refer to any data collected by the state." [
2023 c 317 s 1
.]
Effective date
—
2023 c 317:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2023." [
2023 c 317 s 3
.]
RCW 82.04.4281
Deductions
—
Investments, dividends, interest on loans.
(Effective until January 1, 2026.)
(1) In computing tax there may be deducted from the measure of tax:
(a) Amounts derived from investments;
(b) Amounts derived as dividends or distributions from the capital account by a parent from its subsidiary entities; and
(c) Amounts derived from interest on loans between subsidiary entities and a parent entity or between subsidiaries of a common parent entity, but only if the total investment and loan income is less than five percent of gross receipts of the business annually.
(2) The following are not deductible under subsection (1)(a) of this section:
(a) Amounts received from loans, except as provided in subsection (1)(c) of this section, or the extension of credit to another, revolving credit arrangements, installment sales, the acceptance of payment over time for goods or services, or any of the foregoing that have been transferred by the originator of the same to an affiliate of the transferor; or
(b) Amounts received by a banking, lending, or security business.
(3) The definitions in this subsection apply only to this section.
(a) "Banking business" means a person engaging in business as a national or state-chartered bank, a mutual savings bank, a savings and loan association, a trust company, an alien bank, a foreign bank, a credit union, a stock savings bank, or a similar entity that is chartered under Title *30, 31, 32, or 33 RCW, or organized under Title 12 U.S.C.
(b) "Lending business" means a person engaged in the business of making secured or unsecured loans of money, or extending credit, and (i) more than one-half of the person's gross income is earned from such activities and (ii) more than one-half of the person's total expenditures are incurred in support of such activities.
(c) The terms "loan" and "extension of credit" do not include ownership of or trading in publicly traded debt instruments, or substantially equivalent instruments offered in a private placement.
(d) "Security business" means a person, other than an issuer, who is engaged in the business of effecting transactions in securities as a broker, dealer, or broker-dealer, as those terms are defined in the securities act of Washington, chapter
21.20
RCW, or the federal securities act of 1933. "Security business" does not include any company excluded from the definition of broker or dealer under the federal investment company act of 1940 or any entity that is not an investment company by reason of sections 3(c)(1) and 3(c)(3) through 3(c)(14) thereof.
[
2007 c 54 s 9
;
2002 c 150 s 2
;
1980 c 37 s 2
. Formerly RCW 82.04.430
(1).]
NOTES:
*Reviser's note:
Title
30
RCW was recodified and/or repealed pursuant to 2014 c 37, effective January 5, 2015.
Severability
—
2007 c 54:
See note following RCW 82.04.050
.
Findings
—
Intent
—
2002 c 150:
"The legislature finds that the application of the business and occupation tax deductions provided in RCW 82.04.4281
for investment income of persons deemed to be "other financial businesses" has been the subject of uncertainty, and therefore, disagreement and litigation between taxpayers and the state. The legislature further finds that the decision of the state supreme court in
Simpson Investment Co. v. Department of Revenue
could lead to a restrictive, narrow interpretation of the deductibility of investment income for business and occupation tax purposes. As a result, the legislature directed the department of revenue to work with affected businesses to develop a revision of the statute that would provide certainty and stability for taxpayers and the state. The legislature intends, by adopting this recommended revision of the statute, to provide a positive environment for capital investment in this state, while continuing to treat similarly situated taxpayers fairly." [
2002 c 150 s 1
.]
Effective date
—
2002 c 150:
"This act takes effect July 1, 2002." [
2002 c 150 s 3
.]
Finding
—
Intent on application of deduction
—
2001 c 320:
"The legislature finds that the application of the business and occupation tax deduction provided in RCW 82.04.4281
for investment income of persons other than those engaging in banking, loan, security, or other financial businesses has been the subject of disagreement between taxpayers and the state. Decisions of the supreme court have provided some broad guidelines and principles for interpretation of the deduction provided in RCW 82.04.4281, but these decisions have not provided the certainty and clarity that is desired by taxpayers and the state. Therefore, it is the intent of the legislature to delay change in the manner or extent of taxation of the investment income until definitions or standards can be developed and enacted by the legislature." [
2001 c 320 s 18
.]
Reviser's note:
2001 c 320 s 19, which was vetoed May 15, 2001, would have implemented the intent in this section.
Report to legislature
—
2001 c 320:
"The department of revenue shall report to the fiscal committees of the legislature by November 30, 2001, on the progress made in working with affected businesses on potential amendments to RCW 82.04.4281
which would clarify the application of RCW 82.04.4281
to other financial businesses." [
2001 c 320 s 20
.]
Intent
—
1980 c 37:
"The separation of sales tax exemption, use tax exemption, and business and occupation deduction sections into shorter sections is intended to improve the readability and facilitate the future amendment of these sections. This separation shall not change the meaning of any of the exemptions or deductions involved." [
1980 c 37 s 1
.]
PDF
RCW 82.04.4281
Deductions
—
Investments, dividends, interest on loans
—
Rules.
(Effective January 1, 2026.)
(1) In computing tax under this chapter, a person may deduct the following from the measure of tax:
(a) Except as provided in subsection (2) of this section, amounts derived from investments that are incidental to the main purpose of the person's business. Investments are incidental to the main purpose of the person's business if the total worldwide gross income derived from such investments is less than five percent of the person's total worldwide gross income of the business annually.
(b) Amounts derived as dividends or distributions from the capital account by a parent from its subsidiary entities.
(c) Amounts derived from interest on loans between subsidiary entities and a parent entity or between subsidiaries of a common parent entity, but only if the total investment and loan income is less than five percent of gross receipts of the business annually.
(2) The following are not deductible under either subsection (1)(a) or (3) of this section, or both:
(a) Amounts received from loans, except as provided in subsection (1)(c) of this section, or the extension of credit to another, revolving credit arrangements, installment sales, the acceptance of payment over time for goods or services, or any of the foregoing that have been transferred by the originator of the same to an affiliate of the transferor; or
(b) Amounts received by a banking, lending, or security business.
(3) Except as provided in subsections (2) and (4) of this section, in computing tax under this chapter, the following persons may deduct from the measure of the tax amounts derived from such person's investments regardless of whether the investments are incidental to the main purpose of the person's business:
(a) Nonprofit organizations;
(b) Collective investment vehicles;
(c) Retirement accounts and recipients of distributions therefrom, to that extent; and
(d) Family investment vehicles and recipients of distributions therefrom, to that extent.
(4) The following are not deductible under subsection (3)(b) of this section:
(a) Amounts derived from investments of persons who are invested in a collective investment vehicle but not themselves a collective investment vehicle;
(b) Amounts received by persons as compensation for services rendered to either the collective investment vehicle or the collective investment vehicle's investors, or both;
(c) Amounts derived from sources other than investments by a collective investment vehicle; or
(d) Amounts derived from factoring.
(5) The department must, consistent with the purpose of this section, adopt rules necessary to implement this section including, but not limited to, rules that provide examples of investment income from personal investments that is not eligible for a deduction under this section by virtue of it not being income from engaging in business and thus not taxable under this chapter. Such rule making must also include examples of the tax treatment of investment income received by persons making certain investments through different types of collective investment vehicles.
(6) The definitions in this subsection apply only to this section.
(a) "Banking business" means a person engaging in business as a national or state-chartered bank, a mutual savings bank, a savings and loan association, a trust company, an alien bank, a foreign bank, a credit union, a stock savings bank, or a similar entity that is chartered under Title *30, 31, 32, or 33 RCW, or organized under Title 12 U.S.C.
(b)(i) "Collective investment vehicle" means a person who meets all the following criteria:
(A) The person's total gross income derived from its investments is at least 90 percent of the person's total worldwide gross income of the business annually;
(B) The person holds title to passive investment assets for the benefit of the person's investors and the investment decisions are made by another person who serves as the collective investment vehicle's manager or advisor; and
(C) The person accepts unrelated persons as its investors.
(ii) A collective investment vehicle may take the form of a mutual fund, collective fund, and any similar investment vehicle whether structured as a limited or general partnership, limited liability company, corporation, trust, or otherwise.
(c) "Family investment vehicle" means:
(i) The estate of any decedent;
(ii) An inter vivos or testamentary trust, provided that the grantor and all beneficiaries are either members of the family as defined in RCW 83.100.046, or nonprofit organizations, or both;
(iii) A qualified tuition program established under the provisions of the internal revenue code section 529; or
(iv) A coverdell education savings account established under the provisions of the internal revenue code section 530.
(d) "Internal revenue code" means the United States internal revenue code of 1986, as amended, as of January 1, 2026, or such subsequent date as the department may provide by rule consistent with this chapter.
(e) "Investments" includes, but is not limited to, securities, trading account assets, federal funds, options, futures contracts, forward contracts, notional principal contracts, equities, foreign currency transactions, fixed income instruments, derivative instruments, and commodities.
(f) "Lending business" means a person engaged in the business of making secured or unsecured loans of money, or extending credit, and (i) more than one-half of the person's gross income is earned from such activities and (ii) more than one-half of the person's total expenditures are incurred in support of such activities.
(g) The terms "loan" and "extension of credit" do not include ownership of or trading in publicly traded debt instruments, or substantially equivalent instruments offered in a private placement.
(h) "Nonprofit organization" has the same meaning as in RCW 82.04.3651
.
(i) "Retirement account" means any qualified plan established under any of the provisions of sections 401 through 409, inclusive, of the internal revenue code.
(j) "Security business" means a person, other than an issuer, who is engaged in the business of effecting transactions in securities as a broker, dealer, or broker-dealer, as those terms are defined in the securities act of Washington, chapter
21.20
RCW, or the federal securities act of 1933. "Security business" does not include any company excluded from the definition of broker or dealer under the federal investment company act of 1940 or any entity that is not an investment company by reason of sections 3(c)(1) and 3(c)(3) through 3(c)(14) thereof.
[
2025 c 420 s 402
;
2007 c 54 s 9
;
2002 c 150 s 2
;
1980 c 37 s 2
. Formerly RCW 82.04.430
(1).]
NOTES:
*Reviser's note:
Title
30
RCW was recodified and/or repealed pursuant to 2014 c 37, effective January 5, 2015.
Finding
—
Intent
—
2025 c 420 s 402:
"The legislature finds that the decision of the state supreme court in
Antio, LLC v. Department of Revenue
could lead to uncertainty insofar as it affirms that the business and occupation tax deduction provided in RCW 82.04.4281
for the investment income of persons is only applicable if such income is from investments that are incidental to the main purpose of a person's business, without providing a bright line rule for what constitutes incidental to the main purpose of the person's business. The legislature intends, by adopting this revision of the statute, to avoid uncertainty and provide clarity around what incidental to the main purpose of the business means and, by extension, what income qualifies for the business and occupation tax deduction provided in RCW 82.04.4281
for investment income.
The legislature also intends to make it clear that amounts received by individuals from personal investments are generally not considered amounts received from engaging in business and therefore are not subject to the business and occupation tax. To that end, the legislature directs the department of revenue to provide guidance on what constitutes income from personal investments that are not considered engaging in business and thus not subject to the business and occupation tax.
The legislature further intends to make it clear that nondeductible investment income is subject to the service and other activities business and occupation tax classification and should be apportioned in accordance with RCW 82.04.462
." [
2025 c 420 s 401
.]
Effective date
—
2025 c 420 ss 114, 201, 301, 401, and 402:
See note following RCW 82.32.875
.
Tax preference performance statement exemption
—
Automatic expiration date exemption
—
Necessity of act
—
2025 c 420:
See notes following RCW 82.04.230
.
Severability
—
2007 c 54:
See note following RCW 82.04.050
.
Findings
—
Intent
—
2002 c 150:
"The legislature finds that the application of the business and occupation tax deductions provided in RCW 82.04.4281
for investment income of persons deemed to be "other financial businesses" has been the subject of uncertainty, and therefore, disagreement and litigation between taxpayers and the state. The legislature further finds that the decision of the state supreme court in
Simpson Investment Co. v. Department of Revenue
could lead to a restrictive, narrow interpretation of the deductibility of investment income for business and occupation tax purposes. As a result, the legislature directed the department of revenue to work with affected businesses to develop a revision of the statute that would provide certainty and stability for taxpayers and the state. The legislature intends, by adopting this recommended revision of the statute, to provide a positive environment for capital investment in this state, while continuing to treat similarly situated taxpayers fairly." [
2002 c 150 s 1
.]
Effective date
—
2002 c 150:
"This act takes effect July 1, 2002." [
2002 c 150 s 3
.]
Finding
—
Intent on application of deduction
—
2001 c 320:
"The legislature finds that the application of the business and occupation tax deduction provided in RCW 82.04.4281
for investment income of persons other than those engaging in banking, loan, security, or other financial businesses has been the subject of disagreement between taxpayers and the state. Decisions of the supreme court have provided some broad guidelines and principles for interpretation of the deduction provided in RCW 82.04.4281, but these decisions have not provided the certainty and clarity that is desired by taxpayers and the state. Therefore, it is the intent of the legislature to delay change in the manner or extent of taxation of the investment income until definitions or standards can be developed and enacted by the legislature." [
2001 c 320 s 18
.]
Reviser's note:
2001 c 320 s 19, which was vetoed May 15, 2001, would have implemented the intent in this section.
Report to legislature
—
2001 c 320:
"The department of revenue shall report to the fiscal committees of the legislature by November 30, 2001, on the progress made in working with affected businesses on potential amendments to RCW 82.04.4281
which would clarify the application of RCW 82.04.4281
to other financial businesses." [
2001 c 320 s 20
.]
Intent
—
1980 c 37:
"The separation of sales tax exemption, use tax exemption, and business and occupation deduction sections into shorter sections is intended to improve the readability and facilitate the future amendment of these sections. This separation shall not change the meaning of any of the exemptions or deductions involved." [
1980 c 37 s 1
.]
RCW 82.04.4282
Deductions
—
Fees, dues, charges.
In computing tax there may be deducted from the measure of tax amounts derived from bona fide (1) initiation fees, (2) dues, (3) contributions, (4) donations, (5) tuition fees, (6) charges made by a nonprofit trade or professional organization for attending or occupying space at a trade show, convention, or educational seminar sponsored by the nonprofit trade or professional organization, which trade show, convention, or educational seminar is not open to the general public, (7) charges made for operation of privately operated kindergartens, and (8) endowment funds. This section may not be construed to exempt any person, association, or society from tax liability upon selling tangible personal property, digital goods, digital codes, or digital automated services, or upon providing facilities or other services for which a special charge is made to members or others. If dues are in exchange for any significant amount of goods or services rendered by the recipient thereof to members without any additional charge to the member, or if the dues are graduated upon the amount of goods or services rendered, the value of such goods or services shall not be considered as a deduction under this section.
[
2009 c 535 s 410
;
1994 c 124 s 3
;
1989 c 392 s 1
;
1980 c 37 s 3
. Formerly RCW 82.04.430
(2).]
NOTES:
Intent
—
Construction
—
2009 c 535:
See notes following RCW 82.04.192
.
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4283
Deductions
—
Cash discount taken by purchaser.
In computing tax there may be deducted from the measure of tax the amount of cash discount actually taken by the purchaser. This deduction is not allowed in arriving at the taxable amount under the extractive 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 provisions of RCW 82.04.450
.
[
1980 c 37 s 4
. Formerly RCW 82.04.430
(3).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4284
Deductions
—
Bad debts.
(1) In computing tax there may be deducted from the measure of tax bad debts, as that term is used in 26 U.S.C. Sec. 166, as amended or renumbered as of January 1, 2003, on which tax was previously paid.
(2) For purposes of this section, "bad debts" do not include:
(a) Amounts due on property that remains in the possession of the seller until the full purchase price is paid;
(b) Expenses incurred in attempting to collect debt;
(c) Sales or use taxes payable to a seller; and
(d) Repossessed property.
(3) If a deduction is taken for a bad debt and the debt is subsequently collected in whole or in part, the tax on the amount collected must be paid and reported on the return filed for the period in which the collection is made.
(4) Payments on a previously claimed bad debt must be applied under RCW 82.08.037
(4) and
82.12.037, according to such rules as the department may prescribe.
[
2004 c 153 s 307
;
1980 c 37 s 5
. Formerly RCW 82.04.430
(4).]
NOTES:
Retroactive effective date
—
Effective date
—
2004 c 153:
See note following RCW 82.08.0293
.
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4285
Deductions
—
Motor vehicle fuel and special fuel taxes.
In computing tax there may be deducted from the measure of tax so much of the sale price of fuel as constitutes the amount of tax imposed by the state under chapter
82.38
RCW or the United States government, under 26 U.S.C., Subtitle D, chapters 31 and 32, upon the sale thereof.
[
2013 c 225 s 639
;
1998 c 176 s 3
;
1980 c 37 s 6
. Formerly RCW 82.04.430
(5).]
NOTES:
Effective date
—
2013 c 225:
See note following RCW 82.38.010
.
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4286
Deductions
—
Nontaxable business.
In computing tax there may be deducted from the measure of tax amounts derived from business which the state is prohibited from taxing under the Constitution of this state or the Constitution or laws of the United States.
[
1980 c 37 s 7
. Formerly RCW 82.04.430
(6).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4287
Deductions
—
Compensation for receiving, washing, etc., horticultural products for person exempt under RCW 82.04.330
—
Materials and supplies used.
In computing tax there may be deducted from the measure of tax amounts derived by any person as compensation for the receiving, washing, sorting, and packing of fresh perishable horticultural products and the material and supplies used therein when performed for the person exempted in RCW 82.04.330, either as agent or as independent contractor.
[
1980 c 37 s 8
. Formerly RCW 82.04.430
(7).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
Sales and use tax exemption for materials and supplies used in packing horticultural products: RCW 82.08.0311
and
82.12.0311
.
RCW 82.04.4289
Exemption
—
Compensation for patient services or attendant sales of drugs dispensed pursuant to prescription by certain nonprofit organizations.
This chapter does not apply to amounts derived as compensation for services rendered to patients or from sales of drugs for human use pursuant to a prescription furnished as an integral part of services rendered to patients by a kidney dialysis facility operated as a nonprofit corporation, a nonprofit hospice agency licensed under chapter
70.127
RCW, and nursing homes and homes for unwed mothers operated as religious or charitable organizations, but only if no part of the net earnings received by such an institution inures directly or indirectly, to any person other than the institution entitled to deduction hereunder. "Prescription" and "drug" have the same meaning as in RCW 82.08.0281
.
[
2003 c 168 s 402
;
1998 c 325 s 1
;
1993 c 492 s 305
;
1981 c 178 s 2
;
1980 c 37 s 10
. Formerly RCW 82.04.430
(9).]
NOTES:
Effective dates
—
Part headings not law
—
2003 c 168:
See notes following RCW 82.08.010
.
Findings
—
Intent
—
1993 c 492:
See notes following RCW 43.20.050
.
Short title
—
Savings
—
Reservation of legislative power
—
Effective dates
—
1993 c 492:
See RCW 43.72.910
through
43.72.915
.
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4290
Deductions
—
Mental health services or substance use disorder treatment services.
(Expires January 1, 2032.)
(1) A health or social welfare organization may deduct from the measure of tax amounts received as compensation for providing mental health services or substance use disorder treatment services under a government-funded program.
(2) A behavioral health administrative services organization may deduct from the measure of tax amounts received from the state of Washington for distribution to a health or social welfare organization that is eligible to deduct the distribution under subsection (1) of this section.
(3) A person claiming a deduction under this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(4) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Behavioral health administrative services organization" has the same meaning as provided in RCW 71.24.025
.
(b) "Health or social welfare organization" has the same meaning as provided in RCW 82.04.431
.
(c) "Mental health services" means mental health services as described in chapter
71.24
RCW.
(d) "Substance use disorder treatment services" means substance use disorder treatment services as described in chapter
71.24
RCW.
(5) This section expires January 1, 2032.
[
2021 c 124 s 3
.]
NOTES:
Finding
—
Intent
—
2021 c 124:
"The legislature finds that COVID-19 has had significant impacts on behavioral health. The legislature previously had a feature of its tax system that exempted government-funded behavioral health services from paying business and occupation tax in order for more tax dollars to be utilized in providing health services. The legislature intends to reenact that preference in light of increased behavioral health needs for the foreseeable future, and in recognition that treatment reduces costs to the government in other services." [
2021 c 124 s 1
.]
Tax preference performance statement
—
2021 c 124:
"(1) This section is the tax preference performance statement for the tax preference contained in section 3, chapter 124, Laws of 2021. This performance statement is only intended to be used for subsequent evaluation of the tax preference. It is not intended to create a private right of action by any party or to be used to determine eligibility for preferential tax treatment.
(2) The legislature categorizes this tax preference as one intended to accomplish a general purpose, reducing taxes so more money can go directly to behavioral health services, as indicated in RCW 82.32.808
(2)(f).
(3) It is the legislature's specific public policy objective to support behavioral health services that can prevent more serious and costly health issues.
(4) If a review finds that the amount of funding available for behavioral health services by these taxpayers increased, then the legislature intends to extend the expiration date of the tax preference.
(5) In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may refer to any data collected by the state." [
2021 c 124 s 2
.]
Effective date
—
2021 c 124:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [April 26, 2021]." [
2021 c 124 s 4
.]
RCW 82.04.4291
Deductions
—
Compensation received by a political subdivision from another political subdivision for services taxable under RCW 82.04.290
.
In computing tax there may be deducted from the measure of tax amounts derived by a political subdivision of the state of Washington from another political subdivision of the state of Washington as compensation for services which are within the purview of RCW 82.04.290
.
[
1980 c 37 s 11
. Formerly RCW 82.04.430
(10).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4292
Deductions
—
Interest on investments or loans secured by mortgages or deeds of trust.
(1) In computing tax there may be deducted from the measure of tax by those engaged in banking, loan, security or other financial businesses, interest received on investments or loans primarily secured by first mortgages or trust deeds on nontransient residential properties.
(2) Interest deductible under this section includes the portion of fees charged to borrowers, including points and loan origination fees, that is recognized over the life of the loan as an adjustment to yield in the taxpayer's books and records according to generally accepted accounting principles.
(3) Subsections (1) and (2) of this section notwithstanding, the following is a nonexclusive list of items that are not deductible under this section:
(a) Fees for specific services such as: Document preparation fees; finder fees; brokerage fees; title examination fees; fees for credit checks; notary fees; loan application fees; interest lock-in fees if the loan is not made; servicing fees; and similar fees or amounts;
(b) Fees received in consideration for an agreement to make funds available for a specific period of time at specified terms, commonly referred to as commitment fees;
(c) Any other fees, or portion of a fee, that is not recognized over the life of the loan as an adjustment to yield in the taxpayer's books and records according to generally accepted accounting principles;
(d) Gains on the sale of valuable rights such as service release premiums, which are amounts received when servicing rights are sold; and
(e) Gains on the sale of loans, except deferred loan origination fees and points deductible under subsection (2) of this section, are not to be considered part of the proceeds of sale of the loan.
(4) Notwithstanding subsection (3) of this section, in computing tax there may be deducted from the measure of tax by those engaged in banking, loan, security, or other financial businesses, amounts received for servicing loans primarily secured by first mortgages or trust deeds on nontransient residential properties, including such loans that secure mortgage-backed or mortgage-related securities, but only if:
(a)(i) The loans were originated by the person claiming a deduction under this subsection (4) and that person either sold the loans on the secondary market or securitized the loans and sold the securities on the secondary market; or
(ii)(A) The person claiming a deduction under this subsection (4) acquired the loans from the person that originated the loans through a merger or acquisition of substantially all of the assets of the person who originated the loans, or the person claiming a deduction under this subsection (4) is affiliated with the person that originated the loans. For purposes of this subsection, "affiliated" means under common control. "Control" means the possession, directly or indirectly, of more than fifty percent of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise; and
(B) Either the person who originated the loans or the person claiming a deduction under this subsection (4) sold the loans on the secondary market or securitized the loans and sold the securities on the secondary market; and
(b) The amounts received for servicing the loans are determined by a percentage of the interest paid by the borrower and are only received if the borrower makes interest payments.
(5) The deductions provided in this section do not apply to persons subject to tax under RCW 82.04.29005
.
(6) By June 30, 2015, the joint legislative audit and review committee must review the deductions provided in this section in accordance with RCW 43.136.055
and make a recommendation as to whether the deductions should be continued without modification, modified, or terminated immediately.
[
2012 2nd sp.s. c 6 s 102
;
2010 1st sp.s. c 23 s 301
;
1980 c 37 s 12
. Formerly RCW 82.04.430
(11).]
NOTES:
Existing rights, liabilities, or obligations
—
Effective dates
—
Contingent effective dates
—
2012 2nd sp.s. c 6:
See notes following RCW 82.04.29005
.
Effective date
—
2010 1st sp.s. c 23:
"Parts III and XIII and sections 101 through 106, 108 through 112, 501 through 503, 505, 507, 510 through 514, 516 through 519, 901, 903 through 911, and 1201 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect June 1, 2010." [
2010 1st sp.s. c 23 s 1709
.]
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4293
Deductions
—
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 organized pursuant to the laws thereof.
[
1980 c 37 s 13
. Formerly RCW 82.04.430
(12).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4294
Deductions
—
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.
[
1980 c 37 s 14
. Formerly RCW 82.04.430
(13).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4295
Deductions
—
Manufacturing activities completed outside the United States.
In computing tax there may be deducted from the measure of tax by persons subject to payment of the tax on manufacturers pursuant to RCW 82.04.240, the value of articles to the extent of manufacturing activities completed outside the United States, if:
(1) Any additional processing of such articles in this state consists of minor final assembly only; and
(2) In the case of domestic manufacture of such articles, can be and normally is done at the place of initial manufacture; and
(3) The total cost of the minor final assembly does not exceed two percent of the value of the articles; and
(4) The articles are sold and shipped outside the state.
[
1980 c 37 s 15
. Formerly RCW 82.04.430
(14).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4296
Deductions
—
Reimbursement for accommodation expenditures by funeral homes.
In computing tax there may be deducted from the measure of tax that portion of amounts received by any funeral home licensed to do business in this state which is received as reimbursements for expenditures (for goods supplied or services rendered by a person not employed by or affiliated or associated with the funeral home) and advanced by such funeral home as an accommodation to the persons paying for a funeral, so long as such expenditures and advances are billed to the persons paying for the funeral at only the exact cost thereof and are separately itemized in the billing statement delivered to such persons.
[
1980 c 37 s 16
. Formerly RCW 82.04.430
(15).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.4297
Deductions
—
Compensation from public entities for health or social welfare services
—
Exception.
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.
[
2011 1st sp.s. c 19 s 2
;
2002 c 314 s 3
;
2001 2nd sp.s. c 23 s 2
;
1988 c 67 s 1
;
1980 c 37 s 17
. Formerly RCW 82.04.430
(16).]
NOTES:
Application
—
2011 1st sp.s. c 19:
"This act applies to amounts received by a taxpayer on or after August 1, 2011." [
2011 1st sp.s. c 19 s 4
.]
Findings
—
Refund of taxes
—
Effective date
—
2002 c 314:
See notes following RCW 82.04.4311
.
Findings
—
2001 2nd sp.s. c 23:
"The legislature finds that the deduction under the business and occupation tax statutes for compensation from public entities for health or social welfare services was intended to provide government with greater purchasing power when government provides financial support for the provision of health or social welfare services to benefited classes of persons. The legislature also finds that both the legislature and the United States congress have in recent years modified government-funded health care programs to encourage participation by beneficiaries in highly regulated managed care programs operated by persons who act as intermediaries between government entities and health or social welfare organizations. The legislature further finds that the objective of these changes is again to extend the purchasing power of scarce government health care resources, but that this objective would be thwarted to a significant degree if the business and occupation tax deduction were lost by health or social welfare organizations solely on account of their participation in managed care for government-funded health programs. In keeping with the original purpose of the health or social welfare deduction, it is desirable to ensure that compensation received from government sources through contractual managed care programs also be deductible." [
2001 2nd sp.s. c 23 s 1
.]
Effective date
—
2001 2nd sp.s. c 23:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [July 13, 2001]." [
2001 2nd sp.s. c 23 s 4
.]
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
"Health or social welfare organization" defined
—
Conditions for exemption
—
"Health or social welfare services" defined: RCW 82.04.431
.
RCW 82.04.4298
Deductions
—
Repair, maintenance, replacement, etc., of residential structures and commonly held property
—
Eligible organizations.
(Effective until January 1, 2028.)
(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 section "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 section:
(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 rebated 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.
[
1980 c 37 s 18
. Formerly RCW 82.04.430
(17).]
NOTES:
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
PDF
RCW 82.04.4298
Deductions
—
Repair, maintenance, replacement, management, or improvement of residential structures and common elements
—
Eligible organizations.
(Effective January 1, 2028.)
(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 common elements, 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, corporation, or partnership from a person who resides in a structure owned by the cooperative, corporation, or partnership;
(b) A condominium from a person who is a unit owner; or
(c) A plat community or miscellaneous community from a unit owner.
(2) For the purposes of this section "common elements," "condominium," "cooperative," "plat community," and "miscellaneous community" have the meaning given in RCW 64.90.010
.
(3) To qualify for the deductions under this section:
(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 rebated 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.
[
2024 c 321 s 432
;
1980 c 37 s 18
. Formerly RCW 82.04.430
(17).]
NOTES:
Effective dates
—
2024 c 321 ss 319 and 401-432:
See note following RCW 64.90.485
.
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
RCW 82.04.431
"Health or social welfare organization" defined
—
Conditions for exemption
—
"Health or social welfare services" defined.
(1) The term "health or social welfare organization" means an organization, including any community action council, which renders health or social welfare services as defined in subsection (2) of this section, which is a domestic or foreign nonprofit corporation under chapter
24.03A
RCW and which is managed by a governing board of not less than eight individuals none of whom is a paid employee of the organization or which is a corporation sole under chapter
24.12
RCW. Health or social welfare organization does not include a corporation providing professional services as authorized in chapter
18.100
RCW. In addition a corporation in order to be exempt under RCW 82.04.4297
must satisfy the following conditions:
(a) 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;
(b) 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 public service of the state;
(c) 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 nonprofit organization, association, or corporation which also would be entitled to the exemption;
(d) The corporation must be duly licensed or certified where licensing or certification is required by law or regulation;
(e) The amounts received qualifying for exemption must be used for the activities for which the exemption is granted;
(f) Services must be available regardless of race, color, national origin, or ancestry; and
(g) The director of revenue must have access to its books in order to determine whether the corporation is exempt from taxes within the intent of RCW 82.04.4297
and this section.
(2) The term "health or social welfare services" includes and is limited to:
(a) Mental health, drug, or alcoholism counseling or treatment;
(b) Family counseling;
(c) Health care services;
(d) Therapeutic, diagnostic, rehabilitative, or restorative services for the care of the sick, aged, or physically, developmentally, or emotionally-disabled individuals;
(e) Activities which are for the purpose of preventing or ameliorating juvenile delinquency or child abuse, including recreational activities for those purposes;
(f) Care of orphans or foster children;
(g) Day care of children;
(h) Employment development, training, and placement;
(i) Legal services to the indigent;
(j) Weatherization assistance or minor home repair for low-income homeowners or renters;
(k) Assistance to low-income homeowners and renters to offset the cost of home heating energy, through direct benefits to eligible households or to fuel vendors on behalf of eligible households;
(l) Community services to low-income individuals, families, and groups, which are designed to have a measurable and potentially major impact on causes of poverty in communities of the state; and
(m) Temporary medical housing, as defined in RCW 82.08.997, if the housing is provided only:
(i) While the patient is receiving medical treatment at a hospital required to be licensed under RCW 70.41.090
or at an outpatient clinic associated with such hospital, including any period of recuperation or observation immediately following such medical treatment; and
(ii) By a person that does not furnish lodging or related services to the general public.
[
2021 c 176 s 5246
;
2011 1st sp.s. c 19 s 3
;
2008 c 137 s 1
;
1986 c 261 s 6
;
1985 c 431 s 3
;
1983 1st ex.s. c 66 s 1
;
1980 c 37 s 80
;
1979 ex.s. c 196 s 6
.]
NOTES:
Effective date
—
2021 c 176:
See note following RCW 24.03A.005
.
Application
—
2011 1st sp.s. c 19:
See note following RCW 82.04.4297
.
Effective date
—
2008 c 137:
See note following RCW 82.08.997
.
Intent
—
1980 c 37:
See note following RCW 82.04.4281
.
Effective date
—
1979 ex.s. c 196:
See note following RCW 82.04.240
.
RCW 82.04.4311
Deductions
—
Compensation received under the federal medicare program by certain hospitals or health centers.
(1) A public hospital that is owned by a municipal corporation or political subdivision, or a nonprofit hospital, or a nonprofit community health center, or a network of nonprofit community health centers, that qualifies as a health and social welfare organization as defined in RCW 82.04.431, may deduct from the measure of tax amounts received as compensation for health care services covered under the federal medicare program authorized under Title XVIII of the federal social security act; medical assistance, children's health, or other program under chapter
74.09
RCW; or for the state of Washington basic health plan under chapter
70.47
RCW. The deduction authorized by this section does not apply to amounts received from patient copayments or patient deductibles.
(2) As used in this section, "community health center" means a federally qualified health center as defined in 42 U.S.C. 1396d as existing on August 1, 2005.
[
2005 c 86 s 1
;
2002 c 314 s 2
.]
NOTES:
Effective date
—
2005 c 86:
"This act takes effect August 1, 2005." [
2005 c 86 s 2
.]
Findings
—
2002 c 314:
"The legislature finds that the provision of health services to those people who receive federal or state subsidized health care benefits by reason of age, disability, or lack of income is a recognized, necessary, and vital governmental function. As a result, the legislature finds that it would be inconsistent with that governmental function to tax amounts received by a public hospital or nonprofit hospital qualifying as a health and social welfare organization, when the amounts are paid under a health service program subsidized by federal or state government. Further, the tax status of these amounts should not depend on whether the amounts are received directly from the qualifying program or through a managed health care organization under contract to manage benefits for a qualifying program. Therefore, the legislature adopts this act to provide a clear and understandable deduction for these amounts, and to provide refunds for taxes paid as specified in section 4 of this act." [
2002 c 314 s 1
.]
Refund of taxes
—
2002 c 314:
"A public hospital owned by a municipal corporation or political subdivision, or a nonprofit hospital that qualifies as a health and social welfare organization under RCW 82.04.431, is entitled to:
(1) A refund of business and occupation tax paid between January 1, 1998, and April 2, 2002, on amounts that would be deductible under section 2 of this act; and
(2) A waiver of tax liability for accrued, but unpaid taxes that would be deductible under section 2 of this act." [
2002 c 314 s 4
.]
Effective date
—
2002 c 314:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [April 2, 2002]." [
2002 c 314 s 5
.]
RCW 82.04.432
Deductions
—
Municipal sewer service fees or charges.
In computing the tax imposed by this chapter, municipal sewerage utilities and other public corporations imposing and collecting fees or charges for sewer service may deduct from the measure of the tax, amounts paid to another municipal corporation or governmental agency for sewerage interception, treatment or disposal.
[
1967 ex.s. c 149 s 17
.]
RCW 82.04.4327
Deductions
—
Artistic and cultural organizations.
In computing tax under this chapter, an artistic or cultural organization may deduct from the measure of tax:
(1) All amounts received by the artistic or cultural organization; and
(2) The value of articles manufactured by the artistic or cultural organization solely 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.
[
2020 c 139 s 8
;
1985 c 471 s 6
.]
NOTES:
Severability
—
Effective date
—
1985 c 471:
See notes following RCW 82.04.260
.
"Artistic or cultural organization" defined: RCW 82.04.4328
.
RCW 82.04.4328
"Artistic or cultural organization" defined.
(1) For the purposes of RCW 82.04.4327, 82.08.031, and
82.12.031, the term "artistic or cultural organization" means an organization that 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 (2) of this section, for viewing or attendance by the general public. The organization must be a nonprofit corporation under chapter
24.03A
RCW and managed by a governing board of not less than eight individuals none of whom is a paid employee of the organization or by a corporation sole under chapter
24.12
RCW. In addition, to qualify for deduction or exemption from taxation under RCW 82.04.4327, 82.08.031, and
82.12.031, the corporation must satisfy the following conditions:
(a) 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;
(b) 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;
(c) 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 nonprofit organization, association, or corporation which also would be entitled to the exemption;
(d) The corporation must be duly licensed or certified when licensing or certification is required by law or regulation;
(e) The amounts received that qualify for exemption must be used for the activities for which the exemption is granted;
(f) Services must be available regardless of race, color, national origin, or ancestry; and
(g) The director of revenue must have access to its books in order to determine whether the corporation is exempt from taxes.
(2) The term "artistic or cultural exhibitions, presentations, or performances or cultural or art education programs" includes and 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.
[
2021 c 176 s 5247
;
2020 c 139 s 9
;
1985 c 471 s 7
;
1981 c 140 s 6
.]
NOTES:
Effective date
—
2021 c 176:
See note following RCW 24.03A.005
.
Severability
—
Effective date
—
1985 c 471:
See notes following RCW 82.04.260
.
RCW 82.04.433
Deductions
—
Sales of fuel for consumption outside United States' waters by vessels in foreign commerce.
(1) In computing tax there may be deducted from the measure of tax imposed under RCW 82.04.250
and
82.04.270
amounts derived from sales of fuel for consumption outside the territorial waters of the United States, by vessels used primarily in foreign commerce.
(2) The deduction in subsection (1) of this section does not apply with respect to the tax imposed under RCW 82.04.240, whether the value of the fuel under that tax is measured by the gross proceeds derived from the sale thereof or otherwise under RCW 82.04.450
.
[
2009 c 494 s 2
;
1985 c 471 s 16
.]
NOTES:
Intent
—
Finding
—
2009 c 494:
"(1) Through this act the legislature intends to address the taxation of persons manufacturing and/or selling bunker fuel. Bunker fuel is fuel intended for consumption outside the waters of the United States by vessels in foreign commerce. Although the state has historically collected tax from bunker fuel manufacturers, recently questions have arisen whether the manufacture of bunker fuel is subject to business and occupation tax under RCW 82.04.240
. Pursuant to this act, the activity is taxable under RCW 82.04.240
.
(2) The legislature finds that at the time the deduction allowed under RCW 82.04.433
was enacted in 1985, it was intended to apply only to the wholesaling or retailing of bunker fuel. In 1987 the legislature enacted the multiple activities tax credit in RCW 82.04.440
. Enactment of the multiple activities tax credit resulted in changed tax liability for certain taxpayers. In particular, some taxpayers that engaged in activities that had been exempt under the prior multiple activities exemption became subject to tax on manufacturing activities upon enactment of the multiple activities tax credit in its place. The manufacturing of bunker fuel is one such activity." [
2009 c 494 s 1
.]
Administration
—
2009 c 494:
"The department of revenue must take any actions that are necessary to ensure that its rules and other interpretive statements are consistent with this act." [
2009 c 494 s 3
.]
Application
—
2009 c 494:
"This act applies both prospectively and retroactively." [
2009 c 494 s 4
.]
Effective date
—
2009 c 494:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [May 14, 2009]." [
2009 c 494 s 6
.]
Severability
—
Effective date
—
1985 c 471:
See notes following RCW 82.04.260
.
RCW 82.04.4331
Deductions
—
Insurance claims for state health care coverage.
In computing tax, insurers as defined by RCW 48.01.050, may deduct from the measure of tax amounts paid out for claims incurred before July 1, 1990, for covered health services under medical and dental coverage purchased under chapter
41.05
RCW.
[
1988 c 107 s 33
.]
NOTES:
Implementation
—
Effective dates
—
1988 c 107:
See RCW 41.05.901
.
RCW 82.04.4332
Deductions
—
Tuition fees of foreign degree-granting institutions.
An approved branch campus of a foreign degree-granting institution in compliance with chapter
28B.90
RCW is considered an educational institution for the purpose of the deduction of tuition fees provided by RCW 82.04.170
in those instances where it is recognized as an organization exempt from income taxes pursuant to 26 U.S.C. Sec. 501(c).
[
1993 c 181 s 10
.]
RCW 82.04.4337
Deductions
—
Certain amounts received by assisted living facilities.
(1) An assisted living facility licensed under chapter
18.20
RCW may deduct from the measure of tax amounts received as compensation for providing adult residential care, enhanced adult residential care, or assisted living services under contract with the department of social and health services authorized by chapter
74.39A
RCW to residents who are medicaid recipients.
(2) For purposes of this section, "adult residential care," "enhanced adult residential care," and "assisted living services" have the same meaning as in RCW 74.39A.009
.
[
2012 c 10 s 72
;
2004 c 174 s 7
.]
NOTES:
Application
—
2012 c 10:
See note following RCW 18.20.010
.
Effective date
—
2004 c 174:
See note following RCW 82.04.2908
.
RCW 82.04.4339
Deductions
—
Salmon recovery grants.
(1) In computing tax there may be deducted from the measure of tax amounts received by a nonprofit organization from the United States or any instrumentality thereof, the state of Washington or any municipal corporation or political subdivision thereof, or an Indian tribe as defined in RCW 43.06.523, as salmon recovery grants.
(2) For the purposes of this section, the following definitions apply:
(a) "Nonprofit organization" has the same meaning as in RCW 82.04.3651
.
(b) "Salmon recovery grant" means, solely for the purposes of this section, financial assistance provided to primarily benefit the public as a whole by renewing, restoring, or protecting, by human intervention, salmon ecosystems or salmon habitats in this state, whether or not such financial assistance furthers the regulatory activities of the grantor.
[
2021 c 143 s 1
;
2004 c 241 s 1
.]
NOTES:
Automatic expiration date and tax preference performance statement exemption
—
2021 c 143:
"The provisions of RCW 82.32.805
and
82.32.808
do not apply to this act." [
2021 c 143 s 6
.]
Effective date
—
2021 c 143:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [April 26, 2021]." [
2021 c 143 s 7
.]
Effective date
—
2004 c 241:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [March 31, 2004]." [
2004 c 241 s 2
.]
RCW 82.04.43391
Deductions
—
Commercial aircraft loan interest and fees.
(1) In computing tax there may be deducted from the measure of tax interest and fees on loans secured by commercial aircraft primarily used to provide routine air service and owned by:
(a) An air carrier, as defined in RCW 82.42.010, which is primarily engaged in the business of providing passenger air service;
(b) An affiliate of such air carrier; or
(c) A parent entity for which such air carrier is an affiliate.
(2) The deduction authorized under this section is not available to any person who is physically present in this state as determined under RCW 82.04.067
.
(3) For purposes of this section, the following definitions apply:
(a) "Affiliate" means a person is "affiliated," as defined in RCW 82.04.645, with another person; and
(b) "Commercial aircraft" means a commercial airplane as defined in RCW 82.32.550
.
[
2019 c 8 s 703
;
2017 c 323 s 503
;
2010 1st sp.s. c 23 s 112
.]
NOTES:
Effective date
—
2019 c 8 ss 102, 103, 107, and 701-703:
See note following RCW 82.04.067
.
Existing rights and liability
—
Retroactive application
—
2019 c 8:
See notes following RCW 82.02.250
.
Tax preference performance statement exemption
—
Automatic expiration date exemption
—
2017 c 323:
See note following RCW 82.04.040
.
Contingency
—
Application
—
2010 1st sp.s. c 23 ss 102-112:
See notes following RCW 82.04.067
.
Effective date
—
2010 1st sp.s. c 23:
See note following RCW 82.04.4292
.
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
RCW 82.04.43392
Deductions
—
Qualified dispute resolution centers.
(1) A qualified dispute resolution center may deduct from the measure of tax amounts received as a contribution from federal, state, or local governments and nonprofit organizations for providing dispute resolution services.
(2) A nonprofit organization may deduct from the measure of tax amounts received from federal, state, or local governments for distribution to a qualified dispute resolution center.
(3) A qualified dispute resolution center must:
(a) Be established under chapter
7.75
RCW; and
(b) Provide services either without charge to the participants or for a fee that is based on the participant's ability to pay, as required by RCW 7.75.030
.
(4) As used in this section, a "nonprofit organization" has the same meaning as in RCW 82.04.3651
(2).
[
2012 c 249 s 1
.]
RCW 82.04.43393
Deductions
—
Paymaster services.
(1) In computing tax there may be deducted from the measure of tax, amounts that a qualified employer of record engaged in providing paymaster services receives from an affiliated business to cover employee costs of a qualified employee. However, no exclusion is allowed under this section for any employee costs incurred in connection with a contractual obligation of the taxpayer to provide services, including staffing services as defined in RCW 82.04.540
.
(2) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Affiliated" has the same meaning as provided in RCW 82.32.655
(7).
(b) "Employee costs" are the actual cost of wages and salaries, benefits, workers' compensation, payroll taxes, withholding, or other assessments paid to or on behalf of an employee.
(c) "Functional employment relationship" means having control over the work schedule and activities of the employees and control over all employment decisions such as salary, discipline, hiring, or layoffs.
(d) "Paymaster services" means providing payroll and related human resource services.
(e) "Qualified employee" means an employee with whom the affiliated business has a functional employment relationship. Neither the employer of record, nor any other affiliate, may have a functional employment relationship with the employee.
(f) "Qualified employer of record" is a person who:
(i) Has no functional employment relationship with a qualified employee; and
(ii) Has no contractual liability with a qualified employee for the employee costs. A qualified employer of record may have statutory or common law liability to the qualified employees or to third parties for employee costs.
(3) RCW 82.32.805
(1) does not apply to the deduction authorized in this section.
[
2013 2nd sp.s. c 13 s 102
.]
NOTES:
Findings
—
Intent
—
2013 2nd sp.s. c 13:
"(1) The legislature finds that the supreme court's decision in
William Rogers v. Tacoma
, while clarifying the taxation of temporary staffing agencies, resulted in differing interpretations of regulatory requirements in order to qualify for a pass-through exclusion from Washington B&O taxes for payroll reimbursements made within an affiliated group.
(2) The legislature passed Second Engrossed Substitute Senate Bill No. 6143 during the 2010 legislative session that directed the department of revenue to conduct a review and provide a report on the state's tax policies with respect to the taxation of intercompany transactions. The report affirms that centralized payroll reporting systems can result in an additional layer of tax for Washington businesses. Exclusions for payroll reimbursements allow businesses to have efficient administrative costs without incurring an additional tax obligation resulting exclusively from streamlining payroll processes. Further, this treatment of allowing for an exclusion of payroll cost reimbursements within a centralized payroll system is consistent with historical tax practices of the department of revenue prior to the
William Rogers
decision.
(3) The department of revenue continues to work with taxpayers to study taxation of transactions within and between affiliated business organizations in order to determine the appropriate policies and to identify areas where statutory and regulatory changes may be necessary.
(4) The legislature finds that the tax policy of allowing exclusions for payroll cost reimbursements within a centralized payroll reporting system is appropriate and should be affirmed. The legislature adopts the historical tax policy of allowing exclusions for payroll cost reimbursements within a centralized payroll reporting system of an affiliated group and requires the implementation of such tax policy from October 1, 2013. In affirming this tax policy, the legislature also intends to monitor these transactions to ensure they are being used appropriately and not for tax avoidance purposes and to monitor the potential impact on state revenue collections. The legislature does not intend for part I of this act to retroactively create a right of refund for taxes paid on payroll cost reimbursements prior to the enactment of this statute." [
2013 2nd sp.s. c 13 s 101
.]
Effective date
—
2013 2nd sp.s. c 13:
"Except as otherwise provided in this act, this act takes effect October 1, 2013." [
2013 2nd sp.s. c 13 s 1904
.]
RCW 82.04.43395
Deductions
—
Accountable community of health.
(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 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
.
[
2023 c 313 s 1
;
2019 c 350 s 1
;
2018 c 102 s 2
.]
NOTES:
Tax preference performance statement exemption
—
Automatic expiration date exemption
—
2023 c 313:
"RCW 82.32.805
and
82.32.808
do not apply to this act." [
2023 c 313 s 2
.]
Application
—
2019 c 350:
"The deductions in section 1 of this act apply only with respect to amounts received on or after July 28, 2019, by a hospital that is owned by a municipal corporation or political subdivision, a hospital that is affiliated with a state institution, or a managed care organization." [
2019 c 350 s 2
.]
Automatic expiration date and tax preference performance statement exemption
—
2019 c 350:
"The provisions of RCW 82.32.805
and
82.32.808
do not apply to this act." [
2019 c 350 s 3
.]
Effective date
—
2018 c 102:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [March 15, 2018]." [
2018 c 102 s 5
.]
Application
—
2018 c 102:
"The deductions in section 2 of this act apply only with respect to amounts received on or after March 15, 2018, by an accountable community of health or a hospital that is owned by a municipal corporation or political subdivision." [
2018 c 102 s 3
.]
Tax preference performance statement
—
2018 c 102:
"(1) This section is the tax preference performance statement for the tax preference contained in section 2, chapter 102, Laws of 2018. The performance statement is only intended to be used for subsequent evaluation of the tax preference. It is not intended to create a private right of action by any party or be used to determine eligibility for preferential tax treatment.
(2) The legislature categorizes this tax preference as one intended to reduce structural inefficiencies in the tax structure under RCW 82.32.808
(2)(d).
(3) The legislature acknowledges the importance of accountable communities of health under *RCW 41.05.800
in aligning actions to achieve healthy communities and populations, improving health care quality, and lowering costs. It is the legislature's intent to remedy inconsistencies in the tax structure by allowing accountable communities of health to deduct certain funds as amounts subject to business and occupation tax in order to ensure accountable communities of health receive tax relief similar to other nonprofit or public-private health care organizations." [
2018 c 102 s 1
.]
*Reviser's note:
RCW 41.05.800
expired July 1, 2020, pursuant to
2014 c 223 s 21
.
Tax preference performance statement requirement and automatic expiration date exemption
—
2018 c 102:
"The provisions of RCW 82.32.805
and
82.32.808
do not apply to this act." [
2018 c 102 s 4
.]
RCW 82.04.43396
Deductions
—
Scan-down allowances.
(1) In computing tax under RCW 82.04.290
(2), a seller may deduct from the measure of tax the amount of scan-down allowances.
(2) For purposes of this section, a provision that the seller must sell at a certain retail price or a specific price reduction does not constitute either:
(a) A service provided by the seller to the manufacturer or wholesaler; or
(b) A business activity directly or indirectly benefiting the manufacturer or wholesaler.
(3) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Product" means:
(i) Food and food ingredients other than prepared food, as those terms are defined in RCW 82.08.0293, whether or not exempt from sales tax under RCW 82.08.0293
; and
(ii) Pet food and specialty pet food as defined in RCW 15.53.901
.
(b) "Scan-down allowance" means a payment or credit offered to a seller by a manufacturer or wholesaler of products, where:
(i) The amount of the payment or credit is based on the quantity of the product to be sold at retail by the seller within a specified period of time;
(ii) The seller knew the terms of the offer before making the sales that generated the payment or credit from the manufacturer or wholesaler; and
(iii) The seller is not required to provide any services to the manufacturer or wholesaler or engage in any business activities directly or indirectly benefiting the manufacturer or wholesaler, in order to receive the payment or credit from the manufacturer or wholesaler.
[
2019 c 217 s 1
.]
NOTES:
Automatic expiration date and tax preference performance statement exemption
—
2019 c 217:
"The provisions of RCW 82.32.805
and
82.32.808
do not apply to this act." [
2019 c 217 s 2
.]
RCW 82.04.43397
Deductions
—
Processors of electronic transactions.
(Effective January 1, 2026.)
(1) In computing the tax under RCW 82.04.290
(4), a processor may deduct from the measure of the tax amounts retained by persons other than the processor in the following forms:
(a) Interchange fees;
(b) Network fees; and
(c) Portions of fees retained by other processors.
(2) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
(a) "Acquirer" means a person that contracts directly or indirectly with a merchant to provide settlement for the merchant's electronic transactions over a payment card network. "Acquirer" does not include a person that acts only as a processor for the services it provides to the merchant.
(b) "Interchange fee" means an amount received by an issuer with respect to the interchange of a transaction conducted by a merchant.
(c) "Issuer" means any person that authorizes the use of a card to perform an electronic transaction.
(d) "Network fees" means fees received by payment networks associated with the processing of a transaction or with the acceptance of the payment network's brand.
(e) "Payment network" means an entity that directly or indirectly provides the proprietary services, infrastructure, and software that route information and data to an issuer from an acquirer to conduct the authorization, clearance, and settlement of electronic transactions; and a merchant uses in order to accept as a form of payment a brand of card or other device that may be used to carry out electronic transactions.
(f) "Processor" means a person, including an acquirer or issuer, that processes or routes electronic transactions for issuers, acquirers, or merchants.
[
2025 c 401 s 2
.]
NOTES:
Intent
—
2025 c 401:
"The unique nature of payment system arrangements distinguishes payment card processors from other taxpayers. Due to the unique nature of processors' activities related to interchange fees and network fees, the legislature intends to address the business and occupation taxation of processors' activities on a prospective basis through the deduction and rate authorized in this act. The legislature does not intend for inferences as to the taxability of prior periods to be drawn from the passage of this act." [
2025 c 401 s 1
.]
Tax preference performance statement exemption
—
Automatic expiration date exemption:
"RCW 82.32.805
and
82.32.808
do not apply to this act." [
2025 c 401 s 6
.]
Effective date
—
2025 c 401:
"This act takes effect January 1, 2026." [
2025 c 401 s 7
.]
RCW 82.04.434
Credit
—
Public safety standards and testing.
(Effective until January 1, 2026.)
(1) There may be credited against the tax imposed by this chapter, the value of services and information relating to setting of standards and testing for public safety provided to the state of Washington, without charge, at the state's request, by a nonprofit corporation that is:
(a) Organized and operated for the purpose of setting standards and testing for public safety; and
(b) Exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code of 1986, as amended; and
(c) Organized with no direct or indirect industry affiliation.
(2) The value of the services and information requested by the state and provided to the state, without charge, shall be determined by the allocation of the cost method using generally accepted accounting standards.
(3) The credit allowed under this section shall be limited to the amount of tax imposed by this chapter. Any unused excess credit in a reporting period may be carried forward to future reporting periods for a maximum of one year.
[
1991 c 13 s 1
.]
NOTES:
Effective date
—
1991 c 13:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect July 1, 1991." [
1991 c 13 s 2
.]
RCW 82.04.436
Credit
—
Manufacture of alternative jet fuel.
(1)(a) Subject to the limits and provisions of this section, a credit is allowed against the tax otherwise due under this chapter for persons engaged in the manufacturing of alternative jet fuel.
(b) Except as provided in (c) of this subsection, the credit under this section is equal to $1 for each gallon of alternative jet fuel that has at least 50 percent less carbon dioxide equivalent emissions than conventional petroleum jet fuel and is sold during the prior calendar year by:
(i) A business that produces alternative jet fuel and is located in a qualifying county; or
(ii) A business's designated alternative jet fuel blender that is located in this state.
(c) The credit amount under (b) of this subsection must increase by 2 cents for each additional one percent reduction in carbon dioxide equivalent emissions beyond 50 percent, not to exceed $2 for each gallon of alternative jet fuel.
(d) A person may not receive credit under both (b)(i) and (ii) of this subsection.
(e) The credit under this section is calculated only on the portion of jet fuel that is considered alternative jet fuel and does not include conventional petroleum jet fuel when such fuels are blended or otherwise used in a jet fuel mixture.
(f) A credit under this section may not be claimed until the department of ecology verifies that there are one or more facilities operating in this state with cumulative production capacity of at least 20,000,000 gallons of alternative jet fuel each year and has provided such notice to the department.
(g) Contract pricing for sales of alternative jet fuel between a person claiming the credit under this section and the final consumer must reflect the per gallon credit under (b) and (c) of this subsection.
(h) A credit under this section may not be claimed until the department of ecology, in consultation with the department of archaeology and historic preservation, verifies that the person applying for the credit is not engaged in the manufacturing of alternative jet fuel on the footprint of a structure listed with the department of archaeology and historic preservation as a historic cemetery or tribal burial grounds as per chapter
27.44
or
68.60
RCW. If the department of ecology has not made a determination within 60 days of the person requesting verification under this subsection, the application is deemed to be verified.
(2) A person may not receive credit under this section for amounts claimed as credits under RCW 82.04.4361
or chapter
82.16
RCW.
(3) To claim a credit under this section a person must electronically file with the department all returns, forms, and any other information required by the department, in an electronic format as provided or approved by the department.
(4) To claim a credit under this section, the person applying must:
(a) Complete an application for the credit which must include:
(i) The name, business address, and tax identification number of the applicant;
(ii) Documentation of the total amount of alternative jet fuel manufactured and sold in the prior calendar year;
(iii) Documentation sufficient for the department to verify that the alternative jet fuel for which the credit is being claimed meets the definition in RCW 82.04.287
(3) and the carbon intensity reduction benchmarks under subsection (1)(b) and (c) of this section, as certified by the department of ecology under chapter
70A.535
RCW;
(iv) Documentation sufficient to verify compliance with subsection (1)(g) of this section; and
(v) Any other information deemed necessary by the department to support administration or reporting of the program.
(b) Obtain a carbon intensity score from the department of ecology prior to submitting an application to the department.
(5) The department must notify applicants of credit approval or denial within 60 days of receipt of a final application and documentation.
(6) If a person fails to supply the information as required in subsection (4) of this section, the department must deny the application.
(7)(a) The credit under this section may only be claimed against taxes due under RCW 82.04.287, less any taxable amount for which a credit is allowed under RCW 82.04.440
.
(b) A credit earned during one calendar year may be carried over and claimed against taxes incurred for the next subsequent calendar year but may not be carried over for any calendar year thereafter.
(c) No refunds may be granted for credits under this section.
(8) For the purposes of this section:
(a) "Alternative jet fuel" has the same meaning as in RCW 70A.535.010
.
(b) "Carbon dioxide equivalent" has the same meaning as in RCW 70A.45.010
.
(c) "Qualifying county" means a county that has a population less than 650,000 at the time an application for a credit under this section is received by the department.
(9)(a) Credits may be earned beginning on the first day of the first calendar quarter following the month in which notice under subsection (1)(f) of this section was received by the department.
(b) Credits may not be earned beginning nine calendar years after the close of the calendar year in which the credit may be earned, as provided in (a) of this subsection.
(10) A person claiming the credit provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
[
2023 c 232 s 10
.]
NOTES:
Tax preference performance statement
—
Effective date
—
2023 c 232 ss 9-12:
See notes following RCW 82.04.287
.
Intent
—
2023 c 232:
See note following RCW 70A.535.010
.
Automatic expiration date exemption
—
2023 c 232:
See note following RCW 82.04.287
.
RCW 82.04.4361
Credit
—
Alternative jet fuel.
(1)(a) Subject to the limits and provisions of this section, a credit is allowed against the tax otherwise due under this chapter for persons engaged in the use of alternative jet fuel.
(b) Except as provided in (c) of this subsection, the credit under this section is equal to $1 for each gallon of alternative jet fuel that has at least 50 percent less carbon dioxide equivalent emissions than conventional petroleum jet fuel and is purchased during the prior calendar year by a business for use as alternative jet fuel for flights departing in this state.
(c) The credit amount under (b) of this subsection must increase by 2 cents for each additional one percent reduction in carbon dioxide equivalent emissions beyond 50 percent, not to exceed $2 for each gallon of alternative jet fuel.
(d) The credit under this section is calculated only on the portion of jet fuel that is considered alternative jet fuel and does not include conventional petroleum jet fuel when such fuels are blended or otherwise used in a jet fuel mixture.
(e) A credit under this section may not be claimed until the department of ecology verifies that there are one or more facilities operating in this state with cumulative production capacity of at least 20,000,000 gallons of alternative jet fuel each year and has provided such notice to the department.
(2) A person may not receive credit under this section for amounts claimed as credits under RCW 82.04.436
or chapter
82.16
RCW.
(3) To claim a credit under this section a person must electronically file with the department all returns, forms, and any other information required by the department, in an electronic format as provided or approved by the department.
(4) To claim a credit under this section, the person applying must:
(a) Complete an application for the credit which must include:
(i) The name, business address, and tax identification number of the applicant;
(ii) Documentation of the amount of alternative jet fuel purchased by the business in the prior calendar year;
(iii) Documentation sufficient for the department to verify that the alternative jet fuel for which the credit is being claimed meets the definition in RCW 82.04.287
(3) and the carbon intensity reduction benchmarks under subsection (1)(b) and (c) of this section, as certified by the department of ecology under chapter
70A.535
RCW; and
(iv) Any other information deemed necessary by the department to support administration or reporting of the program.
(b) Obtain a carbon intensity score from the department of ecology prior to submitting an application to the department.
(5) The department must notify applicants of credit approval or denial within 60 days of receipt of a final application and documentation.
(6) If a person fails to supply the information as required in subsection (4) of this section, the department must deny the application.
(7)(a) The credit under this section may be used against any tax due under this chapter.
(b) A credit earned during one calendar year may be carried over and claimed against taxes incurred for the next subsequent calendar year but may not be carried over for any calendar year thereafter.
(c) No refunds may be granted for credits under this section.
(8) For the purposes of this section:
(a) "Alternative jet fuel" has the same meaning as in RCW 70A.535.010
.
(b) "Carbon dioxide equivalent" has the same meaning as in RCW 70A.45.010
.
(9)(a) Credits may be earned beginning on the first day of the first calendar quarter following the month in which notice under subsection (1)(e) of this section was received by the department.
(b) Credits may not be earned beginning nine calendar years after the close of the calendar year in which the credit may be earned, as provided in (a) of this subsection.
(10) A person claiming the credit provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
[
2023 c 232 s 11
.]
NOTES:
Tax preference performance statement
—
Effective date
—
2023 c 232 ss 9-12:
See notes following RCW 82.04.287
.
Intent
—
2023 c 232:
See note following RCW 70A.535.010
.
Automatic expiration date exemption
—
2023 c 232:
See note following RCW 82.04.287
.
RCW 82.04.440
Credit
—
Persons taxable on multiple activities.
(1) Every person engaged in activities that are subject to tax under two or more provisions of RCW 82.04.230
through
82.04.298, inclusive, is taxable under each provision applicable to those activities.
(2) Persons taxable under RCW 82.04.2909
(2), 82.04.250, 82.04.270, 82.04.294
(2), or
82.04.260
(1)(b), (c), or (d), (4), (11), or (12) with respect to selling products in this state, including those persons who are also taxable under RCW 82.04.261, are allowed a credit against those taxes for any (a) manufacturing taxes paid with respect to the manufacturing of products so sold in this state, and/or (b) extracting taxes paid with respect to the extracting of products so sold in this state or ingredients of products so sold in this state. Extracting taxes taken as credit under subsection (3) of this section may also be taken under this subsection, if otherwise allowable under this subsection. The amount of the credit may not exceed the tax liability arising under this chapter with respect to the sale of those products.
(3) Persons taxable as manufacturers under RCW 82.04.240
or
82.04.260
(1)(b) or (12), including those persons who are also taxable under RCW 82.04.261, are allowed a credit against those taxes for any extracting taxes paid with respect to extracting the ingredients of the products so manufactured in this state. The amount of the credit may not exceed the tax liability arising under this chapter with respect to the manufacturing of those products.
(4) Persons taxable under RCW 82.04.230, 82.04.240, 82.04.2909
(1), 82.04.294
(1), 82.04.2404, or
82.04.260
(1), (2), (4), (11), or (12), including those persons who are also taxable under RCW 82.04.261, with respect to extracting or manufacturing products in this state are allowed a credit against those taxes for any (i) gross receipts taxes paid to another state with respect to the sales of the products so extracted or manufactured in this state, (ii) manufacturing taxes paid with respect to the manufacturing of products using ingredients so extracted in this state, or (iii) manufacturing taxes paid with respect to manufacturing activities completed in another state for products so manufactured in this state. The amount of the credit may not exceed the tax liability arising under this chapter with respect to the extraction or manufacturing of those products.
(5) For the purpose of this section:
(a) "Gross receipts tax" means a tax:
(i) Which is imposed on or measured by the gross volume of business, in terms of gross receipts or in other terms, and in the determination of which the deductions allowed would not constitute the tax an income tax or value added tax; and
(ii) Which is also not, pursuant to law or custom, separately stated from the sales price.
(b) "State" means (i) the state of Washington, (ii) a state of the United States other than Washington, or any political subdivision of such other state, (iii) the District of Columbia, and (iv) any foreign country or political subdivision thereof.
(c) "Manufacturing tax" means a gross receipts tax imposed on the act or privilege of engaging in business as a manufacturer, and includes (i) the taxes imposed in RCW 82.04.240, 82.04.2404, 82.04.2909
(1), 82.04.260
(1), (2), (4), (11), and (12), and
82.04.294
(1); (ii) the tax imposed under RCW 82.04.261
on persons who are engaged in business as a manufacturer; and (iii) similar gross receipts taxes paid to other states.
(d) "Extracting tax" means a gross receipts tax imposed on the act or privilege of engaging in business as an extractor, and includes (i) the tax imposed on extractors in RCW 82.04.230
and
82.04.260
(12); (ii) the tax imposed under RCW 82.04.261
on persons who are engaged in business as an extractor; and (iii) similar gross receipts taxes paid to other states.
(e) "Business," "manufacturer," "extractor," and other terms used in this section have the meanings given in RCW 82.04.020
through
82.04.212
[
82.04.217
], notwithstanding the use of those terms in the context of describing taxes imposed by other states.
[
2011 c 2 s 205
(Initiative Measure No. 1107, approved November 2, 2010);
2010 1st sp.s. c 23 s 513
. Prior:
2006 c 300 s 8
;
2006 c 84 s 6
; (2007 c 54 s 10 expired July 22, 2007);
2005 c 301 s 3
; prior:
2004 c 174 s 5
;
2004 c 24 s 7
;
2003 2nd sp.s. c 1 s 6
;
1998 c 312 s 9
;
1994 c 124 s 4
;
1987 2nd ex.s. c 3 s 2
;
1985 c 190 s 1
;
1981 c 172 s 5
;
1967 ex.s. c 149 s 16
;
1965 ex.s. c 173 s 12
;
1961 c 15 s 82.04.440
; prior:
1959 c 211 s 3
;
1951 1st ex.s. c 9 s 1
;
1950 ex.s. c 5 s 2
; 1949 c 228 s 2-A;
1943 c 156 s 3
;
1941 c 178 s 3
;
1939 c 225 s 3
;
1937 c 227 s 3
;
1935 c 180 s 6
; Rem. Supp. 1949 s 8370-6.]
NOTES:
Findings
—
Construction
—
2011 c 2 (Initiative Measure No. 1107):
See notes following RCW 82.08.0293
.
Effective date
—
2010 1st sp.s. c 23:
See note following RCW 82.04.4292
.
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
Contingent expiration date
—
2007 c 54 s 10:
"Section 10 of this act expires if the contingency in section 29 of this act occurs." [
2007 c 54 s 31
.]  The contingency in section 29, chapter 54, Laws of 2007 occurred on December 1, 2006.
Effective dates
—
Contingent effective date
—
2006 c 300:
See note following RCW 82.04.261
.
Effective date
—
2006 c 84 ss 2-8:
See note following RCW 82.04.2404
.
Findings
—
Intent
—
2006 c 84:
See note following RCW 82.04.2404
.
Findings
—
Intent
—
Effective date
—
2005 c 301:
See notes following RCW 82.04.294
.
Effective date
—
2004 c 174:
See note following RCW 82.04.2908
.
Intent
—
Effective date
—
2004 c 24:
See notes following RCW 82.04.2909
.
Finding
—
2003 2nd sp.s. c 1:
See note following RCW 82.04.4461
.
Effective date
—
Savings
—
1998 c 312:
See notes following RCW 82.04.332
.
Retroactive application
—
1994 c 124:
"Except as otherwise provided in section 6 of this act, section 4 of this act applies retrospectively to all tax reporting periods on or after June 23, 1987." [
1994 c 124 s 7
.]
Legislative findings and intent
—
1987 2nd ex.s. c 3:
"The legislature finds that the invalidation of the multiple activities exemption contained in RCW 82.04.440
by the United States Supreme Court now requires adjustments to the state's business and occupation tax to achieve constitutional equality between Washington taxpayers who have conducted and will continue to conduct business in interstate and intrastate commerce. It is the intent of chapter 3, Laws of 1987 2nd ex. sess. and sections 4 through 7 of this act to preserve the integrity of Washington's business and occupation tax system and impose only that financial burden upon the state necessary to establish parity in taxation between such taxpayers.
Thus, chapter 3, Laws of 1987 2nd ex. sess. and sections 4 through 7 of this act extends [extend] the system of credits originated in RCW 82.04.440
in 1985 to provide for equal treatment of taxpayers engaging in extracting, manufacturing or selling regardless of the location in which any of such activities occurs. It is further intended that RCW 82.04.440, as amended by section 2, chapter 3, Laws of 1987 2nd ex. sess. and sections 4 through 7 of this act, shall be construed and applied in a manner that will eliminate unconstitutional discrimination between taxpayers and ensure the preservation and collection of revenues from the conduct of multiple activities in which taxpayers in this state may engage." [
1994 c 124 s 5
;
1987 2nd ex.s. c 3 s 1
.]
Application to prior reporting periods
—
1987 2nd ex.s. c 3:
"If it is determined by a court of competent jurisdiction, in a judgment not subject to review, that relief is appropriate for any tax reporting periods before August 11, 1987, in respect to RCW 82.04.440
as it existed before August 11, 1987, it is the intent of the legislature that the credits provided in RCW 82.04.440
as amended by section 2, chapter 3, Laws of 1987 2nd ex. sess. and section 4 of this act shall be applied to such reporting periods and that relief for such periods be limited to the granting of such credits." [
1994 c 124 s 6
;
1987 2nd ex.s. c 3 s 3
.]
Severability
—
1987 2nd ex.s. c 3:
"If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected." [
1987 2nd ex.s. c 3 s 4
.]
Severability
—
1985 c 190:
"If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected." [
1985 c 190 s 8
.]
Effective dates
—
1981 c 172:
See note following RCW 82.04.240
.
RCW 82.04.4451
Credit against tax due
—
Maximum credit
—
Table.
(1) In computing the tax imposed under this chapter, a credit is allowed against the amount of tax otherwise due under this chapter, as provided in this section. Except for taxpayers that report at least 50 percent of their taxable amount under RCW 82.04.255, 82.04.290
(2)(a), and
82.04.285, the maximum credit for a taxpayer for a reporting period is $55 multiplied by the number of months in the reporting period, as determined under RCW 82.32.045
. For a taxpayer that reports at least 50 percent of its taxable amount under RCW 82.04.255, 82.04.290
(2)(a), and
82.04.285, the maximum credit for a reporting period is $160 multiplied by the number of months in the reporting period, as determined under RCW 82.32.045
.
(2) When the amount of tax otherwise due under this chapter is equal to or less than the maximum credit, a credit is allowed equal to the amount of tax otherwise due under this chapter.
(3) When the amount of tax otherwise due under this chapter exceeds the maximum credit, a reduced credit is allowed equal to twice the maximum credit, minus the tax otherwise due under this chapter, but not less than zero.
(4) The department may prepare a tax credit table consisting of tax ranges using increments of no more than five dollars and a corresponding tax credit to be applied to those tax ranges. The table shall be prepared in such a manner that no taxpayer will owe a greater amount of tax by using the table than would be owed by performing the calculation under subsections (1) through (3) of this section. A table prepared by the department under this subsection must be used by all taxpayers in taking the credit provided in this section.
[
2022 c 295 s 1
;
2010 1st sp.s. c 23 s 1102
;
1997 c 238 s 2
;
1994 sp.s. c 2 s 1
.]
NOTES:
Tax preference performance statement exemption
—
Automatic expiration date exemption
—
2022 c 295 s 1:
"Section 1 of this act is exempt from RCW 82.32.805
and
82.32.808
." [
2022 c 295 s 4
.]
Application
—
2022 c 295:
"This act applies to reporting periods beginning on or after January 1, 2023." [
2022 c 295 s 3
.]
Effective date
—
2010 1st sp.s. c 23:
See note following RCW 82.32.655
.
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
Findings
—
Intent
—
1997 c 238:
"The legislature finds that many businesses have difficulty applying the small business credit under RCW 82.04.4451
. Further, the legislature appreciates the valuable time and resources small businesses expend on calculating the amount of credit based upon a statutory formula. For the purpose of tax simplification, it is the intent of this act to direct the department of revenue to create a schedule, in standard increments, to replace required calculations for the small business credit. Each taxpayer can make reference to the taxpayer's tax range on the schedule and find the amount of the taxpayer's small business credit. Further, no taxpayer will owe a greater amount of tax nor will any taxpayer be responsible for a greater amount of taxes otherwise due." [
1997 c 238 s 1
.]
Effective date
—
1994 sp.s. c 2:
"This act shall take effect on July 1, 1994." [
1994 sp.s. c 2 s 5
.]
Application to reporting periods
—
1994 sp.s. c 2 s 1:
"Section 1 of this act applies to the entire period of reporting periods ending after July 1, 1994." [
1994 sp.s. c 2 s 6
.]
RCW 82.04.44525
Credit
—
New employment for international service activities in eligible areas
—
Designation of census tracts for eligibility
—
Records
—
Tax due upon ineligibility
—
Interest assessment
—
Information from employment security department.
(Effective until January 1, 2026.)
(1) Subject to the limits in this section, an eligible person is allowed a credit against the tax due under this chapter. The credit is based on qualified employment positions in eligible areas. The credit is available to persons who are engaged in international services as defined in this section. In order to receive the credit, the international service activities must take place at a business within the eligible area.
(2)(a) The credit shall equal three thousand dollars for each qualified employment position created after July 1, 1998, in an eligible area. A credit is earned for the calendar year the person is hired to fill the position, plus the four subsequent consecutive years, if the position is maintained for those four years.
(b) Credit may not be taken for hiring of persons into positions that exist on July 1, 1998. Credit is authorized for new employees hired for new positions created after July 1, 1998. New positions filled by existing employees are eligible for the credit under this section only if the position vacated by the existing employee is filled by a new hire.
(c) When a position is newly created, if it is filled before July 1st, this position is eligible for the full yearly credit. If it is filled after June 30th, this position is eligible for half of the credit.
(d) Credit may be accrued and carried over until it is used. No refunds may be granted for credits under this section.
(3) For the purposes of this section:
(a) "Eligible area" means: (i) A community empowerment zone under RCW 43.31C.020
; or (ii) a contiguous group of census tracts that meets the unemployment and poverty criteria of RCW 43.31C.030
and is designated under subsection (4) of this section;
(b) "Eligible person" means a person, as defined in RCW 82.04.030, who in an eligible area at a specific location is engaged in the business of providing international services;
(c)(i) "International services" means the provision of a service, as defined under (c)(iii) of this subsection, that is subject to tax under RCW 82.04.290
(2) or (3), and either:
(A) Is for a person domiciled outside the United States; or
(B) The service itself is for use primarily outside of the United States.
(ii) "International services" excludes any service taxable under RCW 82.04.290
(1).
(iii) Eligible services are: Computer; data processing; information; legal; accounting and tax preparation; engineering; architectural; business consulting; business management; public relations and advertising; surveying; geological consulting; real estate appraisal; or financial services. For the purposes of this section these services mean the following:
(A) "Computer services" are services such as computer programming, custom software modification, customization of canned software, custom software installation, custom software maintenance, custom software repair, training in the use of software, computer systems design, and custom software update services;
(B) "Data processing services" are services such as word processing, data entry, data retrieval, data search, information compilation, payroll processing, business accounts processing, data production, and other computerized data and information storage or manipulation. "Data processing services" also includes the use of a computer or computer time for data processing whether the processing is performed by the provider of the computer or by the purchaser or other beneficiary of the service;
(C) "Information services" are services such as electronic data retrieval or research that entails furnishing financial or legal information, data or research, internet access as defined in RCW 82.04.297, general or specialized news, or current information;
(D) "Legal services" are services such as representation by an attorney, or other person when permitted, in an administrative or legal proceeding, legal drafting, paralegal services, legal research services, and court reporting services, arbitration, and mediation services;
(E) "Accounting and tax preparation services" are services such as accounting, auditing, actuarial, bookkeeping, or tax preparation services;
(F) "Engineering services" are services such as civil, electrical, mechanical, petroleum, marine, nuclear, and design engineering, machine designing, machine tool designing, and sewage disposal system designing services;
(G) "Architectural services" are services such as structural or landscape design or architecture, interior design, building design, building program management, and space planning services;
(H) "Business consulting services" are services such as primarily providing operating counsel, advice, or assistance to the management or owner of any business, private, nonprofit, or public organization, including but not limited to those in the following areas: Administrative management consulting; general management consulting; human resource consulting or training; management engineering consulting; management information systems consulting; manufacturing management consulting; marketing consulting; operations research consulting; personnel management consulting; physical distribution consulting; site location consulting; economic consulting; motel, hotel, and resort consulting; restaurant consulting; government affairs consulting; and lobbying;
(I) "Business management services" are services such as administrative management, business management, and office management. "Business management services" does not include property management or property leasing, motel, hotel, and resort management, or automobile parking management;
(J) "Public relations and advertising services" are services such as layout, art direction, graphic design, copy writing, mechanical preparation, opinion research, marketing research, marketing, or production supervision;
(K) "Surveying services" are services such as land surveying;
(L) "Geological consulting services" are services rendered for the oil, gas, and mining industry and other earth resource industries, and other services such as soil testing;
(M) "Real estate appraisal services" are services such as market appraisal and other real estate valuation; and
(N) "Financial services" are services such as banking, loan, security, investment management, investment advisory, mortgage servicing, contract collection, and finance leasing services, engaged in by financial businesses, or businesses similar to or in competition with financial businesses; and
(d) "Qualified employment position" means a permanent full-time position to provide international services. If an employee is either voluntarily or involuntarily separated from employment, the employment position is considered filled on a full-time basis if the employer is either training or actively recruiting a replacement employee.
(4) By ordinance, the legislative authority of a city, or legislative authorities of contiguous cities by ordinance of each city's legislative authority, with population greater than eighty thousand, located in a county containing no community empowerment zones as designated under RCW 43.31C.020, may designate a contiguous group of census tracts within the city or cities as an eligible area under this section. Each of the census tracts must meet the unemployment and poverty criteria of RCW 43.31C.030
. Upon making the designation, the city or cities shall transmit to the department of revenue a certification letter and a map, each explicitly describing the boundaries of the census tract. This designation must be made by December 31, 1998.
(5) No application is necessary for the tax credit. The person must keep records necessary for the department to verify eligibility under this section. This information includes:
(a) Employment records for the previous six years;
(b) Information relating to description of international service activity engaged in at the eligible location by the person; and
(c) Information relating to customers of international service activity engaged in at that location by the person.
(6) If at any time the department finds that a person is not eligible for tax credit under this section, the amount of taxes for which a credit has been used shall be immediately due. The department shall assess interest, but not penalties, on the credited taxes for which the person is not eligible. The interest shall be assessed at the rate provided for delinquent excise taxes under chapter
82.32
RCW, shall be assessed retroactively to the date the tax credit was taken, and shall accrue until the taxes for which a credit has been used are repaid.
(7) The employment security department shall provide to the department of revenue such information needed by the department of revenue to verify eligibility under this section.
[
2009 c 535 s 1104
;
2008 c 81 s 9
;
1998 c 313 s 2
.]
NOTES:
Intent
—
Construction
—
2009 c 535:
See notes following RCW 82.04.192
.
Findings
—
Savings
—
Effective date
—
2008 c 81:
See notes following RCW 82.08.975
.
Intent
—
Findings
—
1998 c 313:
"It is the intent of the legislature to attract and retain businesses that provide professional services and insurance services to international customers. To that end, the legislature finds that an incentive measured by a business's growth in jobs is a meaningful method of attracting and retaining such businesses. Therefore, the incentive in this act is specifically targeted at "net new jobs." In addition, to further the impact and benefit of this program, this incentive is limited to those urban areas of the state, both in eastern Washington and western Washington, that are characterized by unemployment and poverty. The legislature finds that providing this targeted incentive will be of benefit to the state as a whole." [
1998 c 313 s 1
.]
Effective date
—
1998 c 313:
"This act takes effect July 1, 1998." [
1998 c 313 s 4
.]
RCW 82.04.4461
Credit
—
Preproduction development expenditures.
(Expires July 1, 2040.)
(1)(a)(i) In computing the tax imposed under this chapter, a credit is allowed for each person for qualified aerospace product development. For a person who is a manufacturer or processor for hire of commercial airplanes or components of such airplanes, credit may be earned for expenditures occurring after December 1, 2003. For all other persons, credit may be earned only for expenditures occurring after June 30, 2008.
(ii) For purposes of this subsection, "commercial airplane" and "component" have the same meanings as provided in RCW 82.32.550
.
(b) Before July 1, 2005, any credits earned under this section must be accrued and carried forward and may not be used until July 1, 2005. These carryover credits may be used at any time thereafter, and may be carried over until used. Refunds may not be granted in the place of a credit.
(2) The credit is equal to the amount of qualified aerospace product development expenditures of a person, multiplied by the rate of 1.5 percent.
(3) Except as provided in subsection (1)(b) of this section the credit must be claimed against taxes due for the same calendar year in which the qualified aerospace product development expenditures are incurred. Credit earned on or after July 1, 2005, may not be carried over. The credit for each calendar year may not exceed the amount of tax otherwise due under this chapter for the calendar year. Refunds may not be granted in the place of a credit.
(4) Any person claiming the credit must file a form prescribed by the department that must include the amount of the credit claimed, an estimate of the anticipated aerospace product development expenditures during the calendar year for which the credit is claimed, an estimate of the taxable amount during the calendar year for which the credit is claimed, and such additional information as the department may prescribe.
(5) The definitions in this subsection apply throughout this section.
(a) "Aerospace product" has the meaning given in RCW 82.08.975
.
(b) "Aerospace product development" means research, design, and engineering activities performed in relation to the development of an aerospace product or of a product line, model, or model derivative of an aerospace product, including prototype development, testing, and certification. The term includes the discovery of technological information, the translating of technological information into new or improved products, processes, techniques, formulas, or inventions, and the adaptation of existing products and models into new products or new models, or derivatives of products or models. The term does not include manufacturing activities or other production-oriented activities, however the term does include tool design and engineering design for the manufacturing process. The term does not include surveys and studies, social science and humanities research, market research or testing, quality control, sale promotion and service, computer software developed for internal use, and research in areas such as improved style, taste, and seasonal design.
(c) "Qualified aerospace product development" means aerospace product development performed within this state.
(d) "Qualified aerospace product development expenditures" means operating expenses, including wages, compensation of a proprietor or a partner in a partnership as determined by the department, benefits, supplies, and computer expenses, directly incurred in qualified aerospace product development by a person claiming the credit provided in this section. The term does not include amounts paid to a person or to the state and any of its departments and institutions, other than a public educational or research institution to conduct qualified aerospace product development. The term does not include capital costs and overhead, such as expenses for land, structures, or depreciable property.
(e) "Taxable amount" means the taxable amount subject to the tax imposed in this chapter required to be reported on the person's tax returns during the year in which the credit is claimed, less any taxable amount for which a credit is allowed under RCW 82.04.440
.
(6) In addition to all other requirements under this title, a person claiming the credit under this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(7) Credit may not be claimed for expenditures for which a credit is claimed under *RCW 82.04.4452
.
(8) This section expires July 1, 2040.
[
2017 c 135 s 15
;
2013 3rd sp.s. c 2 s 9
;
2010 c 114 s 115
;
2008 c 81 s 7
;
2007 c 54 s 11
;
2003 2nd sp.s. c 1 s 7
.]
NOTES:
*Reviser's note:
RCW 82.04.4452
expired January 1, 2015.
Effective date
—
2017 c 135:
See note following RCW 82.32.534
.
Contingent effective date
—
2013 3rd sp.s. c 2:
See RCW 82.32.850
.
Findings
—
Intent
—
2013 3rd sp.s. c 2:
See note following RCW 82.32.850
.
Application
—
Finding
—
Intent
—
2010 c 114:
See notes following RCW 82.32.534
.
Findings
—
Savings
—
Effective date
—
2008 c 81:
See notes following RCW 82.08.975
.
Severability
—
2007 c 54:
See note following RCW 82.04.050
.
Finding
—
2003 2nd sp.s. c 1:
"The legislature finds that the people of the state have benefited from the presence of the aerospace industry in Washington state. The aerospace industry provides good wages and benefits for the thousands of engineers, mechanics, and support staff working directly in the industry throughout the state. The suppliers and vendors that support the aerospace industry in turn provide a range of jobs. The legislature declares that it is in the public interest to encourage the continued presence of this industry through the provision of tax incentives. The comprehensive tax incentives in this act address the cost of doing business in Washington state compared to locations in other states." [
2003 2nd sp.s. c 1 s 1
.]
RCW 82.04.4463
Credit
—
Property and leasehold taxes paid on property used for manufacture of commercial airplanes.
(Expires July 1, 2040.)
(1) In computing the tax imposed under this chapter, a credit is allowed for property taxes and leasehold excise taxes paid during the calendar year.
(2) The credit is equal to:
(a)(i)(A) Property taxes paid on buildings, and land upon which the buildings are located, constructed after December 1, 2003, and used exclusively in manufacturing commercial airplanes or components of such airplanes; and
(B) Leasehold excise taxes paid with respect to buildings constructed after January 1, 2006, the land upon which the buildings are located, or both, if the buildings are used exclusively in manufacturing commercial airplanes or components of such airplanes; and
(C) Property taxes or leasehold excise taxes paid on, or with respect to, buildings constructed after June 30, 2008, the land upon which the buildings are located, or both, and used exclusively for aerospace product development, manufacturing tooling specifically designed for use in manufacturing commercial airplanes or their components, or in providing aerospace services, by persons not within the scope of (a)(i)(A) and (B) of this subsection (2) and are taxable under RCW 82.04.290
(3), 82.04.260
(11)(b), or
82.04.250
(3); or
(ii) Property taxes attributable to an increase in assessed value due to the renovation or expansion, after: (A) December 1, 2003, of a building used exclusively in manufacturing commercial airplanes or components of such airplanes; and (B) June 30, 2008, of buildings used exclusively for aerospace product development, manufacturing tooling specifically designed for use in manufacturing commercial airplanes or their components, or in providing aerospace services, by persons not within the scope of (a)(ii)(A) of this subsection (2) and are taxable under RCW 82.04.290
(3), 82.04.260
(11)(b), or
82.04.250
(3); and
(b) An amount equal to:
(i)(A) Property taxes paid, by persons taxable under RCW 82.04.260
(11)(a), on machinery and equipment exempt under RCW 82.08.02565
or
82.12.02565
and acquired after December 1, 2003;
(B) Property taxes paid, by persons taxable under RCW 82.04.260
(11)(b), on machinery and equipment exempt under RCW 82.08.02565
or
82.12.02565
and acquired after June 30, 2008; or
(C) Property taxes paid, by persons taxable under RCW 82.04.250
(3) or
82.04.290
(3), on computer hardware, computer peripherals, and software exempt under RCW 82.08.975
or
82.12.975
and acquired after June 30, 2008.
(ii) For purposes of determining the amount eligible for credit under (i)(A) and (B) of this subsection (2)(b), the amount of property taxes paid is multiplied by a fraction.
(A) The numerator of the fraction is the total taxable amount subject to the tax imposed under RCW 82.04.260
(11) (a) or (b) on the applicable business activities of manufacturing commercial airplanes, components of such airplanes, or tooling specifically designed for use in the manufacturing of commercial airplanes or components of such airplanes.
(B) The denominator of the fraction is the total taxable amount subject to the tax imposed under all manufacturing classifications in chapter
82.04
RCW.
(C) For purposes of both the numerator and denominator of the fraction, the total taxable amount refers to the total taxable amount required to be reported on the person's returns for the calendar year before the calendar year in which the credit under this section is earned. The department may provide for an alternative method for calculating the numerator in cases where the tax rate provided in RCW 82.04.260
(11) for manufacturing was not in effect during the full calendar year before the calendar year in which the credit under this section is earned.
(D) No credit is available under (b)(i)(A) or (B) of this subsection (2) if either the numerator or the denominator of the fraction is zero. If the fraction is greater than or equal to nine-tenths, then the fraction is rounded to one.
(E) As used in (b)(ii)(C) of this subsection (2), "returns" means the tax returns for which the tax imposed under this chapter is reported to the department.
(3) The definitions in this subsection apply throughout this section, unless the context clearly indicates otherwise.
(a) "Aerospace product development" has the same meaning as provided in RCW 82.04.4461
.
(b) "Aerospace services" has the same meaning given in RCW 82.08.975
.
(c) "Commercial airplane" and "component" have the same meanings as provided in RCW 82.32.550
.
(4) A credit earned during one calendar year may be carried over to be credited against taxes incurred in a subsequent calendar year, but may not be carried over a second year. No refunds may be granted for credits under this section.
(5) In addition to all other requirements under this title, a person claiming the credit under this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(6) This section expires July 1, 2040.
[
2017 c 135 s 16
;
2013 3rd sp.s. c 2 s 10
;
2010 1st sp.s. c 23 s 515
; (2010 1st sp.s. c 23 s 514 expired June 10, 2010);
2010 c 114 s 116
;
2008 c 81 s 8
;
2006 c 177 s 10
;
2005 c 514 s 501
;
2003 2nd sp.s. c 1 s 15
.]
NOTES:
Effective date
—
2017 c 135:
See note following RCW 82.32.534
.
Contingent effective date
—
2013 3rd sp.s. c 2:
See RCW 82.32.850
.
Findings
—
Intent
—
2013 3rd sp.s. c 2:
See note following RCW 82.32.850
.
Expiration date
—
2010 1st sp.s. c 23 ss 503, 505, and 514:
See note following RCW 82.04.4266
.
Effective date
—
2010 1st sp.s. c 23 ss 504, 506, and 515:
See note following RCW 82.04.4266
.
Findings
—
Intent
—
2010 1st sp.s. c 23:
See notes following RCW 82.04.220
.
Effective date
—
2010 1st sp.s. c 23:
See note following RCW 82.04.4292
.
Application
—
Finding
—
Intent
—
2010 c 114:
See notes following RCW 82.32.534
.
Findings
—
Savings
—
Effective date
—
2008 c 81:
See notes following RCW 82.08.975
.
Effective date
—
2006 c 177 ss 10 and 11:
"Sections 10 and 11 of this act take effect January 1, 2007." [
2006 c 177 s 13
.]
Application
—
2006 c 177 s 10:
"Section 10 of this act applies with respect to leasehold excise taxes paid on or after January 1, 2007." [
2006 c 177 s 11
.]
Effective date
—
2005 c 514 ss 501 and 1002:
"Sections 501 and 1002 of this act take effect January 1, 2006." [
2005 c 514 s 1305
.]
Part headings not law
—
Severability
—
2005 c 514:
See notes following RCW 82.12.808
.
Finding
—
2003 2nd sp.s. c 1:
See note following RCW 82.04.4461
.
RCW 82.04.447
Credit
—
Natural or manufactured gas purchased by direct service industrial customers
—
Reports.
(1) Unless the context clearly requires otherwise, the definitions in this subsection apply throughout this section.
(a) "Direct service industrial customer" means a person who is an industrial customer that contracts for the purchase of power from the Bonneville Power Administration for direct consumption as of May 8, 2001. "Direct service industrial customer" includes a person who is a subsidiary that is more than fifty percent owned by a direct service industrial customer and who receives power from the Bonneville Power Administration pursuant to the parent's contract for power.
(b) "Facility" means a gas turbine electrical generation facility that does not exist on May 8, 2001, and is owned by a direct service industrial customer for the purpose of producing electricity to be consumed by the direct service industrial customer.
(c) "Average annual employment" means the total employment in this state for a calendar year at the direct service industrial customer's location where electricity from the facility will be consumed.
(2) Effective July 1, 2001, a credit is allowed against the tax due under this chapter to a direct service industrial customer who purchases natural or manufactured gas from a gas distribution business subject to the public utility tax under chapter
82.16
RCW. The credit is equal to the value of natural or manufactured gas purchased from a gas distribution business and used to generate electricity at the facility multiplied by the rate in effect for the public utility tax on gas distribution businesses under RCW 82.16.020
. This credit may be used each reporting period for sixty months following the first month natural or manufactured gas was purchased from a gas distribution business by a direct service industrial customer who constructs a facility.
(3) Application for credit shall be made by the direct service industrial consumer before the first purchase of natural or manufactured gas. The application shall be in a form and manner prescribed by the department and shall include but is not limited to information regarding the location of the facility, the projected date of first purchase of natural or manufactured gas to generate electricity at the facility, the date construction is projected to begin or did begin, the applicant's average annual employment in the state for the six calendar years immediately preceding the year in which the application is made, and affirm the applicant's status as a direct service industrial customer. The department shall rule on the application within thirty days of receipt.
(4) Credit under this section is limited to the amount of tax imposed under this chapter. Refunds shall not be given in place of credits and credits may not be carried over to subsequent calendar years.
(5) All or part of the credit shall be disallowed and must be paid if the average of the direct service industrial customer's average annual employment for the five calendar years subsequent to the calendar year containing the first month of purchase of natural or manufactured gas to generate electricity at a facility is less than the six-year average annual employment stated on the application for credit under this section. The direct service industrial customer will certify to the department by June 1st of the sixth calendar year following the calendar year in which the month of first purchase of gas occurs the average annual employment for each of the five prior calendar years. All or part of the credit that shall be disallowed and must be paid is commensurate with the decrease in the five-year average of average annual employment as follows:
Decrease in Average Annual
Employment Over
Five-Year Period
% of Credit to be Paid
Less than 10%
10%
10% or more but less than 25%
25%
25% or more but less than 50%
50%
50% or more but less than 75%
75%
75% or more
100%
(6)(a) The direct service industrial customer shall begin paying the credit that is disallowed and is to be paid in the sixth calendar year following the calendar year in which the month following the month of first purchase of natural or manufactured gas to generate electricity at the facility occurs. The first payment will be due on or before December 31st with subsequent annual payments due on or before December 31st of the following four years according to the following schedule:
Payment Year
% of Credit to be Paid
1
10%
2
15%
3
20%
4
25%
5
30%
(b) The department may authorize an accelerated payment schedule upon request of the taxpayer.
(c) Interest shall not be charged on the credit that is disallowed for the sixty-month period the credit may be taken, although all other penalties and interest applicable to delinquent excise taxes may be assessed and imposed. The debt for credit that is disallowed and must be paid will not be extinguished by insolvency or other failure of the direct service industrial customer. Transfer of ownership of the facility does not affect eligibility for this credit. However, the credit is available to the successor only if the eligibility conditions of this section are met.
(7) The employment security department shall make, and certify to the department of revenue, all determinations of employment under this section as requested by the department.
(8) A person claiming this credit shall supply to the department quarterly reports containing information necessary to document the total volume of natural or manufactured gas purchased in the quarter, the value of that total volume, and the percentage of the total volume used to generate electricity at the facility.
[
2001 c 214 s 9
.]
NOTES:
Severability
—
Effective date
—
2001 c 214:
See notes following RCW 80.50.010
.
Findings
—
2001 c 214:
See note following RCW 39.35.010
.
RCW 82.04.448
Credit
—
Manufacturing semiconductor materials.
(Contingent effective date; contingent expiration date.)
(1) Subject to the limits and provisions of this section, a credit is authorized against the tax otherwise due under RCW 82.04.241
for persons engaged in the business of manufacturing semiconductor materials. For the purposes of this section "semiconductor materials" has the same meaning as provided in RCW 82.04.241
.
(2)(a) The credit under this section equals $3,000 for each employment position used in manufacturing production that takes place in a new building exempt from sales and use tax under RCW 82.08.965
and
82.12.965
. A credit is earned for the calendar year a person fills a position. Additionally a credit is earned for each year the position is maintained over the subsequent consecutive years, up to eight years. Those positions that are not filled for the entire year are eligible for 50 percent of the credit if filled less than six months, and the entire credit if filled more than six months.
(b) To qualify for the credit, the manufacturing activity of the person must be conducted at a new building that qualifies for the exemption from sales and use tax under RCW 82.08.965
and
82.12.965
.
(c) In those situations where a production building in existence on the effective date of this section will be phased out of operation, during which time employment at the new building at the same site is increased, the person is eligible for credit for employment at the existing building and new building, with the limitation that the combined eligible employment not exceed full employment at the new building. "Full employment" has the same meaning as in RCW 82.08.965
. The credit may not be earned until the commencement of commercial production, as that term is used in RCW 82.08.965
.
(3) No application is necessary for the tax credit. The person is subject to all of the requirements of chapter
82.32
RCW. In no case may a credit earned during one calendar year be carried over to be credited against taxes incurred in a subsequent calendar year. No refunds may be granted for credits under this section.
(4) If at any time the department finds that a person is not eligible for tax credit under this section, the amount of taxes for which a credit has been claimed is immediately due. The department must assess interest, but not penalties, on the taxes for which the person is not eligible. The interest must be assessed at the rate provided for delinquent excise taxes under chapter
82.32
RCW, is retroactive to the date the tax credit was taken, and accrues until the taxes for which a credit has been used are repaid.
(5) A person claiming the credit under this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
(6) Credits may be claimed after the expiration date of this section, for those buildings at which commercial production began before the expiration date of this section, subject to all of the eligibility criteria and limitations of this section.
(7) Any person who has claimed the credit under this section must reimburse the department for 50 percent of the amount of the tax preference under this section if the number of persons employed by the person claiming the tax preference is less than 90 percent of the person's three-year employment average for the three years immediately preceding the year in which the credit is claimed.
(8) Pursuant to RCW 82.32.790, this section is contingent on the siting and commercial operation of a significant semiconductor microchip fabrication facility in the state of Washington.
(9) This section expires January 1, 2034, unless the contingency in RCW 82.32.790
(2) occurs.
[
2024 c 261 s 4
. Prior:
2017 3rd sp.s. c 37 s 516
; (2017 3rd sp.s. c 37 s 515 expired January 1, 2018);
2017 c 135 s 17
;
2010 c 114 s 117
;
2003 c 149 s 9
.]
NOTES:
Tax preference performance statement exemption
—
Effective date
—
2024 c 261 ss 2-9:
See notes following RCW 82.04.241
.
Effective date
—
2017 3rd sp.s. c 37 ss 101-104, 403, 503, 506, 508, 510, 512, 514, 516, 518, 520, 522, 524, 526, 703, 705, 707, and 801-803:
See note following RCW 82.04.2404
.
Expiration date
—
2017 3rd sp.s. c 37 ss 502, 505, 507, 509, 511, 513, 515, 517, 519, 521, 523, and 525:
See note following RCW 82.04.2404
.
*Contingent effective date
—
2017 c 135; 2010 c 114:
See RCW 82.32.790
.
Effective date
—
2017 c 135:
See note following RCW 82.32.534
.
Finding
—
Intent
—
2010 c 114:
See note following RCW 82.32.534
.
Findings
—
Intent
—
2003 c 149:
See note following RCW 82.04.426
.
RCW 82.04.4481
Credit
—
Property taxes paid by aluminum smelter.
(1) In computing the tax imposed under this chapter, a credit is allowed for all property taxes paid during the calendar year on property owned by a direct service industrial customer and reasonably necessary for the purposes of an aluminum smelter.
(2) A person claiming the credit under this section is subject to all the requirements of chapter
82.32
RCW. A credit earned during one calendar year may be carried over to be credited against taxes incurred in the subsequent calendar year, but may not be carried over a second year. Credits carried over must be applied to tax liability before new credits. No refunds may be granted for credits under this section.
(3) Credits may not be claimed under this section for property taxes levied for collection in 2027 and thereafter.
(4) A person claiming the credit provided in this section must file a complete annual tax performance report with the department under RCW 82.32.534
.
[
2017 c 135 s 18
;
2015 3rd sp.s. c 6 s 503
;
2011 c 174 s 302
. Prior:
2010 1st sp.s. c 2 s 2
;
2010 c 114 s 118
;
2006 c 182 s 2
;
2004 c 24 s 8
.]
NOTES:
Effective date
—
2017 c 135:
See note following RCW 82.32.534
.
Effective dates
—
2015 3rd sp.s. c 6:
See note following RCW 82.04.4266
.
Findings
—
Tax preference performance statement
—
2015 3rd sp.s. c 6 ss 502-506:
See note following RCW 82.04.2909
.
Application
—
Finding
—
Intent
—
2010 c 114:
See notes following RCW 82.32.534
.
Intent
—
Effective date
—
2004 c 24:
See notes following RCW 82.04.2909
.
RCW 82.04.4482
Credit
—
Sales of electricity or gas to an aluminum smelter.
(1) A person who is subject to tax under this chapter on gross income from sales of electricity, natural gas, or manufactured gas made to an aluminum smelter is eligible for an exemption from the tax in the form of a credit, if the contract for sale of electricity or gas to the aluminum smelter specifies that the price charged for the electricity or gas will be reduced by an amount equal to the credit.
(2) The credit is equal to the gross income from the sale of the electricity or gas to an aluminum smelter multiplied by the corresponding rate in effect at the time of the sale under this chapter.
(3) The exemption provided for in this section does not apply to amounts received from the remarketing or resale of electricity originally obtained by contract for the smelting process.
[
2004 c 24 s 9
.]
NOTES:
Intent
—
Effective date
—
2004 c 24:
See notes following RCW 82.04.2909
.
RCW 82.04.4486
Credit
—
Syrup taxes paid by buyer.
(1) In computing the tax imposed under this chapter, a credit is allowed to a buyer of syrup to be used by the buyer in making carbonated beverages that are sold by the buyer if the tax imposed by RCW 82.64.020
has been paid in respect to the syrup. The amount of the credit shall be equal to twenty-five percent from July 1, 2006, through June 30, 2007, fifty percent from July 1, 2007, through June 30, 2008, seventy-five percent from July 1, 2008, through June 30, 2009, and one hundred percent after June 30, 2009, of the taxes imposed under RCW 82.64.020
in respect to the syrup purchased by the buyer.
(2) Credit under this section shall be earned, and claimed against taxes due under this chapter, for the tax reporting period in which the syrup was purchased by the person claiming credit under this section. The credit shall not exceed the tax otherwise due under this chapter for the tax reporting period. Unused credit may be carried over and used in subsequent tax reporting periods, except that no credit may be claimed more than twelve months from the end of the tax reporting period in which the credit was earned. No refunds shall be granted for credits under this section.
(3) No credit is available under this section for taxes paid under RCW 82.64.020
before July 1, 2006.
(4) For the purposes of this section, "carbonated beverage," "previously taxed syrup," and "syrup" have the same meanings as provided in RCW 82.64.010
.
[
2006 c 245 s 1
.]
NOTES:
Effective date
—
2006 c 245:
"This act takes effect July 1, 2006." [
2006 c 245 s 2
.]
RCW 82.04.4488
Credit
—
Conversion to worker-owned cooperative, employee ownership trust, or employee stock ownership plan.
(Expires July 1, 2026.)
(1) Beginning July 1, 2024, in computing the tax imposed under this chapter, a credit is allowed for costs related to converting a qualifying business to a worker-owned cooperative, employee ownership trust, or an employee stock ownership plan, as provided in this section.
(2) The credit is equal to:
(a) Up to 50 percent of the conversion costs, not to exceed $25,000, incurred by a qualified business for converting the qualified business to a worker-owned cooperative or an employee ownership trust; or
(b) Up to 50 percent of the conversion costs, not to exceed $100,000, incurred by a qualified business for converting the qualified business to an employee stock ownership plan.
(3)(a) Credit under this section is earned, and claimed against taxes due under this chapter, for the tax reporting period in which the conversion to a worker-owned cooperative, employee ownership trust, or an employee stock ownership plan is complete, or subsequent tax reporting periods as provided in (c) of this subsection.
(b) The credit must not exceed the tax otherwise due under this chapter for the tax reporting period.
(c) Unused credit may be carried over and used in subsequent tax reporting periods, except that no credit may be claimed more than 12 months from the end of the tax reporting period in which the credit was earned.
(d) No refunds may be granted for credits under this section.
(4)(a) The total amount of credits authorized under this section may not exceed an annual statewide limit of $2,000,000.
(b) Credits must be authorized on a first-in-time basis.
(c) No credit may be earned, during any calendar year, on or after the last day of the calendar month immediately following the month the department has determined that $2,000,000 in credit has been earned.
(5)(a) The department may require persons claiming a credit under this section to provide appropriate documentation, in a manner as determined by the department, for the purposes of determining eligibility under this section.
(b) Every person claiming a credit under this section must preserve, for a period of five years, any documentation to substantiate the amount of credit claimed.
(6) For the purposes of this section:
(a) "Conversion costs" means professional services, including accounting, legal, and business advisory services, as detailed in the guidelines issued by the department, for: (i) A feasibility study or other preliminary assessments regarding a transition of a business to an employee stock ownership plan, a worker-owned cooperative, or an employee ownership trust; or (ii) the transition of a business to an employee stock ownership plan, a worker-owned cooperative, or an employee ownership trust.
(b) "Employee ownership trust" means an indirect form of employee ownership in which a trust holds a controlling stake in a qualified business and benefits all employees on an equal basis.
(c) "Employee stock ownership plan" has the same meaning as set forth in 26 U.S.C. Sec. 4975(e)(7), as of July 1, 2024.
(d) "Qualified business" means a person subject to tax under this chapter, including but not limited to a C corporation, S corporation, limited liability company, partnership, limited liability partnership, sole proprietorship, or other similar pass-through entity, that is not owned in whole or in part by an employee ownership trust, that does not have an employee stock ownership plan, or that is not, in whole or in part, a worker-owned cooperative, and that is approved by the department for the tax credit in this section.
(e) "Worker-owned cooperative" has the same meaning as set forth in 26 U.S.C. Sec. 1042(c)(2), as of July 1, 2024, or such subsequent dates as may be provided by rule by the department, consistent with the purposes of this section.
(7) Credits allowed under this section can be earned for tax reporting periods starting on or before June 30, 2025. No credits can be claimed on returns filed for tax periods starting on or after July 1, 2026.
(8) This section expires July 1, 2026.
[
2025 c 366 s 1
;
2023 c 392 s 5
.]
NOTES:
Tax preference performance statement
—
2023 c 392 s 5:
"(1) This section is the tax preference performance statement for the tax preference contained in section 5, chapter 392, Laws of 2023. This performance statement is only intended to be used for subsequent evaluation of the tax preference. It is not intended to create a private right of action by any party or be used to determine eligibility for preferential tax treatment.
(2) The legislature categorizes this tax preference as one intended to induce certain designated behavior by taxpayers, as indicated in RCW 82.32.808
(2)(a).
(3) It is the legislature's specific public policy objective to encourage business owners to create an employee stock ownership plan or employee ownership trust, or to convert to a worker-owned cooperative, that allows the company to share ownership with their employees without requiring employees to invest their own money.
(4) If a review finds that the number of businesses in this state offering employee stock ownership plans, employee ownership trusts, or ones that have converted to a worker-owned cooperative, has increased because of the tax credit under this act, then the legislature intends for the legislative auditor to recommend extending the expiration date of the tax preference.
(5) In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may access and use any relevant data collected by the state." [
2023 c 392 s 4
.]
Effective date
—
2023 c 392 ss 4 and 5:
"Sections 4 and 5 of this act take effect July 1, 2024." [
2023 c 392 s 7
.]
Findings
—
Intent
—
Short title
—
2023 c 392:
See notes following RCW 43.330.590
.