Opinion ID: 1363839
Heading Depth: 1
Heading Rank: 1

Heading: RCW 82.29A.030 provides:

Text: There is hereby levied and shall be collected a leasehold excise tax on the act or privilege of occupying or using publicly owned real or personal property through a leasehold interest on and after January 1, 1976, at a rate of twelve percent of taxable rent ... For the purposes of this case, the taxable rent is the contract rent, which is defined as the amount of consideration due as payment for a leasehold interest, including: The total of cash payments made to the lessor or to another party for the benefit of the lessor according to the requirements of the lease or agreement; expenditures for the protection of the lessor's interest when required by the terms of the lease or agreement; and expenditures for improvements to the property to the extent that such improvements become the property of the lessor. Where the consideration conveyed for the leasehold interest is made in combination with payment for concession or other rights granted by the lessor, only that portion of such payment which represents consideration for the leasehold interest shall be part of contract rent. (Italics ours.) RCW 82.29A.020(2)(a). The first issue involves interpreting the emphasized portion of the statute, for RCW 82.29A does not provide a definition of concession or other rights. The trial court concluded that the rent attributable to the monopoly rights and to having access to the Center's pedestrian traffic was not taxable. Instead, it ruled that the taxable rent was simply the rent which anyone would pay for similar-sized areas with similar improvements near the Seattle Center. The State argues that concession or other rights, as used in RCW 82.29A.020, refer only to those rights unrelated to the possession and use of public property. It believes that MAC's monopoly rights and favorable location are inseparable from the leasehold and thus are taxable. [4] In light of the tax's purpose, the portion of the rent attributable to favorable location, and to having access to the stream of commerce, must be taxable. The City expends large sums to promote activities and to provide services within the Center. To the extent that the court's ruling exempts the rent traceable to that access and location, it defeats the purpose of the tax. A similar conclusion is suggested by RCW 82.29A.020(2)(b), which provides: If it shall be determined by the department of revenue ... that such leasehold interest has not been ... negotiated under circumstances ... clearly showing that the contract rent was the maximum attainable by the lessor, the department may establish a taxable rent computation for use in determining the tax payable under authority granted in this chapter based upon the following criteria: (i) Consideration shall be given to rental being paid to other lessors by lessees of similar property for similar purposes over similar periods of time ... (Italics ours.) That statute, though not directly applicable to this case, suggests that taxable rent is at least that rent paid for similar property used for similar purposes. The similar purposes and property restriction, in turn, connotes that location is a factor in the tax equation. The restriction acknowledges that properties differ, that differing characteristics affect the rent paid, and that taxable rent should vary with those differing characteristics. One differing characteristic is location and access to commerce. MAC's arrangement is not substantially different from that of a lessee in a shopping center owned by a single lessor. Each has chosen its location on the basis of access to the commercial traffic generated by the lessor. In each, access is an inherent element of the location. The attempt to segregate from the rent that portion relating to favorable location seems to us to be contrary to the stated legislative purposes for the tax, and we therefore hold that the rent traceable to good location is taxable under RCW 82.29A.