Opinion ID: 2621461
Heading Depth: 1
Heading Rank: 2

Heading: Overview of RCW 82.29A.050 and WAC 458-29A-500

Text: A LET is imposed on private parties or individuals for the act or privilege of occupying or using publicly owned real or personal property through a leasehold interest at a rate of 12 percent of taxable rent. RCW 82.29A.030(1). [7] Chapter 82.29A RCW defines leasehold interest as an interest in publicly owned real or personal property which exists by virtue of any lease, permit, license, or any other agreement, written or verbal, between the public owner of the property and a person who would not be exempt from property taxes if that person owned the property in fee, granting possession and use, to a degree less than fee simple ownership[.] RCW 82.29A.020(1). Under article VII, section 1 of our state constitution, publicly owned real or personal property is exempt from taxation. By leasing publicly owned property, private lessees receive significant benefits in the form of services by the government. RCW 82.29A.010(1)(a). Therefore, the LET is intended to fairly compensate governmental units for services rendered to such lessees of publicly owned property. RCW 82.29A.010(1)(c). The LET is measured by the private lessee's taxable rent, which is defined as contract rent ... where the lease or agreement has been established or renegotiated through competitive bidding, or negotiated or renegotiated in accordance with statutory requirements regarding the rent payable, or negotiated or renegotiated under circumstances, established by public record, clearly showing that the contract rent was the maximum attainable by the lessor[.] RCW 82.29A.020(2). [8] Under RCW 82.29A.050, the LET is paid by the lessee to the lessor, and the lessor shall collect such tax and remit the same to DOR. RCW 82.29A.050(1). Upon receiving the LET from the private lessee, the public lessor must remit it to DOR on or before the last day of the month following the month in which the tax is collected. RCW 82.29A.050(2). Further, [t]he lessor shall be fully liable for collection and remittance of the tax. Id. (emphasis added). Upon enactment of the LET statutes in 1976, [9] the legislature authorized DOR to make rules and regulations consistent with the Administrative Procedure Act (APA), chapter 34.05 RCW, that are necessary to permit its effective administration including procedures for collection and remittance of taxes. RCW 82.29A.140. However, DOR did not promulgate any LET rules until 1999 when Rule 500 took effect. See WAC 458-29A-500 (effective November 1, 1999). Rule 500 states in relevant part: (2) Lessor's responsibility to collect and remit tax. The public lessor is responsible for collecting and remitting the leasehold excise tax from its private lessees. If the public lessor collects the leasehold excise tax but fails to remit it to the department, the public lessor is liable for the tax. (a) Where the public lessor has attempted to collect the tax, but has received neither contract rent nor leasehold excise tax from the lessee, the department will proceed directly against the lessee for payment of the tax and the lessee shall be solely liable for the tax, provided, the lessor notifies the department in writing when the lessor is unable to collect rent and/or taxes, and the amount of the leasehold excise tax arrearage is $1000 or greater. If the lessor fails to notify the department, the department may, in its discretion, look to the public lessor for payment of the tax. (b) If, upon examining all of the facts and circumstances, the department determines that the public lessor in good faith believed the lessee to be exempt from all or part of the leasehold excise tax, the department will look to the public lessor for assistance in collection of the tax due, but will not hold the public lessor personally liable for payment of such tax. To satisfy the requirement of good faith the public lessor must have acted with reasonable diligence and prudence to determine whether the leasehold excise tax was due from the lessee. WAC 458-29A-500 (emphasis added). WPPA and DOR have conflicting interpretations of the LET statute and Rule 500. WPPA's interpretation would place liability on the public lessor if it collects, but fails to remit the LET to DOR, or if the public lessor fails to make a good faith effort to collect the LET. Whereas, DOR's interpretation places total liability on public lessors for the collection and remittance of the LET. We are in agreement with DOR.