Signed by Governor Chris Gregoire

Vote Smart's Synopsis:

Vote to adopt a conference report that establishes additional state taxes

Highlights:

-Extends the state business and occupation tax to out-of-state business that are not physically present in Washington, but earn significant income from Washington residents (Sec. 101). -Specifies that a person engaging in business is deemed to have a substantial connection with Washington if the person is (Sec. 104):

-An individual and is a resident of Washington or has a home there; -A business entity and is organized or commercially domiciled in Washington; or -A nonresident individual or a business entity that is organized or commercially located outside Washington, and in any tax year the person has:
-More than $50,000 of property in Washington; -More than $50,000 of payroll in Washington; -More than $250,000 of receipts from Washington; or -At least 25 percent of the person's total property, total payroll, or total receipts in Washington.

-Specifies that if the property securing a loan is located both within Washington and one or more other states, the loan is deemed owned and used in Washington if more than 50 percent of the fair market value of the real or personal property is located within Washington (Sec. 104). -Requires any person earning apportionable income that is taxable by Washington and also by another state to apportion to Washington that portion of the person's apportionable income derived from business activities performed within the state (Sec. 108). -Authorizes the department to disregard, for tax purposes, the tax avoidance transactions or arrangements and requires the department to disregard a transaction or arrangement after considering the following (Sec. 201):

-Whether an arrangement or transaction changes in a meaningful way, apart form its tax effects, the economic positions of the participants in the arrangement when considered as a whole; -Whether substantial nontax reasons exist for entering into an arrangement or transaction; -Whether an arrangement or transaction is a reasonable means of accomplishing a substantial nontax purpose; -An entities' relative contributions to the work that generates income; -The location where work is performed; and -Other relevant factors.

-Specifies that the deductible interest for first mortgages or trust deeds on nontransient residential properties includes the portion of fees charged to borrowers, including points and loan origination fees (Sec. 301). -Specifies 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 (Sec. 701). -Authorizes all income of all independent contractors to be taxed under the business and occupation tax (Sec. 701). -Authorizes the department of revenue, if unpaid retail tax funds have not been collected from a business, to levy penalties and interest on unpaid taxes on any or all responsible people of that entity (Sec. 801). -Repeals the tax exemptions for soft drinks, bottled water, candy, prepared food, or dietary supplements (Sec. 901). -Exempts bottled water used for patients, pursuant to a prescription, for use in the cure, mitigation, treatment or prevention of disease or other medical conditions or bottled water used by those who do not have an available source of potable water (Sec. 904 - 906). -Specifies that, beginning May 1, 2010 through June 30, 2013, an additional rate of tax of 0.30 percent is added to the rate provided for real estate brokers, contests of chance, and international investment management services or other business or service activities (Sec. 1101). -Establishes an additional tax of $1.30 per barrel of 31 gallons of beer on all sales to licensees (Sec. 1301). -Establishes an additional tax of $.02 per 12 ounces of carbonated beverages on every person for the privilege of selling, at wholesale or retail, carbonated beverages through June 30, 2013 (Sec. 1402).

Full Bill Text

Vote Smart's Synopsis:

Vote to adopt a conference report that establishes additional state taxes

Highlights:

-Extends the state business and occupation tax to out-of-state business that are not physically present in Washington, but earn significant income from Washington residents (Sec. 101). -Specifies that a person engaging in business is deemed to have a substantial connection with Washington if the person is (Sec. 104):

-An individual and is a resident of Washington or has a home there; -A business entity and is organized or commercially domiciled in Washington; or -A nonresident individual or a business entity that is organized or commercially located outside Washington, and in any tax year the person has:
-More than $50,000 of property in Washington; -More than $50,000 of payroll in Washington; -More than $250,000 of receipts from Washington; or -At least 25 percent of the person's total property, total payroll, or total receipts in Washington.

-Specifies that if the property securing a loan is located both within Washington and one or more other states, the loan is deemed owned and used in Washington if more than 50 percent of the fair market value of the real or personal property is located within Washington (Sec. 104). -Requires any person earning apportionable income that is taxable by Washington and also by another state to apportion to Washington that portion of the person's apportionable income derived from business activities performed within the state (Sec. 108). -Authorizes the department to disregard, for tax purposes, the tax avoidance transactions or arrangements and requires the department to disregard a transaction or arrangement after considering the following (Sec. 201):

-Whether an arrangement or transaction changes in a meaningful way, apart form its tax effects, the economic positions of the participants in the arrangement when considered as a whole; -Whether substantial nontax reasons exist for entering into an arrangement or transaction; -Whether an arrangement or transaction is a reasonable means of accomplishing a substantial nontax purpose; -An entities' relative contributions to the work that generates income; -The location where work is performed; and -Other relevant factors.

-Specifies that the deductible interest for first mortgages or trust deeds on nontransient residential properties includes the portion of fees charged to borrowers, including points and loan origination fees (Sec. 301). -Specifies 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 (Sec. 701). -Authorizes all income of all independent contractors to be taxed under the business and occupation tax (Sec. 701). -Authorizes the department of revenue, if unpaid retail tax funds have not been collected from a business, to levy penalties and interest on unpaid taxes on any or all responsible people of that entity (Sec. 801). -Repeals the tax exemptions for soft drinks, bottled water, candy, prepared food, or dietary supplements (Sec. 901). -Exempts bottled water used for patients, pursuant to a prescription, for use in the cure, mitigation, treatment or prevention of disease or other medical conditions or bottled water used by those who do not have an available source of potable water (Sec. 904 - 906). -Specifies that, beginning May 1, 2010 through June 30, 2013, an additional rate of tax of 0.30 percent is added to the rate provided for real estate brokers, contests of chance, and international investment management services or other business or service activities (Sec. 1101). -Establishes an additional tax of $1.30 per barrel of 31 gallons of beer on all sales to licensees (Sec. 1301). -Establishes an additional tax of $.02 per 12 ounces of carbonated beverages on every person for the privilege of selling, at wholesale or retail, carbonated beverages through June 30, 2013 (Sec. 1402).

Full Bill Text