HomeMy WebLinkAbout4040 Ordinance No . 4040
(Amending or Repealing Ordinances)
CFN=104 - Finance
Special Council Meeting 7/31/2012
Amending Title 13; new sec. 3.28
B&O Tax Ordinance
DID NOT PASS
The date['Beginning July 1, 1998"] has led to confusion This date will be deleted from cover sheets of
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ORDINANCE NO. �00
' AN ORDINANCE of the City Council of the
City of Kent, Washington, adopting a new chapter
3.28 to the Kent City code entitled Business and
Occupation Tax Gross Receipts and establishing an
effective date.
RECITALS
A. One of the most important functions of a government,
including municipal government, in setting and implementing tax policy is
to strive for fairness, consistency, equity, and efficiency.
B. In recognition of concerns over the business and occupation
(B & O) tax, and legislative debates over how to address those concerns,
the Association of Washington Cities (AWC) and six B & O tax jurisdictions
formed a Task Force to analyze these issues.
C. The Task Force, with the concurrence of the majority of other
Washington cities levying gross receipts B & O taxes, has developed a
model ordinance that creates greater uniformity and consistency among
city gross receipts business and occupation taxes; includes a system of
deductions to prevent multiple taxation of the same gross receipts; makes
the city gross receipts business and occupation taxes simpler, more
predictable, and easier to administer; provides examples of activities that
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constitute "engaging in business" and establishes safe harbors for de
minimus activies that a person may engage in without having to register or
becoming subject to tax; and contains sufficient flexibility to provide local
control over the city tax structure.
D. The model ordinance also strives to minimize any major
revenue impact on cities levying gross receipts B & O tax; and retains local
control over B & O tax rates, thus preserving "local control" and revenue-
protection measure that are critical to all cities in the State of Washington.
E. Adoption of the model ordinance is also vital in demonstrating
to the Washington State Legislature that cities are sensitive to legitimate
complaints over the local B & O tax and are serious about ensuring that it
more fairly, equitably, consistently, and efficiently administered.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT,
WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS:
ORDINANCE
SECTION 1. - New Chapter. A new Chapter 3.28 of the Kent City
Code is hereby adopted
CHAPTER 3.28
Business and Occupation Tax - Gross Receipts
Sec. 3.28.010 Purpose. This section implements Washington
Constitution Article XI, Sec. 12 and RCW 35A.82.020and 35A.11.020,
which gives municipalities the authority to license for revenue. In the
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absence of a legal or constitutional prohibition, municipalities have the
power to define taxation categories as they see fit in order to respond to
the unique concerns and responsibilities of local government. The city of
Kent has developed over the last half century into a major
manufacturing/warehousing hub. However, due to recent changes in sales
tax laws, the city no longer receives sufficient revenue from warehousing
activities to support the transportation infrastructure needed serve
warehouse activities. As a result, the city no longer generates sufficient
revenue to maintain and operate its considerable past investment in local
streets and arterial infrastructure. This ordinance, then, is intended to
generate additional revenue to maintain, repair, and operate the city's
existing transportation network and to cause those business entities that
contribute most to the use and degradation of city streets to pay the most
significant share of that cost.
Sec., 3.28.020 Exercise of revenue license power. The
provisions of this chapter shall be deemed an exercise of the power of the
city to license for revenue. The provisions of this chapter are subject to
periodic statutory or administrative rule changes or judicial interpretations
of the ordinances or rules. The responsibility rests with the licensee or
taxpayer to reconfirm tax computation procedures and remain in
compliance with the city code.
Sec. 3.28.028 Administrative Provisions. The administrative
provisions contained in chapter 3.29 shall be fully applicable to the
provisions of this chapter except as expressly stated to the contrary
herein.
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Sec. 3.28.030 Definitions. In construing the provisions of this
chapter, the following definitions shall be applied. Words in the singular
number shall include the plural, and the plural shall include the singular.
A. "Business. " "Business" includes all activities engaged in with the
object of gain, benefit, or advantage to the taxpayer or to another person
or class, directly or indirectly.
B. "Business and occupation tax." "Business and occupation tax" or
"gross receipts tax" means a tax imposed on or measured by the value of
products, the'gross income of the business, or the gross proceeds of sales,
as the case may be, and that is the legal liability of the business.
C. "Commercial or industrial use." "Commercial or industrial use"
means the following uses of products, including by-products, by the
extractor or manufacturer thereof:
(1) Any use as a consumer; and
-(2) The manufacturing of articles, substances or commodities;
D. "Delivery means the transfer of possession of tangible personal
property between the seller and the buyer or the buyer's representative.
Delivery to an employee of a buyer is considered delivery to the buyer.
Transfer of possession of tangible personal property occurs when the
buyer or the buyer's representative first takes physical control of the
property or exercises dominion and control over the property. Dominion
and control means the buyer has the ability to put the property to the
buyer's own purposes. It means the buyer or the buyer's representative
has made the final decision to accept or reject the property, and the seller
has no further right to possession of the property and the buyer has no
right to return the property to the seller, other than under a warranty
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contract. A buyer does not exercise dominion and control over tangible
personal property merely by arranging for shipment of the property from
the seller to itself. A buyer's representative is a person, other than an
employee of the buyer, who is authorized in writing by the buyer to
receive tangible personal property and take dominion and control by
making the final decision to accept or reject the property. Neither a
shipping company nor a seller can serve as a buyer's representative. It is
immaterial where the contract of sale is negotiated or where the buyer
obtains title to the property. Delivery terms and other provisions of the
Uniform Commercial Code (Title 62A RCW) do not determine when or
where delivery of tangible personal property occurs for purposes of
taxation.
E. "Eligible gross receipts tax." The term "eligible gross receipts tax"
means a tax which:
(1) Is imposed on the act or privilege of engaging in business
activities within section .050; and
(2) Is measured by the gross volume of business, in terms of
gross receipts and is not an income tax or value added tax; and
(3) Is not, pursuant to law or custom, separately stated from the
sales price; and
(4) Is not a sales or use tax, business license fee, franchise fee,
royalty or severance tax measured by volume or weight, or concession
charge, or payment for the use and enjoyment of property, property right
or a privilege; and
(5) Is a tax imposed by a local jurisdiction, whether within or
without the State of Washington, and not by a country, state, province, or
any other non-local jurisdiction above the county level.
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F. "Engaging in business."
(1) The term "engaging in business" means commencing,
conducting, or continuing in business, and also the exercise of corporate
or franchise powers, as well as liquidating a business when the liquidators
thereof hold themselves out to the public as conducting such business.
(2) This section sets forth examples of activities that constitute
engaging in business in the city, and establishes safe harbors for certain of
those activities so that a person who meets the criteria may engage in de
minimus business activities in the city without having to pay city business
and occupation taxes. The activities listed in this section are illustrative
only and are not intended to narrow the definition of "engaging in
business" in subsection (1). If an activity is not listed, whether it
constitutes engaging in business in the city shall be determined by
considering all the facts and circumstances and applicable law.
(3) Without being all inclusive, any one of the following activities
conducted within the city by a person, or its employee, agent,
representative, independent contractor, broker or another acting on its
behalf constitutes engaging in business and requires a person to register
and obtain a business license.
(a) Owning, renting, leasing, maintaining, or having the
right to use, or using, tangible personal property, intangible personal
property, or real property permanently or temporarily located in the city.
(b) Owning, renting, leasing, using, or maintaining, an
office, place of business, or other establishment in the city.
(c) Soliciting sales.
(d) Making repairs or providing maintenance or service to
real or tangible personal property, including warranty work and property
maintenance.
(e) Providing technical assistance or service, including
quality control, product inspections, warranty work, or similar services on
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or in connection with tangible personal property sold by the person or on
its behalf.
(f) Installing, constructing, or supervising installation or
construction of, real or tangible personal property.
(g) Soliciting, negotiating, or approving franchise, license,
or other similar agreements.
(h) Collecting current or delinquent accounts.
(1) Picking up and transporting tangible personal property,
solid waste, construction debris, or excavated materials.
(j) Providing disinfecting and pest control services,
employment and labor pool services, home nursing care, janitorial
services, appraising, landscape architectural services, security system
services, surveying, and real estate services including the listing of homes
and managing real property.
(k) Rendering professional services such as those provided
by accountants, architects, attorneys, auctioneers, consultants, engineers,
professional athletes, barbers, baseball clubs and other sports
organizations, chemists, consultants, psychologists, court reporters,
dentists, doctors, detectives, laboratory operators, teachers, veterinarians.
(1) Meeting with customers or potential customers, even
when no sales or orders are solicited at the meetings.
(m) Training or recruiting agents, representatives,
independent contractors, brokers or others, domiciled or operating on a
job in the city, acting on its behalf, or for customers or potential
customers.
(n) Investigating, resolving, or otherwise assisting in
resolving customer complaints.
(o) In-store stocking or manipulating products or goods,
sold to and owned by a customer, regardless of where sale and delivery of
the goods took place.
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(p) Delivering goods in vehicles owned, rented, leased,
used, or maintained by the person or another acting on its behalf.
(q) Accepting or executing a contract with the city,
irrespective of whether goods or services are delivered within or without
the city, or whether the person's office or place of business is within or
without the city.
(4) If a person, or its employee, agent, representative,
independent contractor, broker or another acting on the person's behalf,
engages in no other activities in or with the city but the following, it need
not register and obtain a business license and pay tax.
(a) Meeting with suppliers of goods and services as a
customer.
(b) Meeting with government representatives in their
official capacity, other than those performing contracting or purchasing
functions.
(c) Attending meetings, such as board meetings, retreats,
seminars, and conferences, or other meetings wherein the person does
not provide training in connection with tangible personal property sold by
the person or on its behalf.
(d) Renting tangible or intangible property as a customer
when the property is not used in the city.
(e) Attending, but not participating in a "trade show" or
"multiple vendor events". Persons participating at a trade show shall
review the City's trade show or multiple vendor event ordinances.
(f) Conducting advertising through the mail.
(g) Soliciting sales by phone from a location outside the
city.
(5) A seller located outside the city merely delivering goods into
the city by means of common carrier is not required to register and obtain
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a business license, provided that it engages in no other business activities
in the city. Such activities do not include those in subsection (4).
(6) The City expressly intends that engaging in business includes
any activity sufficient to establish nexus for purposes of applying the tax
under the law and the constitutions of the United States and the State of
Washington. Nexus is presumed to continue as long as the taxpayer
benefits from the activity that constituted the original nexus generating
contact or subsequent contacts.
G. "Extracting." "Extracting" is the activity engaged in by an extractor
and is reportable under the extracting classification.
H. "Extractor." "Extractor" means every person who from the person's
own land or from the land of another under a right or license granted by
lease or contract, either directly or by contracting with others for the
necessary labor or mechanical services, for sale or for commercial or
industrial use, mines, quarries, takes or produces coal, oil, natural gas,
ore, stone, sand, gravel, clay, mineral or other natural resource product;
or fells, cuts or takes timber, Christmas trees, other than plantation
Christmas trees, or other natural products; or takes fish, shellfish, or other
sea or inland water foods or products. "Extractor" does not include
persons performing under contract the necessary labor or mechanical
services for others; or persons meeting the definition of farmer.
I. "Extractor for Hire." "Extractor for hire" means a person who
performs under contract necessary labor or mechanical services for an
extractor.
J. "Gross income of the business." "Gross income of the business"
means the value proceeding or accruing by reason of the transaction of
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the business engaged in and includes gross proceeds of sales,
compensation for the rendition of services, gains realized from trading in
stocks, bonds, or other evidences of indebtedness, interest, discount,
rents, royalties, fees, commissions, dividends, and other emoluments
however designated, all without any deduction on account of the cost of
tangible property sold, the cost of materials used, labor costs, interest,
discount, delivery costs, taxes, or any other expense whatsoever paid or
accrued and without any deduction on account of losses.
K. "Gross proceeds of sales." "Gross proceeds of sales" means the
value proceeding or accruing from the sale of tangible personal property
or for services rendered, without any deduction on account of the cost of
property sold, the cost of materials used, labor costs, interest, discount
paid, delivery costs, taxes, or any other expense whatsoever paid or
accrued and without any deduction on account of losses.
L. "Manufacturing." "Manufacturing" means the activity conducted by
a manufacturer and is reported under the manufacturing classification.
M. "Manufacturer," "to manufacture."
(1) "Manufacturer" means every person who, either directly or by
contracting with others for the necessary labor or mechanical services,
manufactures for sale or for commercial or industrial use from the
person's own materials or ingredients any products. When the owner of
equipment or facilities furnishes, or sells to the customer prior to
manufacture, materials or ingredients equal to less than twenty percent
(20%) of the total value of all materials or ingredients that become a part
of the finished product, the owner of the equipment or facilities will be
deemed to be a processor for hire, and not a manufacturer. A business
not located in this City that is the owner of materials or ingredients
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processed for it in this City by a processor for hire shall be deemed to be
engaged in business as a manufacturer in this City.
(2) "To manufacture" means all activities of a commercial or
industrial nature wherein labor or skill is applied, by hand or machinery, to
materials or ingredients so that as a result thereof a new, different or
useful product is produced for sale or commercial or industrial use, and
shall include:
(a) The production of special made or custom made
articles;
(b) The production of dental appliances, devices,
restorations, substitutes, or other dental laboratory products by a dental
laboratory or dental technician;
(c) Crushing and/or blending of rock, sand, stone, gravel,
or ore; and
(d) The producing of articles for sale, or for commercial or
industrial use from raw materials or prepared materials by giving such
materials, articles, and substances of trade or commerce new forms,
qualities, properties or combinations including, but not limited to, such
activities as making, fabricating, processing, refining, mixingr slaughtering,
packing, aging, curing, mild curing, preserving, canning, and the preparing
and freezing of fresh fruits and vegetables.
"To manufacture" shall not include the production of computer software if
the computer software is delivered from the seller to the purchaser by
means other than tangible storage media, including the delivery by use of
a tangible storage media where the tangible storage media is not
physically transferred to the purchaser.
N. "Person." "Person" means any individual, receiver, administrator,
executor, assignee, trustee in bankruptcy, trust, estate, firm, co-
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partnership, joint venture, club, company, joint stock company, business
trust, municipal corporation, political subdivision of the State of
Washington, corporation, limited liability company, association, society, or
any group of individuals acting as a unit, whether mutual, cooperative,
fraternal, non-profit, or otherwise and the United States or any
instrumentality thereof.
O. "Retailing." "Retailing" means the activity of engaging in making
sales at retail and is reported under the retailing classification.
P. "Retail Service." "Retail service" shall include the sale of or charge
made for personal, business, or professional services including amounts
designated as interest, rents, fees, admission, and other service
emoluments however designated, received by persons engaging in the
following business activities:
(1) Amusement and recreation services including but not limited
to golf, pool, billiards, skating, bowling, swimming, bungee jumping, ski
lifts and tows, basketball, racquet ball, handball, squash, tennis, batting
cages, day trips for sightseeing purposes, and others, when provided to
consumers. "Amusement and recreation services" also include the
provision of related facilities such as basketball courts, tennis courts,
handball courts, swimming pools, and charges made for providing the
opportunity to dance. The term "amusement and recreation services"
does not include instructional lessons to learn a particular activity such as
tennis lessons, swimming lessons, or archery lessons.
(2) Abstract, title insurance, and escrow services;
(3) Credit bureau services;
(4) Automobile parking and storage garage services;
(5) Landscape maintenance and horticultural services but
excluding (i) horticultural services provided to farmers and (ii) pruning,
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trimming, repairing, removing, and clearing of trees and brush near
electric transmission or distribution lines or equipment, if performed by or
at the direction of an electric utility;
(6) Service charges associated with tickets to professional
sporting events; and
(7) The following personal services: Physical fitness services,
tanning salon services, tattoo parlor services, steam bath services, turkish
bath services, escort services, and dating services.
(8) The term shall also include the renting or leasing of tangible
personal property to consumers and the rental of equipment with an
operator.
Q. "Sale," "casual or isolated sale."
(1) "Sale" means any transfer of the ownership of, title to, or
possession of, property for a valuable consideration and includes any
activity classified as a "sale at retail," "retail sale," or "retail service." It
includes renting or leasing, conditional sale contracts, leases with option to
purchase, and any contract under which possession of the property is
given to the purchaser but title is retained by the vendor as security for
the payment of the purchase price. It also includes the furnishing of food,
drink, or meals for compensation whether consumed upon the premises or
not.
(2) "Casual or isolated sale" means a sale made by a person who
is not engaged in the business of selling the type of property involved on a
routine or continuous basis.
R. "Sale at retail," "retail sale."
(1) "Sale at retail" or "retail sale" means every sale of tangible
personal property (including articles produced, fabricated, or imprinted) to
all persons irrespective of the nature of their business and including,
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among others, without limiting the scope hereof, persons who install,
repair, clean, alter, improve, construct, or decorate real or personal
property of or for consumers, other than a sale to a person who presents a
resale certificate under RCW 82.04.470 and who:
(a) Purchases for the purpose of resale as tangible
personal property in the regular course of business without intervening
use by such person; or
(b) Installs, repairs, cleans, alters, imprints, improves,
constructs, or decorates real or personal property of or for consumers, if
such tangible personal property becomes an ingredient or component of
such real or personal property without intervening use by such person; or
(c) Purchases for the purpose of consuming the property
purchased in producing for sale a new article of tangible personal property
or substance, of which such property becomes an ingredient or component
or is a chemical used in processing, when the primary purpose of such
chemical is to create a chemical reaction directly through contact with an
ingredient of a new article being produced for sale; or
(d) Purchases for the purpose of consuming the property
purchased in producing ferrosilicon which is subsequently used in
producing magnesium for sale, if the primary purpose of such property is
to create a chemical reaction directly through contact with an ingredient of
ferrosilicon; or
(e) Purchases for the purpose of providing the property to
consumers as part of competitive telephone service, as defined in RCW
82.04.065. The term shall include every sale of tangible personal property
which is used or consumed or to be used or consumed in the performance
of any activity classified as a "sale at retail" or "retail sale" even though
such property is resold or utilized as provided in (a), (b), (c), (d), or (e) of
this subsection following such use.
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(f) Purchases for the purpose of satisfying the person's
obligations under an extended warranty as defined in subsection (7) of
this section, if such tangible personal property replaces or becomes an
ingredient or component of property covered by the extended warranty
without intervening use by such person.
(2) "Sale at retail" or "retail sale" also means every sale of
tangible personal property to persons engaged in any business activity
which is taxable under .050(1)(g).
(3) "Sale at retail" or "retail sale" shall include the sale of or charge
made for tangible personal property consumed and/or for labor and
services rendered in respect to the following:
(a) The installing, repairing, cleaning, altering, imprinting,
or improving of tangible personal property of or for consumers, including
charges made for the mere use of facilities in respect thereto, but
excluding charges made for the use of coin-operated laundry facilities
when such facilities are situated in an apartment house, rooming house, or
mobile home park for the exclusive use of the tenants thereof, and also
excluding sales of laundry service to nonprofit health care facilities, and
excluding services rendered in respect to live animals, birds and insects;
(b) The constructing, repairing, decorating, or improving of
new or existing buildings or other structures under, upon, or above real
property of or for consumers, including the installing or attaching of any
article of tangible personal property therein or thereto, whether or not
such personal property becomes a part of the realty by virtue of
installation, and shall also include the sale of services or charges made for
the clearing of land and the moving of earth excepting the mere leveling
of land used in commercial farming or agriculture;
(c) The charge for labor and services rendered in respect
to constructing, repairing, or improving any structure upon, above, or
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under any real property owned by an owner who conveys the property by
title, possession, or any other means to the person performing such
construction, repair, or improvement for the purpose of performing such
construction, repair, or improvement and the property is then reconveyed
by title, possession, or any other means to the original owner;
(d) The sale of or charge made for labor and services
rendered in respect to the cleaning, fumigating, razing or moving of
existing buildings or structures, but shall not include the charge made for
janitorial services; and for purposes of this section the term "janitorial
services" shall mean those cleaning and caretaking services ordinarily
performed by commercial janitor service businesses including, but not
limited to, wall and window washing, floor cleaning and waxing, and the
cleaning in place of rugs, drapes and upholstery. The term "janitorial
services" does not include painting, papering, repairing, furnace or septic
tank cleaning, snow removal or sandblasting;
(e) The sale of or charge made for labor and services
rendered in respect to automobile towing and similar automotive
transportation services, but not in respect to those required to report and
pay taxes under chapter 82.16 RCW;
(f) The sale of and charge made for the furnishing of
lodging and all other services, except telephone business and cable
service, by a hotel, rooming house, tourist court, motel, trailer camp, and
the granting of any similar license to use real property, as distinguished
from the renting or leasing of real property, and it shall be presumed that
the occupancy of real property for a continuous period of one month or
more constitutes a rental or lease of real property and not a mere license
to use or enjoy the same. For the purposes of this subsection, it shall be
presumed that the sale of and charge made for the furnishing of lodging
for a continuous period of one month or more to a person is a rental or
lease of real property and not a mere license to enjoy the same;
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(g) The sale of or charge made for tangible personal
property, labor and services to persons taxable under (a), (b), (c), (d),
(e), and (f) of this subsection when such sales or charges are for property,
labor and services which are used or consumed in whole or in part by such
persons in the performance of any activity defined as a "sale at retail" or
"retail sale" even though such property, labor and services may be resold
after such use or consumption. Nothing contained in this subsection shall
be construed to modify subsection (1) of this section and nothing
contained in subsection (1) of this section shall be construed to modify
this subsection.
(4) "Sale at retail" or "retail sale" shall also include the providing of
competitive telephone service to consumers.
(5) "Sale at retail" or "retail sale" shall also include the sale of
canned software other than a sale to a person who presents a resale
certificate under RCW 82.04.470, regardless of the method of delivery to
the end user, but shall not include custom software or the customization
of canned software.
(6) "Sale at retail" or "retail sale" shall also include the sale of or
charge made for labor and services rendered in respect to the building,
repairing, or improving of any street, place, road, highway, easement,
right of way, mass public transportation terminal or parking facility,
bridge, tunnel, or trestle which is owned by a municipal corporation or
political subdivision of the state, the State of Washington, or by the United
States and which is used or to be used primarily for foot or vehicular
traffic including mass transportation vehicles of any kind.
(7) "Sale at retail" or "retail sale" shall also include the sale of or
charge made for an extended warranty to a consumer. For purposes of
this subsection, "extended warranty" means an agreement for a specified
duration to perform the replacement or repair of tangible personal
property at no additional charge or a reduced charge for tangible personal
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property, labor, or both, or to provide indemnification for the replacement
or repair of tangible personal property, based on the occurrence of
specified events. The term "extended warranty" does not include an
agreement, otherwise meeting the definition of extended warranty in this
subsection, if no separate charge is made for the agreement and the value
of the agreement is included in the sales price of the tangible personal
property covered by the agreement.
(8) "Sale at retail" or "retail sale" shall also include the sale of or
charge made for labor and services rendered in respect to the
constructing, repairing, decorating, or improving of new or existing
buildings or other structures under, upon, or above real property of or for
the United States, any instrumentality thereof, or a county or city housing
authority created pursuant to chapter 35.82 RCW, including the installing,
or attaching of any article of tangible personal property therein or thereto,
whether or not such personal property becomes a part of the realty by
virtue of installation.
(9) "Sale at retail" or "retail sale" shall not include the sale of
services or charges made for the clearing of land and the moving of earth
of or for the United States, any instrumentality thereof, or a county or city
housing authority. Nor shall the term include the sale of services or
charges made for cleaning up for the United States, or its
instrumentalities, radioactive waste and other byproducts of weapons
production and nuclear research and development.
(10) "Sale at retail" or "retail sale" shall not include the sale of or
charge made for labor and services rendered for environmental remedial
action.
S. "Sale at wholesale." "wholesale sale." "Sale at wholesale" or
"wholesale sale" means any sale of tangible personal property which is not
a retail sale, and any charge made for labor and services rendered for
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persons who are not consumers, in respect to real or personal property
and retail services, if such charge is expressly defined as a retail sale or
retail service when rendered to or for consumers. Sale at wholesale also
includes the sale of telephone business to another telecommunications
company as defined in RCW 80.04.010 for the purpose of resale, as
contemplated by RCW 35.21.715.
T. "Services." "Services" includes those activities that do not fall
within one of the other tax classifications used by a city.
U. "Taxpayer." "Taxpayer" means any "person", as herein defined,
required to have a business license under this chapter or liable for the
collection of any tax or fee under this chapter, or who engages in any
business or who performs any act for which a tax or fee is imposed by this
chapter.
V. "Value proceeding or accruing." "Value proceeding or accruing"
means the consideration, whether money, credits, rights, or other
property expressed in terms of money, a person is entitled to receive or
which is actually received or accrued. The term shall be applied, in each
case, on a cash receipts or accrual basis according to which method of
accounting is regularly employed in keeping the books of the taxpayer.
W. "Value of products."
(1) The value of products, including by-products, extracted or
manufactured, shall be determined by the gross proceeds derived from the
sale thereof whether such sale is at wholesale or at retail, to which shall
be added all subsidies and bonuses received from the purchaser or from
any other person with respect to the extraction, manufacture, or sale of
such products or by-products by the seller.
19 Amend KCC Title 3
New Chapter 3.28 B & O Tax
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(2) Where such products, including by-products, are extracted or
manufactured for commercial or industrial use; and where such products,
including by-products, are shipped, transported or transferred out of the
City, or to another person, without prior sale or are sold under
circumstances such that the gross proceeds from the sale are not
indicative of the true value of the subject matter of the sale; the value
shall correspond as nearly as possible to the gross proceeds from sales in
this state of similar products of like quality and character, and in similar
quantities by other taxpayers, plus the amount of subsidies or bonuses
ordinarily payable by the purchaser or by any third person with respect to
the extraction, manufacture, or sale of such products. In the absence of
sales of similar products as a guide to value, such value may be
determined upon a cost basis. In such cases, there shall be included every
item of cost attributable to the particular article or article extracted or
manufactured, including direct and indirect overhead costs. The Director
may prescribe rules for the purpose of ascertaining such values. (3)
Notwithstanding subsection (2) above, the value of a product
manufactured or produced for purposes of serving as a prototype for the
development of a new or improved product shall correspond to (a) the
retail selling price of such new or improved product when first offered for
sale; or (2) the value of materials incorporated into the prototype in cases
in which the new or improved product is not offered for sale.
X. "Wholesaling_" "Wholesaling" means engaging in the activity of
making sales at wholesale, and is reported under the wholesaling
classification.
Sec. 3.28.050 Imposition of the tax - tax or fee levied. (1)
Except as provided in subsection (2) of this section, there is hereby levied
upon and shall be collected from every person a tax for the act or privilege
20 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance
of engaging in business activities within the city, whether the person's
office or place of business be within or without the city. The tax shall be
in amounts to be determined by application of rates against gross
proceeds of sale, gross income of business, or value of products, including
by-products, as the case may be, as follows:
(a) Upon every person engaging within the city in business as an
extractor; as to such persons the amount of the tax with respect to such
business shall be equal to the value of the products, including by-
products, extracted within the city for sale or for commercial or industrial
use, multiplied by the rate of zero tenths of one percent (0.000). The
measure of the tax is the value of the products, including by-products, so
extracted, regardless of the place of sale or the fact that deliveries may be
made to points outside the City.
(b) Upon every person engaging within the city in business as a
manufacturer, as to such persons the amount of the tax with respect to
such business shall be equal to the value of the products, including by-
products, manufactured within the city, multiplied by the rate of zero
tenths of one percent (0.000). The measure of the tax is the value of the
products, including by-products, so manufactured, regardless of the place
of sale or the fact that deliveries may be made to points outside the City.
(c) Upon every person engaging within the city in the business of
making sales at wholesale, as to such persons, the amount of tax with
respect to such business shall be equal to the gross proceeds of such sales
of the business without regard to the place of delivery of articles,
commodities or merchandise sold, multiplied by the rate of two tenths of
one percent (0.002).
(d) Upon every person engaging within the city in the business of
making sales at retail, as to such persons, the amount of tax with respect
to such business shall be equal to the gross proceeds of such sales of the
business, without regard to the place of delivery of articles, commodities
21 Amend KCC Title 3
New Chapter 3.28 B & O Tax
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or merchandise sold, multiplied by the rate of zero tenths of one percent
(0.000).
(e) Upon every person engaging within the city in the business of
(i) printing, (ii) both printing and publishing newspapers, magazines,
periodicals, books, music, and other printed items, (iii) publishing
newspapers, magazines and periodicals, (iv) extracting for hire, and (v)
processing for hire; as to such persons, the amount of tax on such
business shall be equal to the gross income of the business multiplied by
the rate of zero tenths of one percent (0.000).
(f) Upon every person engaging within the city in the business
of making sales of retail services; as to such persons, the amount of tax
with respect to such business shall be equal to the gross proceeds of sales
multiplied by the rate of zero tenths of one percent (0.000).
(g) Upon every other person engaging within the city in any
business activity other than or in addition to those enumerated in the
above subsections; as to such persons, the amount of tax on account of
such activities shall be equal to the gross income of the business
multiplied by the rate of zero tenths of one percent (0.000). This
subsection includes, among others, and without limiting the scope hereof
(whether or not title to material used in the performance of such business
passes to another by accession, merger or other than by outright sale),
persons engaged in the business of developing, or producing custom
software or of customizing canned software, producing royalties or
commissions, and persons engaged in the business of rendering any type
of service which does not constitute a sale at retail, a sale at wholesale,
or a retail service.
(2) The gross receipts tax imposed in this section shall not apply to any
person whose gross proceeds of sales, gross income of the business, and
value of. products, including by-products, as the case may be, from all
activities conducted within the city during any calendar year is equal to or
22 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance
less than $500,000, or is equal to or less than $125,000 during any
quarter if on a quarterly reporting basis.
Sec. 3.28.060 Doing business with the City. Except where
such a tax is otherwise levied and collected by the City from such person,
there is hereby levied a tax on the privilege of accepting or executing a
contract with the City. Such tax shall be levied and collected whether
goods or services are delivered within or without the City and whether or
not such person has an office or place of business within or without the
City.
Except as provided in Kent City Code section 3.28.077, as to such
persons the amount of tax shall be equal to the gross contract price
multiplied by the rate under section .050 that would otherwise apply if the
sale or service were taxable pursuant to that section.
Sec. 3.28 .070 Multiple activities credit when activities take
place in one or more cities with eligible gross receipt taxes.
(1) Persons who engage in business activities that are within the
purview of two (2) or more subsections of .050 shall be taxable under
each applicable subsection.
(2) Notwithstanding anything to the contrary herein, if imposition of the
city's tax would place an undue burden upon interstate commerce or
violate constitutional requirements, a taxpayer shall be allowed a credit to
the extent necessary to preserve the validity of the city's tax, and still
apply the city tax to as much of the taxpayer's activities as may be subject
to the city's taxing authority.
(3) To take the credit authorized by this section, a taxpayer must be
able to document that the amount of tax sought to be credited was paid
upon the same gross receipts used in computing the tax against which the
credit is applied.
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New Chapter 3.28 8 & O Tax
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(4) Credit for persons that sell in the City products that they extract or
manufacture. Persons taxable under the retailing or wholesaling
classification with respect to selling products in this City shall be allowed a
credit against those taxes for any eligible gross receipts taxes paid (a)
with respect to the manufacturing of the products sold in the City, and (b)
with respect to the extracting of the products, or the ingredients used in
the products, sold in the city. The amount of the credit shall not exceed
the tax liability arising under this chapter with respect to the sale of those
products.
(5) Credit for persons that manufacture products in the City using
ingredients they extract. Persons taxable under the manufacturing
classification with respect to manufacturing products in this city shall be
allowed a credit against those taxes for any eligible gross receipts tax paid
with respect to extracting the ingredients of the products manufactured in
the city. The amount of the credit shall not exceed the tax liability arising
under this chapter with respect to the manufacturing of those products.
(6) Credit for persons that sell within the City products that they print.
or publish and print. Persons taxable under the retailing or wholesaling
classification with respect to selling products in this City shall be allowed a
credit against those taxes for any eligible gross receipts taxes paid with
respect to the printing, or the printing and publishing, of the products sold
within the City. The amount of the credit shall not exceed the tax liability
arising under this chapter with respect to the sale of those products.
Sec. 3.28.075 Deductions to prevent multiple taxation of
certain manufacturing activities and transactions involving more
than one city with an eligible gross receipts tax.
(1) Amounts subject to an eligible gross receipts tax in another city that
also maintains nexus over the same activity may be entitled to a
deduction as follows:
24 Amend KCC Title 3
New Chapter 3.28 8 & O Tax
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(a) A taxpayer that has paid an eligible gross receipts tax, with
respect to a sale of goods or services, to a jurisdiction in which the goods
are delivered or the services are provided may deduct an amount equal to
the gross receipts used to measure that tax from the measure of the tax
owed to the City.
(b) Notwithstanding the above, a person that is subject to an
eligible gross receipts tax in more than one jurisdiction on the gross
income derived from intangibles such as royalties, trademarks, patents, or
goodwill shall assign those gross receipts to the jurisdiction where the
person is domiciled (its headquarters is located).
(c) A taxpayer that has paid an eligible gross receipts tax on the
privilege of accepting or executing a contract with another city may deduct
an amount equal to the contract price used to measure the tax due to the
other city from the measure of the tax owed to the City.
(2) Person manufacturing products within and without the City. A
person manufacturing products within the City using products
manufactured by the same person outside the City may deduct from the
measure of the manufacturing tax the value of products manufactured
outside the City and included in the measure of an eligible gross receipts
tax paid to the other jurisdiction with respect to manufacturing such
products.
Sec. 3.28.076. Assignment of gross income derived from
intangibles. Gross income derived from the sale of intangibles such as
royalties, trademarks, patents, or goodwill shall be assigned to the
jurisdiction where the person is domiciled (its headquarters is located).
Sec. 3.28.077. Allocation and apportionment of income
when activities take place in more than one jurisdiction.
25 Amend KCC Title 3
New Chapter 3.28 B & O Tax
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Effective January 1, 2008, gross income, other than persons subject to the
provisions of chapter 82.14A RCW, shall be allocated and apportioned as
follows:
(1) Gross income derived from all activities other than those taxed as
service or royalties under KCC S.XX.050(1)(g) shall be allocated to the
location where the activity takes place.
(2) In the case of sales of tangible personal property, the activity takes
place where delivery to the buyer occurs.
(3) Gross income derived from activities taxed as services and other
activities taxed under KCC 3.28.050(1)(g) shall be apportioned to the city
by multiplying apportionable income by a fraction, the numerator of which
is the payroll factor plus the service-income factor and the denominator of
which is two.
(a) The payroll factor is a fraction, the numerator of which is the total
amount paid in the city during the tax period by the taxpayer for
compensation and the denominator of which is the total compensation
paid everywhere during the tax period. Compensation is paid in the city if:
(i) The individual is primarily assigned within the city;
(ii The individual is not primarily assigned to any place of
business for the tax period and the employee performs fifty percent or
more of his or her service for the tax period in the city; or
(iii) The individual is not primarily assigned to any place of
business for the tax period, the individual does not perform fifty percent or
more of his or her service in any city and the employee resides in the city.
(b) The service income factor is a fraction, the numerator of which is
the total service income of the taxpayer in the city during the tax period,
and the denominator of which is the total service income of the taxpayer
everywhere during the tax period. Service income is in the city if:
(i) The customer location is in the city; or
26 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance
(ii) The income-producing activity is performed in more than
one location and a greater proportion of the service-income-producing
activity is performed in the city than in any other location, based on costs
of performance, and the taxpayer is not taxable at the customer location;
or
(iii) The service-income-producing activity is performed
within the city, and the taxpayer is not taxable in the customer location.
(c) If the allocation and apportionment provisions of this
subsection do not fairly represent the extent of the taxpayer's business
activity in the city or cities in which the taxpayer does business, the
taxpayer may petition for or the tax administrators may jointly require, in
respect to all or any part of the taxpayer's business activity, that one of
the following methods be used jointly by the cities to allocate or apportion
gross income, if reasonable:
(i) Separate accounting;
(ii) The use of a single factor;
(iii) The inclusion of one or more additional factors that will
fairly represent the taxpayer's business activity in the city; or
(iv) The employment of any other method to effectuate an
equitable allocation and apportionment of the taxpayer's income.
(4) The definitions in this subsection apply throughout this section.
(a) "Apportionable income" means the gross income of the
business taxable under the service classifications of a city's gross receipts
tax, including income received from activities outside the city if the income
would be taxable under the service classification if received from activities
within the city, less any exemptions or deductions available.
(b) "Compensation" means wages, salaries, commissions, and
any other form of remuneration paid to individuals for personal services
that are or would be included in the individual's gross income under the
federal internal revenue code.
27 Amend KCC Title 3
New Chapter 3.28 B & O Tax
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(c) "Individual" means any individual who, under the usual
common law rules applicable in determining the employer-employee
relationship, has the status of an employee of that taxpayer.
(d) "Customer location" means the city or unincorporated area of
a county where the majority of the contacts between the taxpayer and the
customer take place.
(e) "Primarily assigned" means the business location of the
taxpayer where the individual performs his or her duties.
(f) "Service-taxable income" or "service income" means gross
income of the business subject to tax under either the service or royalty
classification.
(g) "Tax period" means the calendar year during which tax
liability is accrued. If taxes are reported by a taxpayer on a basis more
frequent than once per year, taxpayers shall calculate the factors for the
previous calendar year for reporting in the current calendar year and
correct the reporting for the previous year when the factors are calculated
for that year, but not later than the end of the first quarter of the following
year.
(h) "Taxable in the customer location" means either that a
taxpayer is subject to a gross receipts tax in the customer location for the
privilege of doing business, or that the government where the customer is
located has the authority to subject the taxpayer to gross receipts tax
regardless of whether, in fact, the government does so.
(5) Assignment or apportionment of revenue under this Section shall
be made in accordance with and in full compliance with the provisions of
the interstate commerce clause of the United States Constitution where
applicable.
28 Amend KCC Title 3
New Chapter 3.28 B & O Tax
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Sec. 3.28.078. Allocation and apportionment of printing and
publishing income when activities take place in more than one
jurisdiction.
Notwithstanding RCW 35.102.130, gross income from the activities of
printing, and of publishing newspapers, periodicals, or magazines, shall be
allocated to the principal place in this state from which the taxpayer's
business is directed or managed. As used in this section, the activities of
printing, and of publishing newspapers, periodicals, or magazines, have
the same meanings as attributed to those terms in RCW 82.04.280(1) by
the department of revenue.
Sec. 3.28.090. Exemptions.
(1) Public utilities. This chapter shall not apply to any person in respect
to a business activity with respect to which tax liability is specifically
imposed under the utility tax provisions of Chapter 3.18 of the Kent City
Code.
(2) Investments - dividends from subsidiary corporations. (a) This
chapter shall not apply to amounts derived by persons, other than those
engaging in banking, loan, security, or other financial businesses, from
investments or the use of money as such, and also amounts derived as
dividends by a parent from its subsidiary corporations.
(3) Employees.
(a) This chapter shall not apply to any person in respect to the
persons employment in the capacity as an employee or servant as
distinguished from that of an independent contractor. For the purposes of
this subsection, the definition of employee shall include those persons that
are defined in the Internal Revenue Code, as hereafter amended.
(b) A booth renter is an independent contractor for purposes of
this chapter.
29 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance
(4) Amounts derived from sale of real estate. This chapter shall not
apply to gross proceeds derived from the sale of real estate. This,
however, shall not be construed to allow an exemption 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. This chapter shall also not apply to
amounts received for the rental of real estate if the rental income is
derived from a contract to rent for a continuous period of thirty (30) days
or longer.
(5) Mortgage brokers' third-12arty 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.
(6) Amounts derived from manufacturing, selling or distributing motor
vehicle fuel. This chapter shall not apply to the manufacturing, selling, or
distributing motor vehicle fuel, as the term "motor vehicle fuel" is defined
in RCW 82.36.010 and exempt under RCW 82.36.440, provided that any
fuel not subjected to the state fuel excise tax, or any other applicable
deduction or exemption, will be taxable under this chapter.
(7) Amounts derived from liquor, and the sale or distribution of liquor.
This chapter shall not apply to liquor as defined in RCW 66.04.010 and
exempt in RCW 66.08.120.
(8) Casual and isolated sales. This chapter shall not apply to the gross
proceeds derived from casual or isolated sales.
(9) Accommodation sales. This chapter shall not apply to sales for
resale by persons regularly engaged in the business of making retail 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 the vendor in the
30 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance
acquisition of the article and (2) the sale is made as an accommodation to
the buyer to enable the buyer 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.
(10) Taxes collected as trust funds. This chapter shall not apply to
amounts collected by the taxpayer from third parties to satisfy third party
obligations to pay taxes such as the retail sales tax, use tax, and
admission tax.
(11) Non-profit corporations or non-profit organizations. This chapter
shall not apply to non-profit organizations exempt from federal income tax
under Section 501(c)(3) of the Internal Revenue Code, as hereafter
amended, except with respect to retail sales of such persons.
Sec. 3.28.100. Deductions. In computing the license fee or tax,
there may be deducted from the measure of tax the following items:
(1) Receipts from tangible personal property delivered outside the
State. In computing tax, there may be deducted from the measure of tax
under retailing or wholesaling amounts derived from the sale of tangible
personal property that is delivered by the seller to the buyer or the buyer's
representative at a location outside the State of Washington.
(2) Cash discount taken by purchaser. In computing tax, there may be
deducted from the measure of tax the cash discount amounts actually
taken by the purchaser. This deduction is not allowed in arriving at the
taxable amount under the extracting 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
"value of product" provisions.
(3) Credit losses of accrual basis taxpayers. In computing tax, there
may be deducted from the measure of tax the amount of credit losses
31 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance
actually sustained by taxpayers whose regular books of account are kept
upon an accrual basis.
(4) Constitutional prohibitions. In computing tax, there may be
deducted from the measure of the tax amounts derived from business
which the City is prohibited from taxing under the Constitution of the State
of Washington or the Constitution of the United States.
(5) Receipts From the Sale of Tangible Personal Property and Retail
Services Delivered Outside the City but Within Washington. Amounts
included in the gross receipts reported on the tax return derived from the
sale of tangible personal property delivered to the buyer or the buyer's
representative outside the City but within the State of Washington may be
deducted from the measure of tax under the retailing, retail services, or
wholesaling classification.
(6) Professional employer services. In computing the tax, a
professional employer organization may deduct from the calculation of
gross income the gross income of the business derived from performing
professional employer services that is equal to the portion of the fee
charged to a client that represents the actual cost of wages and salaries,
benefits, workers' compensation, payroll taxes, withholding, or other
assessments paid to or on behalf of a covered employee by the
professional employer organization under a professional employer
agreement.
Sec. 3.28.120. Tax part of overhead.
It is not the intention of this chapter that the taxes or fees herein levied
upon persons engaging in business be construed as taxes or fees upon the
purchasers or customer, but that such taxes or fees shall be levied upon,
and collectible from, the person engaging in the business activities herein
designated and that such taxes or fees shall constitute a part of the cost of
doing business of such persons.
32 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance
Sec. 3.28.130. Severability Clause.
If any provision of this chapter or its application to any person or
circumstance is held invalid, the remainder of the chapter or the
application of the provision to other persons or circumstances shall not be
affected.
SECTION 2. - Savings. The existing portions of Title 3 of the Ken
City Code which are repealed and replaced by this ordinance, shall remain
in full force and effect until the effective date of this ordinance.
SECTION 3. - Corrections by City Clerk or Code Reviser. Upo
approval of the City Attorney, the City Clerk and the code reviser are
authorized to make necessary corrections to this ordinance, including th
correction of clerical errors; ordinance, section, or subsection numbering;
or references to other local, state or federal laws, codes, rules, o
regulations.
SECTION 4. - Severability. If any one or more section, subsection
or sentence of this ordinance is held to be unconstitutional or invalid, that
decision shall not affect the validity of the remaining portion of this
ordinance and that remaining portion shall maintain its full force an
effect.
SECTION 4. - Effective Date. This ordinance shall take effect an
be in force five (5) days from and after its passage and publication, a
provided by law.
SUZETTE COOKE, MAYOR
33 Amend KCC Title
New Chapter 3.28 B & O Tax
Ordinance
ATTEST:
BRENDA JACOBER, CITY CLERK
APPROVED AS TO FORM:
TOM BRUBAKER, CITY ATTORNEY
PASSED: day of 12012.
APPROVED: day of 12012.
PUBLISHED: day of , 2012.
I hereby certify that this is a true copy of Ordinance No.
passed by the City Council of the City of Kent, Washington, and approved
by the Mayor of the City of Kent as hereon indicated.
(SEAL)
BRENDA JACOBER, CITY CLERK
P\GNI\Ordinance\B&O Tax door
34 Amend KCC Title 3
New Chapter 3.28 B & O Tax
Ordinance