HomeMy WebLinkAbout4106ORDINANCE NO. �//Ufo
AN ORDINANCE of the City Council of the
City of Kent, Washington, amending Chapter 3.28
of the Kent City Code, pertaining to the business
and occupation tax, to adopt further exemptions
and deductions and to clarify a portion of the
square footage tax component.
RECITALS
A. On November 20, 2012, the City Council passed Ordinance
No. 4054, adopting a business and occupation (B&O) tax that included
both a gross receipts component and a square footage component. That
ordinance went into effect beginning January 1, 2013.
B. Chapter 35.102 RCW required that the City implement its
B&O tax based on a model ordinance that contained mandatory provisions
applicable to all Washington cities.
C. RCW 35.102.040(3) provides that except for certain
deductioHZ)
and exemptions prescribed in Chapter 35.102 RCW and the
model ordinance, a city may adopt its own provisions for tax credits, tax
exemF
tions and tax deductions.
1 Amend Chapter 3.28 KCC
Ordinance
D. The Association of Washington Cities (AMC) drafted both the
model ordinance and the model ordinance guidelines, containing numerous
exemptions and deductions that are optional for cities imposing a B&O tax.
While not mandatory, a number of Washington cities imposing B&O taxes
have all adopted several of the same optional deductions and exemptions
that the city of Kent has not. The Finance Department has found that this
lack of uniformity has led to confusion and incorrect reporting for some
taxpayers who pay B&O tax in both Kent and in other jurisdictions.
E. One of the most important considerations in setting and
implementing tax policy is to strive for fairness, consistency, equity, and
efficiency.
F. Now that the City and local taxpayers have had a year's worth
of experience with the City's B&O tax, the Finance Department
recommends that the City adopt certain of the optional deductions and
exemptions as set forth in the AWC model ordinance guidelines to ensure
that the City's tax is more fairly, equitably, consistently, and efficiently
administered.
G. The City wishes to also amend a portion of the square footage
tax component to clarify correct reporting requirements based on state law
governing the taxability of certain rental income, and to include a new
definition, "Artistic or cultural organization," to support one of the
recommended deductions.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT,
WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS:
2 Amend Chapter 3.28 KCC
Ordinance
L
SECTION 1. Amendment. Section 3.28.030 of the Kent City Code,
is hereby amended as follows:
Sec. 3.28.030 efinitions. 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. Advance, reimbursement.
1. Advance means money or credits received by a taxpayer from
a customer or client with which the taxpayer is to pay costs or fees on
behalf of the customer or client.
2. Reimbursement means money or credits received from a
customer or client to repay the taxpayer for money or credits expended by
the taxpayer in payment of costs or fees of the customer or client.
B. Agricultural product, farmer.
1. Agricultural product means any product of plant cultivation or
animal husbandry including, but not limited to: a product of horticulture,
grain cultivation, vermiculture, viticulture, or aquaculture as defined in
RCW 15.85.020; plantation Christmas trees; turf; or any animal including
but not limited to an animal that is a private sector cultured aquatic
product as defined in RCW 15.85.020, or a bird, or insect, or the
3 Amend Chapter 3.28 KCC
Ordinance
substances obtained from such an animal. `Agricultural product" does not
include animals intended to be pets.
2. Farmer means any person engaged in the business of growing
or producing, upon the person's own lands or upon the lands in which the
person has a present right of possession, any agricultural product
whatsoever for sale. "Farmer" does not include a person using such
products as ingredients in a manufacturing process, or a person growing or
producing such products for the person's own consumption. "Farmer" does
not include a person selling any animal or substance obtained therefrom in
connection with the person's business of operating a stockyard or a
slaughter or packing house. "Farmer" does not include any person in
respect to the business of taking, cultivating, or raising timber.
C. "Artistic or cultural organization". As used in this chapter:
1. The term "artistic or cultural organization" means an
organization which 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 (10) of this
section, for viewing or attendance by the general public.
2. The organization must be snot -for-profit corporation under
chapter 24.03 RCW.
3. The organization must be managed by a governing board of
not less than eight (8) individuals none of whom is a paid employee of the
organization or by a corporation sole under chapter 24.12 RCW,
4. 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.
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Ordinance
5. 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 posons wn the state.
6. Assets of the corporation must be irrevocably dedicated to the
activities
for which
the
exemption is
granted and,
on the
IiquidationA
dissolution, or abandonment by the corporation,
may
not inure
directly or
indirectly
to the benefit of any member
or individual
except a
non-profit
organization,
association, or corporation
which also
would be
entitled to
the exemption.
7. The corporation must be duly licensed or certified when
licensing or certification is required by law or regulation.
8. The amounts received that qualify for exemption must be
used for the activities for which the exemption is granted.
9. Services must be available regardless of race, color, national
origin, ancestrX, religion, age. sex, marital status, sexual orientation
Vietnam or disabled veteran status, or the presence of any mental or
physical disability_
10. The term "artistic or cultural exhibitions, presentations, or
performances or cultural or art education programs" 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.
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Ordinance
6®. 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.
$E. 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
businessI or the gross proceeds of sales, as the case may be, and that is
the legal liability of the business.
�F. Commercial or Industria/ use means the following uses of products,
including byproducts, by the extractor or manufacturer thereof:
1. Any use as a consumer; and
2. The manufacturing of articles, substances, or commodities.
fG. Competitive telephone service means the providing by any person of
telecommunications equipment or apparatus, or service related to that
equipment or apparatus such as repair or maintenance service, if the
equipment or apparatus is of a type which can be provided by persons that
are not subject to regulation as telephone companies under RCW Title 80
and for which a separate charge is made.
GH. Consumer means the following:
1. Any person who purchases, acquires, owns, holds, or uses
any tangible or intangible personal property irrespective of the nature of
the person's business and including, among others, without limng the
scope hereof, persons who install, repair, clean, alter, improve, construct,
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Ordinance
or decorate real or personal property of or for a consumer other than for
the purpose of:
a. Resale as tangible or intangible personal property in
the regular course of business;
b. Incorporating such property as an ingredient or
component of real or personal property when installing, repairing,
cleaning, altering, imprinting, improving, constructing, or decorating such
real or personal property of or for consumers;
c. Incorporating such property as an ingredient or
component of a new product or as a chemical used in processing a new
product when the primary purpose of such chemical is to create a chemical
reaction directly through contact with an ingredient of a new product; or
d. Consuming the property 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;
2. Any person engaged in any business activity taxable under
KCC 3.28.050(A)(7);
3. Any person who purchases, acquires, or uses any competitive
telephone service as herein defined, other than for resale in the regular
course of business;
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Ordinance
4. Any person who purchases, acquires, or uses any personal,
business, or professional service defined as a retail sale or retail service in
this section, other than for resale in the regular course of business;
5. Any person who is an end user of software;
6. Any person engaged in the business of "public road
construction" in respect to tangible personal property when that person
incorporates the tangible personal property as an ingredient or component
of a publicly owned street, place, road, highway, easement, right-of-way,
mass public transportation terminal or parking facility, bridge, tunnel, or
trestle by installing, placing, or spreading the property in or upon the
right-of-way of a publicly owned street, place, road, highway, easement,
bridge, tunnel, or trestle or in or upon the site of a publicly owned mass
public transportation terminal or parking facility;
7. Any person who is an owner, lessee, or has the right of
possession to or an easement in real property which is being constructed,
repaired, decorated, improved, or otherwise altered by a person engaged
in business;
8. Any person who is an owner, lessee, or has the right of
possession to personal property which is being constructed, repaired,
improved, cleaned, imprinted, or otherwise altered by a person engaged in
business;
9. Any person engaged in "government contracting." Any such
person shall be a consumer within the meaning of this subsection in
respect to tangible personal property incorporated into, installed in, or
attached to such building or other structure by such person.
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Ordinance
Nothing contained in this or any other subsection of this section shall be
construed to modify any other definon of consumer."
++I. 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 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 (RCW Title
62A) do not determine when or where delivery of tangible personal
property occurs for purposes of taxation.
�J. Director means the finance director of the city or any officer, agent
or employee of the city designated to act on the director's behalf.
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3N . Digital automated service, digital code, and digital goods have the
same meaning as in RCW 82.04.192.
�4L. Digital products means digital goods, digital codes, digital
automated services, and the services described in RCW 82.04.050(2)(g)
and (6)(b).
�M. 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 KCC 3.28.050; 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 nonlocal jurisdiction above the county level.
�4N. Engaging in business.
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Ordinance
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
minimis business activities in the city without having to register and obtain
a business license or 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 fMJM(1) of this
section. 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 (1) 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.
11 Amend Chapter 3.28 KCC
Ordinance
d. Making repairs or providing maintenance or service to
reU l 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
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.
i. 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
12 Amend Chapter 3.28 KCC
Ordinance
organizations, chemists, consultants, psychologists, court reporters,
dentists, doctors, detectives, laboratory operators, teachers, and
veterinarians.
I. 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.
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,
indeF endent contractor, broker, or another acting on H behalf,
13 Amend Chapter 3.28 KCC
Ordinance
engages in no other activities in or with the city but the following, it need
nUL register and obtain a business license and pay tax:
customer.
a. Meeting with suppliers of goods and services as a
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. This provision does not apply to any board of
director member or attendee engaging in business, such as a member of a
board of directors who attends a board meeting.
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.
city.
f. Conducting advertising through the mail.
g. Soliciting sales by phone from a location outside the
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Ordinance
5A A seller located outside the city merely delivering goods into
the city by means of common carrier is not required to register and obtain
a business license; provided, that it engages in no other business activities
in the city. Such activities do not include those in subsection f4 kM(4) of
this section.
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.
SFO. Extracting is the activity engaged in by an extractor and is
reportable under the extracting classification.
8P. 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."
RQ. Extractor for hire means a person who performs under contract
necessary labor or mechanical services for an extractor.
15 Amend Chapter 3.28 KCC
Ordinance
QR. Gross income of the business means the value proceeding or
accruing by reason of the transaction of 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.
f�S. Gross proceeds of sa/es means the value proceeding or accruing
from the sale of tangible personal property, digital goods, digital codes,
digital automated services, or for other 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.
�T. Manufacturing means the activity conducted by a manufacturer and
is reported under the manufacturing classification.
�U. 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,
16 Amend Chapter 3.28 KCC
Ordinance
materials or ingredients equal to less than twenty (20) percent 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 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:
articles;
a. The production of special made or custom made
b. The production of dental appliances, devices,
restorations, substitutes, or other dental laboratory products by a dental
laboratory or dental technician;
or ore; and
c. Crushing and/or blending of rock, sand, stone, gravel,
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, mixing, slaughtering,
17 Amend Chapter 3.28 KCC
Ordinance
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 digital goods or 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.
�V. Newspaper means a publication offered for sale regularly at stated
intervals at least once a week and printed on newsprint in tabloid or
broadsheet format folded loosely together without stapling, glue, or any
other binding of any kind.
Magazine or periodical means any printed publication, other than a
newspaper, issued and offered for sale regularly at stated intervals at least
once every three (3) months, including any supplement or special edition
of the publication. Any publication meeting this definition qualifies
regardless of its content.
SFW. Nonprofit corporation or nonprofit organization means a corporation
or organization in which no part of the income can be distributed to its
members, directors, or officers and that holds a current tax exempt status
as provided under Section 501(c)(3) of the Internal Revenue Code, as
hereafter amended, or is specifically exempted from the requirement to
apply for its tax exempt status under Section 501(c)(3) of the Internal
Revenue Code, as hereafter amended. Where the term "nonprofit
organization" is used, it is meant to include a nonprofit corporation.
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Ordinance
X. Office or place of business means a fixed location or permanent
facility where the regular business of the person is conducted and which is
either owned by the person or over which the person exercises legal
dominion and control. The regular business of the person is presumed
conducted at a location.
1. Whose address the person uses as its business mailing
address;
2. Where the place of primary use is shown on a telephone
billing or a location containing a telephone line listed in a public telephone
directory or other similar publication under the business name;
3. Where the person holds itself out to the general public as
conducting its regular business through signage or other means; and
4. Where the person is required to obtain any appropriate state
and local business license or registration unless they are exempted by law
from such requirement.
A vehicle such as a pick-up, van, truck, boat or other motor vehicle is not
an office or place of business. A post office box is not an office or place of
business.
If a person has an office or place of business, the person's home is not an
office or place of business unless it meets the criteria for office or place of
business above. If a person has no office or place of business, the person's
home or apartment within the city will be deemed the place of business.
19 Amend Chapter 3.28 KCC
Ordinance
#In Person means any individual, receiver, administrator, executor,
assignee; trustee in bankruptcy, trust, estate, firm, copartnership, 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, nonprofit, or
otherwise, and the United States or any instrumentality thereof.
�Z. Processing for hire means the performance of labor and mechanical
services upon materials or ingredients belonging to others so that as a
result a new, different, or useful product is produced for sale, or
commercial or industrial use. A processor for hire is any person who would
be a manufacturer if that person were performing the labor and
mechanical services upon that person's own materials or ingredients. If a
person furnishes, or sells to the customer prior to manufacture, materials
or ingredients equal to twenty (20) percent or more of the total value of all
materials or ingredients that become a part of the finished product, the
person will be deemed to be a manufacturer and not a processor for hire.
SAA. Product means tangible personal property, including articles,
substances, or commodities created, brought forth, extracted, or
manufactured by human or mechanical effort.
Byproduct means any additional product, other than the principal or
intended product, which results from extracting or manufacturing activities
and which has a market value without regard to whether or not such
additional product was an expected or intended result of the extracting or
manufacturing activities.
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Ordinance
BB. Retailing means the activity of engaging in making sales at retail
and is reported under the retailing classification.
$BCC. 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 includes 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 (a) horticultural services provided to farmers and (b) pruning,
trimming, repairing, removing, and clearing of trees and brush near
21 Amend Chapter 3,28 KCC
Ordinance
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
personaI
property to consumers and the rental of equipment with an
operator.
£-EDD. Sa/e, casual or isolated sale.
1. Sa/e 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.
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Ordinance
rKE. Sale at retail, retail sale.
1. Sa/e 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,
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
23 Amend Chapter 3.28 KCC
Ordinance
to create a chemical reaction directly through contact with an ingredient of
ferrosilicon; or
e. Purchases for the purpose of provng 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 subsection
DDEE (1)(a), (b), (c), (d), or (e) of this section following such use; or
f. Purchases for the purpose of satisfying the person's
obligations under an extended warranty as defined in subsection
{-B$} EE (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 KCC 3.28.050(A)(7).
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 faces 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
24 Amend Chapter 3.28 KCC
Ordinance
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
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
25 Amend Chapter 3.28 KCC
Ordinance
services" does not include painting, papering, repairing, furnace or septic
tank cleaning, snow removal, or sandblasting,
eR 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 (1) 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 (1) month or more to a person is a rental or
lease of real property and not a mere license to enjoy the same;
g. The installing, repairing, altering, or improving of
digital goods for consumers;
h. The sale of or charge made for tangible personal
property, labor, and services to persons taxable under subsections
{-BBQ EE (3)(a), (b), (c), (d), (e), (f), and (g) of this section 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.
26 Amend Chapter 3,28 KCC
Ordinance
fVothing contained in this subsection shall be construed to modify
subsection {B -9J} EE (1) of this section and nothing contained in subsection
{B$} EE k of this section shall be construed to modify this subsection.
4. "Sale at retail" or "retail sale" shall also include the providing
of competitive telephone service to consumers.
5.a. "Sale at retail" or "retail sale" shall also include the sale of
prewritten software other than a sale to a person who presents a resale
certificate under RCW 82.04.470, regardless of the method of delivery to
the end user. For purposes of this subsection f6i$EE (5)(a) the sale of
prewritten computer software includes the sale of or charge made for a
key or an enabling or activation code, where the key or code is required to
activate prewritten computer software and put the software into use. There
is no separate sale of the key or code from the prewritten computer
software, regardless of how the sale may be characterized by the vendor
or by the purchaser.
The term "sale at retail" or "retail sale" does not include the sale of or
charge made for:
i. Custom software; or
ii. The customization of prewritten software.
b.i. The term also includes the charge made to consumers for the
right to access and use prewritten computer software, where possession of
thU software is maintained by the seller or a third party, regardless of
whether the charge for the service is on a per use, per user, per license,
subscription, or some other basis.
27 Amend Chapter 3,28 KCC
Ordinance
ii.(A) The service described in subsection fBB} EE (5)(b)(i) of this
section includes the right to access and use prewritten software to perform
data processing.
(B) For purposes of this subsection {-BB� EE (5)(b)(ii) data
processing means the systematic performance of operations on data to
extract the required information in an appropriate form or to convert the
data to usable information. Data processing includes check processing,
image processing, form processing, survey processing, payroll processing,
claim processing, and similar activities.
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 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
28 Amend Chapter 3.28 KCC
Ordinance
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.
11. "Sale at retail" or "retail sale" shall also include the following
sales to consumers of digital goods, digital codes, and digital automated
services:
29 Amend Chapter 3.28 KCC
Ordinance
a. Sales in which the seller has granted the purchaser the
right of permanent use;
b. Sales in which the seller has granted the purchaser a
right of use that is less than permanent;
c. Sales in which the purchaser is not obligated to make
continued payment as a condition of the sale; and
d. Sales in which the purchaser is obligated to make
continued payment as a condition of the sale.
A retail sale of digital goods, digital codes, or digital automated services
under this subsection f944 EE (11) includes any services provided by the
seller exclusively in connection with the digital goods, digital codes, or
digital automated services, whether or not a separate charge is made for
such services.
For purposes of this subsection, permanent means perpetual or for an
indefinite or unspecified length of time. A right of permanent use is
presumed to have been granted unless the agreement between the seller
and the purchaser specifies or the circumstances surrounding the
transaction suggest or indicate that the right to use terminates on the
occurrence of a condition subsequent.
12. Sa/e at retail" or retail sale" shall also include the installing,
repairing, altering, or improving of digital goods for consumers.
EEFF. Sale at wholesale or wholesale sale means any sale of tangible
personal property, digital goods, digital codes, digital automated services,
30 Amend Chapter 3.28 KCC
Ordinance
prewritten computer software, or services described in subsection
{B -B} EE (5)(b)(i) of this section which is not a retail sale, and any charge
made for labor and services rendered for 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.
FfGG. Services includes those activities that do not fall within one of the
other tax classifications used by the city.
6�FiH. Software, prewritten software, custom software,
customization of canned software, master copies, retained rights.
1. Prewritten software or canned software means computer
software, including prewritten upgrades, that is not designed and
developed by the author or other creator to the specifications of a specific
purchaser. The combining of two (2) or more prewritten computer software
programs or prewritten portions thereof does not cause the combination to
be other than prewritten computer software. Prewritten computer software
includes software designed and developed by the author or other creator
to the specifications of a specific purchaser when it is sold to a person
other than such purchaser. Where a person modifies or enhances computer
software of which such person is not the author or creator, the person shall
be deemed to be the author or creator only of the person's modifications
or enhancements. Prewritten computer software or a prewritten portion
thereof that is moed or enhanced to any degree, where such
modification or enhancement is designed and developed to the
specifications of a specific purchaser, remains prewritten computer
31 Amend Chapter 3.28 KCC
Ordinance
software; however, where there is a reasonable, separately stated charge
or an invoice or other statement of the price given to the purchaser for the
modification or enhancement, the modification or enhancement shall not
constitute prewritten computer software.
2. Custom software means software created for a single person.
3. Customization of canned software means any alteration,
modification, or development of applications using or incorporating canned
software to specific individualized requirements of a single person.
Customization of canned software includes individualized configuration of
software to work with other software and computer hardware but does not
include routine installation. Customization of canned software does not
change the underlying character or taxability of the original canned
software.
4. Master copies of software means copies of software from
which a software developer, author, inventor, publisher, licensor,
sublicensor, or distributor makes copies for sale or license. The software
encoded on a master copy and the media upon which the software resides
are both ingredients of the master copy.
5. Retained rights means any and all rights, including intellectual
property rights such as those rights arising from copyrights, patents, and
trade secret laws, that are owned or are held under contract or license by
a software developer, author, inventor, publisher, licensor, sublicensor, or
distributor.
6. Software means any information, program, or routine, or any
set of one (1) or more programs, routines, or collections of information,
32 Amend Chapter 3.28 KCC
Ordinance
used, or intended for use, to convey information that causes one (1) or
more computers or pieces of computer-related peripheral equipment, or
any combination thereof, to perform a task or set of tasks. "Software"
includes the associated documentation, materials, or ingredients,
regardless of the media upon which that documentation is provided, that
describe the code and its use, operation, and maintenance and that
typically are delivered with the code to the consumer. All software is
classified as either canned or custom.
+�-F+II. 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.
i�JJ. Tuition fee includes library, laboratory, health service, and other
special fees, and amounts charged for room and board by an educational
institution when the property or service for which such charges are made
is furnished exclusively to the students or faculty of such institution.
Educational institution, as used in this section, means only those
institutions created or generally accredited as such by the state and
includes educational programs that such educational institution cosponsors
with a nonprofit organization, as defined by the Internal Revenue Code
Section 501(c)(3), as hereafter amended, if such educational institution
grants college credit for coursework successfully completed through the
educational program, or an approved branch campus of a foreign degree -
granting institution in compliance with Chapter 286.90 RCW, and in
accordance with RCW 82.04.4332 or defined as a degree -granting
institution under RCW 286.85.010(3) and accredited by an accrediting
association recognized by the United States Secretary of Education, and
offering to students an educational program of a general academic nature
33 Amend Chapter 3.28 KCC
Ordinance
or those institutions which are not operated for profit and which are
privately endowed under a deed of trust to offer instruction in trade,
industry, and agriculture, but not including specialty schools, business
colleges, other trade schools, or similar institutions.
�}KK. Value proceeding or accruing means the consideration, whether
moneyI 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.
fFi4LL. Value of products.
1. The value of products, including byproducts, 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 byproducts by the seller.
2. Where such products, including byproducts, are extracted or
manufactured for commercial or industrial use; and where such products,
including byproducts, 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
34 Amend Chapter 3,28 KCC
Ordinance
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 {-iH4} LL (2) of this section, 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
corresponA
to:
a. The retail selling price of such new or improved product
when first offered for sale; or
b. The value of materials incorporated into the prototype
in cases in which the new or improved product is not offered for sale.
AMM. Wholesaling means engaging in the activity of making sales at
wholesale, and is reported under the wholesaling classification.
SECTION 2. Amendment. Section 3.28.050 of the Kent City Code,
is hereby amended as follows:
Sec. 3.28.050. Imposition of the tax —Tax or fee levied.
Except as provided in subsection (C) of this section, there is hereby levied
upon and shall be collected from every person a tax for the act or privilege
of engaging in business activities within the city, whether the person's
35 Amend Chapter 3.28 KCC
Ordinance
oI fice or place of business be within or without the city. The tax shall be in
amounts to be determined by application of rates against the gross
proceeds of sale, gross income of business, or value of products, including
byproducts, and by application of rates against the square footage of
business office or facility space within the city, as the case may be, as
follows:
A. Gross receipts tax.
1. 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 byproducts,
extracted within the city for sale or for commercial or industrial use,
multiplied by the rate of 0.152 hundredths of one percent (0.00152). The
measure of the tax is the value of the products, including byproducts, so
extracted, regardless of the place of sale or the fact that deliveries may be
made to points outside the city.
2. 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
byproducts, manufactured within the city, multiplied by the rate of 0.046
hundredths of one percent (0.00046). The measure of the tax is the value
of the products, including byproducts, so manufactured, regardless of the
place of sale or the fact that deliveries may be made to points outside the
city.
3. 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
36 Amend Chapter 3.28 KCC
Ordinance
of the business without regard to the place of delivery of articles,
commodities or merchandise sold, multiplied by the rate of 0.152
hundredths of one percent (0.00152).
4. 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
or merchandise sold, multiplied by the rate of 0.046 hundredths of one
percent (0.00046).
5. Upon every person engaging within the city in the business of
(a) printing, (b) both printing and publishing newspapers, magazines,
periodicals, books, music, and other printed items, (c) publishing
newspapers, magazines and periodicals, (d) extracting for hire, and (e)
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 0.046 hundredths of one percent (0.00046).
6. 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 0.152 hundredths of one percent (0.00152).
7. 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 0.152 hundredths of one percent (0.00152). This subsection
includes, among others, and without limiting the scope hereof (whether or
37 Amend Chapter 3.28 KCC
Ordinance
nOL 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.
B. Square footage tax. Upon every person who leases, owns, occupies,
or otherwise maintains an office, warehouse, or other place of business
within the city for purposes of engaging in business activities in the city,
the tax shall be measured by the number of square feet of warehouse
business floor space or other business floor space for each office,
warehouse, or other place of business leased, owned, occupied, or
otherwise maintained within the city during the reporting period, calculated
to the nearest square foot.
1. Subject to the reductions established in subsection (B)(6) of
this section, the amount of the tax due shall be equal to the sum of the
number of square feet of business warehouse floor space for each business
warehouse leased, owned, occupied, or otherwise maintained within the
city multiplied by the rate of three cents ($0.03) quarterly for each
calendar year, and the number of square feet of other business floor space
for each office or other place of business leased, owned, occupied, or
otherwise maintained within the city multiplied by the rate of one cent
($0.01) quarterly for each calendar year.
2. For purposes of this section, business warehouse means a
building or structure, or any part thereof, in which goods, wares,
merchandiseI or commodities are received or stored, whether or not for
compensation, in furtherance of engaging in business.
38 Amend Chapter 3.28 KCC
Ordinance
J For purposes of this section, other business floor space means
the floor space of an office or place of business, other than a business
warehouse.
4. For purposes of this section, the square footage shall be
computed by measuring to the inside finish of permanent outer building
walls and shall include space used by columns and projections necessary to
the building. Square footage shall not include stairs, elevator shafts, flues,
pipe shafts, vertical ducts, heating or ventilation shafts, janitor closets,
and electrical or utility closets.
5. Persons with more than one (1) office, warehouse, or other
place of business within the city must include all business warehouse floor
space and other business floor space for all locations within the city. When
a person rents space to another person, the person occupying the rental
space is responsible for the square footage business tax on that rental
space only if the renter has exclusive right of possession in the space as
against the landlord. Space rented for the storage of goods in a warehouse
where no walls separate the goods, and where the exclusive right of
possession in the space is not held by the person to whom the space is
rented, and spaee Fented eut an " "
shall
be included in the warehouse business floor space of the person that
operates the warehouse business, and not by the person renting the
warehouse space.
6. If the square footage tax imposed in this subsection (B) is
less than or equal to the gross receipts tax imposed in subsection (A) of
this section, no square footage tax will be due', if the square footage tax
39 Amend Chapter 3,28 KCC
Ordinance
imposed in this subsection (B) exceeds the gross receipts tax imposed in
subsection (A) of this section, the taxpayer shall also remit the excess over
the gross receipts tax payable under subsection (A) %J this section.
C. Gross receipts exemption/square footage threshold.
1. Any person whose gross proceeds of sales, gross income of
the business, and value of products, including byproducts, as the case may
be, from all activities conducted within the city during any quarter is equal
to or less than sixty-two thousand five hundred dollars ($62,500) during
that quarter shall be exempt from the gross receipts tax imposed in this
chapter. The applicable tax rates shall only apply to amounts in excess of
sixty-two thousand five hundred dollars ($62,500) during any quarter.
2. The square footage tax imposed in subsection (B) of this
section shall not apply to any person unless that person's total floor area
of business space within the city exceeds the following threshold:
a. Four thousand (4,000) taxable square feet of business
warehouse space; or
b. Twelve thousand (12,000) taxable square feet of other
business floor space.
This is a threshold and not an exemption. If the square footage tax
applies, it applies to all business space leased, owned, occupied, or
otherwise maintained by the taxpayer during the applicable reporting
period.
40 Amend Chapter 3.28 KCC
Ordinance
D. Rules. The director may promulgate rules and regulations regarding
the manner, means, and method of calculating any tax imposed under this
section.
SECTION 3. -Amendment. Section 3.28.090 of the Kent City
Code, is hereby amended as follows:
A. Nonprofit corporations or nonprofit organizations. This chapter shall
not apply to nonprofit 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.
B. Certain fraternal and
beneficiary organizations. This
sales
chapter
the
shall
income received by
corporations
which
have been incorporated
under any
act %J the congress
of the United
States
of America and
whose
principal
purposes are to furnish
volunteer
aid to
not apply
to fraternal benefit societies or fraternal fire
insurance
also to carry
associations,
as described in
Title 48 RCW; nor to beneficiary
corporations
relief and to apply
the same in
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.
This 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.
C. Certain corporations furnishing aid and relief. This chanter shall not
apply to the gross
41 Amend Chapter 3.28 KCC
Ordinance
sales
or
the
gross
income received by
corporations
which
have been incorporated
under any
act %J 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
41 Amend Chapter 3.28 KCC
Ordinance
mitigating the sufferings caused by pestilence, famine, fire, floods, and
other national calamities and to devise and carry on measures for
preventing the same.
D. Operation of she/tered 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 non-profit group training homes as defined by
chapter 71A.22 RCW or to the business activities of non-profit
organizations from the operation of sheltered workshops. For the purposes
of this subsection, "the operation of sheltered workshops" means
performance of business activities of any kind on or off the premises of
such non-profit organizations which are performed for the primary purpose
of:
(1) providing gainful employment or rehabilitation services to the
handicapped 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
handicapped individuals.
E. Credit unions. This chapter shall not apply to the gross income of
credit unions organized under the laws of the state, any other state, or the
United States.
$F. Health maintenance organization, health care service contractor,
cered health plan. This chapter does not apply to any health
maintenance organization, health care service contractor, or certified
42 Amend Chapter 3.28 KCC
Ordinance
health plan in respect to premiums or prepayments that are taxable under
RCW 48.14.0201.
EG. 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 KCC.
�Fi. Investments -Dividends from subsidiary corporations. 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.
�I. International banking facilities. This chapter shall not apply to the
gross receipts of an international banking facility. As used in this
subsection, an international banking facility means a facility represented
by a set of asset and liability accounts segregated on the books and
records of a commercial bank, the principal office of which is located in this
state, and which is incorporated and doing business under the laws of the
United States or of this state, a United States branch or agency of a
foreign bank, an Edge corporation organized under Section 25(a) of the
Federal Reserve Act, 12 U.S.C. Sections 611 through 631, or an
Agreement corporation having an agreement or undertaking with the
Board of Governors of the Federal Reserve System under Section 25 of the
Federal Reserve Act, 12 U.S.C. Sections 601 through 604(a), that includes
only international banking facility time deposits (as defined in subsection
(a)(2) of Section 204.8 of Regulation D (12 CFR Part 204), as promulgated
by the Board of Governors of the Federal Reserve System), and
43 Amend Chapter 3.28 KCC
Ordinance
international banking facility extensions of credit (as defined in subsection
(a)(3) of Section 204.8 of Regulation D).
FJ. Insurance business. This chapter shall not apply to amounts
received by any person who is an insurer, or their appointed insurance
producer, upon which a tax based on gross premiums is paid to the state
pursuant to RCW 48.14.020, and provided further, that the provisions of
this subsection shall not exempt any bonding company from tax with
respect to gross income derived from the completion of any contract as to
which it is a surety, or as to any liability as successor to the liability of the
defaulting contractor.
�K. Farmers -Agriculture. This chapter shall not apply to any farmer in
respect to amounts received from selling fruits, vegetables, berries, butter,
eggs, fish, milk, poultry, meats, or any other agricultural product that is
raised, caught, produced, or manufactured by such persons.
++L. Athletic exhibitions. This chapter shall not apply to any person in
respect to the business of conducting boxing contests and sparring or
wrestling matches and exhibitions for the conduct of which a license must
be secured from the State Boxing Commission.
1M, Racing. This chapter shall not apply to any person in respect to the
business of conducting race meets for the conduct of which a license must
be secured from the Washington State Horse Racing Commission.
Na Ride sharing. This chapter does not apply to any funds received in
the course of commuter ride sharing or ride sharing for persons with
sV
ecial transportation needs in accordance with RCW 46.74.010.
44 Amend Chapter 3.28 KCC
Ordinance
�4®. Employees.
1. This chapter shall not apply to any person in respect to the
person's 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.
2. A booth renter is an independent contractor for purposes of
this chapter.
�P. 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.
#}Q. 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.
+ R. Amounts derived from manufacturing, selling, or distributing motor
vehic/e fuel. This chapter shall not apply to the manufacturing, selling, or
distributing motor vehicle fuel, as the term 'motor vehicle fuel" is defined
45 Amend Chapter 3.28 KCC
Ordinance
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.
6S. 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.
RT. Casual and isolated sales. This chapter shall not apply to the gross
proceeds derived from casual or isolated sales.
@U. Accommodation sa/es. 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 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 (14) days to reimburse in kind a previous accommodation
sale by the buyer to the seller.
f�V. 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.
�W. United States, Washington State governmental entities. This chapter
shall not apply to gross income received by the United States or any
instrumentality thereof and by the state of Washington or any municipal
subdivision thereof.
46 Amend Chapter 3.28 KCC
Ordinance
TX. Research and development under federal contracts. This chapter
shall not apply to amounts received for research and development
activities performed on behalf of, under contract to, or in partnership with
the United States government. For purposes of this section, research and
development activities means activities performed to discover
technological information, and technical and nonroutine activities
concerned with translating technological information into new or improved
products, processes, techniques, formulas, inventions, or software, the
application of which is intended to be useful in the development of a new
or improved federal project or component thereof.
SECTION 4. -Amendment. Section 3.28.100 of the Kent City
Code, is hereby amended as follows:
Sec. 3.28.100. Deductions. In computing the license fee or tax,
there may be deducted from the measure of tax the following items:
A. Membership fees and certain service fees by non-profit youth
organization. For purposes of this subsection, 'anon -profit youth
organization" means a non-profit organization engaged in character
building of youth which is exempt from property tax under RCW
84.36.030. In computing tax due under this chapter, there may be
deducted from the measure of tax all amounts received by a non-profit
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
47 Amend Chapter 3.28 KCC
Ordinance
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.
B. 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:
I contributions:
4. donations:
50 tuition fees;
64 charges made by a non-profit trade or professional
organization for attending or occupying space at a trade show,
convention, or educational seminar sponsored by the non-profit trade or
professional organization, which trade show, convention, or educational
seminar is not open to the general public;
7R charges made for operation of privately operated
kindergartens; and
8v endowment funds.
This subsection shall not be construed to exempt anv person, association
or society from tax liability upon selling tangible personal property or upon
providing facilities or 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 subsection.
48 Amend Chapter 3.28 KCC
Ordinance
C. Artistic and cultural organizations - income from business activities.
In computing tax, there may be deducted from the measure of tax those
amounts received by artistic or cultural organizations, as defined in this
chapter, which represent,
11 income derived from business activities conducted by the
organization, provided that this deduction does not apply to retail sales
made by artistic and cultural organizations;
2s amounts received from the United States or any
instrumentality thereof or from the State of Washington or any municipal
corporation or subdivision thereof as compensation for, or to support
artistic or cultural exhibitions, performances, or programs provided by an
artistic or cultural organization for attendance or viewing by the general
public; or
I amounts received as tuition charges collected for the privilege
of attending artistic or cultural education programs.
D. Artistic or cultural organization - deduction for tax under the
manufacturing classification - value of articles for use in displaying art
objects or presenting artistic or cultural exhibitions, performances, or
programs. In computing tax, there may be deducted from the measure of
tax by persons subject to payment of the tax under the manufacturing
classification, the value of articles to the extent manufacturing activities
are undertaken by an artistic or cultural organization, as defined in this
chapter, solely for the purpose of manufacturing articles 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.
E. Day care activities. In computing tax, there may be deducted from
the measure of tax amounts derived from day care activities by any
49 Amend Chapter 3.28 KCC
Ordinance
organization organized and operated for charitable, educational, or other
purposes which is exempt from taxation pursuant to Section 501 (c)(3)
the Internal Revenue Code, as hereafter amended; provided, however,
that amounts derived from selling, altering or repairing tangible personal
property shall be deductible.
�4F. 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 subsection for amounts that are received under an employee
benefit plan. For purposes of this subsection, "employee benefit plan"
includes the military benefits program authorized in 10 U.S.C. Section
1071 et seq., as amended, or amounts payable pursuant thereto.
$G. Interest on investments or loans secured by mortgages or deeds of
trust. In computing tax, to the extent permitted by Chapter 82.14A RCW,
there may be deducted from the measure of tax by those engaged in
banking, loan, security, or other financial businesses amounts derived from
interest received on investments or loans primarily secured by first
mortgages or trust deeds on nontransient residential properties.
�fi. 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
50 Amend Chapter 3.28 KCC
Ordinance
of the state of Washington, its political subdivisions, and municipal
corporations organized pursuant to the laws thereof.
BI. 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.
�J. 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.
FK. 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.
51 Amend Chapter 3.28 KCC
Ordinance
GL. Credit losses of accrual basis taxpayers. In computing tax, there
may be deducted from the measure of tax the amount of credit losses
actually sustained by taxpayers whose regular books of account are kept
upon an accrual basis.
M. Repair, maintenance, replacement, etc., of residential structures and
commonly held property - eligible organizations.
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 bva
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 subsection ��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
52 Amend Chapter 3.28 KCC
Ordinance
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 subsection:
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
country 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.
N. Radio and television broadcasting - advertisinc�agency fees -
national, regional, and network advertising - interstate allocations. In
computing tax, there may be deducted from the measure of tax by radio
and television broadcasters amounts representing the following:
1n advertising agencies' fees when such fees or allowances are
shown as discount or price reduction in the billing or that the billing is on
a net basis, i.e., less the discount;_
2, actual gross receipts from national network, and regional
advertising or a "standard deduction" as provided by RCW 82.04.280; and
I local advertising revenue that represent advertising which is
intended to reach potential customers of the advertiser who are located
outside the State of Washington. The Director may issue a rule that
provides detailed auidance as to how these deductions are to he
calculated.
53 Amend Chapter 3.28 KCC
Ordinance
SUN 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 %J the state
of Washington or the Constitution of the United States.
1P. 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.
�Q. 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.
SECTION 5. -Retroactivity. This ordinance shall be effective and
apply retroactively to all reporting periods that began on or after January
1, 2014.
SECTION 6. -Corrections by City Clerk or Code Reviser. Upon
approval of the City Attorney, the City Clerk and the code reviser are
authorized to make necessary corrections to this ordinance, including the
correction of clerical errors; ordinance, section, or subsection numbering;
54 Amend Chapter 3.28 KCC
Ordinance
or references to other local, state or federal laws, codes, rules, or
regulations.
SECTION 7. -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 and
effect.
SECTION 8. -Effective Date. This ordinance shall take effect and
be in force five (5) days from and after its passage and publication, as
provided by law.
ATTEST:
RONALD F
APPROVED AS TO FORM:
SU�ETTE
�lsyl�
CLE
OKE, MAYOR
CK, ACTING CITY ATTORNEY
APPROVED: � day of fAr'.y , 2014.
��
PUBLISHED: J day of ;��cy , 2014.
55 Amend Chapter 3.28 KCC
Ordinance
I hereby certify that this is a true copy of Ordinance No. 71X
passed by the City Council of the City of Kent, Washington, and approved
by the Mayor of the City of Kent as hereon indicated.
P:\C•sil\Ordinance\3.]6.090 B&O RaNslons 2014 Optlan - F.docz
RONALD F.
AL)
Amend Chapter 3.28 KCC
Ordinance