1065, Business & Occupation Update Edited 01 2021 CITY OF YELM ORDINANCE NO. 1065 •
AN ORDINANCE AMENDING CHAPTER 5.06 OF THE YELM MUNICIPAL CODE RELATING TO
BUSINESS AND OCCUPATION TAX.
WHEREAS, The State of Washington has revised the City model ordinance as of September
2019 to reflect mandatory regulation and definition changes for all cities participating in the
collection of Business and Occupation taxes;
NOW,THEREFORE,THE CITY COUNCIL OF YELM DOES ORDAIN AS FOLLOWS:
Section 1. Chapter 5.06 Yelm Municipal Code is hereby amended as follows:
5.06.010 Purpose.
The purpose of this chapter is to provide for implementation of the city's authority to
license for revenue as authorized by Article XI, Section 12 of the Washington State
Constitution and RCW 35A.11.020.
5.06.020 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.
5.06.028 Administrative provisions.
The administrative provisions contained in Chapter 5.04 YMC shall be fully applicable to the
provisions of this chapter except as expressly stated to the contrary herein.
5.06.030 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. Definitions, A— I.
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.
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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.
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 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.
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 definition, for viewing or attendance by the general public.
2. The organization must be a not-for-profit corporation under Chapter 24.03 RCW.
3. The organization must be managed by a governing board of not less than eight
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.
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
positions within the state.
6. Assets of the corporation must be irrevocably dedicated to the activities for which the
exemption is granted and, on the liquidation, dissolution, or abandonment by the
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corporation, may not inure directly or indirectly to the benefit of any member or
individual except a nonprofit 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, ancestry, 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.
"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.
"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.
"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;
2. Any use in the manufacturing of products including articles, substances or
commodities; or
3. Consigning, shipping or transferring extracted or manufactured products to another
either without consideration or in the performance of contracts.
"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.
"Consumer" means the following:
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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 limiting the scope hereof, persons who install, repair, clean,
alter, improve, construct, 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 YMC 5.06.050(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;
4. Any person who purchases, acquires, or uses any personal, business, or professional
service defined as a retail sale or retail service in subsection B of 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;
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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.
Nothing contained in this or any other subsection of this section shall be construed to modify
any other definition of "consumer."
"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.
"Digital automated service," "digital code," and "digital goods" have the same meaning as in
RCW 82.04.192.
"Director" means the city clerk/treasurer of the city or any officer, agent or employee of the
city designated to act on the director's behalf.
"Eligible gross receipts tax" means a tax which:
1. Is imposed on the act or privilege of engaging in business activities within YMC
5.06.050; 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
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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.
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 definition 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 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 (1) of this
definition. 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 any other individual 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 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.
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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 organizations, chemists,
psychologists, court reporters, dentists, doctors, detectives, laboratory
operators, teachers, veterinarians.
I. Meeting with customers or potential customers, even when no sales or
orders are solicited at the meetings.
m. Training or recruiting employees, agents, representatives, independent
contractors, brokers or others, domiciled or operating on a job in the city,
whether 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.
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. 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.
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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 a business license; provided,
that it engages in no other business activities in the city. Such activities do not
include those in subsection (4) of this definition.
The city expressly intends that engaging in business include 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.
"Extracting" is the activity engaged in by an extractor and is reportable under the extracting
classification.
"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, or takes, cultivates, or
raises 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: or persons raising fish entirely within confined
rearing areas on the person's own land or on land in which the person has a present right of
possession; or persons who fell, cut, or take plantation Christmas trees from the person's own
land or from land in which the person has a present right of possession.
"Extractor for hire" means a person who performs under contract necessary labor or
mechanical services for an extractor.
"Gross income of the business" means the value proceeding or accruing by reason of the of the
transaction of the business activity 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,
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delivery costs, taxes, or any other expense whatsoever paid or accrued and without any
deduction on account of losses.
"Gross proceeds of sales" means the value proceeding or accruing from the sale of tangible
personal property, digital goods, digital codes, digital automated services 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.
"In this city" or "within this city" includes all federal areas lying within the corporate city limits
of the city.
B. Definitions, J — R.
Manufacturer, To Manufacture.
A. "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 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.
B. "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, mixing, slaughtering, packing, aging, curing,
mild curing, preserving, canning, and the preparing and freezing of fresh
fruits and vegetables.
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e. "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.
Magazine, Newspaper, Periodical.
"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 months, including any
supplement or special edition of the publication. Any publication meeting this definition
qualifies regardless of its content.
"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.
"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.
"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. Containing a telephone line listed in a public telephone directory or other similar
publication under the business name; and
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
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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.
"Person" means any individual, receiver, administrator, executor, assignee, trustee in
bankruptcy, trust, estate, firm, co-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.
Precious Metal Bullion or Monetized Bullion.
"Precious metal bullion" means any precious metal which has been put through a process of
smelting or refining, including, but not limited to, gold, silver, platinum, rhodium, and
palladium, and which is in such state or condition that its value depends upon its contents and
not upon its form.
For purposes of this chapter, "monetized bullion" means coins or other forms of money
manufactured from gold, silver, or other metals and heretofore, now, or hereafter used as a
medium of exchange under the laws of this state, the United States, or any foreign nation, but
does not include coins or money sold to be manufactured into jewelry or works of art.
"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 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.
Product, Byproduct.
"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.
"Retailing." "Retailing" means the activity of engaging in making sales at retail and is reported
under retailing classification.
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"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 (a) horticultural
services provided to farmers, and (b) pruning, 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.
"Royalties" means compensation for the use of intangible property, such as copyrights, patents,
licenses, franchises, trademarks, trade names, and similar items.
C. Definitions, S—Z.
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," or
"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
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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.
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, 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 subsections (1) (a), (b), (c), (d), or (e) of this definition
following such use.
f. Purchases for the purpose of satisfying the person's obligations under an
extended warranty as defined in subsection(7) of his section, if such tangible
personal property replaces or becomes an ingredient or component of
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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 YMC 5.06.050(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 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,
1 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 services" does not include painting,
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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 network telephone service 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;
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 (a), (b), (c), (d), (e), (f) and (g) 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 definition
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"
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 (5) (a) The sale of 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,
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regardless of how the sale may characterized by the vendor or by the
purchaser. The term "sale at retail" or "retail at sale" does not include the
sale of or charge made for;
i. Custom software; or
ii. The customization of prewritten software.
b. The term also includes the charge made to consumers for the right to access and use
prewritten computer software, where possession of the 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
i. The service described in (b) (i) of this subsection (5) includes the
right to access and use prewritten software to perform data
processing.
ii. For purposes of this subsection (b) (ii) "data processing" mean 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 (Public road construction).
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
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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
(government contracting).
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. (This is reported under the service or other
classification).
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. (This is reported under the
service and other classification.)
11. "Sale at retail" or "retail sale" shall also include the following sales to consumers of
digital sale, digital codes, and digital automated services;
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. Sale 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 (reference to subsection (5) of this
definition) 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
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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. "Sale at retail" or "retail sale" shall also include the installing, repairing, altering, or
improving of digital goods for consumers.
Sale at wholesale" or "wholesale sale" means any sale of tangible personal property, digital
goods, digital codes, digital automated services, prewritten computer software, or services
described in section (5) (b) (i)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 telecommunication company as defined in RCW 80.04.010 for the purpose of resale, as
contemplated by RCW 35.21.715.
Services. No definition.
Software, Canned Software, Custom Software, Customization of Canned Software, Master
Copies, Retained Rights.
1. "Canned software" means software that is created for sale to more than one person.
For purposes of this chapter, canned software is deemed to be tangible personal
property regardless of the method of delivery-tangible media (e.g., disk or installed
on hardware) or intangible (e.g., electronically over telecommunications paths).
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, sub-licensor, 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, sub-licensor, or distributor.
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6. "Software" means any information, program, or routine, or any set of one or more
programs, routines, or collections of information used, or intended for use, to
convey information that causes one 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 describes the code and its use, operation, and maintenance and that typically is
delivered with the code to the consumer. All software is classified as either canned
or custom.
"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.
"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 28B.90 RCW, and in accordance with RCW 82.04.4332 or defined as a degree-granting
institution under RCW 28B.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 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.
"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.
"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
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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 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 (b) the value of materials incorporated
into the prototype in cases in which the new or improved product is not offered for sale.
"Wholesaling" means engaging in the activity of making sales at wholesale, and is reported
under the wholesaling classification.
5.06.040 Agency—Sales and services by agent, consignee, bailee, factor or auctioneer.
A. Sales in Own Name—Sales or Purchases as Agent. Every person, including agents,
consignees, bailees, factors or auctioneers having either actual or constructive
possession of tangible personal property or having possession of the documents of title
thereto, with power to sell such tangible personal property in the person's own name
and actually so selling shall be deemed the seller of such tangible personal property
within the meaning of this chapter.
The burden shall be upon the taxpayer in every case to establish the fact that such
taxpayer is not engaged in the business of selling tangible personal property but is
acting merely as broker or agent in promoting sales or making purchases for a principal.
Such claim will be recognized only when the contract or agreement between such
persons clearly establishes the relationship of principal and agent and when the
following conditions are complied with:
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1. The books and records of the broker or agent show the transactions were made in
the name and for the account of the principal, and show the name of the actual
owner of the property for whom the sale was made, or the actual buyer for whom
the purchase was made.
2. The books and records show the amount of the principal's gross sales, the amount of
commissions and any other incidental income derived by the broker or agent from
such sales. The principal's gross sales must not be reflected as the agent's income on
any of the agent's books and records. Commissions must be computed according to
a set percentage or amount, which is agreed upon in the agency agreement.
3. No ownership rights may be conferred to the agent unless the principal refuses to
pay, or refuses to abide by the agency agreement. Sales or purchases of any goods
by a person who has any ownership rights in such goods shall be taxed as retail or
wholesale sales.
4. Bulk goods sold or purchased on behalf of a principal must not be co-mingled with
goods belonging to another principal or lose their identity as belonging to the
particular principal. Sales or purchases of any goods which have been co-mingled or
have lost their identity as belonging to the principal shall be taxed as retail or
wholesale sales.
B. If the above requirements are not met the consignor, bailor, principal or other shall be
deemed a seller of such property to the agent, consignee, bailee, factor or auctioneer.
C. Services in Own Name — Procuring Services as Agent. For purposes of this subsection, an
agent is a person who acts under the direction and control of the principal in procuring
services on behalf of the principal that the person could not itself render or supply.
Amounts received by an agent for the account of its principal as advances or
reimbursements are exempted from the measure of the tax only when the agent is not
primarily or secondarily liable to pay for the services procured.
Any person who claims to be acting merely as agent in obtaining services for a principal
will have such claim recognized only when the contract or agreement between such
persons clearly establishes the relationship of principal and agent and when the
following conditions are complied with:
1. The books and records of the agent show that the services were obtained in the
name and for the account of the principal, and show the actual principal for whom
the purchase was made.
2. The books and records show the amount of the service that was obtained for the
principal, the amount of commissions and any other income derived by the agent for
acting as such. Amounts received from the principal as advances and
reimbursements must not be reflected as the agent's income on any of the agent's
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books and records. Commissions must be computed according to a set percentage
or amount, which is agreed upon in the agency agreement.
5.06.050 Imposition of the tax—Tax or fee levied.
A. Except as provided in subsection (B) 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 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:
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 by-products, extracted within the city for
sale or for commercial or industrial use, multiplied by the rate of one-tenth of
one percent (.001). 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.
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 by-products, manufactured within the
city, multiplied by the rate of one-tenth of one percent (.001). 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.
3. Upon every person engaging within the City in the business of making sales at
wholesale, except persons taxable under subsection (A)(2) of this section; 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
one-tenth of one percent (.001).
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 two-tenths of one percent (.002).
5. 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,
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(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 two-tenths of one percent (.002).
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
two-tenths of one percent (.002).
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 two-tenths of one percent
(.002). 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 or a sale at wholesale or a retail service.
B. 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 less than $20,000, or is equal to or less than $5,000 during
any quarter if on a quarterly reporting basis.
5.06.070 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 YMC 5.06.050 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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4. Credit for Persons That Sell in the City Products That hey 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.
5.06.075 Deductions to prevent multiple taxation of manufacturing activities and prior to
January 1, 2008, 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. For taxes due prior to January 1, 2008, A taxpayer that is
subject to an eligible gross receipts tax on the same activity in more than one
jurisdiction may be entitled to a deduction as follows:
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
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to the contract price used to measure the tax due to the other city from the
measure of the tax owed to the City.
Person Manufacturing Products Within and Without. 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.
5.06.076 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).
5.06.077 Allocation and apportionment of income when activities take place in more than one
jurisdiction.
Effective January 1, 2008, gross income, other than for 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 YMC 5.06.050 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. In the case of sales of digital products, the activity takes place where delivery to
the buyer occurs. The delivery of digital products will be deemed to occur at:
a. The seller's place of business if the purchaser receives the digital
product at the seller's place of business;
b. If not received at the seller's place of business, the location where the
purchaser or the purchaser's donee, designated as such by the
purchaser, receives the digital product, including the location
indicated by instructions for delivery to the purchaser or donee,
known to the seller;
c. If the location where the purchaser or the purchaser's donee receives
the digital product is not known, the purchaser's address maintained
in the ordinary course of the seller's business when use of this
address does not constitute bad faith;
d. If no address for the purchaser is maintained in the ordinary course of
the seller's business, the purchaser's address obtained during the
consummation of the sale, including the address of the purchaser's
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payment instrument, if no other address is available, when use of this
address does not constitute bad faith; and
e. If no address for the purchaser is obtained during the consummation
of the sale, the address where the digital good or digital code is first
made available for the transmission by the seller or the address from
which the digital automated service or service described in RCW
82.04.050 (2)(g) or (6)(b) was provided, disregarding for these
purposes any location that merely provided the digital transfer of the
product sold.
4. If none of the methods in subsection YMC 5.06.077 (3) for determining where the
delivery of digital products occurs are available after a good faith effort by the taxpayer
to apply the methods provided in subsections YMC 5.06.077 (3)(a) through YMC
5.06.077 (3)(e), then the city and the taxpayer may mutually agree to employee any
other method to effectuate an equitable allocation of income from the sale of digital
products. The taxpayer will be responsible for petitioning the city to use an alternative
method under this subsection YMC 5.06.077 (d). The city may employee an alternative
method for allocating the income from the sale of digital products if the methods
provided in subsections YMC 5.06.077 (3)(a) through YMC 5.06.077 (3)(e) are not
available and the taxpayer and the city are unable to mutually agree on an alternative
method to effectuate an equitable allocation of income from the sale of digital products.
5. For the purposes of subsections YMC 5.06.077 (3)(a) through YMC 5.06.077 (3)(e), the
following definitions apply;
I. "Digital Automated Services," "Digital Codes," and "Digital Goods" have the
same meaning as in RCW 82.04.192;
II. "Digital Products" means digital goods, digital goods, digital automated services,
and the services described in RCW 82.04.050 (2)(g) and (6)(c); and
III. "Received" has the same meaning as in RCW 82.32.730.
6. Effective January 1, 2020: Gross income derived from activities taxed as services and
other activities taxed under YMC 5.06.050 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;
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ii. The individual is not primarily assigned to any place of business for the tax
period and the employee performs 50 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 50 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 the customer location is in the city.
c. Gross income of the business form engaging in an apportionable activity must be
excluded from the denominator of the service income factor if, in respect to such
activity, at least some of the activity is performed in the city, and the gross income is
attributable under (b) of this subsection (6) to a city or unincorporated area of the
county within the United States or to a foreign country in which the taxpayer is not
taxable. For purposes of this subsection (6)(c), "not taxable" means that the
taxpayer is not subject to a business activities tax by that city or county within the
United States or by that foreign country, except that a taxpayer is taxable in a city or
county within the United States or in a foreign country in which it would be deemed
to have a substantial nexus with the city or county within the United States or with
the foreign country under the standards in RCW 35.102.050 regardless of whether
that city or county within the US or that foreign country imposes such a tax.
d. If the allocation and apportionment provisions of this subsection (6) do not fairly
represent the extent of the taxpayer's business activity in the city„ the taxpayer may
petition for or the tax administrators may require, in respect to all or any part of the
taxpayer's business activity, if reasonable:
i. Separate accounting;
ii. The exclusion of any one or more of the factors;
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.
e. The party petitioning for, or the tax administrator requiring, the use of any method
to effectuate an equitable allocation and apportionment of the taxpayer's income
pursuant to subsection (d) of this subsection (6) must prove by preponderance of
the evidence;
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i. That the allocation and apportionment provisions of this subsection (6) do
not fairly represent the extent of the taxpayer's business activity in the city;
and
ii. That the alternative to such provisions is reasonable. The same burden of
proof shall apply whether the taxpayer is petitioning for, or the tax
administrator is requiring, the use of an alternative, reasonable method to
effectuate and equitable allocation and apportionment of the taxpayer's
income.
f. If the tax administrator requires any method to effectuate an equitable allocation
and apportionment of the taxpayer's income, the tax administrator cannot impose
any civil or criminal penalty with reference to the tax due that is attributable to the
taxpayer's reasonable reliance solely on the allocation and apportionment
provisions of this subsection (6).
g. A taxpayer that has received written permission from the tax administrator to use a
reasonable method to effectuate an equitable allocation and apportionment the
taxpayer's income shall not have that permission revoked with respect to
transactions and activities that have already occurred unless there has been a
material change in, or a material misrepresentation of, the facts provided by the
taxpayer upon which the tax administrator reasonable relied in approving a
reasonable alternative method.
7. 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. "Business Activities Tax" means a tax measured by the amount of, or economic
results of, business activity conducted in a city or county with the United States or
within a foreign country. The term includes taxes measured in whole or in part on
net income or gross income or receipts. "Business Activities Tax" does not include a
sales tax, use tax, or a similar transaction tax, imposed on the sale or acquisition of
goods or services, whether or not denominated a gross receipts tax or a tax imposed
on the privilege of doing business.
c. "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.
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d. "Customer" means a person or entity to whom the taxpayer makes a sale or renders
services or from whom the taxpayer otherwise receives gross income of the
business.
e. "Customer location" means the following;
i. For a customer not engaged in business, if the service requires the customer
to be physically present where the service is performed.
ii. For a customer not engaged in business, if the service does not require the
customer to be physically present;
(A) The customer's residence; or
(B) If the customer's residence is not known, the customer's billing/mailing
address.
iii. For a customer engaged in business:
(A) Where the services are ordered from;
(B) At the customer's billing/mailing address if the location from which the
services are ordered is not known; or
(C) At the customer's commercial domicile if none of the above are known.
f. "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.
g. "Primarily assigned" means the business location of the taxpayer where the
individual performs his or her duties.
h. "Service-taxable income" or "service income" means gross income of the business
subject to tax under either the service or royalty classification.
i. "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.
8. Assignment for 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.
5.06.078 Allocation and apportionment of printing and publishing income when activities take place in
more than one jurisdiction.
Notwithstanding RCW 35.102.130, effective January 1, 2008, 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,
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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.
5.06.090 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 provisions of Chapter
3.42 YMC.
2. 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.
3. 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, 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.
4. 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.
5. 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.
6. 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.
7. Ride Sharing. This chapter does not apply to any funds received in the course of commuter
ride sharing or ride sharing for persons with special transportation needs in accordance with
RCW 46.74.010.
8. Employees.
a. 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.
b. A booth renter is an independent contractor for purposes of this chapter.
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9. 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.
10. 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.
11. 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 82.38.020and exempt under RCW
82.38.280, 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.
12. 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.
13. Casual and Isolated Sales. This chapter shall not apply to the gross proceeds derived from
casual or isolated sales.
14. 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
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.
15. 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.
5.06.100 Deductions.
1. In computing the license fee or tax, there may be deducted from the measure of tax the
following items:
(A) 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
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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. Sec.
1071 et seq., as amended, or amounts payable pursuant thereto.
(B) 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.
(C) 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.
(D) 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.
(E) 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 by:
i. A cooperative housing association, corporation, or partnership
from a person who resides in a structure owned by the
cooperative housing association, corporation, or partnership;
ii. 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
iii. 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
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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 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:
i. 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 county wherein
the property is located;
ii. 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;
iii. 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.
(F) Sales at Wholesale or Retail of Precious Metal Bullion and Monetized Bullion. In
computing tax, there may be deducted from the measure of the tax amounts
derived from the sale at wholesale or retail of precious metal bullion and monetized
bullion. However, no deduction is allowed on amounts received as commissions
upon transactions for the accounts of customers over and above the amount paid to
other dealers associated in such transactions, and no deduction or offset is allowed
against such commissions on account of salaries or commissions paid to salesmen or
other employees.
(G) Amounts Representing Rental of Real Estate for Boarding Homes. In computing tax,
there may be deducted from the measure of tax amounts representing the value of
the rental of real estate for "boarding homes." To qualify for the deduction, the
boarding home must meet the definition of"boarding home," and be licensed by the
state of Washington under Chapter 18.20 RCW. The deduction shall be in the
amount of 25 percent of the gross monthly billing when the boarder has resided
within the boarding home for longer than 30 days.
(H) Radio and Television Broadcasting—Advertising Agency Fees— National, Regional,
and Network Advertising— Interstate Allocations. In computing tax, there may be
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deducted from the measure of tax by radio and television broadcaster's amounts
representing the following:
a. Advertising agencies' fees when such fees or allowances are shown as a discount
or price reduction in the billing or that the billing is on a net basis, i.e., less the
discount;
b. Actual gross receipts from national network, and regional advertising or a
"standard deduction" as provided by RCW 82.04.280; and
c. Local advertising revenue that represents 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 guidance as to
how these deductions are to be calculated.
(I) 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.
(J) Receipts from the Sale of Tangible Personal Property and Retail Services Delivered
Outside the City but Within Washington. Effective January 1, 2008, 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 service, or wholesaling classification.
(K) 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, worker's 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.
(L) 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 non-transient
residential properties.
(M)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
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derived from interest paid on all obligations of the state of Washington, its political
subdivisions, and municipal corporations organized pursuant to the laws thereof.
(N) 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.
5.06.120 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 constituted 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.
5.06.130 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. This Ordinance shall become effective retroactively to January 1, 2020.
PASSED by the City Council of Yelm this 28th day of July, 2020
C" Foster, May97.:vvr:
Lori Lucas, City Clerk/HR Manager
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PUBLISHED: Nisqually Valley News, August 6, 2020
EFFECTIVE DATE:January 1, 2020
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