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888 B&O TAX Regulation and Taxation License AmendCity of Yelm Ordinance No. 888 AN ORDINANCE of the City of Yelm, Washington, relating to the regulation, licensing and taxation of business activities in the City of Yelm, and repealing and replacing selected sections of the Yelm Municipal Code Chapter 5.06 and declaring an effective date WHEREAS, Yelm Municipal Code Chapter 5.06 combines licensing and taxation regulation for both businesses and utility licensing and taxation, and WHEREAS, IT IS THE INTENT OF THE City to meet legislative requirements established in House Bill 2030 with provision set out in legislation in 2004; and WHEREAS, the state has mandated that cities must adopt allocation and apportionment provision to comply with RCW 35.102.130 by January 2008 NOW THEREFORE, the City Council of the City of Yelm do ordain as follows: SECTION 5 Business Chapter 5.06 Business and Occupation Tax selected sections are added or amended to read as follows: Title BUSINESS AND OCCUPATION TAX Chapters: 5.06 - (A new section is added to Definitions) 5.06.030 "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 of the buyer. Transfer of possession of tangible personal property occurs when the buyer of 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 that 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 neaotiated or where the buyer obtains title to the property. Delivery terms and other provisions of the Uniform Commercial Code (Title 62A RCW) do not determine when or where delivery of tangible personal property occurs for purposes of taxation City of Yelm Ord. 888 Page 1 of 5 Chapters; 5.06 5.06.030 "Engaging in Business" (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) Chapter 5.06.030 (9) "Sale at retail" or "retail sale" shall not include the sale of or charge made for labor and services rendered for environmental remedial action (as defined in RCW 82.04.2635(2). (This is reported under the service and other classification) "Sale at wholesale," "wholesale sale" means any sale of tangible personal property which is not a retail sale, and any charge made for labor and services rendered for 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 ~et~e~~zel ^"^^° °°^~~^° 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 Chapter 5.06.030 "Value proceeding or accruing" Value proceeding or accruing means the consideration, whether money, credits, rights, or other property expressed in terms of money, a person is entitled to receive or which is actually received or accrued. The term shall be applied, in each case, on a cash receipts or accrual basis according to which method of accounting is regularly employed in keeping the books of the taxpayer. T""~~ ~er~e-~+e-: Chapter 5.06.075 (A new section is added) Allocation and apportionment of income when activities take place in more than one jurisdiction. Effective January 1 2008 gross income other than persons subject to the provisions of chapter 82.14A RCW shall be allocated and apportioned as follows: (1) Gross income derived from all activities other than those taxed as service or royalties under 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) Gross income derived from activities taxed as services and other activities taxed under 5.06.050 shall be apportioned to the city by multiplying apportionable income by a fraction the numerator of which is the pavroll factory plus the service-income factor and the denominator of which is two. a. The pavroll factor is a fraction, the numerator of which is the total amount paid in the city during the tax period by the taxpayer for City of Yelm Ord. 888 Page 2 of 5 compensation and the denominator of which is the total compensation paid everywhere during the tax period. Compensation is paid in the city if; i. The individual is primarily assigned within the city ii. The individual is not primarily assigned to any place of business for the tax period and the employee performs fifth percent or more of his or her service fro the tax period in the city; or iii. The individual is not primarily assigned to any place of business for the tax period, the individual does not perform fifty percent or more of his or her service in any city and the employee resides in the city_ b. The service income factor is a fraction. the numerator of which is the total service income of the taxpayer in the city during the tax period. and the denominator of which is the total service income of the taxpayer everywhere during the tax period Service income is in the if i. The customer location is in the city or ii. The income-producing activity is performed in more than one location and a greater proportion of the service-income -producing activity is performed in the city than in any other location. based on costs of performance and the taxpayer is not taxable at the customer location: or iii. The service-income-production activity is performed within the city, and the taxpayer is not taxable in the customer location. c. If the allocation and a ortionment rovisions of this subsection do not fairly represent the extent of the taxpayer's business activity in the city or cities in which the taxpayer does business the taxpayer may petition for or the tax administrators mayjointly reauire in respect to all or any part of the taxpayer's business activity that one of the following methods be used jointly by the cities to allocate or apportion gross income if reasonable i. Separate accountina_ ii. The use of a single factor' iii. The inclusion of one or more additional factors that will fairly represent the taxpayer's business activity in the city or iv. The employment of any other method to effectuate an eauitable allocation and apportionment of the taxpayer's income. (4) The definitions in this subsection apply throughout this section a. "Apportion able income" means the gross income of the business taxable under the service classifications of a city's gross receipts tax. including income received from activities outside the city if the income would be taxable under the service classification if received from activities within the city less any exemptions or deductions available. b. "Compensation" means wages salaries commissions and any other form of remuneration paid to individuals for personal services City of Yelm Ord. 888 Page 3 of 5 that are or would be included in the individual's gross income under the federal internal revenue code. c. "Individual" means any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee of that taxpayer. d. "Customer location" means the city or unincorporated area of a county where the majority of the contacts between the taxpayer and the customer take place. e. "Primarily assigned" means the business location of the taxpayer where the individual performs his or her duties. f. "Service-taxable income" or "service income" means gross income of the business subject to tax under either the service or royalty classification. g. "Tax period" means the calendar year during which tax liability is accrued. If taxes are reported by a taxpayer on a basis more frequent than once per year, taxpayers shall calculate the factors for the previous calendar year for reporting in the current calendar near and correct the reporting for the previous year when the factors are calculated for that year but not later than the end of the first quarter of the following_year. h. "Taxable in the customer location" means either that a taxpayer is subiect to a gross receipts tax in the customer location for the privilege of doing business. or that the government where the customer is located has the authority to subject the taxpayer to gross receipts tax regardless of whether in fact the government does do. (5) Assignment for apportionment of revenue under this Section shall be made in clause of the United States constitution where applicable Chapter 5.06.078 (A new section added) 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 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 Chapter 5.06-090 Exemptions (E) Miscellaneous Exemptions E.6. b. booth renter, is an independent contractor for purposes of this chapter. Chapter 5.06-100 Deductions ©Miscellaneous Deductions. (1) Receipts from Tangible Personal Property Delivered Outside the State. In computing tax, there may be deducted from the measure of tax under retailing or wholesaling amounts derived from the sale of tangible City of Yelm Ord. 888 Page 4 of 5 personal property that is rem°~~•°~' h., +he nurnh~c~or „r ;+~ ~nen+ delivered by the seller to the buyer's representative outside the state of Washington. (5) 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 services, or wholesaling classification. (6) Professional Employer Services. In computing the tax, a professional employer organization may deduct from the calculation of gross income the gross income of the business derived from performing professional employer services. that is equal to the portion of the fee charged to a client that represents the actual cost of wages and salaries, benefits, 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. Chapter 5.06-130 Severability Clause -shall be added 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. Passed by the Yelm City Council at a regular meeting January 8, 2008 ~ ~,~ Ron Harding, Mayor AUTHENTICATED: Janine A<~ chnepf, City Clerk Published: Nisqually Valley News, January 18, 2008 Effective Date: January 16, 2008 City of Yelm Ord. 888 Page 5 of 5