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HomeMy WebLinkAboutOrd 1062 - 4% Leasehold Excise TaxCITY OF TUKWIL WASHINGTON ORDINANCE NO. /06-AZ AN ORDINANCE OF THE CITY OF TUKWILA PROVIDING FOR IMPOSITION OF A 4% LEASEHOLD EXCISE TAX. COUNCIL ACTION 1 DATE I AITEMA II ACTION I6 %L In'M i /Th1 1.6 /1_7d I P WHEREAS, State Statute imposes a 12% leasehold tax on the use of publicly owned real property such as the Foster Golf Course, and; WHEREAS, the law also gives the City authority to impose a 4% tax on the same leasehold interest (the 4% is an allowed credit against the 12% imposed by the State and will be distributed back to the City) NOW, THEREFORE, The City Council of the City of Tukwila does ordain as follows: Section 1. There is hereby levied and shall be collected a leasehold excise tax on and after April 1, 1978, upon the act or privilege of occupying or using publicly owned real or personal property within the City of Tukwila through a "leasehold interest" as defined by section 2, chapter 61, Laws of 1975 -76, Second extraordinary Session (hereafter "the state act The tax shall be paid, collected, and remitted to the department of revenue of the State of Washington at the time and in the manner prescribed by Section 5 of the state act. Section 2. The rate of the tax imposed by section 1 shall be 4% (four percent) of the taxable rent (as defined by section 2 of the state act): PROVIDED: That the following credits shall be allowed in determining the tax payable: (1) With respect to a leasehold interest arising out of any lease or agreement, the terms of which were binding on the lessee prior to July 1, 1970, where such lease or agreement has not been renegotiated (as defined by section 2 of the state act) since that date, and excluding from such credit any lease or agreement including options to renew which extends beyond January 1, 1985, as follows: With respect to taxes due in calendar year 1978, a credit equal to forty percent of the tax produced by the above rate. With respect to taxes due in calendar year 1979, a credit equal to twenty percent of the tax produced by the above rate. (2) With respect to a product lease (as defined by section 2 of the state act), a credit of thirty -three percent of the tax produced by the above rate. Section 3. The administration and collection of the tax imposed by this ordinance shall be in accordance with the provisions of the state act. Section 4. Leasehold interest exempted by section 13 of the state act as it now exists or may hereafter be amended shall be exempt from the tax imposed pursuant to Section 1 of this ordinance. Deputy City Attorney Section 5. The City hereby consents to the inspection of such records as are necessary to qualify the City for inspection of records of the department of revenue pursuant to RCW 82.32.330. COMMENT: RCW 82.32.330 imposes confidentiality restrictions on the Department of Revenue unless such other state or city or town or county grants substantially similar privileges to the proper officers of this state; Section 6. The Mayor is authorized to execute a contract with the department of revenue of the state of Washington for the administra- tion and collection of the tax imposed by section 1: PROVIDED, that the city attorney shall first approve the form and content of said contract. Section 7. If any provision of this ordinance, or its applica- tion to any person or circumstance is held invalid, the remainder of the ordinance or the application of the provision to other persons or circumstances is not affected. PASSED by the City Council of the City of Tukwila, Washington, at a regular meeting thereof, this /9 day of 1978. Mayor ATTEST: 7/19a4 City Clerk *PROVED AS TO FORM: d geied /97P Dat'Approved Published: Renton Record Chronicle dun -30, /978 AGREEMENT BETWEEN THE STATE OF WASHINGTON, DEPARTMENT OF REVENUE AND THE CITY OF TUKWILA REGARDING ADMINISTRATION AND COLLECTION OF LOCAL LEASEHOLD EXCISE TAX THIS AGREEMENT, Made this 30th and between the State of Washington, after referred to as the Department, hereinafter referred to as the city, day of June 1978 by Department of Revenue, herein and the above designated city, WITNESSETH: WHEREAS, The Legislature of the State of Washington has by chap- ter 61, Laws of 1975 -76, 2nd ex. sess., authorized cities and counties to impose a local leasehold excise tax, and WHEREAS, It is provided in section 8 of said act that any city or county imposing a local leasehold excise tax by ordinance shall, prior to the effective date thereof, contract with the Department for the administration and collection of said tax, and WHEREAS, The city has by ordinance, a copy of which is attached hereto, elected to impose a leasehold excise tax commencing on the first day of April 1 19 78 NOW, THEREFORE, To effectuate section 8 of the aforementioned act, the parties hereto agree as follows: 1. The Department shall exclusively perform all functions incident to the administration and collection of the taxes imposed by the said ordinance, other than criminal prosecutions. 2. The Department shall retain from the taxes so collected the amount of two percent thereof as expenses of administration and collection. Said amount shall be subject to review during January of each year. 3. The remainder of said taxes so collected shall be deposited by the Department in the Local Leasehold Excise Tax Revolving Fund under the custody of the State Treasurer. 4. In carrying out its administration and collection duties hereunder, the Department shall, insofar as the same are applicable, apply the administrative provisions contained in chapters 82.02 and 82.32 RCW, and the Department's rules and regulations promulgated pursuant to RCW 82.32.300, as the same exist or may hereafter be amended. The Department shall adopt additional rules and regulations, in accordance with the State Administrative Procedure Act, to facili- tate the administration and collection of the local taxes as it may deem necessary or desirable. 5. The Department shall perform its duties hereunder so that as far as possible the local leasehold excise tax adopted by the city shall be administered and collected in a manner which is as consistent and uniform as possible with the state leasehold excise tax and facilitates the imposition of the local leasehold excise tax upon individual taxable events simultaneously with the imposition of the state leasehold excise tax. 6. The city shall have the right from time to time to examine the records of the Department as they concern taxpayers subject to the aforementioned ordinance. 7. The allocation of local leasehold excise tax collections among the various cities and counties will be sent by the Department to the State Treasurer within 60 days after the close of the first bimonthly period for which the tax is imposed and thereafter on a bimonthly basis. 8. All refunds and credits for local leasehold excise tax made by the Department shall be charged to the city. 9. The Department shall require redistribution to the affected counties or cities, of any tax, penalty and interest distributed to a county or city other than the county or city entitled thereto but such redistribution shall not be made as to amounts originally distributed earlier than three bimonthly periods prior to the bimonthly period in which the Department obtains knowledge of the improper distribution. 10. This agreement shall take effect on the day of 197 and shall thereafter be automatically renewed on December 31 of each year unless one of the parties gives written notice of termination on or before November 1 of each such year. 11. In witness whereof the parties hereto have affixed their signature the day and year first above written. DEPARTMENT OF REVENUE STATE 0? WASHINGTON BY M Director [CITY] By rA.A1.6a4t1 Titl/ QANIEL J: EVANS, GOVERNOR MARY ELLEN MCCAFFREE, DIRECTOR Telephone: (206) 753 -5551 STATE OF WASHINGTON DEPARTMENT OF REVENUE OLYMPIA 98504 March 10, 1976 NOTICE TO ALL CITIES AND COUNTIES LEASEHOLD EXCISE TAX The Department of Revenue is proceeding with the implementation of the "leasehold excise tax," Chapter 61, Laws of 1975 -76, 2nd Ex. Sess. This statute imposes a 12% excise tax on the act or privilege of occupying or using publicly owned real or personal property through a leasehold interest on or after January 1, 1976. The law also gives authority for counties and cities to enact ordinances providing for imposition of a 6% tax by counties and a 4% tax by cities on the same act or privilege. (The tax imposed by cities will be a credit against the county tax.) Six percent is an allowed credit against the 12% imposed by the state and will be distributed back to counties and cities participating. The Department of Revenue must be provided with a copy of the enacting ordinance and two copies of an agreement executed by the county or city levying the tax providing for administration and collection of the tax by the Department. Attached is: (1) Copy of model ordinance (or resolution) (2) Two copies of the agreement form (3) Summary of Leasehold Tax The ordinance may be enacted with an effective levying date back to January 1, 1976, or the first day of any succeeding quarter (Apr 1 July 1 Oct 1). In order to participate as of January 1, 1976, the Department must have a copy of the enacted ordinance and the signed agreement forms by April 15, 1976. Upon receipt, the agreement form will be signed by the Director for the Department and one copy returned to the county or city. Questionnaires to identify public lessors are now being designed and will be sent to all public bodies by mail within the next week. We anticipate first tax collection for the period January 1 through March 31, 1976 to be accomplished by April 30, 1976. First distribution to counties and cities would follow before June 30, 1976. Please forward copies of ordinance and agreements to: R. L. Heady, Assistant Director Department of Revenue General Administration Building Olympia, Washington 98504 3 COUNCIL ACTION MEEIGENDA TYP€ NC DATE I A �JEM ACTION I JMMARY OF THE LEASEHOLD EXCISE"( On March 1, 1976, the Governor signed HB 971 into law (Ch. 61, 1975 -76 Laws, 2d Ex. Sess.). It repeals both the property tax and the in lieu tax on leasehold interests in publicly owned land (except for operating properties of public utilities) and cancels all assessments or levies of such property taxes for collection in 1976. In lieu of these taxes, the new law provides for a 12% leasehold excise tax effective January 1, 1976, on the act or privilege of occupying or using publicly owned real or personal property through a leasehold interest. "Leasehold interest" is broadly defined by the law to include any interest granting possession and use less than fee simple arising from a lease, permit, license, or other agreement (whether written or verbal) between a public owner of the property and a person who would pay property taxes if the person were the owner. The measure of the tax is "taxable rent" which generally is the contract rent paid to the lessor (or to another for the benefit of the lessor) for the use or occupation of the property, including expenditures for protection of the lessor's interest and expenditures for improvements which become property of the lessor. The tax is to be collected by the lessor from the lessee and paid over to the state Department of Revenue on monthly tax returns. Cities and counties are author- ized to a share of the 12% excise tax by 1. enacting an ordinance levying the tax, and 2. contracting with the State Department of Revenue for collection of the tax prior to the effective date of the levying ordinance. The maximum local tax is 6% (one -half of the tax). If a county and a city within that county both levy the maximum tax, the county's share is a 2% rate and the city's is 4 The statutory scheme is that the county may levy at 6% but must permit a credit for the city tax of up to 4% on the same taxable event. The leasehold excise tax is patterned after the general retail sales tax. For example: 1. Generally, the lessor is the collector of the tax. 2. The tax must be separately stated as an additional amount to the rent. 3. The tax is to be paid by the lessee to the lessor at the time "rental" payments are due. 4. The lessor is fully liable for collection and remittance of the tax and the law makes the tax a debt owed by the lessee to the lessor. 5. In the case of federally owned land or federal trust land, the Department will collect the tax directly from the lessee. The state treasurer will distribute the leasehold excise tax collected for counties and cities bimonthly. Counties are to further distribute taxes received in accordance with RCW 84.56.230 (i.e., the same general proportional distribution used for the regular property tax).