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HomeMy WebLinkAboutORD 5945CITY OF RENTON, WASHINGTON ORDINANCE NO. 5945 AN ORDINANCE OF THE CITY OF RENTON, WASHINGTON, AMENDING SUBSECTION 5-25-2.J, SECTION 5-25-8, AND SUBSECTION 5-25-10.V, OF THE RENTON MUNICIPAL CODE, AMENDING THE BUSINESS AND OCCUPATION TAX REGULATIONS, PROVIDING FOR SEVERABILITY, AND ESTABLISHING AN EFFECTIVE DATE. THE CITY COUNCIL OF THE CITY OF RENTON, WASHINGTON, DO ORDAIN AS FOLLOWS: SECTION I. All portions of the Renton Municipal Code in this ordinance not shown in strikethrough and underline edits remain in effect and unchanged. SECTION II. Subsection 5-25-2.J of the Renton Municipal Code is amended as follows: J. 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 hold themselves out to the public as conducting such business. 2. This section sets forth examples of activities that constitute engaging in business in the City, and establishes safe harbors for certain activities so that a person who meets the criteria may engage in de minimus minimis business activities in the City without having to register and obtain a business license or pay City business and occupation taxes. The activities listed in this section are illustrative only and are not intended to narrow the definition of "engaging in business" in subsection 1. If an activity is not listed, whether it constitutes 1 ORDINANCE NO. 5945 engaging in business in the City shall be determined by considering all the facts and circumstances and applicable law. 3. Without being all-inclusive, any one of the following activities conducted within the City by a person, or its employee, agent, representative, independent contractor, broker or another person 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. 2 ORDINANCE NO. 5945 h. Collecting current or delinquent accounts. i. Picking up and transporting tangible personal property, solid waste, construction debris, or excavated materials. j. Providing disinfecting and pest control services, employment and labor pool services, home nursing care, janitorial services, appraising, landscape architectural services, security system services, surveying, and real estate services including the listing of homes and managing real property. k. Rendering professional services such as those provided by accountants, architects, attorneys, auctioneers, consultants, engineers, professional athletes, barbers, baseball clubs and other sports organizations, chemists, consultants, 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 agents, representatives, independent contractors, brokers or others, domiciled or operating on a job in the City, acting on its behalf, or for customers or potential customers. n. Investigating, resolving, or otherwise assisting in resolving customer complaints. o. In-store stocking or manipulating products or goods, sold to and owned by a customer, regardless of where sale and delivery of the goods took place. 3 ORDINANCE NO. 5945 p. Delivering goods in vehicles owned, rented, leased, used, or maintained by the person or another person acting on its behalf. 4. If a person, or its employee, agent, representative, independent contractor, broker or another person 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. il ORDINANCE NO. 5945 e. Attending, but not participating in a "trade show" or "multiple vendor events". Persons participating at a trade show shall review RMC Chapter 5-22, Special Event Permits. 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. The City expressly intends that engaging in business includes any activity sufficient to establish nexus for purposes of applying the tax under the law and the constitutions of the United States and the State of Washington. Nexus is presumed to continue as long as the taxpayer benefits from the activity that constituted the original nexus generating contact or subsequent contacts. SECTION III. Section 5-25-8 of the Renton Municipal Code is amended as follows: 5-25-8 ALLOCATION AND APPORTIONMENT OF INCOME WHEN ACTIVITIES TAKE PLACE IN MORE THAN ONE JURISDICTION: Gross income, other than persons subject to the provisions of RCW Chapter 82.14.A, shall be allocated and apportioned as follows: A. Gross income derived from all activities other than those taxed as service or royalties under RMC 5-25-4.A.7 shall be allocated to the location where the activity takes place. 5 ORDINANCE NO. 5945 B. In the case of sales of tangible personal property, the activity takes place where delivery to the buyer occurs. C. 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: 1. The seller's place of business if the purchaser receives the digital product at the seller's place of business; 2. 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; 3. 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; 4. 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 a purchaser's payment instrument, if no other address is available, when use of this address does not constitute bad faith; and 5. 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 transmission by the seller or the address from which the digital 0 ORDINANCE NO. 5945 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. D. If none of the methods in RMC 5-25-8.0 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 RMC 5-25-8.C.1 through 5, then the City and the taxpayer may mutually agree to employ 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 RMC 5- 25-8.D. The City may employ an alternative method for allocating the income from the sale of digital products if the methods provided in RMC 5-25-8.C.1 through 5 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. E. For purposes of RMC 5-25-8.C.1 through 5, the following definitions apply: 1. "Digital automated services," "digital codes," and "digital goods" have the same meaning as in RCW 82.04.192; 2. "Digital products" means digital goods, digital codes, digital automated services, and the services described in RCW 82.04.050 (2)(g) and (6)(c); and 3. "Receive" has the same meaning as in RCW 82.32.730. F. Effective January 1, 2020, Ggross income derived from activities taxed as services and other activities taxed under RMC 5-25-4.A.7 shall be apportioned to 7 ORDINANCE NO. 5945 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 (2). 1. 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: a. The individual is primarily assigned within the City; b. The individual is not primarily assigned to any place of business for the tax period and the employee performs fifty percent (50%) or more of his or her service for the tax period in the City; or c. The individual is not primarily assigned to any place of business for the tax period, the individual does not perform fifty percent (50%) or more of his or her service in any city and the employee resides in the City. 2. 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. 3. Gross income of the business from eneaeine in an apmortionable 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 M ORDINANCE NO. 5945 the gross income is attributable under subsection F.2 to a city or unincorporated area of a countv within the United States or to a foreign country in which the taxpayer is not taxable. For purposes of this subsection F.3, "not taxable" means that the taxpayer is not subiect to a business activities tax by that citv or cou within the United States or by that foreign country, except that a taxpayer is taxable in a citv or countv 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 United States or that foreign country imposes such a tax. a. The custemer lecatien is On the GityT-e-r and the taxpayer iS Ret taxable at the r 34. If the allocation and apportionment provisions of this subsection F do not fairly represent the extent of the taxpayer's business activity in the City of cities ; which the taxpayer ,does business, the taxpayer may petition for or the tax administratorsmay jeffintly Fequire,ectte all or aRy part of tl+e 9 ORDINANCE NO. 5945 by the te-af4eEateeF appeFt+e�.--Fne, if FeaseR^ may require, in respect to all or any part of the taxpayer's business activity, if reasonable: factors; a. Separate accounting; b. The use of a single factor exclusion of any one (1) or more of the c. The inclusion of one (1) or more additional factors that will fairly represent the taxpayer's business activity in the City; or d. The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income. 5. 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 F.44 must prove by a preponderance of the evidence: a. That the allocation and apportionment Drovisions of this subsection F do not fairly represent the extent of the taxpayer's business activity in the Citv: and b. 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 an eauitable allocation and apportionment of the taxpaver's income. 10 ORDINANCE NO. 5945 6. If the tax administrator requires any method to effectuate an equitable allocation and apportionment of the taxpaver's income, the tax administrator cannot impose any civil or criminal penalty with reference to the tax due that is attributable to the taxpaver's reasonable reliance solelv on the allocation and apportionment provisions of this subsection F. 7. A taxpaver that has received written permission from the tax administrator to use a reasonable method to effectuate an equitable allocation and apportionment of the taxpaver's income shall not have that Dermission revoked with respect to transactions and activities that have already occurred unless there has been a material chance in. or a material misrepresentation of the facts provided by the taxpayer upon which the tax administrator reasonably relied in approving a reasonable alternative method. G. The definitions in this subsection apply throughout this section: 1. "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. 2. "Business activities tax" means a tax measured by the amount of, or economic results of. business activitv conducted in a citv or countv within 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 11 ORDINANCE NO. 5945 tax" does not include a sales tax, use tax, or a similar transaction tax, imposed on the sale or acauisition of Roods or services, whether or not denominated a Rross receipts tax or a tax imposed on the privilege of doing business. 2-3. "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. 4. "Customer" means a Derson or entitv to whom the taxaaver makes a sale or renders services or from whom the taxpayer otherwise receives gross income of the business. 45. "Customer location" means the following: G4ye �� a. For a customer not engaged in business, if the service requires the customer to be Dhvsically Dresent. where the service is Derformed. b. For a customer not engaged in business, if the service does not reauire the customer to be Dhvsically Dresent: i. The customer's residence; or 12 ORDINANCE NO. 5945 ii. If the customer's residence is not known, the customer's billing/mailing address. c. For a customer engaged in business: i. Where the services are ordered from: ii. At the customer's billing/mailing address if the location from which the services are ordered is not known: or k, n (1\A/ n iii. At the customer's commercial domicile if none of the above are 6. "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. -57. "Primarily assigned" means the business location of the taxpayer where the individual performs his or her duties. 68. "Service -taxable income" or "service income" means gross income of the business subject to tax under either the service or royalty classification. -79. "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. 13 ORDINANCE NO. 5945 �rsssT H. Assignment or apportionment of revenue under this section shall be made in accordance with and in full compliance with the provisions of the interstate commerce clause of the United States Constitution where applicable. SECTION IV. Subsection 5-25-10.V of the Renton Municipal Code is amended as follows: V. 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 8236.010 82.38.020 and exempte4 under RCW 82�0-82.38.280, 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. SECTION V. If any section, subsection, sentence, clause, phrase or work of this ordinance should be held to be invalid or unconstitutional by a court or competent jurisdiction, such invalidity or unconstitutionality thereof shall not affect the constitutionality of any other section, subsection, sentence, clause, phrase or word of this ordinance. SECTION VI. This ordinance shall be in full force and effect thirty (30) days after publication of a summary of this ordinance in the City's official newspaper. The summary shall consist of this ordinance's title. 14 ORDINANCE NO. 5945 PASSED BY THE CITY COUNCIL this 18th day of November, 2019. APPROVED BY THE MAYOR this 18th day of Novemk Approved as to form: Shane Moloney, City Attorney Date of Publication: 11/22/2019 (Summary) ORD:2080:10/18/19 Denis Law, Mayor 15