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HomeMy WebLinkAbout2882 Enacting a Model Business and Occupation Tax Ordinance Ordinance No. 2882 AN ORDINANCE OF THE CITY OF PORT TOWNSEND ENACTING A MODEL BUSINESS AND OCCUPATION TAX ORDINANCE AS NEW CHAPTER 5.04A TO THE PORT TOWNSEND MUNICIPAL CODE, AND REPEALING EXISTING PORT TOWNSEND MUNICIPAL CODE CHAPTER 5.04 PROVIDING FOR A BUSINESS AND OCCUPATION TAX WHEREAS, the Washington State Legislature enacted Engrossed House Bill 2030 March 19, 2003 requiring all cities to amend their business and occupation tax ordinances by December 31,2004 in accordance with the Core Model Ordinance, NOW, THEREFORE, the City Council of the City of Port Townsend ordains as follows: SECTION 1. Adoption. There is hereby adopted and enacted as part of the Port Townsend Municipal Code a new Chapter 5.04A, Business and Occupation Tax, replacing existing Chapter 5.04 - Business and Occupation Tax, as follows: See Exhibit A. SECTION 2. Repeal. Chapter 5.04, Business and Occupation Tax, of the Port Townsend Municipal Code, which is attached as Exhibit B, is hereby repealed in its entirety. SECTION 3. Severability. If any provision of this ordinance 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. This Ordinance shall take effect and be in force five days after the date of its publication in the manner provided by law. Adopted by the City Council of the City of Port Townsend, Washington, at a regular meeting thereof, held this second day of December, 2004. ~'LJ¿l'Á J, Catharine Robinson, Mayor Attest: Approved as to Form: ~0-L9~ John P. Watts, City Attorney Page 1 Ordinance 2882 EXHIBIT A CHAPTER 5.04A BUSINESS AND OCCUPATION TAX Sections: 5.04A.020 5.04A.028 5.04A.030 5.04A.050 5.04A.060 5.04A.070 5.04A.075 5.04A.076 5.04A.090 5.04A.100 5.04A.120 Exercise of revenue license power Administrative Provisions Definitions Imposition of the tax - tax or fee levied Doing business with the City Multiple activities credit when activities take place in one of more cities with eligible gross receipt taxes Deductions to prevent multiple taxation of transactions involving more than one city with an eligible gross receipts tax Assignment of gross income derived from intangibles Exemptions Deductions Tax part of overhead 5.04A.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. 5.04A.028 Administrative Provisions. The administrative provisions contained in chapter 5.04B shall be fully applicable to the provisions of this chapter except as expressly stated to the contrary herein. 5.04A.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. "Business. " "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." "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." "Commercial or industrial use" means the following uses of products, including by-products, by the extractor or manufacturer thereof: Page 1 Ordinance 2882 EXHIBIT A (1) Any use as a consumer; and (2) The manufacturing of articles, substances or commodities; "Eligible gross receipts tax." The term "eligible gross receipts tax" means a tax which: (1) Is imposed on the act or privilege of engaging in business activities within section .050; and (2) Is measured by the gross volume of business, in terms of gross receipts and is not an income tax or value added tax; and (3) Is not, pursuant to law or custom, separately stated from the sales price; and (4) Is not a sales or use tax, business license fee, franchise fee, royalty or severance tax measured by volume or weight, or concession charge, or payment for the use and enjoyment of property, property right or a privilege; and (5) Is a tax imposed by a local jurisdiction, whether within or without the State of Washington, and not by a Country, State, Province, or any other non-local 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 section sets forth examples of activities that constitute engaging in business in the City, and establishes safe harbors for certain of those activities so that a person who meets the criteria may engage in de 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). 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, anyone of the following activities conducted within the City by a person, or its employee, agent, representative, independent contractor, broker or another acting on its behalf constitutes engaging in business and requires a person to register and obtain a business license. (a) Owning, renting, leasing, maintaining, or having the right to use, or using, tangible personal property, intangible personal property, or real property permanently or temporarily located in the City. (b) Owning, renting, leasing, using, or maintaining, an office, place of business, or other establishment in the City. (c) Soliciting sales. (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. Page 2 Ordinance 2882 EXHIBIT A (g) Soliciting, negotiating, or approving franchise, license, or other similar agreements. (h) Collecting current or delinquent accounts. (I) Picking up and transporting tangible personal property, solid waste, construction debris, or excavated materials. ü) 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. (0) In-store stocking or manipulating products or goods, sold to and owned by a customer, regardless of where sale and delivery of the goods took place. (p) Delivering goods in vehicles owned, rented, leased, used, or maintained by the person or another acting on its behalf. (q) Accepting or executing a contract with the City, irrespective of whether goods or services are delivered within or without the City, or whether the person's office or place of business is within or without the City. (4) If a person, or its employee, agent, representative, 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. (d) Renting tangible or intangible property as a customer when the property is not used in the City. (e) Attending, but not participating in a "trade show" or "multiple vendor events". Persons participating at a trade show shall review the City's trade show or multiple vendor event ordinances. (f) Conducting advertising through the mail. (g) Soliciting sales by phone from a location outside the City. Page 3 Ordinance 2882 EXHIBIT A (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. 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." "Extracting" is the activity engaged in by an extractor and is reportable under the extracting classification. "Extractor." "Extractor" means every person who from the person's own land or from the land of another under a right or license granted by lease or contract, either directly or by contracting with others for the necessary labor or mechanical services, for sale or for commercial or industrial use, mines, quarries, takes or produces coal, oil, natural gas, ore, stone, sand, gravel, clay, mineral or other natural resource product; or fells, cuts or takes timber, Christmas trees, other than plantation Christmas trees, or other natural products; or takes fish, shellfish, or other sea or inland water foods or products. "Extractor" does not include persons performing under contract the necessary labor or mechanical services for others; or persons meeting the definition of farmer. "Extractor for Hire" "Extractor for hire" means a person who performs under contract necessary labor or mechanical services for an extractor. "Gross income of the business." "Gross income of the business" means the value proceeding or accruing by reason of the transaction of the business engaged in and includes gross proceeds of sales, compensation for the rendition of services, gains realized from trading in stocks, bonds, or other evidences of indebtedness, interest, discount, rents, royalties, fees, commissions, dividends, and other emoluments however designated, all without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses. "Gross proceeds of sales." "Gross proceeds of sales" means the value proceeding or accruing from the sale of tangible personal property 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. "Manufacturing." "Manufacturing" means the activity conducted by a manufacturer and is reported under the manufacturing classification. "Manufacturer," "to manufacture." (1) "Manufacturer" means every person who, either directly or by contracting with others for the necessary labor or mechanical services, manufactures for sale or for commercial or industrial use from the person's own materials or ingredients any products. When the owner of equipment or facilities furnishes, or sells to the customer prior to manufacture, 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 Page 4 Ordinance 2882 EXHIBIT A deemed to be a processor for hire, and not a manufacturer. (A business not located in this City that is the owner of materials or ingredients processed for it in this City by a processor for hire shall be deemed to be engaged in business as a manufacturer in this City.) (2) "To manufacture" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials or ingredients so that as a result thereof a new, different or useful product is produced for sale or commercial or industrial use, and shall include: (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. "To manufacture" shall not include 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. "Person." "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. "Retailing." "Retailing" means the activity of engaging in making sales at retail and is reported under the retailing classification. "Retail Service." "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; Page 5 Ordinance 2882 EXHIBIT A (3) Credit bureau services; (4) Automobile parking and storage garage services; (5) Landscape maintenance and horticultural services but excluding (i) horticultural services provided to farmers and (ii) 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. "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," "retail sale," or "retail service." It includes renting or leasing, conditional sale contracts, leases with option to purchase, and any contract under which possession of the property is given to the purchaser but title is retained by the vendor as security for the payment of the purchase price. It also includes the furnishing of food, drink, or meals for compensation whether consumed upon the premises or not. (2) "Casual or isolated sale" means a sale made by a person who is not engaged in the business of selling the type of property involved on a routine or continuous basis. "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 Page 6 Ordinance 2882 EXHIBIT A (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 (a), (b), (c), (d), or (e) of this subsection following such use. (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 .050(1)(g). (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, 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, papering, repairing, furnace or septic tank cleaning, snow removal or sandblasting; Page 7e Ordinance 2882 EXHIBIT A (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 sale of or charge made for tangible personal property, labor and services to persons taxable under (a), (b), (c), (d), (e), and (f) 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 section shall be construed to modify this subsection. (4) "Sale at retail" or "retail sale" shall also include the providing of competitive telephone service to consumers. (5) "Sale at retail" or "retail sale" shall also include the sale of canned 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, but shall not include custom software or the customization of canned software. (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 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). (8) "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 Page 8 Ordinance 2882 EXHIBIT A 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 should be reported under the service and other classification.) (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 should be reported under the service and other classification.) "Sale at wholesale," "wholesale sale." "Sale at wholesale" or "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 network telephone service to a telecommunications company as defined in RCW 80.04.010 for the purpose of resale, as contemplated by RCW 35.21.715. "Services." "Other services and activities" shall be construed to mean the same as the term "selected business activities" as contained in RCW 82.04.055, as now or later amended, which is incorporated by reference. "Taxpayer." "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. "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. The value proceeding or accruing from sales on the installment plan under conditional contracts of sale shall be reported as of the dates when the payments become due. "Value of products." (1) The value of products, including by-products, extracted or manufactured, shall be determined by the gross proceeds derived from the sale thereof whether such sale is at wholesale or at retail, to which shall be added all'subsidies and bonuses received from the purchaser or from any other person with respect to the extraction, manufacture, or sale of such products or by-products by the seller. (2) Where such products, including by-products, are extracted or manufactured for commercial or industrial use; and where such products, including by-products, 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 Page 9 Ordinance 2882 EXHIBIT 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 (2) the value of materials incorporated into the prototype in cases in which the new or improved product is not offered for sale. "Wholesaling." "Wholesaling" means engaging in the activity of making sales at wholesale, and is reported under the wholesaling classification. 5.04A.050 Imposition of the tax - tax or fee levied. (1) Except as provided in subsection (2) 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: (a) 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 0.2 of one percent (.002). 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. (b) 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 0.2 of one percent (.002). 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. (c) Upon every person engaging within the City in the business of making sales at wholesale, except persons taxable under subsection (d) 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 0.20 of one percent (.0020). (d) Upon every person engaging within the City in the business of making sales at retail, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of such sales of the business, without regard to the place of delivery of articles, commodities or merchandise sold, multiplied by the rate of 0.20 of one percent (.0020). (e) 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, (iv) extracting for Page 10 Ordinance 2882 EXHIBIT A 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 0.20 of one percent (.0020). (f) Upon every person engaging within the City in the business of making sales of retail services; as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of sales multiplied by the rate of 0.2 of one percent (.002). (g) Upon every other person engaging within the City in any business activity other than or in addition to those enumerated in the above subsections; as to such persons, the amount of tax on account of such activities shall be equal to the gross income of the business multiplied by the rate of 0.2 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, a sale at wholesale, or a retail service. (2) 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. 5.04A.060 Doing business with the City. Except where such a tax is otherwise levied and collected by the City from such person, there is hereby levied a tax on the privilege of accepting or executing a contract with the City. Such tax shall be levied and collected whether goods or services are delivered within or without the City and whether or not such person has an office or place of business within or without the City. As to such persons the amount of tax shall be equal to the gross contract price multiplied by the rate under section .050 that would otherwise apply if the sale or service were taxable pursuant to that section. 5.04A.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 .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. Page 11 Ordinance 2882 EXHIBIT A (4) Credit for persons that sell in the City products that they 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 usinQ inQredients 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. 5.04A.075 Deductions to prevent multiple taxation of transactions involving more than one city with an eligible gross receipts tax. (1) Amounts subject to an eliQible Qross receipts tax in another city that also maintains nexus over the same activity. 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 to the contract price used to measure the tax due to the other city from the measure of the tax owed to the City. (2) Person manufacturinQ 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. Page 12 Ordinance 2882 EXHIBIT A 5.04A.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). 5.04A.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 PTMC 5.84.030. (2) Investments - dividends from subsidiary corporations. (a) 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) Emplovees. (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, as defined by RCW 18.16.020, is an independent contractor for purposes of this chapter. (4) 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. (5) MortQaQe 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. (6) Amounts derived from manufacturinQ, sellinQ or distributinQ 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 82.36.010 and exempt under RCW 82.36.440, provided that any fuel not subjected to the state fuel excise tax, or any other applicable deduction or exemption, will be taxable under this chapter. (7) Amounts derived from liauor. and the sale or distribution of liauor. This chapter shall not apply to liquor as defined in RCW 66.04.010 and exempt in RCW 66.08.120. (8) Casual and isolated sales. This chapter shall not apply to the gross proceeds derived from casual or isolated sales. (9) 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 Page 13 Ordinance 2882 EXHIBIT A 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. (10) 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. 5.04A.100 Deductions. In computing the license fee or tax, there may be deducted from the measure of tax the following items: (1) Receipts from tanaible 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 received by the purchaser or its agent outside the State of Washington. (2) 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 ofthis tax, have been computed according to the "value of product" provisions. (3) 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. (4) 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. 5.04A.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 construed 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. Page 14 Ordinance 2882 EXHIBIT A EXHIBIT B REPEAL CHAPTER 5.04 Chapter 5.04 BUSINESS AND OCCUPATION TAX Sections: 5.04.010 5.04.020 5.04.200 5.04.210 5.04.220 5.04.230 5.04.235 5.04.240 5.04.250 5.04.260 5.04.270 5.04.280 5.04.290 5.04.300 5.04.310 5.04.320 5.04.330 5.04.340 5.04.350 5.04.360 5.04.370 5.04.380 5.04.390 5.04.400 5.04.410 5.04.420 5.04.430 5.04.440 5.04.444 5.04.445 5.04.450 5.04.010 Exercise of revenue power. Definitions. Enumeration of persons subject to tax - Amount. Taxable as to each activity. Determination of values. Taxes - Apportionment - Persons rendering services inside and outside city. Same offices within and without the city. Sales by consignee, bailee, factor or auctioneer. Exemptions. Deductions allowed in computing license fees. Repealed. Quarterly payments of business and occupation tax. Form of payment business and occupation tax. Books of account. Final payment public work contract - License fees to be paid first. Extension of time - Penalties. Sale or transfer of business. Applications and returns confidential. Over or underpayment of tax. Failure to make return. Appeals to the city council. Treasurer to make rules. Mailing of notices. False returns. Tax additional to others. Tax constitutes debt. Application to city's business activities. Revocation of business license. Repealed. Repealed. Violations - Penalties. Exercise of revenue power. The provisions of this chapter shall be deemed an exercise of the power of the city to license for revenue. 5.04.020 Definitions. In construing the provisions of this chapter, save when otherwise declared or clearly apparent from the context, the following definitions shall be applied: A. "Tax year" or "taxable year" means either the calendar year, or the taxpayer's fiscal year when permission is obtained from the city treasurer to use a fiscal year in lieu of the calendar year. B. "Person" or "company" herein used interchangeably, means any individual, receiver, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, municipal corporation, corporation, association, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit or otherwise and the United States or any instrumentality thereof. C. "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" under subsection D of this section. It includes conditional sales contracts, leases with option to purchase and any other contract under which possession of the property is given to the purchaser but title is retained by the vendor as Page 1 Ordinance 2882 EXHIBIT B security for the payment of the purchase price. It shall also be construed to include the furnishing of food, drink, or meals for compensation whether consumed upon the premises or not. The term "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. D. "Sale at retail" or "retail sale" means the definition given the terms in RCW 82.04.050, Business and Occupation Tax, as now or later amended, which is incorporated by reference. E. "Sale at wholesale" or "wholesale sale" means any sale of tangible personal propertyand any sale of or charge made for labor and services rendered in respect to real or personal property, which is not a sale at retail. F. "Gross proceeds of sales" means the value proceeding or accruing from the sale of tangible personal property and/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. G. "Gross income" of the business means the value proceeding or accruing by reason of the transaction of the business engaged in and includes gross proceeds of sales, compensation for the rendition of services, gains realized from trading in stocks, bonds or other evidences of indebtedness, interest, discount, rents, royalties, fees, commissions, dividends, and other emoluments however designated, all without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes or any other expense whatsoever paid or accrued and without any deduction on account of losses. H. "Value proceeding or accruing" means the consideration, whether money, credits, rights or other property expressed in terms of money, 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. The city treasurer may provide by regulation that the value proceeding or accruing from sales on the installment plan under conditional contracts of sale may be reported as of the dates when due payments become due. I. "Extractor" means every person who from his 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, natural gas, ore, stone, sand, gravel, clay, mineral or other natural resource product, or fells, cuts or takes timber or other natural products, or takes, cultivates, or raises fish, shell fish, or other sea or inland water foods or products; it does not include persons performing under contract the necessary labor or mechanical services for others. J. "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 his own materials or ingredients any articles, substances or commodities. When the owner of equipment or facilities furnishes, or sells to the customer prior to manufacture, all or a portion of the materials that become a part or whole of the manufactured article, the city treasurer shall prescribe equitable rules for determining tax liability. K. "To manufacture" embraces all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery to materials so that as a result thereof a new, different or useful article of tangible personal property or substance of trade or commerce is produced and shall include the production or fabrication of special made or custom made articles. L. "Commercial or industrial use" means the following use of products, including by-products, by the extractor or manufacturer thereof: 1. Any use as a consumer; and 2. The manufacturing of articles, substances or commodities from extracted products, including by- products. M. "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. N. "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. O. "Cash discount" means a deduction from the invoice price of goods or charge for services which is allowed if the bill is paid on or before a specified date. Page 2 Ordinance 2882 EXHIBIT B P. "Tuition fee" shall be construed to include library, laboratory, health service and other special fees, and amount 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; provided, that the term, "educational institution" as used herein, means only those institutions created or generally accredited as such by the state 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 instructions in trade, industry and agriculture, but not including specialty schools, business colleges, other trade schools or similar institutions. Q. "Successor" means any person who shall, through direct or mesne conveyance, purchase or succeed to the business, or portion thereof, or the whole or any part of the stock of goods, wares, merchandise or fixtures, or any interest therein of a taxpayer quitting, selling out, exchanging or otherwise disposing of his business. Any person obligated to fulfill the terms of a contract shall be deemed a successor to any contractor defaulting in the performance of any contract as to which such person is a surety or guarantor. R. "Consumer" means the following: 1. Any person who purchases, acquires, owns, holds or uses any article of tangible personal property other than for the purposes of resale as tangible personal property in the regular course of business or for the purpose of consuming such property or a new 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 produced for sale; 2. Any person engaged in the business of rendering professional or personal services to persons (as distinguished from services rendered to property of persons) and who are taxable under PTMC 5.04.200C; 3. Any person engaged in the business of contracting for the building, repairing or improving of any publicly owned street, place, road, highway, bridge or trestle which is used or to be used primarily for foot or vehicular traffic, in respect, however, only to tangible personal property used or consumed in such business; 4. Any person who is an owner, lessee or has the right of possession to or an easement in real or personal property which is being constructed, repaired, improved, cleaned, imprinted or otherwise altered by a person engaged in business, excluding only the United States of America, the state of Washington and its political subdivisions in respect to labor and services rendered to their real property which is used or held for public road purposes. S. "City" means Port Townsend, a municipal corporation. "In this city" or "within this city" as used herein includes all federal areas lying within the exterior boundaries of the city of Port Townsend. T. "By-product" means any additional products, 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. U. "Taxpayer" includes any individual, group of individuals, corporation or association required to have a business license hereunder, or liable for any license fee or tax, or for the collection of any license fee or tax hereunder, or who engages in any business, or who performs any act, for which a license fee or tax is imposed by this chapter. V. Words in the singular number shall include the plural, and the plural shall include the singular. Words in one gender shall include all other genders. W. "Quarterly" means that three-month period of each quarter of every calendar year. X. "Other services and activities" shall be construed to mean the same as the term "selected business activities" as contained in RCW 82.04.055, as now or later amended, which is incorporated by reference. Y. "Treasurer" means the city treasurer of the city of Port Townsend, a municipal corporation, or his or her designee. The provisions of this chapter shall be administered and enforced by the city treasurer except as otherwise provided by state statute. 5.04.200 Enumeration of persons subject to tax - Amount. A business and occupation tax is levied upon and shall be collected from every person for the act and privilege of engaging in business activities within the city. The tax shall be paid quarterly, in amounts to be determined by the application of rates given against gross proceeds of sale, or gross income of business, as the case may be, as follows: Page 3 Ordinance 2882 EXHIBIT B A. Upon every person engaging within this city in the business of making sales at wholesale or retail, the amount of tax with respect to such business shall be equal to the gross proceeds of such sales of the business without regard to the place of delivery of articles, commodities, or merchandise sold, multiplied by the rate of 0.0014; B. Upon every person engaging within this city in the business of: 1. Printing and of publication of newspapers, periodicals or magazines, 2. Building, repairing or improving any publicly owned street, place, road, highway, bridge or trestle which is used, or to be used, primarily for foot or vehicular traffic or any purpose, the amount of tax on such business shall be equal to the gross income of the business multiplied by the rate of 0.0014; C. Upon every person engaging within this city in any business activity other than or in addition to those set forth in subsections A and B above, the amount of tax shall be equal to the gross income of the business multiplied by the rate of 0.002. This subsection also includes, without limitation, persons engaged in the business of rendering "services and other activities" as defined in this chapter. 5.04.210 Taxable as to each activity. Every person engaging in the activities which are within the purview of the provisions of the Port Townsend Municipal Code, shall be taxable under each paragraph applicable to the activities engaged in; provided, however, that persons taxable under paragraph C of PTMC 5.04.200 shall not be taxable under paragraphs A or B of PTMC 5.04.200 with respect to making sales at retail or wholesale of products extracted or manufactured within the city by such persons. 5.04.220 Determination of values. The value of products, including by-products, extracted or manufactured shall be determined by the gross proceeds derived from the sale thereof whether such sale is at wholesale or at retail, to which shall be added all subsidies and bonuses received from the purchaser or from any other person with respect to the extraction, manufacture, or sale of such products or by-products by the seller, except: A. Where such products, including by-products, are extracted or manufactured for commercial or industrial use; B. Where such products, including by-products, 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. In the above cases, the value shall correspond as nearly as possible to the gross proceeds from the sales in this city 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. The city treasurer shall prescribe uniform and equitable rules for the purpose of ascertaining such values. 5.04.230 Taxes - Apportionment - Persons rendering services inside and outside city. A. Persons engaging in the business of rendering services, both within and without the city, or partially without and partially within the city, and maintaining an office or place of business within the city and not elsewhere, shall be taxable on the gross income from the business without regard to the place where the services are rendered. B. Persons engaged in the business of rendering services without the city, having an office both inside and outside the city, shall be taxable on the gross income from the business rendered outside the city which is administered and/or processed in any way through an office located within the city. A credit shall be given to a taxpayer as to gross income subject to occupational tax of another city for services rendered outside the city and within another city. C. Persons who render services both inside and outside of the city and who maintain an office or place of business both inside the city and outside the city, or who have no office or other place of business within the city, shall have the option, for purposes of limiting their tax liability to the city under this chapter, of apportioning to the city that portion of gross income derived from services rendered within the city. If the person cannot readily determine the portion of gross income derived from services rendered within the city, the person shall apportion to the city that portion of total income which the cost of rendering services within the city bears to the total cost of rendering services both inside and outside of the city. Page 4 Ordinance 2882 EXHIBIT B 5.04.235 Same offices within and without the city. A. Persons maintaining an office, plant, warehouse or other business establishment which is partly within and partly outside of the city, shall be taxable on the value of products, gross proceeds of the sale, or gross income of the business attributable to business within the city, ascertained either: 1. Bya segregation of business within the business outside the city, shown and supported by separate accounting records, or 2. If such segregation cannot be practicably made, by an apportionment to the city of that part of the total value of products, gross proceeds of sales, or gross income of the business derived from business both within and outside the city: a. In the proportion that the cost of doing business within the city bears to the cost of doing business both within and outside the city, or b. When the use of such apportionment factor is impractical or inequitable, by a fair and equitable apportionment of such values, proceeds, or income between business within the city and business outside the city upon such basis, comparable in character to that prescribed in (a) above, as shall be agreed upon by the treasurer and the taxpayer after consideration of the facts. 5.04.240 Sales by consignee, bailee, factor or auctioneer. Every consignee, bailee, factor or auctioneer 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 his/her or its own name and actually so selling, shall be deemed the seller of such tangible personal property within the meaning of this chapter; and further, the consignee, bailor, principal or owner shall be deemed a seller of such property to the consignee, bailee, factor or auctioneer. The burden shall be on 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 for a principal; such claim will be allowed only when the taxpayer's account records are kept in such a manner as the treasurer shall by general regulation provide. 5.04.250 Exemptions. A. The provisions of this chapter shall not apply to any sale or activity which is exempt from taxation under the Washington State sales tax, or is specifically made exempt by state law. B. The tax under this chapter shall only be imposed if the gross income of the person exceeds $900.00 in any quarter. 5.04.260 Deductions allowed in computing taxes. In computing the tax there may be deducted from the measure of tax the following items: A. 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; B. Amounts derived from bona fide initiation fees, dues, contributions, donations, tuition fees and endowment funds. The provisions of this paragraph shall not be construed to exempt any persons, association or society from tax liability upon selling tangible personal property or upon providing facilities or services for which a special charge is made to members of others; provided that dues which are for, or graduated upon, the amount of service rendered by the recipient are not permitted as a deduction; C. The amount of cash discount actually taken by the purchaser. This deduction is not allowed in arriving at the taxable amount under the extractive and/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 provisions of PTMC 5.04.220; D. The amount of credit losses actually sustained by taxpayers whose regular books of account are kept upon an accrual basis; E. Amounts derived by any person as compensation for the receiving, washing, sorting and packing of fresh perishable horticultural products and the material and supplies used therein when performed for the person exempted in PTMC 5.04.250, either as agent or as independent contractor; F. Amounts derived from business which the city is prohibited from taxing under the Constitution or laws of the state or the Constitution or laws of the United States; G. Amounts derived as compensation for services rendered or to be rendered to patients by a hospital or other institution devoted to the care of human beings with respect to the prevention or treatment of disease, sickness or suffering, when such hospital or other institution is operated by the United States of America or any of its instrumentalities, or by the state of Washington, or any of its political subdivisions; Page 5 Ordinance 2882 EXHIBIT B H. Amounts derived as compensation for services rendered to patients by a hospital or other institution which is organized as a nonprofit corporation devoted to the care of human beings with respect to the prevention or treatment of disease, sickness or suffering; provided, that no part of the net earnings received by such an institution shall inure, directly or indirectly, to any person other than the institution entitled to deduction; provided further, that in no event shall any such deduction be allowed, unless the hospital building is entitled to exemption from taxation under the property tax laws of this state, and unless the superintendent or other proper officer of the institution shall, under oath, make annual reports to the State Board of Health of its receipts and disbursements during the preceding year, specifying in detail the sources from which receipts have been derived and the subject to which disbursements have been applied, and shall furnish in the report full and complete vital statistics for the use and information of the State Board of Health. 5.04.270 Business license required. 5.04.280 Quarterly payments of business and occupation tax. A. The tax imposed by this chapter shall be due and payable in quarterly installments, and payment made on or before the final day of the month following the end of the quarterly period in which the tax accrued. The payment shall be made as provided in this chapter and shall be accompanied by a return on a form to be provided and prescribed by the treasurer. To the return the taxpayer shall be required to swear or affirm that the information therein given is full and true and that the taxpayer knows the same to be so. B. Annual Return. Whenever the total tax for which any person is liable under this chapter does not exceed the sum of $25.00 during the calendar year, an annual return may be made upon written request and subject to the approval of the city treasurer. C. Partial Periods. Whenever a person commences to engage in business during any quarterly period, the first tax return shall be based upon and cover the portion of the quarterly period which he or she is engaged in business. D. Deleted. 5.04.290 Form of payment of business and occupation tax. A. The tax payment shall be paid to the city treasurer by bank draft, certified check, cashier's check, personal check or money order, or in cash. If payment is made by draft or check, the tax shall not be deemed paid unless the check or draft is honored in the usual course of business; nor shall the acceptance of any sum by the treasurer be an acquittance or discharge of the tax due unless the amount of the payment is in the full and actual amount due. B. Forms. The treasurer shall mail forms for returns, but failure of the taxpayer to receive any such forms shall not excuse the taxpayer from making the returns and paying the tax when due, provided that, in the event that the treasurer fails to timely mail forms for returns, no penalties for nonpayment shall commence until 30 days following the actual date of mailing. 5.04.300 Books of account. It is the duty of every person liable for the payment of tax imposed by this chapter to keep and preserve for the period of three years such books and records as will accurately reflect the amount of his or her gross income, gross proceeds of sale or value of products, as the case may be, and from which can be determined the amount of any tax for which he or she may be liable under the provisions of this chapter; and all books, records, invoices, inventories and stocks of goods, wares and merchandise shall be open for examination at all reasonable times by the treasurer or his or her duly authorized agent. 5.04.310 Final payment public work contract - License fees to be paid first. The treasurer, before issuing any warrant making final payment to any person performing any public work contract for the city, require such person to pay in full all license fees or taxes due under the ordinance codified herein from such person on account of such contract, or otherwise. 5.04.320 Extension of time - Penalties. A. The treasurer for good cause shown may extend the time for making and filing any return as required under this chapter, and may grant such reasonable additional time within which to file such return as the treasurer may deem proper; provided, that any extension in excess of 30 days shall be conditioned upon payment of a penalty as set forth in subsection B below. B. Penalties. If tax return and/or payment are not received on the due date a penalty must be included as follows: If one to 30 days are delinquent, 10 percent of the tax with a minimum penalty of $1.00. If 31 to 60 days delinquent, 15 percent of the tax with a minimum penalty of $2.00. If 61 or more days delinquent, 20 percent of the tax with a minimum penalty of $3.00. Page 6 Ordinance 2882 EXHIBIT B 5.04.330 Sale or transfer of business. Upon the sale or transfer during any quarterly period of a business on account of which tax is hereby required, the purchaser or transferee shall, if the tax has not been paid in full for the quarterly period, be responsible for the payment of the tax for that portion of the quarterly period during which he or she carried on such business. 5.04.340 Applications and returns confidential. The returns made to the treasurer pursuant to this chapter shall not be made public, nor shall they be subject to the inspection of any person except the mayor, city attorney, city treasurer or the treasurer's authorized agent, members of the city council, the chief of police and the chief of police's authorized agents and any federal, state or local duly commissioned law enforcement agent upon certification that such information is required as part of a criminal investigation; and it is unlawful for any person to make public or to inform any other person as to the contents of any information continued in or to permit inspection of any application or returns except as required by an ongoing criminal investigation or prosecution or as otherwise authorized by this section. 5.04.350 Over or underpayment of tax. If the city treasurer upon investigation or upon checking returns finds that the tax paid on an item is more than the amounf required of the taxpayer, he or she shall refund the amount overpaid by a warrant upon the general fund if the amount overpaid exceeds $10.00; otherwise, the amount overpaid shall remain as a credit to the subsequent tax quarter. If the treasurer finds that the tax paid is less than required, he or she shall mail a statement to the taxpayer showing the balance due, who shall within 10 days pay the amount shown thereon. 5.04.360 Failure to make return. If any taxpayer fails, neglects or refuses to make his or her return as and when required herein the treasurer is authorized to determine the amount of the tax payable, and by mail to notify such taxpayer of the amount so determined. The amount so fixed shall thereupon become the tax and be immediately due and payable. 5.04.370 Appeals to the city council. A. Any taxpayer aggrieved by the amount of the fee or tax found by the treasurer to be required under the provisions of this chapter, may appeal to the city council from such finding by filing a written notice of appeal with the city treasurer within 25 days from the time such taxpayer was given notice of such amount and upon paying a $25.00 appeal filing fee. The treasurer shall, as soon as practicable, fix a time and place for the hearing of such appeal, which time shall be not more than 10 days after the filing of the notice of appeal, and shall cause a notice of the time and place thereof to be mailed to the appellant. At such hearing the taxpayer shall be entitled to be heard and to introduce evidence in his or her own behalf. The city council shall thereupon ascertain the correct amount of the fee or tax by written findings and conclusions and the city treasurer shall notify the appellant thereof by mail, which amount, together with costs of the appeal, if appellant is unsuccessful therein, must be paid within 10 days after such notice is given. B. The mayor or the chairman of any committee of the city council before which the appeal is to be heard, may, by subpoena, require the attendance thereat of any person, and may also require him to produce any pertinent books and records. Any person served with such subpoena shall appear at the time and place therein stated and produce the books and records required if any, and shall testify truthfully under oath administered by the chairman in charge of the hearing on appeal as to any matter required of him or her pertinent to the appeal, and it is unlawful for such person to fail or refuse so to do. C. Any decision, finding or ruling made pursuant to this chapter shall be final at the time the final order or decision is issued in written form, and no action to set aside or modify the final order or decision shall be brought in superior court or other tribunal unless the action shall be filed within 30 days from the effective date of such decision, finding or ruling. 5.04.380 Treasurer to make rules. The treasurer shall have the power, and it shall be his or her duty, from time to time, to adopt, publish and enforce rules and regulations not inconsistent with this chapter or with law for the purpose of carrying out the provisions and it is unlawful to violate or fail to comply with any such rule or regulation. 5.04.390 Mailing of notices. Any notice required by this chapter to be mailed to any taxpayer shall be sent by ordinary mail, addressed to the address of the taxpayer as shown by the records of the treasurer, or if no such address is shown, Page 7 Ordinance 2882 EXHIBIT B to such address as the treasurer is able to ascertain by reasonable effort, failure of the taxpayer to receive any such mailed notice shall not release the taxpayer from any tax or any penalties thereon, except as provided in PTMC 5.04.290, nor shall such failure operate to extend any time limit set by the provisions of this chapter. 5.04.400 False returns. It is unlawful for any person liable to tax hereunder to fail or refuse to make the returns as and when required or to pay the tax when due, or for any person to make any false or fraudulent return or any false statement or representation in, or in connection with, any such return, or to aid or abet another in any attempt to evade payment of the tax, or any part thereof, or for any person to fail to appear and/or testify in response to subpoena issued under this chapter, or to testify falsely upon any investigation of the correctness of a return, or upon the hearing of any appeal, or in any manner whatsoever to hinder or delay the city or any of its officers in carrying out the provisions of this chapter. 5.04.410 Tax additional to others. The business and occupation tax imposed and levied by this chapter is additional to any license fee or tax imposed or levied under any law or any other ordinance of the city, except as otherwise expressly provided. 5.04.420 Tax constitutes debt. Any tax due and unpaid under this chapter, and all penalties, shall constitute a debt to Port Townsend, a municipal corporation, and may be collected by court proceedings in the same manner as any other debt in like amount, which remedy shall be in addition to all other existing remedies. The right of recovery by the city from the taxpayer for any tax provided under this chapter shall be outlawed after the expiration of three years and the right of recovery against the city because of overpayment of tax by any taxpayer shall be outlawed after the expiration of three years after which time the taxpayer shall have no right to recovery against the city. 5.04.430 Application to city's business activities. Whenever Port Townsend, a municipal corporation, through any department or division shall engage in any business activity which if engaged in by any person would under this chapter require the payment of a tax by such person, the city department or division engaging in such business activity shall make returns and from the funds of such department or division pay the business and occupation taxes as required by this chapter. 5.04.440 Revocation of business license. The treasurer may revoke the business license issued to any taxpayer under Chapter 5.08 PTMC who is in default in any tax payment, or who fails to comply with any of the provisions of this chapter. Notice of such revocation shall be mailed to the taxpayer by the treasurer, and on and after the date thereof any such taxpayer who continues to engage in business shall be deemed to be operating without a license and shall be subject to any or all penalties provided in this chapter. 5.04.444 Issuance not to excuse violations. Repealed by Ord. 2459. 5.04.445 Business to be in compliance with zoning provisions. Repealed by Ord. 2459. 5.04.450 Violations - Penalties. Any person who is found to have violated any term or provision of this chapter or who fails to comply with a lawful rule, order, regulation or decision of the treasurer or city council under this chapter shall be guilty of a civil infraction. For the first such infraction, the civil penalty shall be in the amount of $200.00. For the second infraction by the same person within a period of two years, the penalty shall be $400.00. Upon the third violation within a period of two years, such violation shall constitute a misdemeanor, and be punishable upon conviction by a fine in any sum not to exceed $500.00, or by imprisonment for a term not exceeding 90 days, or by both fine and imprisonment. Any civil penalties under this chapter may be collected in a civil action in any court of competent jurisdiction. The city may also seek injunctive relief in superior court to restrain any violations of the provisions of this chapter. Prior to any person being charged with a violation, the city shall mail written notice of the alleged violation to the person at the address shown on the license, giving the person five days to cure the violation. Upon failure to cure, a citation or complaint may issue. Page 8 Ordinance 2882 EXHIBIT B