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Posted January 5, 2011 On November 17, 2010, Governor Chris Gregoire directed state agencies under her jurisdiction to suspend non-critical rule development and adoption activities until the end of 2011 [Executive Order 10-06].  The Office of Financial Management (OFM) issued guidelines to help agencies decide which rule making activities should be suspended [OFM Guidelines]. 

The Department released a preliminary list of what it considered to be critical rule making that should continue, and rule making it believed could be delayed under the Executive Order and OFM Guidelines, to provide stakeholders an opportunity to comment [Preliminary List].  The Department has now made a determination on what rules it intends to move forward and what rules it intends to delay.

At a future time, the Department may determine that additional rulemaking should proceed based on stakeholder comment, legislation, or other additional information. 

Please also note that the great majority of the Department’s rulemaking is interpretive in nature.  Taxpayers need to recognize that when a law changes, taxpayers must collect and/or remit tax consistent with that law change even if the rule has not been updated and appears to give contradictory advice.


The Department intends to proceed with the following rule making

Subject of Rule Making Explanation Exemption Criteria
Property Tax - Interest rates, land values, and inflation rates for use in 2011 and 2012 Interest rate for property tax refunds - 458-18-220
Farm & agricultural land values - 458-30-262
Rate of inflation - 458-30-590

These rules provide rates and values that must be updated by January 1st of each year.

3a - Required by state law - RCW 84.69.100, 84.34.065, and 84.34.310
TRS and WTAP tax rates for telephone switched access lines for use in 2011 and 2012 Telephone program excise tax rate - 458-20-270 The Telecommunications Relay Services (TRS) and Washington Telephone Assistance Program (WTAP) tax rates provided in this rule must be updated and become effective July 1st each year 3a - Required by state law - 43.20A.725 & 80.36.430
Timber Excise Tax - land and stumpage values for use in 2011 and 2012 Forest land values - 458-40-540
Stumpage value tables – Stumpage value adjustments - 458-40-660

Forest land values must be updated by January 1st each year – RCW 84.33.140
Stumpage value tables must be updated by the 1st of January and July of each year – RCW 84.33.091

3a - Required by state law - RCW 84.33.140 and 84.33.091
Digital Products, software, and other computer-related issues Information and computer services - 458-20-155
Taxation of hardware - 458-20-15501
Taxation of software - 458-20-15502
Taxation of digital products 458-20-15503

2009 legislation extended retail sales and use taxes to the sale or use of digital products and digital automated services.  Exemptions were also provided.  2010 legislation amended the law regarding the imposition and exemptions.

3c - Necessary to manage budget shortfalls, maintain fund solvency, or for revenue generating activities - ESHB 2075 (2009) and SHB 2620 (2010)
Reseller Permits Reseller permits - 458-20-102
Resale certificates - 458-20-102A
2009 legislation replaced the self-issued resale certificate with the state-issued reseller permit as the means to document wholesale sales.  2010 legislation modified this program. 3c - Necessary to manage budget shortfalls, maintain fund solvency, or for revenue generating activities - SB 6173 (2009) and SHB 2758 (2010)
Economic Nexus and Income Apportionment Minimum nexus thresholds for apportionable activities - 458-20-19401
Single factor receipts apportionment—Generally - 458-20-19402
Single factor receipts apportionment—Royalties - 458-20-19403
Financial institutions—Income apportionment - 458-20-19404 Travel agents and tour operators - 458-20-258 (separate rule-making action from above) Printing industry - 458-20-144 (separate rule-making action from above)

2010 legislation changed the minimum nexus standards of businesses providing certain services to customers in Washington.  This legislation also changed the method by which these businesses are to apportion income to Washington.  The Department believes this rule making is necessary to explain the tax-reporting responsibilities of businesses engaging in activities subject to these changes.

3c - Necessary to manage budget shortfalls, maintain fund solvency, or for revenue generating activities - SB 6143, Part I (2010) 5 - To finalize permanent rule making previously covered by emergency rules (does not include WAC 458-20-258 or 458-20-144) 3e - Beneficial to or requested or supported by the regulated entities, local governments, or small businesses that it affects (WAC 458-20-144)
Tax Avoidance Transactions Tax Avoidance Transactions - 458-20-New (separate rule making from below) REET program:
Overview - 458-61A-100
Taxability of the transfer or acquisition of the controlling interest of an entity with an interest in real property located in this state - 458-61A-101
Definitions - 458-61A-102
Option to purchase - 458-61A-107
Payment of tax, collection responsibility, audit responsibility, and tax rulings - 458-61A-301
2010 legislation requires the Department to disregard certain specified tax avoidance transactions.  This legislation also closes loopholes and clarifies ambiguities related to the real estate excise tax program (REET).  3c - Necessary to manage budget shortfalls, maintain fund solvency, or for revenue generating activities - SB 6143, Part II (2010)
Temporary B&O tax increase - Exclusion for hospitals

Hospitals, nursing homes, boarding homes, and similar health care facilities - 458-20-168
2010 legislation temporarily increased the tax rate for certain businesses, including those subject to the service B&O tax rate imposed by RCW 82.04.290(2)(a).  This legislation provided an exclusion for hospitals.  Stakeholders have suggested that this exclusion is intended to be broader than the restrictions provided in subsection (2)(a)(i) of the current rule for determining when a clinic operated by a hospital is an integral, interrelated, and essential part of the hospital.  3e - Beneficial to or requested or supported by the regulated entities, local governments, or small businesses that it affects - 2ESSB 6143, Part XI (2010)
Taxation of warranties and maintenance agreements - WAC 458-20-257 This rule is outdated and does not recognize that sales of extended warranties are subject to retail sales tax, and purchases of repair parts and labor by the warrantor can be made at wholesale.  Some businesses are not aware that the law has changed and are not correctly collecting retail sales tax on extended warranty sales.  3c - Necessary to manage budget shortfalls, maintain fund solvency, or for revenue generating activities
Adjudicative proceedings - Cigarette license and tax registration revocation - 458-20-10001

This rule is outdated and inconsistent with Brief Adjudicative Proceedings (BAPs) processes provided for in the process for appealing the denial of a Reseller Permit (WAC 458-20-10202).  This inconsistency creates confusion with taxpayer’s participation in these proceedings.  Updating this rule will streamline the process, eliminate duplication, and be more efficient for taxpayers and the Department.

 

3c - Necessary to manage budget shortfalls, maintain fund solvency, or for revenue generating activities 3e - Beneficial to or requested or supported by the regulated entities, local governments, or small businesses that it affects
Equestrian activities and the farm and agricultural current use valuation property tax programs. Definitions - 458-30-200 2009 legislation amended the farm and agricultural current use classification to include land used for equestrian activities such as stabling, training, riding, and shows.  This legislation also exempts property owners from paying back taxes, penalties, and interest when their property is removed from either program and the reason for the removal is that the land was improperly approved for the program through no fault of the property owner.  Budget cuts have severely impacted county staffing, and in many cases inexperienced staff members are administering this program.  3e - Beneficial to or requested or supported by the regulated entities, local governments, or small businesses that it affects - SHB 1733 (2009) and EHB 1815 (2009)

The Department has not yet decided whether to proceed with the following rule making

Subject of Rule Making Explanation Status
Estate tax - Wills and trusts Nature of estate tax, definitions - 458-57-105
Valuation of property, property subject to estate tax, and how to calculate the tax - 458-57-115
Subject to certain requirements, 2010 legislation provides that a will or trust of a decedent who dies after December 31, 2009 but before January 1, 2011 will be deemed to refer to the federal estate and generation-skipping transfer tax laws as they applied with respect to estates of decedents dying on December 31, 2009.  Stakeholders have suggested to the Department that the Department’s rules need to be updated so that they can advise their clients.  Stakeholders and the Department are reconsidering whether this rule making should continue due to the new changes to estate taxes resulting from the federal “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.”  This Act was signed into law December 17th.


The Department intends to delay rule making for the following

WAC Subject Preliminary Proposal (CR-101 filing) Rule Proposal (CR-102 filing) Rule Proposal – Expedited (CR-105 filing) Rule Adoption (CR-103 filing) Description of Anticipated Changes
458-20-24003 Tax incentives for high technology businesses.     WSR 10-21-044   Incorporate 2010 legislation – E2SHB 1597, Part I
Incorporate 2009 legislation – SB 5909
458-20-126 Sales of motor vehicle fuel, special fuels, and non-pollutant fuel     CR105 proposal - expedited anticipated   Incorporate 2010 legislation – E2SHB 1597, Part II
458-20-141 Duplicating activities and mailing bureaus.     CR105 proposal - expedited anticipated   Incorporate 2010 legislation – E2SHB 1597, Part II and update
Incorporate 2009 legislation – ESHB 2075 & SSB 5566
458-20-189 Sales to and by the state of Washington, counties, cities, towns, school districts, and fire districts.     CR105 proposal - expedited anticipated   Incorporate 2010 legislation – E2SHB 1597, Part II
458-16A-100
458-16A-120
458-16A-150
Property Tax – Exemptions – Homes for the aging, senior citizens and disabled persons     CR105 proposal - expedited anticipated   Incorporate 2010 legislation –  E2SHB 1597, Part III
458-16-165
458-16-190
458-16-210
458-16-300
    Property tax – Exemptions     CR105 proposal - expedited anticipated   Incorporate 2010 legislation – SHB 2402
Incorporate 2009 legislation - SB 5680 (16-165 only) & update
458-20-185
458-20-186
Tobacco products tax
Cigarette taxes
    Anticipated   Incorporate 2010 legislation – ESHB 2493
458-20-24001
458-20-24001A
Sales and use tax deferral – Manufacturing and research/development activities in rural counties     WSR 10-21-052   Incorporate 2010 legislation –ESHB 3014
458-20-17902 Brokered natural gas – Use tax.     CR105 proposal - expedited anticipated   Incorporate 2010 legislation – ESHB 3179
458-20-228 Returns, payments, penalties, extensions, interest, stay of collection.     WSR 10-21-045   Incorporate 2010 legislation – 2ESSB 6143, Part II
458-20-146 National and state banks, mutual savings banks, savings and loan associations and other financial institutions.     CR105 proposal - expedited anticipated   Incorporate 2010 legislation – 2ESSB 6143, Part III
458-20-217 Lien for taxes.     WSR 10-19-017   Incorporate 2010 legislation – 2ESSB 6143, Part VIII
458-20-101 Tax registration and tax reporting.     WSR 10-19-109   Incorporate 2010 legislation – 2ESSB 6143, Part XI
458-18A-060 Deferral of special assessments and/or property taxes - Limitations of deferral - Interest     WSR 10-20-057   Incorporate 2010 legislation – SB 6379
458-18-080 458-18A-080 Deferral of special assessments and/or property taxes - Duties of the department of revenue - State treasurer.
Deferral of special assessments and/or property taxes - Duties of the department of revenue - State treasurer.
    WSR 10-19-142   Incorporate 2010 legislation – SB 6379
458-20-179
458-20-17901 458-20-180
Public utility tax
Energy conservation and cogeneration deductions
Motor & urban transportation
WSR 10-18-033       Incorporate 2010 legislation – SSB 6614
Incorporate 2009 legislation – ESSB 6170 Part VII & update
458-20-13501 Timber harvest operations. CR101 preliminary proposal anticipated       Incorporate 2010 legislation – SHB 3066
Incorporate 2009 legislation – ESSB 6170 Part IV and VII
& update
458-20-136 Manufacturing, processing for hire, fabricating. CR101 preliminary proposal anticipated       Incorporate 2010 legislation – 2ESSB 6143, Part V and update
458-20-210 Sales of tangible personal property for farming – Sales of agricultural products by farmers. CR101 preliminary proposal anticipated       Incorporate 2010 legislation – 2ESSB 6143, Part VI
Incorporate 2009 legislation – ESSB 6170 Part VI & Update
458-16A-140 Senior citizen, disabled person, and one hundred percent disabled veteran exemption     WSR 10-19-148   Incorporate 2009 legislation - E2SHB 1208
458-19-085 Refunds - Procedures - Application limits     CR105 proposal - expedited anticipated   Incorporate 2009 legislation - E2SHB 1208 & update
458-30-210 458-30-225 Classification of land under chapter 84.34 RCW
Application for farm and agricultural classification
CR101 preliminary proposal anticipated       Incorporate 2009 legislation - SHB 1733 and EHB 1815
458-19-080 City annexed by fire protection and/or library districts.     CR105 proposal - expedited anticipated   Incorporate 2009 legislation – SB 5426

458-19-045
Levy limit -- Removal of limit (lid lift).     CR105 proposal - expedited anticipated   Incorporate 2009 legislation –2SSB 5433
458-20-22802 Electronic funds transfer WSR 10-17-085       Incorporate 2009 legislation – SSB 5571
458-20-175 Air, rail, & water interstate/foreign commerce carriers CR101 preliminary proposal anticipated       Incorporate 2009 legislation – SB 6096 & update
458-20-19301 Multiple Activities Tax Credit CR101 preliminary proposal anticipated       Incorporate 2009 legislation – SB 6096 & update
458-20-263 Fuel cell, wind, landfill gas, and solar energy electric generating facilities     CR105 proposal - expedited anticipated   Incorporate 2009 legislation – ESSB 6170 Part I
458-20-153
458-20-154
Funeral directors
Cemeteries
WSR
09-07-088
      Update
458-20-18801 Prescription drugs, medical supplies, and medical devices CR101 preliminary proposal anticipated       Update
458-12-010 Definition – Property – Real    
WSR 10-21-048
  Correct citation
458-16-130
458-16-150
458-16-230
458-16-240
458-16-300
458-16-310
Property Tax – Exemptions     CR105 proposal - expedited anticipated   Update
458-19-005
458-19-020
458-19-025
458-19-030
458-19-035
458-19-065
Property Tax - Levies, rates, and limits     CR105 proposal - expedited anticipated   Update
458-50-060 458-50-130 Failure to make report -  Default valuation - Penalty - Estoppel.
Taxing district boundary changes - Estoppel.
    CR105 proposal - expedited anticipated   Update