Rules and *Ancillary Document Review Checklist

Rules and Ancillary Document Review Checklist

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Document Reviewed: WAC 458-20-170

Title: Constructing and repairing of new or existing buildings or other structures upon real property.

Date last adopted: September 8, 1987

Reviewer: Winnifred Savitch

Date Review Started: May 24, 1999

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Is this document being reviewed at this time because of a taxpayer or business association request? (If "YES", explain). No

If the answer is yes, provide the name of the taxpayer or business association. Also provide a brief explanation of the issues raised in the request.

Type an "x" (lowercase) in the column that most correctly answers the question, and provide clear, concise, and completed explanations where needed.

Explain the goal(s) and purpose(s) of the document:

The goal of WAC 458-20-170 is to explain the tax-reporting responsibilities of persons who perform construction or repair of buildings or other structures upon real property. It defines the terms "prime contractor", "subcontractor", and "speculative builder". It includes a list of attributes of ownership of real estate. The rule defines the term "building or other structures" and explains activities and charges that are included in the term "constructing, repairing, decorating or improving of new or existing buildings or other structures". It explains business and occupation tax classifications applicable to charges for these activities and the measure of the tax. Charges on which contractors are to collect retail sales tax and purchases subject to retail sales tax or use tax are explained.

Need:

YES

NO

X

If reviewing a rule are there any other ancillary documents that can be included in a rule revision? (List ancillary documents in the space provided).

N/A

If reviewing an ETB or PTB or any other ancillary document can it be easily included in an existing rule?

X

Is the document necessary to comply with the statutes that authorize it?

X

Is the document obsolete to a degree that warrants repeal or revision?

X

Have laws or other circumstances changed so that the document should be amended or repealed?

X

Is the document necessary to protect or safeguard the health, welfare, or safety of Washington’s citizens (welfare includes budget levels necessary to provide services to the citizens of the state of Washington)?

Please explain and list those ancillary documents recommended for repeal either because they should be incorporated into a revised rule or have outlived their usefulness. (An ancillary document is "an interpretive or policy statement that advise the public of the Department’s opinions, approaches, or likely course of action." Ancillary documents do not have the same force of law as granted rules in the Administrative Procedures Act (Chapter 34.05 RCW). It includes documents such as Excise Tax Bulletins (ETB), Property Tax Bulletins (PTB), and Revenue Policy Memorandums (RPM). Court cases, Board of Tax Appeals (BTRA) decisions, Appeals Division decisions (WTD), Statutes (RCW) ARE NOT ancillary documents.):

The document states that the rental of equipment with an operator to a property owner is a prime contractor activity subject to the Retailing tax. It states that the rental of equipment with an operator to a prime contractor or subcontractor is a subcontractor activity subject to the Wholesaling tax. This is obsolete information because it does not incorporate RCW 82.04.050 (4), which defines the term retail sale to include the rental of equipment with an operator. Revision is necessary to include reference to rental of equipment with an operator that is not a prime contractor or subcontractor activity.

The document should be amended to include information regarding the following legislation:

Chapter 212, Laws of 1999, defines the phrase "services rendered in respect to constructing" for purposes of the business and occupation and sales and use taxes by adding a new section to chapter 82.04 RCW. Reference to this new section and definitions from this new section should be added to this document.

RCW 82.04.2635 provides for a specific tax rate to apply to the business of "environmental remedial action". The definition of "environmental remedial action" includes activities defined in this document as "construction, repairing, decorating or improving of new or existing buildings or other structures" subject to retailing or wholesaling tax. This document should be amended to define and

differentiate environmental remedial action from retail or wholesale construction activities.

Most of the information provided in the following ancillary documents should be incorporated into a revision of this rule. Refer to the ancillary document review checklists for the specific recommendation for each of the following documents.

Excise Tax Advisories (ETAs):

17.04.170 Labor and Services of a Subcontractor

46.04.170 Joint Venture Agreement: A Prime Contract or a Subcontract

73.08.106 Reimbursement of a Venturer in a Joint Venture

276.08.170 Sales Tax Computed on a Contract Price Including Sales Tax
Paid by Contractor

298.08.217 Sales Tax Not to Be Withheld on Public Works Progress
Estimates

374.08.170 Form Oil Purchased by Building Contractors

376.08.170 Speculative Builders in Joint Ventures

377.08.170 Retail Sales Tax: Contract Reimbursements

404.04.134 Off-Site Component Fabrication by Speculative Builders

414.04.109/170 Amounts Paid Under a Penalty Clause

458.08.170 Condominiums

475.12.178 Use Tax as Applied to Construction "Pins and Loads"

488.04.170.105 Conditions Under Which a Contractor-Owner Relationship Exists

489.04.170 Lessee as Speculative Builder

490.04.170.111 Interest on Construction Loan Taxable as Part of Contract Price

The following ETAs can simply be repealed:

131.04.170 Construction Company as Agent for Owner

275.08.170 Deeding of Land to Contractor Building House for Landowner

433.04.170/171 Business & Occupation Tax: Contract Assignments

436.04.170 Construction on Land Owned by Contractor’s Principal
Stockholder

449.12.170 Turnkey Projects Sold to Housing Authorities

Audit Directive 8170.1 (Proper tax classification for concrete pumping) should also be repealed.

ETA 499.12.170/178 (Tax Liability on Materials Purchased by Contractors in Idaho for use in Washington) was previously reviewed in conjunction with the review of WAC 458-20-178 (Use tax). The recommendation was to incorporate the general information into that rule. This information should also be incorporated into a revision of Rule 170, especially the reporting instructions with respect to materials incorporated by the contractor/purchaser into a retail or wholesale project.

The department should also confirm that the state of Idaho continues to require that vendors collect Idaho’s sales or use tax on materials that are incorporated into an out-of-state construction project. This is contrary to Washington’s position regarding public road contractors when those contractors purchase materials to be incorporated into an out-of-state project. (See ETA 259.12.171.)

Effectiveness:

YES

NO

X

Is the document providing the results that is was originally designed to achieve in a reasonable manner?

X

Are there regulatory alternatives or new technologies that could more effectively or efficiently achieve the same objectives?

Please explain answer(s):

This rule generally achieves the results it was originally designed to achieve. Currently the rule is not fully effective because it does not include changes to the law nor terminology defined by legislation subsequent its filing. For example, legislation regarding environmental remedial action and services rendered in respect to constructing should be added to the current information in this document. Additionally, it is recommended that more information be provided regarding the gross contract price or the measure of the tax. Differentiating the retail activity of rental of equipment with an operator from construction services will increase the effectiveness of the document.

Clarity:

YES

NO

X

Is the document written and organized in a clear and concise manner so that those to whom it applies can readily understand it?

Please explain answer(s):

Intent and Statutory Authority:

YES

NO

X

Is the document consistent with the legislative intent of the statutes that authorize it?

X

Is the document based upon sufficient statutory authority?

X

Is there a need to develop a more specific legislative authorization in order to protect the health, safety, and welfare of Washington’s citizens?

X

Is there a need to recommend legislative changes to the underlying statutes?

List authorizing statutes, Give cites as required and explain answer(s):

RCW 82.32.300 authorizes the Department of Revenue to adopt and publish rules to explain the provisions of the Revenue Act. There have been legislative changes made to RCW 82.04.050 since this rule was last revised that should be incorporated into the rule.

Coordination: Agencies should consult with and coordinate with other jurisdictions that have similar regulatory requirements when it is likely that coordination can reduce duplication and inconsistency.

YES

NO

X

Could additional consultation and coordination with other governmental jurisdictions and state agencies with similar regulatory authority eliminate or reduce duplication and inconsistency?

Please explain answer:

Cost: (Answer yes only when a Cost Benefit Analysis was completed when the rule was last amended).

YES

NO

X

Have qualitative and quantitative benefits of the document been considered in relation to its costs? (Consider only costs imposed by document not statute.)

Please explain answer:

Fairness:

YES

NO

X

Does the document result in equitable treatment of those required to comply with it?

X

Should it be modified to eliminate or minimize any disproportionate impacts on the regulated community? (Consider only impacts imposed by document not statute).

X

Should it be strengthened to provide additional protection?

Please explain answer(s):

LISTING OF DOCUMENTS REVIEWED: (Include any documents discussed above. When listing statutes, ancillary documents, or other regulations also provide titles. Court, Board of Tax Appeals (BTA), or Appeals Division (WTD) decisions should be listed by citation followed by a brief description (phrase or sentence) of the pertinent issue(s).)

Statute(s) Implemented:

Court Cases:

Ancillary documents:

ETAs:

17.04.170 Labor and Services of a Subcontractor

46.04.170 Joint Venture Agreement: A Prime Contract or a Subcontract

73.08.106 Reimbursement of a Venturer in a Joint Venture

131.04.170 Construction Company as Agent for Owner

275.08.170 Deeding of Land to Contractor Building House for Landowner

276.08.170 Sales Tax Computed on a Contract Price Including Sales Tax
Paid by Contractor

298.08.217 Sales Tax Not to Be Withheld on Public Works Progress
Estimates

374.08.170 Form Oil Purchased by Building Contractors

376.08.170 Speculative Builders in Joint Ventures

377.08.170 Retail Sales Tax: Contract Reimbursements

404.04.134 Off-Site Component Fabrication by Speculative Builders

414.04.109/170 Amounts Paid Under a Penalty Clause

433.04.170/171 Business & Occupation Tax: Contract Assignments

436.04.170 Construction on Land Owned by Contractor’s Principal
Stockholder

449.12.170 Turnkey Projects Sold to Housing Authorities

458.08.170 Condominiums

475.12.178 Use Tax as Applied to Construction "Pins and Loads"

488.04.170.105 Conditions Under Which a Contractor-Owner Relationship Exists

489.04.170 Lessee as Speculative Builder

490.04.170.111 Interest on Construction Loan Taxable as Part of Contract Price

499.12.170.178 Tax Liability on Materials Purchased by Contractors in Idaho

for Use in Washington

Audit Directive 8170.1 Proper Tax Classification for Concrete Pumping

YES	NO
X		If reviewing a rule are there any other ancillary documents that can be included in a rule revision? (List ancillary documents in the space provided).
	N/A	If reviewing an ETB or PTB or any other ancillary document can it be easily included in an existing rule?
X		Is the document necessary to comply with the statutes that authorize it?
	X	Is the document obsolete to a degree that warrants repeal or revision?
X		Have laws or other circumstances changed so that the document should be amended or repealed?
X		Is the document necessary to protect or safeguard the health, welfare, or safety of Washington’s citizens (welfare includes budget levels necessary to provide services to the citizens of the state of Washington)?

YES	NO
X		Is the document providing the results that is was originally designed to achieve in a reasonable manner?
	X	Are there regulatory alternatives or new technologies that could more effectively or efficiently achieve the same objectives?

YES	NO
	X	Is the document written and organized in a clear and concise manner so that those to whom it applies can readily understand it?

YES	NO
X		Is the document consistent with the legislative intent of the statutes that authorize it?
X		Is the document based upon sufficient statutory authority?
	X	Is there a need to develop a more specific legislative authorization in order to protect the health, safety, and welfare of Washington’s citizens?
	X	Is there a need to recommend legislative changes to the underlying statutes?

YES	NO
X		Could additional consultation and coordination with other governmental jurisdictions and state agencies with similar regulatory authority eliminate or reduce duplication and inconsistency?

YES	NO
	X	Have qualitative and quantitative benefits of the document been considered in relation to its costs? (Consider only costs imposed by document not statute.)

YES	NO
X		Does the document result in equitable treatment of those required to comply with it?
	X	Should it be modified to eliminate or minimize any disproportionate impacts on the regulated community? (Consider only impacts imposed by document not statute).
	X	Should it be strengthened to provide additional protection?