IMPOSITION OF LOCAL SALES AND USE TAX

TAXATION ‑- COUNTIES ‑- CITIES AND TOWNS ‑- IMPOSITION OF LOCAL SALES AND USE TAX

Impact upon residents of incorporated cities and towns, and upon the governing bodies thereof, of a decision by the county within which they are located to impose a local sales and use tax under RCW 82.14.030.

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                                                                  January 7, 1976

Honorable Robert K. Leick
Prosecuting Attorney
Skamania County Court House
Stevenson, Washington 98648                                                                                                                 Cite as:  AGLO 1976 No. 3

Dear Sir:

            By recent letter you have directed our attention to the provisions of RCW 82.14.010 ‑ 82.14.040, relating to the imposition of optional retail sales and use taxes by the governing body of any county or city, and have asked two questions which we paraphrase as follows:

            (1) Where a county imposes such a sales and use tax, but an incorporated city or town within the county does not, what is the effect of this county action upon

            (a) county residents; and

            (b) residents of a nontaxing city or town?

            (2) May a county impose the optional sales and use tax authorized by RCW 82.14.030 pursuant to an ordinance which specifically excludes taxable events occurring within one or more incorporated cities or towns?

            We answer your first question in the manner set forth in our analysis and your second question in the negative.

                                                                     ANALYSIS

            Both of your questions relate to the optional county and city sales and use tax authorized by chapter 94, Laws of 1970, Ex. Sess., as distinguished from the special sales and use tax for public transportation systems which is provided for by § 2, chapter 296, Laws of 1971, Ex. Sess. RCW 82.14.030, which codifies § 4 of the foregoing 1970 law, reads as follows:

            "The governing body of any county or city while not required by legislative mandate to do so, may, by resolution or ordinance for the purposes authorized by this chapter,  [[Orig. Op. Page 2]] fix and impose a sales and use tax in accordance with the terms of this chapter.  Such tax shall be collected from those persons who are taxable by the state pursuant to chapters 82.08 and 82.12 RCW, upon the occurrence of any taxable event within the county or city as the case may be.  The rate of such tax imposed by a county shall be five‑tenths of one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax).  The rate of such tax imposed by a city shall not exceed five‑tenths of one percent of the selling price (in the case of a sales tax) or value of the article used (in the case of a use tax):  Provided,however, That in the event a county shall impose a sales and use tax, the rate of such tax imposed by any city therein shall not exceed four hundred and twenty-five one‑thousandths of one percent."

            RCW 82.14.040 then says that:

            "Any county ordinance adopted pursuant to this chapter shall contain, in addition to all other provisions required to conform to this chapter, a provision allowing a credit against the county tax for the full amount of any city sales or use tax imposed upon the same taxable event."

            Also to be noted, but not required to be fully quoted for the purposes of this opinion, are RCW 82.14.010 which sets forth the declared legislative purpose behind this taxing authorization, and RCW 82.14.020 which contains various definitions of the key terms appearing in the above quoted provisions of the law.  Among these terms is "taxable event" which is defined by RCW 82.14.020(7) to mean:

            ". . . any retail sale, or any use of an article of tangible personal property, upon which a state tax is imposed pursuant to chapter 82.08 or 82.12 RCW, as they now exist or may hereafter be amended:  Provided,however, That the term shall not include a retail sale taxable pursuant to RCW 82.08.150, as now or hereafter amended."

            As will readily be seen from a reading of RCW 82.14.030 and 82.14.040,supra, it is entirely possible within a given county for both the county itself and one or more of the cities situated therein to be imposing a sales and use tax.   [[Orig. Op. Page 3]] Conversely, it is equally possible for only the county to be imposing the tax or, likewise, for only the cities or towns situated therein to be doing so.

            Of course, if only the cities and towns elect to impose the tax, then its burden will only fall upon taxable events occurring within those municipalities.  On the other hand, if the tax is imposed by the county itself its burden will necessarily be county wide for, in direct answer to the second of your two questions, we find nothing in the subject statutes which may be said to authorize a county, in electing to impose the tax, to exclude taxable events occurring within the incorporated cities and towns in that county.

            If, in addition, one or more such cities and towns also impose the tax then RCW 82.14.040,supra, comes into play so as to cause the city tax to constitute a credit against the county tax.  However, because the maximum rate of the city tax in that event will be slightly less than the county rate (.425% vs. .5%), the county will still receive a small portion of the tax derived from taxable events occurring within the taxing city ‑ along with the full amount derived from similar taxing events occurring in unincorporated areas of the county or in cities which are not also imposing the tax.  The remainder of the revenues, on the other hand, will go to the taxing municipality instead of going to the county ‑ with the taxpayer obtaining a statutory credit against the county tax in an amount equal to the city tax which he is thus paying.

            In the final analysis, what this all means is that if a given county elects to impose the tax in question each of the cities located in that county will have strong reason to do so as well.  Any taxable events occurring within these cities will thus be taxed at .5% either way as a result of the county action; i.e., irrespective of whether a given city also elects to impose the .425% tax then available to it.  Accordingly, the only remaining issue will be whether the entire return from the tax is to accrue to the county or whether, instead, some portion of it is to go to the city or cities located therein.

            It is hoped that the foregoing explanation of this legislation will be of some assistance to you.

Very truly yours,

SLADE GORTON
Attorney General

PHILIP H. AUSTIN
Deputy Attorney General