§ 5.45.100. Deductions.

In computing the license fee or tax, the following may be deducted from the measure of tax:

A.

Membership Fees and Certain Service Fees by Nonprofit Youth Organization. For purposes of this subsection, "nonprofit youth organization" means a nonprofit organization engaged in character building of youth which is exempt from property tax under RCW 84.36.030. In computing tax due under this chapter, there may be deducted from the measure of tax all amounts received by a nonprofit youth organization:

1.

As membership fees or dues, irrespective of the fact that the payment of the membership fees or dues to the organization may entitle its members, in addition to other rights or privileges, to receive services from the organization or to use the organization's facilities; or

2.

From members of the organization for camping and recreational services provided by the organization or for the use of the organization's camping and recreational facilities.

B.

Fees, Dues, Charges. In computing tax, there may be deducted from the measure of tax amounts derived from bona fide:

1.

Initiation fees;

2.

Dues;

3.

Contributions;

4.

Donations;

5.

Tuition fees;

6.

Charges made by a nonprofit trade or professional organization for attending or occupying space at a trade show, convention, or educational seminar sponsored by the nonprofit trade or professional organization, which trade show, convention, or educational seminar is not open to the general public;

7.

Charges made for operation of privately operated kindergartens; and

8.

Endowment funds.

Subsection SMC 5.45.100.B, shall not be construed to exempt any person, 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 or others. If dues are in exchange for any significant amount of goods or services rendered by the recipient thereof to members without any additional charge to the member, or if the dues are graduated upon the amount of goods or services rendered, the value of such goods or services shall not be considered as a deduction under this subsection.

C.

Artistic and Cultural Organizations—Income From Business Activities. In computing tax, there may be deducted from the measure of tax those amounts received by artistic or cultural organizations, as defined in Section 5.30.020, which represent:

1.

Income derived from business activities conducted by the organization, provided that this deduction does not apply to retail sales made by artistic and cultural organizations (the rental of space and the casual sales of props and fixtures used in or culture productions will be exempt from tax);

2.

Amounts received from the United States or any instrumentality thereof or from the State of Washington or any municipal corporation or subdivision thereof as compensation for, or to support, artistic or cultural exhibitions, performances, or programs provided by an artistic or cultural organization for attendance or viewing by the general public; or

3.

Amounts received as tuition charges collected for the privilege of attending artistic or cultural education programs.

D.

Artistic or Cultural Organization—Deduction for Tax Under the Manufacturing Classification—Value of Articles for Use in Displaying Art Objects or Presenting Artistic or Cultural Exhibitions, Performances, or Programs. In computing tax, there may be deducted from the measure of tax by persons subject to payment of the tax under the manufacturing classification, the value of articles to the extent manufacturing activities are undertaken by an artistic or cultural organization, as defined in Section 5.30.020, solely for the purpose of manufacturing articles for use by the organization in displaying art objects or presenting artistic or cultural exhibitions, performances, or programs for attendance or viewing by the general public.

E.

Day Care Activities. In computing tax, nursery schools, preschools, child care providers and privately operated kindergartens may deduct from the measure of tax amounts derived from the care or education, for periods less than 24 hours, of children who are under eight years of age and not enrolled in or above the first grade. Such persons are, however, subject to the tax upon the gross proceeds derived from providing child care to children who are eight years of age or older or enrolled in or above the first grade. Amounts derived from selling, altering or repairing tangible personal property shall not be deductible.

F.

Compensation from Public Entities for Health or Social Welfare Services—Exception. In computing tax, there may be deducted from the measure of tax amounts received from the United States or any instrumentality thereof or from the State of Washington or any municipal corporation or political subdivision thereof as compensation for, or to support, health or social welfare services rendered by a health or social welfare organization (as defined in RCW 82.04.431) or by a municipal corporation or political subdivision, except deductions are not allowed under this section for amounts that are received under an employee benefit plan. For purposes of this subsection, "employee benefit plan" includes the military benefits program authorized in 10 U.S.C. Sec. 1071 et seq., as amended, or amounts payable pursuant thereto.

G.

Interest on Investments or Loans Secured by Mortgages or Deeds of Trust. In computing tax, to the extent permitted by Chapter 82.14A RCW, there may be deducted from the measure of tax by those engaged in banking, loan, security or other financial businesses, amounts derived from interest received on investments or loans primarily secured by first mortgages or trust deeds on non-transient residential properties.

H.

Interest on Obligations of the State, its Political Subdivisions, and Municipal Corporations. In computing tax, there may be deducted from the measure of tax by those engaged in banking, loan, security or other financial businesses, amounts derived from interest paid on all obligations of the State of Washington, its political subdivisions, and municipal corporations organized pursuant to the laws thereof.

I.

Interest on loans to farmers and ranchers, producers or harvesters of aquatic products, or their cooperatives. In computing tax, there may be deducted from the measure of tax amounts derived as interest on loans to bona fide farmers and ranchers, producers or harvesters of aquatic products, or their cooperatives by a lending institution which is owned exclusively by its borrowers or members and which is engaged solely in the business of making loans and providing finance-related services to bona fide farmers and ranchers, producers or harvesters of aquatic products, their cooperatives, rural residents for housing, or persons engaged in furnishing farm-related or aquatic-related services to these individuals or entities.

J.

Receipts From the Sale of Tangible 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 delivered by the seller to the buyer or the buyer's representative at a location outside the State of Washington.

K.

Cash Discount Taken by Purchaser. In computing tax, there may be deducted from the measure of tax the amount of cash discount 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 of this tax, have been computed according to the "value of product" provisions.

L.

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.

M.

Repair, Maintenance, Replacement, etc., of Residential Structures and Commonly Held Property—Eligible Organizations.

1.

In computing tax, there may be deducted from the measure of tax amounts used solely for repair, maintenance, replacement, management, or improvement of the residential structures and commonly held property, but excluding property where fees or charges are made for use by the public who are not guests accompanied by a member, which are derived by:

a.

A cooperative housing association, corporation, or partnership from a person who resides in a structure owned by the cooperative housing association, corporation, or partnership;

b.

An "association of apartment owners", as defined in RCW 64.32.010, as now or hereafter amended, from a person who is an "apartment owner" as defined in RCW 64.32.010; or

c.

An association of owners of residential property from a person who is a member of the association. "Association of owners of residential property" means any organization of all the owners of residential property in a defined area who all hold the same property in common within the area.

2.

For the purposes of this subsection "commonly held property" includes areas required for common access such as reception areas, halls, stairways, parking, etc., and may include recreation rooms, swimming pools and small parks or recreation areas; but is not intended to include more grounds than are normally required in a residential area, or to include such extensive areas as required for golf courses, campgrounds, hiking and riding areas, boating areas, etc.

3.

To qualify for the deductions under this subsection:

a.

The salary or compensation paid to officers, managers, or employees must be only for actual services rendered and at levels comparable to the salary or compensation of like positions within the county wherein the property is located;

b.

Dues, fees, or assessments in excess of amounts needed for the purposes for which the deduction is allowed must be rebated to the members of the association; and

c.

Assets of the association or organization must be distributable to all members and must not inure to the benefit of any single member or group of members.

N.

Sales at Wholesale or Retail of Precious Metal Bullion and Monetized Bullion. In computing tax, there may be deducted from the measure of the tax amounts derived from the sale at wholesale or retail of precious metal bullion and monetized bullion. However, no deduction is allowed of amounts received as commissions upon transactions for the accounts of customers over and above the amount paid to other dealers associated in such transactions, and no deduction or offset is allowed against such commissions on account of salaries or commissions paid to salesmen or other employees.

O.

Radio and Television Broadcasting—Advertising Agency Fees—National, Regional, and Network Advertising—Interstate Allocations. In computing tax, there may be deducted from the measure of the tax by radio and television broadcasters amounts representing the following:

1.

Advertising agencies' fees when such fees or allowances are shown as a discount or price reduction in the billing or that the billing is on a net basis, i.e., less the discount;

2.

Actual gross receipts from national network, and regional advertising or a "standard deduction" as provided by RCW 82.04.280; and

3.

Local advertising revenue that represents advertising which is intended to reach potential customers of the advertiser who are located outside the State of Washington. The Director of Finance and Administrative Services may issue a rule that provides detailed guidance as to how these deductions are to be calculated.

P.

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.

Q.

Distribution Affiliate or Cooperative. In computing tax, there may be deducted from the measure of the tax an amount equal to the actual cost of the merchandise that a distribution cooperative or its distribution affiliate sells to a customer-owner of the distribution cooperative for the customer-owner's resale at retail. Actual cost means the cost actually paid by the distribution cooperative or distribution affiliate after taking into account all cash discounts and other price reductions.

R.

In computing tax imposed by subsection 5.45.050.E, there may be deducted from the measure of the tax gross income from the transport of empty containers picked up in the City if 1) a full container transported from outside the City is exchanged for the empty container at the time of pick-up, and 2) the job is billed to the customer as a round trip charge.

S.

Interstate Trucking. The tax imposed on motor carriers under subsection 5.45.050.E shall not apply to gross income from freight picked up in the City and transported by the taxpayer to a location outside the State of Washington. A motor carrier that does not transport freight across the state boundary is not entitled to a deduction, even though the freight is destined for and is ultimately transported to a location outside Washington.

T.

Sales of Water to Water Districts, Municipalities and other Political Subdivisions of the State of Washington for Resale. In computing tax, there may be deducted from the measure of the tax under the wholesaling classification, amounts derived from the sale of water to any water district, municipality or other political subdivision of the State of Washington.

U.

Sales of Electricity for Resale. In computing tax, there may be deducted from the measure of the tax amounts derived from the sale of electricity to any purchaser of electricity for resale.

V.

Receipts From the Sale of Tangible Personal Property or Retail Services Delivered Outside the City but Within Washington. Effective January 1, 2008, amounts included in the gross receipts reported on the tax return and which are derived from the sale of tangible personal property or retail services delivered to the buyer or the buyer's representative outside the city but within the State of Washington may be deducted from the measure of tax under the retailing or wholesaling classifications. Retail services include those services defined as such pursuant to Section 5.30.040.

(Ord. 124089, § 9, 2012; Ord. 123877, § 1, 2012; Ord. 123704, § 5, 2011; Ord. 123361, § 157, 2010; Ord. 123063, § 12, 2009; Ord. 123063, § 11, 2009; Ord. 122842, § 7, 2008; Ord. 122563 , § 7, 2007; Ord. 122322 , § 1, 2007; Ord. 121987 § 1, 2005; Ord. 121266 § 8, 2003; Ord. 120794 § 118, 2002; Ord. 120668 § 2(part), 2001.)

Editor's note

Ord. 123877, § 1, adopted in 2012 added a subsection W to 5.45.100. § 2 of Ord. 123877 provided for an expiration date of June 6, 2017. Former subsection W read as follows: Funding provided to non-profit and private sector entities and their sub-recipients as compensation for research and development, or to support research and development, in the life sciences by the United States, State of Washington, local or municipal government or any instrumentality thereof may be deducted from the measure of tax.