Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule
explains deductions and exemptions from Washington business and occupation tax,
retail sales tax and use tax as applied to artistic and cultural organizations.
Readers may refer to the following for additional information.
(a) Statutes that may apply:
(i)
RCW
82.04.4327 Deductions-Artistic and cultural
organizations.
(ii)
RCW
82.04.4328 "Artistic or cultural
organization" defined.
(iii)
RCW
82.08.031 Exemptions-Sales to artistic or
cultural organizations of certain objects acquired for exhibition or
presentation.
(iv)
RCW
82.12.031 Exemptions-Use by artistic or
cultural organizations of certain objects.
(b) Other rules that may apply:
(i) WAC
458-20-169
Nonprofit organizations.
(ii) WAC
458-20-178
Use tax and the use of tangible personal property.
(2)
Definitions.
(a) "Artistic or cultural organization" means
an organization that is organized and operated exclusively for the purpose of
providing artistic or cultural exhibitions, presentations, or performances or
cultural or art education programs for viewing or attendance by the general
public and meets all of the following requirements:
(i) The organization is a nonprofit
corporation under chapter 24.03A RCW;
(ii) The organization is managed by a
governing board of not less than eight individuals none of whom is a paid
employee of the organization;
(iii)
No part of the organization's income may be paid directly or indirectly to its
members, stockholders, officers, directors, or trustees except in the form of
services rendered by the corporation in accordance with its purposes and
bylaws;
(iv) Salary or compensation
paid to the organization's officers and executives must be only for actual
services rendered, and at levels comparable to the salary or compensation of
like positions within the state;
(v) Assets of the corporation must be
irrevocably dedicated to the activities for which the exemption is
granted;
(vi) On the liquidation,
dissolution, or abandonment by the corporation, assets of the corporation may
not inure directly or indirectly to the benefit of any member or individual
except a nonprofit organization, association, or corporation that also would be
entitled to the exemption;
(vii)
The corporation must be duly licensed or certified when licensing or
certification is required by law or regulation;
(viii) The amounts received that qualify for
exemption must be used for the activities for which the exemption is
granted;
(ix) Services must be
available regardless of race, color, national origin, or ancestry;
and
(x) The director of revenue
must have access to its books in order to determine whether the corporation is
exempt from taxes.
(b)
The term "artistic or cultural exhibitions, presentations, or performances or
cultural or art education programs" includes and is limited to:
(i) An exhibition or presentation of works of
art or objects of cultural or historical significance, such as those commonly
displayed in art or history museums;
(ii) A musical or dramatic performance or
series of performances; or
(iii) An
educational seminar or program, or series of such programs, offered by the
organization to the general public on an artistic, cultural, or historical
subject.
(3)
Business and occupation tax deduction. In computing tax under
RCW
82.04.4327, an artistic or cultural
organization may deduct the following from the measure of tax:
(a) All amounts received by the artistic or
cultural organization; and
(b) The
value of articles manufactured by the artistic or cultural organization solely
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.
(4)
Retail sales tax.
(a) Artistic or
cultural organizations that charge for goods or services included in the
definition of "retail sale" under
RCW
82.04.050 must collect and report the retail
sales tax. No retail sales tax exemption is available for sales by such
organizations.
(b) Such
organizations are exempt from paying retail sales tax on their purchases of
certain "objects" for the purpose of exhibition or presentation to the general
public if the objects are:
(i) Objects of
art;
(ii) Objects of cultural
value;
(iii) Objects to be used in
the creation of a work of art, other than tools; or
(iv) Objects to be used in displaying art
objects or presenting artistic or cultural exhibitions or performances.
(RCW
82.08.031)
(c) The term "objects" means items of
tangible personal property. It does not include professional or commercial
services rendered by third parties. Where certain services performed are merely
incidental to sales of tangible personal property, e.g., designing playbills or
altering stage curtains that are then sold to qualifying organizations, the
total charge will be exempt.
(d)
Charges for materials, equipment, and services related to repair, maintenance,
or replacement of buildings or structures are not exempt. Thus, e.g., theater
seats, aisle carpeting, air conditioning systems, painting of interior or
exterior of buildings, and the like are not tax exempt "objects."
(e) Exempt sales include rentals of exempt
objects. Examples of objects that qualifying artistic or cultural organizations
may purchase without payment of retail sales tax are:
(i) Tickets, programs, signs, posters,
fliers, and playbills printed for particular displays or performances; scenery,
costumes, stage props, scrims, and materials for their construction;
(ii) Stage lights, filters, control panels,
color medium, stage drapes, sets, set paint, gallery exhibition materials,
risers, display platforms, and materials for their construction;
(iii) Sheet music, recordings, musical
instruments and musical supplies for the staging of displays and
performances;
(iv) Movie
projectors, films, sound systems, video and sound equipment and supplies,
computer hardware and standard, prewritten software directly used exclusively
in the staging of performances or actual display of art objects.
(f) Examples of objects that
qualifying artistic or cultural organizations may purchase, on which the retail
sales tax must be paid are:
(i) Supplies and
equipment for clerical support, including bulk tickets for general use,
stationery, computers, copy machines, and general office supplies;
(ii) Theater seats, lobby furniture,
carpeting, vending machines, and general supplies for audience or patron
convenience and use;
(iii) Shipping
and packing materials, crates, boxes, dunnage, labels, tags, and
container-related items for transfer or storage of exempt objects;
(iv) Sewing machines and other durable
equipment used to prepare, repair, and maintain exempt objects (such items are
deemed to be "tools," rather than exempt objects);
(v) Theater or building lighting and utility
fixtures and systems, and computer hardware and software not directly and
exclusively used in staging performances or actually displaying art
objects.
(g) Qualified
artistic and cultural organizations may obtain the tax exemptions by providing
their suppliers with a written statement in essentially the following form:
Click
to view image
(h) Vendors who accept such certifications in
good faith are not required to collect and remit retail sales tax on such
sales.
(6)
Use
tax. Under
RCW
82.12.031, the use tax does not apply to the
use of any objects that would be exempt from retail sales tax had the objects
been purchased in this state. The use tax applies to all other items of
tangible personal property that artistic or cultural organizations use upon
which retail sales tax has not been paid.
Statutory Authority:
RCW
82.32.300. 86-07-006 (Order ET 86-4), §
458-20-249, filed 3/6/86.