Tax compacts/capital invest.

AN ACT Relating to modifying retail taxes compacts between the 1
state of Washington and federally recognized tribes located in 2
Washington state by increasing the revenue-sharing percentages when a 3
compacting tribe has completed a qualified capital investment; 4
amending RCW 43.06.523; and creating new sections. 5
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:6
Sec. 1. RCW 43.06.523 and 2020 c 132 s 2 are each amended to 7
read as follows: 8
(1)(a) The governor may enter into compacts with tribes 9
concerning revenue collected by the state from the state sales tax, 10
state use tax, and certain state business and occupation taxes, to 11
the extent these taxes are imposed on qualified transactions. All 12
compacts must meet the requirements under this section.13
(b)(i) Except with regard to the terms of a compacting tribe's 14
qualified capital investment, the governor may delegate the authority 15
to negotiate compacts to the department. 16
(ii) In negotiating the terms of a compacting tribe's qualified 17
capital investment, the governor must be satisfied that the 18
compacting tribe's qualified capital investment is substantially 19
proportionate to the compacting tribe's estimated tax revenue under 20
the compact as compared to qualified capital investments contained in 21
Z-0071.3
SENATE BILL 5264
State of Washington 69th Legislature 2025 Regular Session
By Senators Robinson, Hasegawa, Kauffman, Liias, Lovick, Nobles,
Saldaña, Salomon, and Stanford; by request of Department of Revenue
Read first time 01/14/25. Referred to Committee on Ways & Means.
p. 1 SB 5264
other compacts. For purposes of estimating a compacting tribe's tax 1
revenue under a compact, tax revenue from new development is not 2
included in the estimate. 3
(2) Any compact or any amendment to an existing compact 4
authorized under this section must include provisions that allow the 5
compacting tribe to receive, beginning on the compact's 6
((implementation)) or amendment's effective date, the following 7
amounts of tax collected on qualified transactions and received by 8
the state: 9
(a) One hundred percent of certain state business and occupation 10
tax revenues; 11
(b) The first ((five hundred thousand dollars )) $500,000 of the 12
total amount of state sales tax and state use tax collected during 13
each calendar year from taxpayers, regardless of whether the 14
taxpayers meet the requirements of a new development. If this ((five 15
hundred thousand dollar )) $500,000 cap is reached during a calendar 16
year, any amounts collected from taxpayers that do not meet the 17
requirements of a new development will be deemed to have been 18
collected and applied to the cap first, but only in the calendar 19
month in which the cap is reached; 20
(c) The following amounts of state sales tax and state use tax 21
collected during each calendar year from taxpayers meeting the 22
requirements of a new development: 23
(i) Twenty-five percent of any amount over the cap described in 24
(b) of this subsection (2); or 25
(ii) ((Sixty)) One hundred percent of any amount over the cap 26
described in (b) of this subsection (2), if the compacting tribe has 27
completed a qualified capital investment; and 28
(d) Beginning January 1st of the fourth calendar year following 29
the ((signing of the )) compact's effective date , the following 30
amounts of state sales tax and state use tax collected during each 31
calendar year from taxpayers that do not meet the requirements of a 32
new development: 33
(i) Twenty-five percent of any amount over the cap described in 34
(b) of this subsection (2); or 35
(ii) ((Fifty)) One hundred percent of any amount over the cap 36
described in (b) of this subsection (2), if the compacting tribe has 37
completed a qualified capital investment. 38
(3) The parties to any compact must agree to include the 39
following provisions in the compact: 40
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(a) A process for determining when any qualified capital 1
investment is complete; 2
(b) A process to verify compliance with the terms of the compact;3
(c) A delineation of the respective roles and responsibilities of 4
the compacting tribe and the department; 5
(d) A process to resolve disputes, including the use of a 6
nonjudicial process; 7
(e) An agreement that the compact resolves all current and future 8
disputes between the compacting tribe and state and local taxing 9
authorities, while the compact is in effect, to the extent such 10
disputes relate to the levying, assessment, and collection of taxes 11
related to the following: 12
(i) Transactions between nonmembers, where such transactions are 13
subject to any state sales tax, local sales tax, and any other taxes 14
in effect or authorized as of June 11, 2020, except for any business 15
and occupation tax under chapter 82.04 RCW other than certain state 16
business and occupation taxes; 17
(ii) State and local use tax imposed on nonmembers and sourced to 18
a location within the Indian country of the compacting tribe pursuant 19
to RCW 82.32.730; and 20
(iii) State and local personal property taxes imposed on 21
nonmembers; 22
(f) An agreement that in the event of a change in state tax laws 23
that affects the negotiated terms of a compact, or a change in the 24
department's interpretation regarding the property taxation of 25
nonmember-owned improvements on Indian trust land:26
(i) The parties must discuss in good faith any changes in the 27
compact or this section that may be appropriate to preserve the 28
intended benefits of the compact; and 29
(ii) A compacting tribe may terminate the compact if the good 30
faith discussions do not result in a mutually satisfactory 31
resolution; 32
(g)(i) An agreement that the department must perform all 33
functions related to the administration and collection of the taxes 34
collected on qualified transactions. The department may not impose 35
any charge on a compacting tribe for these services. However, the 36
department may seek legislative appropriations to cover its 37
administrative costs associated with compact negotiations and 38
administration. 39
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(ii) As part of the department's authority under (g)(i) of this 1
subsection (3), the department will apply the provisions contained in 2
Title 82 RCW insofar as they are applicable to the taxes at issue in 3
any compact authorized under this section; 4
(h) An agreement that the compacting tribe will provide 5
information the department determines is necessary to fulfill the 6
department's tax administration obligations under the compact, 7
including information related to parcel ownership and business 8
operations in the compact covered area; and 9
(i) Terms specifying the duration of the compact, and any related 10
terms. 11
(4)(a) A compacting tribe may examine department records related 12
to the payment of tax amounts to the compacting tribe. The compacting 13
tribe must agree to keep information obtained from the department 14
pursuant to a compact confidential to the same extent as the 15
department is required to keep that information confidential pursuant 16
to RCW 82.32.330. 17
(b) Information received by the state or open to state review 18
under the terms of a compact is deemed tax information under RCW 19
82.32.330. 20
(5) The amounts in subsection (2) of this section must be paid to 21
the compacting tribe on a monthly basis within ((sixty)) 60 days 22
after the department receives the tax amounts. 23
(6) All refunds and credits the department issues to taxpayers of 24
amounts previously paid to the compacting tribe under the terms of a 25
compact will be charged to the compacting tribe. 26
(7) Funds dedicated under RCW 82.08.020 and 82.12.0201 to the 27
performance audits of government account under RCW 43.09.475 are not 28
reduced by any payment to the compacting tribe. 29
(8) The department may adopt rules as may be necessary to 30
administer the provisions of this section. 31
(9) This section does not affect the depositing of state sales 32
tax, state use tax, and certain state business and occupation tax 33
into the general fund as required by RCW 82.32.380.34
(10) The definitions in this subsection apply throughout this 35
section unless the context clearly requires otherwise.36
(a) "Certain state business and occupation tax" means the tax 37
imposed in chapter 82.04 RCW with respect to any qualified 38
transaction as defined in (o)(i) of this subsection (10).39
(b) "Compact" means a compact authorized by this section.40
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(c)(i) "Compact covered area" means: (A) Trust land, whether 1
located within or outside of the boundaries of the compacting tribe's 2
reservation; and (B) fee land within the boundaries of the compacting 3
tribe's reservation and under tribal or tribal-member ownership.4
(ii) For purposes of this subsection (10)(c), "tribal or tribal- 5
member ownership" means fee land with a greater than ((fifty)) 50 6
percent ownership interest being held by any combination of the 7
compacting tribe or its tribal members. 8
(iii) "Compact covered area" does not include any land that, as 9
of June 11, 2020, was fee land in which one or more nonmembers held a 10
majority ownership, but only with respect to: 11
(A) A business that was in operation on that land as of June 11, 12
2020, and continues to be in operation on that same land; or13
(B) A substantially similar successor business to a business 14
described in (c)(iii)(A) of this subsection (10) is in operation on 15
that same land. 16
(d) "Compacting tribe" means, with respect to any specific 17
compact, the tribe that is a party to the compact.18
(e) "Department" means the department of revenue.19
(f) "((Implementation)) Effective date" means the date, 20
negotiated by the parties to the compact or compact amendment , on 21
which the department is required to begin administering the terms of 22
such compact or compact amendment, as applicable. 23
(g) "Indian country" has the same meaning as provided in 18 24
U.S.C. Sec. 1151, as existing on June 11, 2020. 25
(h) "Indian reservation" means all lands, notwithstanding the 26
issuance of any patent, within the boundaries of areas set aside by 27
the United States for the use and occupancy of Indian tribes by 28
treaty, law, or executive order, or otherwise designated or described 29
"reservation" by any federal act, and that are currently recognized 30
as "Indian reservations" by the United States department of the 31
interior. The term applies to all land within the boundaries of the 32
Indian reservation, regardless of whether the land is owned by 33
nonmembers, tribal members, or an Indian tribe. 34
(i) "Indian tribe" or "tribe" means a federally recognized Indian 35
tribe located at least partially within the geographical boundaries 36
of the state of Washington and includes its enterprises, 37
subsidiaries, and constituent parts. 38
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(j) "Local sales tax" means any sales tax that a local taxing 1
authority is authorized to impose under chapter 82.14 RCW, RCW 2
81.104.170, or any other provision of state law. 3
(k) "Local use tax" means any use tax that a local taxing 4
authority is authorized to impose under chapter 82.14 RCW, RCW 5
81.104.170, or any other provision of state law. 6
(l) "New development" means, with respect to any specific compact 7
and the compact covered area associated with that compact, a person 8
that: 9
(i) Is subject to state sales tax or state use tax collection or 10
payment obligations as a result of business activity within the 11
compact covered area; 12
(ii) Conducts business operations in a structure within the 13
compact covered area, and construction of that structure began on or 14
after the ((date the compact is signed by the parties )) compact's 15
effective date, but not including any such construction involving the 16
renovation of or addition to a structure existing before the ((date 17
the compact is signed by the parties)) compact's effective date; and18
(iii) Has not previously been subject to state sales tax or state 19
use tax collection or payment obligations as a result of that same 20
business activity operated within a different structure located 21
elsewhere within the compact covered area. 22
(m) "Nonmember" means, with respect to any specific compact:23
(i) A natural person who is not a tribal member of the compacting 24
tribe; 25
(ii) A tribe that is not the compacting tribe; or26
(iii) Any entity where not more than ((fifty)) 50 percent of the 27
ownership interests are held by any combination of the compacting 28
tribe or any tribal members of the compacting tribe.29
(n) "Qualified capital investment" means a contribution to the 30
development and construction of a project agreed to by the governor 31
and the compacting tribe. 32
(o) "Qualified transaction" means: 33
(i) A retail sale subject to state sales tax, involving a seller 34
and purchaser who are both nonmembers, and that is sourced to a 35
location within the compact covered area pursuant to RCW 82.32.730; 36
or 37
(ii) Any use by a nonmember upon which the state use tax is 38
imposed and sourced to a location within the compact covered area 39
pursuant to RCW 82.32.730. 40
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(p) "State sales tax" means the tax imposed in RCW 82.08.020(1).1
(q) "State use tax" means the tax imposed in RCW 82.12.020 at the 2
rate in RCW 82.08.020(1). 3
(r) "Tribal member" means an enrolled member of a federally 4
recognized tribe, or in the context of a marital community, the 5
spouse of a tribal member of the compacting tribe. 6
NEW SECTION. Sec. 2. Nothing in this act in any way limits, 7
restricts, reduces, or affects local taxes authorized under chapter 8
82.14 RCW, RCW 81.104.170, Title 35, 36, or 84 RCW, or any other 9
provision of state law authorizing a local tax.10
NEW SECTION. Sec. 3. The department of revenue may begin 11
administering the provisions of this act on or after July 1, 2027.12
NEW SECTION. Sec. 4. This act applies to a compact or compact 13
amendment, as applicable, with an effective date on or after January 14
1, 2028.15
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