ORD 07-562
,
ORDINANCE NO. D/~ 5(pd-.
ORl G1NAL
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
FEDERAL WAY, WASHINGTON, AMENDING THE
DEFINITION OF GROSS INCOME TO CHAPTER 14
TAXATION, ARTICLE V, AND CLARIFYING THE TAX
YEAR AND EXEMPTION FROM THE UTILTY TAX OF
INCOME (AMENDING ORDINANCE NOS. 95-257, and 96-
262 )
WHEREAS, RCW 35.21.870 permits cities to levy a tax on the privilege of conducting utility
businesses such as electrical energy, natural gas, or telephone business; and
WHEREAS, at the November 7, 2006 election, the voters of the City of Federal Way
authorized the City to levy a 1.75% utility tax upon the privilege of conducting an electrical energy,
natural gas, storm drainage, garbage, cable television, cellular and other telephone and wireless
communication services businesses for the purpose of financing enhanced police and community
safety; and
WHEREAS, effective January 1, 2007, the total utility tax levied on behalf of the City is
7.75%; and
WHEREAS, utility companies do not calculate the taxes in the same manner, which may
result in discrepancies in the amount collected for the City's 7.75% utility taxes; and
WHEREAS, the discrepancy can be remedied by expressly excluding the City's utility tax in
the deductions from gross revenue calculations; and
WHEREAS, clarifying the definition of gross revenue to reflect services provided rather than
referring to tangible property and deleting references to licensing in this taxation chapter are intended
ORD # tn-SIt/a, PAGE I
as housekeeping measures that do not substantively affect the levying and/or collecting of utility
taxes; and
WHEREAS, the City Council finds that it is in the interest of the citizens to modify the
Federal Way City Code provisions in regards to the utility tax.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF FEDERAL WAY,
WASHINGTON, DO ORDAIN AS FOLLOWS:
Section 1. 14-171
Definitions.
In construing the provisions of this chapter, the following definitions shall be applied:
(1) Gross income means the value proceeding or accruing from the performance
of the particular public service or transportation business involved including operations
incidental thereto, but without any deduction on account of the cost of the commodity furnished
or sold, the cost of materials used, labor costs. interest. discount. delivery costs. taxes, or any
other expense whatsoever paid or accrued and without any deduction on account of losses. sale of
tangible property or service, and receipts (including all sums earned or charged, whether received
or not), by reason of the investment of capital in the business engaged in, including rentals,
royalties, fees, or other emoluments, hO'.vever designated (excluding receipts or proceeds from
the ....Ise or sale of real property or any interest therein, and proceeds from the sale of notes, bonds,
mortgages, or other evidences of indebtedness, or stocks and the like) and without any deduction
on account of the cost of the property sold, the cost of materials used, labor costs, interest or
discount paid, or any expense whatsoever, and without any deduction on account of losses,
including the amount of credit losses actually sustained by the taxpayer whose regular books or
accounts arc kept upon an accrual basis.
(2) Cable service means:
a. A system providing service pursuant to a franchise issued by the city
under the Cable Communications Policy Act of 1984 Public Law No. 98-549,47 USC Section
521, as it may be amended or superseded; and
b. Any system that competes directly with such franchised system by
employing antennae, microwave, wires, wave guides, coaxial cables, or other conductors,
equipment or facilities designed, construed or used for the purpose of:
1. Collecting and amplifying local and distant broadcast television
signals and distributing and transmitting them;
2. Transmitting original cablecast programming not received
through television broadcast signals; or
3. Transmitting television pictures, film and videotape programs
not received through broadcast television signals, whether or not encoded or processed to permit
reception by only selected receivers;
ORD # Ol-SG)- , PAGE 2
provided, however, that "cable television service" shall not include entities that are subject to
charges as "commercial TV stations" under 47 USC Section 158.
(3) Cellular telephone service means two-way voice and data
telephone/telecommunications system based in whole or substantially in part on wireless radio
communications and which is not subject to regulation by the Washington Utilities and
Transportation Commission (WUTC). This includes cellular mobile service. The definition of
cellular mobile service includes other wireless radio communications services such as specialized
mobile radio (SMR), personal communications services (PCS) and any other evolving wireless
radio communications technology which accomplishes the same purpose as cellular mobile
servIce.
(4) Competitive telecommunication service means the providing by any person of
telecommunications equipment or apparatus, or service related to that equipment or apparatus
such as repair or maintenance service, if the equipment or apparatus is of a type which can be
provided by persons that are not subject to regulation as telephone companies under RCW Title
80 and for which a separate charge is made.
(5) Designated official means such city employee or agent as the city manager
shall designate.
(6) Network telecommunication service means the providing by any person of
access to a local telephone network, local telephone network switching service, toll service, or
coin telephone services, or the providing of telephonic, video, data, pagers, or similar
communication or transmission for hire, via a local telephone network, toll line or channel, cable,
microwave, or similar communication or transmission system. "Network telecommunication
service" includes interstate service, including toll service, originating from or received on
telecommunications equipment or apparatus in this state if the charge for the service is billed to a
person in this state. "Network telecommunication service" does not include the providing of
competitive telecommunication service, the providing of cable television service, nor the
providing of broadcast services by radio or television stations.
(7) Telecommunications company includes every corporation, company,
association, joint stock association, partnership and person, their lessees, trustees or receivers
appointed by any court whatsoever, and every city or town owning, operating or managing any
facilities used to provide telecommunications for hire, sale, or resale to the general public within
this state.
(8) Telecommunication business means the business of providing network
telecommunication service, as defined in this section. It includes cooperative or farmer line
telephone companies or associations operating an exchange.
(9) Telecommunication service means competitive telecommunication service or
network telecommunication service, or both, as defined in this section.
(10) Solid waste means garbage, trash, rubbish, or other materials discarded as
worthless or not economically viable for further use. The term does not include hazardous or
toxic waste, and does not include yard waste or material collected primarily for recycling or
salvage. (Ord. No. 95-257, ~ 1, 12-19-95; Ord. No. 96-262, ~ 1,2-20-96)
ORD # Ol-${p J , PAGE 3
14-177 License tTax year.
All utility occupation licenses and tho foc for the tax therefor shall be for the tax year for
'.vhich issued and shall expire at the end of the tax year. The tax year shall commence January 1st
and shall end on December 31st. (Ord. No. 95-257, ~ 1, 12-19-95; Ord. No. 96-262, ~ 1,2-20-96)
14-178 Deductions.
In computing the tax imposed by this chapter, the following items may be deducted from
the measure of the tax:
(1) The amount of credit losses actually sustained by taxpayers whose regular
books are kept upon an accrual basis.
(2) Charges by a taxpayer engaging in a telephone business to a
telecommunications company for telephone service that the purchaser buys for the purpose of
resale.
(3) That portion of the gross income derived from charges to another
telecommunications company for connecting fees, switching charges, or carrier access charges
relating to intrastate toll telephone services, or for access to, or charges for, interstate services.
(4) Adjustments made to a billing or to a customer account or to an accrual
account in order to reverse a billing or charge that had been made as a result ofthird-party fraud
or other crime and was not properly a debt ofthe customer.
(5) Amounts derived from a business which the city is prohibited from taxing
under the Constitution of this state or the Constitution or laws of the United States.
(6) Grants from governmental agencies.
(7) The utility tax charged by the City of Federal Way. (Ord. No. 95-257, ~ 1, 12-
19-95; Ord. No. 96-262, ~ 1,2-20-96)
Section 2. Severability. The provisions ofthis ordinance are declared separate and severable.
The invalidity of any clause, sentence, paragraph, subdivision, section, or portion ofthis ordinance
or the invalidity ofthe application thereofto any person or circumstance, shall not affect the validity
ofthe remainder ofthe ordinance, or the validity of its application to other persons or circumstances.
Section 3. Corrections. The City Clerk and the codifiers ofthis ordinance are authorized to
make necessary corrections to this ordinance including, but no limited to, the correction of
scrivener/clerical errors, references, ordinance numbering, section/subsection numbers and any
references thereto.
ORD # (Jl-S&d , PAGE 4
Section 4. Effective Date. This ordinance shall take effect and be in force five (5) days from
the time of its final passage, as provided by law.
P A~SED by the City Council of the City of Federal Way this &? (\ d.-
cOtldnJ ,2007.
day of
CITY OF FEDERAL WAY
~~.~~
MAYOR,MI', PAAK
ATTEST:
THAWAY, CMC
APPROVED AS TO FORM:
~~ti. ~
CITY ATTORNEY, PATRICIAA. RICHARDSON
FILED WITH THE CITY CLERK:
PASSED BY THE CITY COUNCIL:
PUBLISHED:
EFFECTIVE DATE:
ORDINANCE NO.:
K:/ordinance/2007/utility tax
ORD #-.J 0'7-Slt>'L, PAGE 5