(1) "Digital audio works" means works that result from the fixation of a series of musical, spoken, or other sounds, including ringtones.

     (2) "Digital audio-visual works" means a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.

     (3)(a) "Digital automated service," except as provided in (b) of this subsection (3), means any service transferred electronically that uses one or more software applications.

     (b) "Digital automated service" does not include:

     (i) Any service that primarily involves the application of human effort, and the human effort originated after the customer requested the service;

     (ii) The loaning or transferring of money or the purchase, sale, or transfer of financial instruments. For purposes of this subsection (3)(b)(ii), "financial instruments" include cash, accounts receivable and payable, loans and notes receivable and payable, debt securities, equity securities, as well as derivative contracts such as forward contracts, swap contracts, and options;

     (iii) Dispensing cash or other physical items from a machine;

     (iv) Payment processing services;

     (v) Parimutuel wagering and handicapping contests as authorized by chapter 67.16 RCW;

     (vi) Telecommunications services and ancillary services as those terms are defined in RCW 82.04.065;

     (vii) The internet and internet access as those terms are defined in RCW 82.04.297;

     (viii) The service described in RCW 82.04.050(6)(b);

     (ix) Online educational programs provided by a:

     (A) Public or private elementary or secondary school; or

     (B) An institution of higher education as defined in sections 1001 or 1002 of the federal higher education act of 1965 (Title 20 U.S.C. Secs. 1001 and 1002), as existing on July 1, 2009. For purposes of this subsection (3)(b)(ix)(B), an online educational program must be encompassed within the institution's accreditation;

     (x) Travel agent services, including online travel services, and automated systems used by travel agents to book reservations;

     (xi) A service that allows the person receiving the service to make online sales of products or services, digital or otherwise, using the service provider's web site. The service described in this subsection (3)(b)(xi) does not include the underlying sale of the products or services, digital or otherwise, by the person receiving the service; and

     (xii) Online classified advertising services.

     (4) "Digital books" means works that are generally recognized in the ordinary and usual sense as books.

     (5) "Digital code" means a code that provides a purchaser with the right to obtain one or more digital products, if all of the digital products to be obtained through the use of the code have the same sales and use tax treatment. "Digital code" does not include a code that represents a stored monetary value that is deducted from a total as it is used by the purchaser. "Digital code" also does not include a code that represents a redeemable card, gift card, or gift certificate that entitles the holder to select digital products of an indicated cash value. A digital code may be obtained by any means, including e-mail or by tangible means regardless of its designation as song code, video code, book code, or some other term.

     (6)(a) "Digital goods," except as provided in (b) of this subsection (6), means sounds, images, data, facts, or information, or any combination thereof, transferred electronically, including, but not limited to, specified digital products and other products transferred electronically not included within the definition of specified digital products.

     (b) The term "digital goods" does not include:

     (i) Telecommunications services and ancillary services as those terms are defined in RCW 82.04.065;

     (ii) Computer software as defined in RCW 82.04.215;

     (iii) Internet access as defined in RCW 82.04.297;

     (iv) The representation of a personal service in electronic form, such as an electronic copy of an engineering report prepared by an engineer, that primarily involves the application of human effort, and the human effort originated after the customer requested the service; and

     (v) Digital automated services and services and activities excluded from the definition of digital automated services in subsection (3)(b) of this section.

     (7) "Digital products" means digital goods and digital automated services.

     (8) "Electronically transferred" or "transferred electronically" means obtained by the purchaser by means other than tangible storage media. It is not necessary that a copy of the product be physically transferred to the purchaser. So long as the purchaser may access the product, it will be considered to have been electronically transferred to the purchaser.

     (9) "Specified digital products" means electronically transferred digital audio-visual works, digital audio works, and digital books.

[2009 c 535 § 201.]

NOTES:

     Reviser's note: The definitions in this section have been alphabetized pursuant to RCW 1.08.015(2)(k).

     Intent -- 2009 c 535: "(1) In 2007, the legislature directed the department of revenue (department) to conduct a study of the taxation of electronically delivered products (digital products). In conducting the study, the department was assisted by a committee comprised of legislators, academics, and individuals representing different segments of government and industry (the "study committee").

     (2) At the conclusion of the study, the department issued its final report December 5, 2008. The final report noted that any recommendations to the legislature should promote the following goals: (a) Simplicity and fairness; (b) conformity with the streamlined sales and use tax agreement; (c) neutrality regardless of industry, content, and delivery method while taking the purchaser's underlying property rights into account; (d) consideration given to the revenue impact of potential changes to the tax base; (e) consideration given to the impact caused by the pyramiding of business inputs; (f) maintaining or enhancing the competitiveness of businesses located in Washington; and (g) maintaining certainty, consistency, durability, and equity despite changes in technology and business models.

     (3) While the department's final report did not contain recommendations for the legislature, the report's conclusion notes that the study committee found that legislation implementing digital products tax policy is necessary in 2009 to: (a) Protect the sales and use tax base; (b) establish certainty in our tax code; (c) maintain conformity with the streamlined sales and use tax agreement; and (d) encourage economic development.

     (4) This act is the outgrowth of the work of the department and the study committee. The purpose of this act is to implement those findings of the study committee noted in subsection (3) of this section. This act also takes into account the goals noted in subsection (2) of this section. Moreover, this act contains specific provisions to: (a) Provide protections for taxpayers who failed to pay or collect tax on digital products for periods before July 26, 2009; and (b) promote the location of server farms and data centers in this state by preventing the department from considering a person's ownership of, or rights in, digital goods or digital codes residing on servers located in this state in determining whether the person has nexus with this state for purposes of the taxes imposed in Title 82 RCW." [2009 c 535 § 101.]

     Construction -- 2009 c 535: "This act does not have any impact whatsoever on the characterization of digital goods and digital codes as tangible or intangible personal property for purposes of property taxation and may not be used in any way in construing any provision of Title 84 RCW." [2009 c 535 § 1201.]

     Construction -- 2009 c 535: "The repeals in sections 515 and 623 of this act do not affect any existing right acquired or liability or obligation incurred under the statutes repealed or under any rule or order adopted under those statutes nor do they affect any proceedings instituted under them." [2009 c 535 § 1203.]