COUNTIES ‑- TAXATION ‑- APPLICABILITY OF STATE BUSINESS AND OCCUPATION TAX TO COUNTY DATA PROCESSING SERVICES
A county which provides data processing services to other municipal corporations (such as other counties and cities) and to title insurance companies on a regular and continuous basis is thereby subject to the business and occupation tax imposed by chapter 82.04 RCW.
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December 22, 1975
Honorable Robert E. Schillberg
Everett, Washington Cite as: AGLO 1975 No. 97
This is written in response to your recent request for our opinion on a question which we paraphrase as follows:
Is a county which provides data processing services to other municipal corporations (such as other counties and cities) and to title insurance companies on a regular and continuous basis thereby subject to the business and occupation tax imposed by chapter 82.04 RCW?
We answer this question in the affirmative.
From your opinion request as supplemented by subsequent oral conversations with your office, we discern the circumstances giving rise to your request to be as follows:
Snohomish County currently provides data processing services to at least two other counties and the same number of title insurance companies for compensation on a regular and continuing basis. The services involve processing of data which is fed, stored, and maintained in the county's computer facility in the form of magnetic tapes, cards, and discs. In addition, they involve providing communication capability with the computer by direct input through outlying terminals located in the other counties and in the offices of the title insurance companies. Typically, the services provided for the other counties involve all data processing services necessary for running a county's property tax roll. The services provided to the title insurance companies involve the supplying of information relating to real property transactions. Also, the county provides a "backup" computer capability for various other municipal corporations. It is anticipated that similar arrangements will soon be entered into between the county and additional municipal corporations.
[[Orig. Op. Page 2]] The business and occupation tax is imposed by RCW 82.04.220, which provides in pertinent part as follows:
"There is levied and shall be collected from every person a tax for the act or privilege of engaging in business activities. . . ."
Thus, the applicability of the tax to the activities described above turns on two questions. First, is a county a "person" within the meaning of this language? And secondly, is the county "engaging in business activities" under the above described factual circumstances?
An affirmative answer to the first question is required by RCW 82.04.030 which defines "person" as including "any . . . municipal corporation, [and any] political subdivision of the state of Washington, . . ." Likewise, an affirmative answer to the second question is required by RCW 82.04.150, which defines the term "engaging in business" as ". . . commencing, conducting, or continuing in business. . ." The term "business" is defined in RCW 82.04.140 as follows:
"'Business' includes all activities engaged in with the object of gain, benefit, or advantage to the taxpayer or to another person or class, directly, or indirectly."
The data processing services of the county in the instant case certainly result in "gain, benefit, or advantage" to the entities, public and private, receiving them and, one may safely presume, to the county providing them as well. Otherwise, it would be difficult to imagine why the arrangements for the data processing services were entered into in the first place. Thus, we must conclude that the activities in question are within the scope of RCW 82.04.140, and for that reason are subject to the tax provided for in RCW 82.04.220.1/ Accord, an interpretative regulation of the state Department of Revenue, WAC 458-20-189, which provides in part:
"The State of Washington, its departments and institutions and all counties, cities and other municipal subdivisions engaging in governmental functions and receiving income therefrom in the form of license fees, inspection fees, permits, or taxes are not subject to the provisions of the business and occupation tax upon such revenues. [[Orig. Op. Page 3]] However, subdivisions are taxable with respect to income however designated derived from any activity whether proprietary or governmental wherein a specific charge is made to its residents or others based upon and measured by some service actually rendered by the subdivision. . . ."
We trust that the above will be of assistance to you.
Very truly yours,
TIMOTHY R. MALONE
Assistant Attorney General
*** FOOTNOTES ***
1/We express no opinion at this time as to the application of the tax when the data processing activities are not on a regular and continuous basis. Cf. WAC 458-20-106 andBudget Rent-A-Car v. Dep't of Rev., 81 Wn.2d 171, 500 P.2d 764 (1972). Based upon the facts here involved, that question is not presently before us.