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WAC 118 Sale or rental of real estate, license to use real estate.
SOURCE DOCUMENT DETER. NO DATE OF ISSUE DESCRIPTION
       
WAC: 458-20-118   12/28/1990 Sale or rental of real estate, license to use real estate.Effective 1/28/91
         
       
RCW: 82.04.050   1995 "Sale at retail," "retail sale."
  82.04.390   1961 Exemptions--Amounts derived from sale of real estate.
  82.04.290   1998 Tax on international investment management services or other business or service activities.
         
       
ETA 3165.2011 02/18/2011 Dry Stack Boat Storage. The Department issued ETA 3165.2011 Dry Stack Boat Storage.  This ETA explains the business and occupation (B&O) tax responsibilities of businesses that offer land based boat storage in the form of stacking berths (“dry stack storage”).
  3066.2010 06/03/2010 Purchase of Personalty for Resale as Realty ETA 3066 and 3069 recite language from RCW 82.12.020. The Department has updated this language to reflect the changes to this statute by Section 206 of Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143).
  3030.2009 2/2/09 Parking fees as income from rental of real estate
3057.2009 2/2/09 Purchase of billboards: real property or tangible personal property
3066.2009 2/2/09 Purchase of personalty for resale as realty
232.08.118 9/16/66 PARKING FEES AS INCOME FROM RENTAL OF REAL ESTATE Revised 2/2/09 See ETA 3030.2009
         
       
INDUSTRY GUIDES:   10/01/2011 Self-Service Storage Businesses
    2003 Lodging Guide
         
         
SPECIAL NOTICES:      
Subject Title Reference:      
Kiosks 10/24/2013 How Taxes Apply to Charges for Kiosk and Cart Spaces in Shopping Malls
Hotel Motel     07/03/2002 Changes Relating to the Definition of Rental of real Estate for Hotels and Motels
Hurricane Relief   09/22/2005 No Sales Tax Due on Purchases Made With American Red Cross Cash Assistance Cards or FEMA Debit Cards Issued to Hurricane Victims
Hotel /Motel     05/22/2008 Tax Exemptions for Temporary Medical Housing Provided by Health or Social Welfare Organizations
         
       
DIRECTIVE: None      
         
       
RPM: None      
         
       
WTD:        
  4 WTD 211 87-333   B&O -- SERVICE -- INTEREST -- REAL ESTATE CONTRACTS -- SELLER FINANCED MORTGAGES. The taxpayer was engaged in the business of buying and selling apartment buildings.Interest payments received through real estate contracts are part of the gross income of contracts are part of the gross income of the business and subject to Service B&O, unless the real estate contracts constitute investments and the taxpayer is not engaged in a financial business. O'Leary v. Department of Revenue, 105 Wn. 2d 679 (1986).
  5 WTD 157 88-150   STORAGE TANK -- LEASE OF -- FACTORS DETERMINING.An agreement for the short term storage of oil was not found to be an agreement for the rental of the storage tanks where the owner of the oil did not receive sole continuous possession of the storage tanks. Chemical Processors v. State, Board of Tax Appeals, Docket Nos. 23223 and 23594, distinguished.
  6 WTD 443 88-379   B&O TAX -- EXEMPTION -- REAL PROPERTY -- LEASE -- LICENSE TO USE DISTINGUISHED.Agreement to lease a portion of a taxpayer's facilities as office space found to be for the rental of real estate where the customer/lessee was the exclusive occupant of a specific office and the taxpayer only provided janitorial services.
  7 WTD 35 88-427   RENTAL OF OR LICENSE TO USE REAL ESTATE --EXCLUSIVE POSSESSION AND CONTROL -- REQUIREMENTS.An arrangement whereby an associate rents a single office in an office suite from the taxpayer, where the associate has a separately defined office space, is not dependent on the taxpayer for access to the space, and has a locking door to its office, meets the requirements for exclusive possession and control necessary to find a rental of real estate.Tacoma v. Smith, 50 Wn. App. 717 (Div. II, 1988), Ross v. Washington, Docket No. 80-26 (BTA 1981).
  7 WTD 257 89-146   B&O TAX -- DEDUCTION -- SALES OF REAL ESTATE -- INTEREST.Interest received from the sale of real estate is subject to Service B&O tax whether the sale is secured by a real estate contract, deed of trust or mortgage.Such interest is not deductible under RCW 82.04.4292 if it is not received as a result of a loan or investment made by one in a financial business.
  8 WTD 149 89-398   RENTAL OF OR LICENSE TO USE REAL ESTATE -- PARKING -- TRACTORS AND TRAILERS.Because tractors and trailers are not "automobiles," service tax, and not retailing business and occupation tax and retail sales tax, is applicable if it is determined that designated parking spaces have not been rented for a continuous period of one month or more.In such a case there has been a license to use, and not the rental of real estate.
  8 WTD 219 89-458   B&O TAX -- EXEMPTION -- REAL PROPERTY -- RENTAL OF -- LICENSE TO USE -- LEASED DEPARTMENT -- MANICURIST.A leased department is deemed to be the rental of real property, the income from which is exempt of B&O tax.The operation of an independent manicurist with a makeup store is found to be a leased department.Both WAC 458-20-118 and WAC 458-20-200 have been amended since the issuance of this determination.These rule changes will affect the holding of issue [2] in the determination.
  10 WTD 41 90-252   RENTAL OF REAL ESTATE -- PROVIDING CONGREGATE CARE FACILITIES TO MENTALLY ILL ADULTS.Facilities which provide residential care to mentally ill adults are "similar institutions" to nursing and rest homes for purposes of Rule 168.Therefore, revenues attributable to professional services rendered to residents are taxable under the Service and Other classification of the business and occupation tax. Amounts the taxpayer receives from the county for providing lodging are revenues from the rental of real estate exempt from the business and occupation tax.THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET. NO. 04-0022E, 23 WTD 198 (2004) AND DET.NO. 04-0023E, 23 WTD 206 (2004).
  10 WTD 87 90-297   RENTAL OF REAL ESTATE -- GROUP HOME FOR DEVELOPMENTALLY DISABLED ADULTS.Where a taxpayer furnishes lodging to developmentally disabled adults who have the exclusive control and occupancy of rooms for thirty days or more, the amounts the taxpayer receives directly attributable to furnishing such lodging are revenues from the rental of real estate exempt from the business and occupation tax.ACCORD: Det. 90-252, ___ WTD ___ (1990). THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET. NO. 04-0022E, 23 WTD 198 (2004) AND DET.NO. 04-0023E, 23 WTD 206 (2004).
  11 WTD 203 91-163   B&O TAX -- RENTAL -- ADVERTISING.Shopping mall rental receipts are not bifurcated for advertising charge if the receipts received as "advertising" are rent.
  11 WTD 403 91-228   B&O TAX -- REAL ESTATE CONTRACTS -- INTEREST FROM -- ENGAGING IN BUSINESS.A taxpayer whose contract sale of real property is subject to B&O tax on interest derived therefrom does not cut off his liability for same by simply declaring his retirement.Interest payments earned from sales of business property which continue beyond his cessation of conventional business operations are B&O taxable as well.
  12 WTD 349 92-100   RENTAL OF OR LICENSE TO USE REAL ESTATE --EXCLUSIVE POSSESSION AND CONTROL -- REQUIREMENTS.Arrangement whereby individual physicians rent single offices in a building owned, operated, and managed by their partnership will be deemed rental of real estate where a landlord-tenant relationship is shown to exist. The fact that other services are offered by the building owner to the doctors does not defeat the landlord-tenant relationship where various charges are separately contemplated in the rental agreement and separately accounted for by the partnership.Tacoma v. Smith, 50 Wn. App. 717 (Div. II, 1988); Det. No. 88-427, 7 WTD 35 (1988).
  12 WTD 461 92-297   COLD STORAGE WAREHOUSES -- DISTINGUISHED FROM RENTALS.Whether the legal relationship between two parties as to an interest in real property is landlord-tenant or licensor-licensee will be determined by reference to the definitions of those terms in the statute and in the rule, and by the weight of the evidence.
  13 WTD 108 92-213ER   SERVICE B&O TAX -- LEASE VERSUS LICENSE TO USE REAL ESTATE -- TRADE SHOW SPACE.Under Rule 256, effective March 5, 1990, income from trade show space is subject to service B&O tax where the trade show is open to the public.Under Rule 118, for periods prior to March 5, 1990, income from trade show space is subject to service B&O tax where the space is provided for a short period and the taxpayer retains control over the space.
  13 WTD 215 92-201   SALES TAX -- USE TAX -- REALTY -- FIXTURES -- TEST -- CONCOMITANCE OF SALE WITH LAND.The three key factors in determining whether an item is a fixture of the realty or tangible personal property are (1) actual annexation, (2) application to use or purpose, and (3) intention to make a permanent part of the realty.The fact that fixtures are sold while the land to which they are attached is leased is not determinative of their status as real or personal.
  13 WTD 322 93-163   SERVICE B&O -- OPTION TO PURCHASE.Payment for an option to purchase real estate is not subject to service B&O.This determination has been overruled or modified in whole or part by Det. No. 99-011R, 19 WTD 423 (2000).
  15 WTD 15 94-113   HOTEL/MOTEL TAX -- LICENSE TO USE REAL ESTATE -- TRANSIENT -- AIRPORT TIE-DOWN FEES --BOAT MOORAGE FEES.Transient boat moorage fees and transient airport tie-downs are not subject to the special hotel/motel tax because they are not received for the "furnishing of lodging."
  17 WTD 89 97-198   RETAIL SALES TAX -- B&O TAX -- HOTEL-MOTEL TAX -- TIMESHARE -- FEE OWNERSHIP. Charges by a timeshare operator are subject to retail sales tax, B&O tax, and hotel-motel tax in situations where the members do not acquire the attributes of ownership in the real estate.
  18 WTD 1 96-173   B&O TAX -- EXEMPTION -- REAL ESTATE -- LICENSE TO USE -- LEASE -- ANTIQUE MALL.Where the use of space in an antique mall is conveyed by a written agreement purporting to be a lease and where the space is identified with particularity in the agreement and at the physical location, and where the agreement specifies a certain term, as well as notice for termination, the arrangement will be construed as a rental or lease of real property, as opposed to a license to use same.
  19 WTD 618 99-345   SERVICE B&O TAX -- LEASE VERSUS LICENSE TO USE REAL ESTATE - COMPUTER EQUIPMENT CO-LOCATION SERVICE.Income from providing space for customers solely to locate their equipment on taxpayer's secure premises or to pair the co-location with a range of internet-access services is subject to service B&O tax where the taxpayer retains control over the space and how its customers are permitted to use it.
  21 WTD 298 00-154ER   RCW 82.04.320: B&O TAX - EXEMPTIONS - RENTALS - LICENSES.The labeling of payments as royalties or rents is not controlling in determining whether the payments are for the rental of real property or for a license or other right involving the use of real property.
  21 WTD 298 00-154ER   RCW 82.04.320: B&O TAX - EXEMPTIONS - RENTALS - LICENSES - MINERAL LEASES.In general, royalties received under a mineral lease are for the grant of the right to extract natural products and are treated as a license, a profit a prendre, or an incorporeal heriditament, not as the rental of real property.
  23 WTD 121 01-015   B&O TAX - EXEMPTION - RENTAL OF REAL ESTATE.A lessor's limited access to a rented space for specific purposes pursuant to the lease agreement does not destroy the character of the contractual arrangement as a lease.
  23 WTD 121 01-015   B&O TAX - EXEMPTION - RENTAL OF REAL ESTATE.When a lessee iscontractually authorized to occupy the premises, and its interest is not terminable or revocable at the will of the party who gave it, and the agreement unequivocally provides for notice to the other party before termination of the agreement, the agreement is found to be a lease and not a license.
  23 WTD 198 04-0022E   B&O TAX - EXEMPTIONS -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING - BOARDING HOMES -- 30 DAY PRESUMPTION.The statutory presumption that occupancy of real property for a continuous period of one month or more constitutes a lease of real property does not apply to assisted living facilities.
  23 WTD 198 04-0022E   B&O TAX -EXEMPTIONS -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING -- BOARDING HOMES -- EXCLUSIVE CONTROL - PRIMARY PURPOSE.Although some indicia of a lease are present in the assisted living context, the primary purpose of the taxpayer's assisted living facilities is to provide daily living assistance and care to the aged or infirm.Accordingly, the rental of real estate exemption does not apply.
  23 WTD 198 04-0022E   CONGREGATE CARE CASES OVERRULED.In published determinations, we previously held that two congregate care facilities were entitled to the rental of real estate exemption for amounts attributable to lodging if they could segregate with reasonable accuracy the amounts received from real estate rental from amounts received for personal and professional services.Det. No. 90-252, 10 WTD 41 (1990); Det. No. 90-297, 10 WTD 87 (1990).We hereby overrule these determinations to the extent those determinations stand for the proposition that assisted living facilities can bifurcate income and treat part of the income as subject to the rental of real estate exemption.
  23 WTD 206 04-0023E   SERVICE B&O TAX - B&O TAX EXEMPTION -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING - 30 DAY PRESUMPTION.The statutory presumption that occupancy of real property for a continuous period of one month or more constitutes a lease of real property does not apply to assisted living facilities.
  23 WTD 206 04-0023E   SERVICE B&O TAX -B&O TAX EXEMPTION -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING-EXCLUSIVE CONTROL VS. RIGHT TO USE - PRIMARY PURPOSE.Although some indicia of a lease are present in the assisted living context, the primary purpose of the taxpayer's assisted living facilities is to provide daily living assistance and care to the aged.Accordingly, the rental of real estate exemption does not apply.
  23 WTD 206 04-0023E   CONGREGATE CARE CASES OVERRULED.In published determinations, we previously held that two congregate care facilities were entitled to the rental of real estate exemption for amounts attributable to lodging if they could segregate with reasonable accuracy the amounts received from real estate rental from amounts received for personal and professional services.Det. No. 90-252, 10 WTD 41 (1990); Det. No. 90-297, 10 WTD 87 (1990).We hereby overrule these determinations to the extent those determinations stand for the proposition that assisted living facilities can bifurcate income and treat part of the income as subject to the rental of real estate exemption.
  23 WTD 218 03-0118   BUSINESS AND OCCUPATION TAX - EXEMPTION -LEASES -LICENSES TO USE -- DESIGNATION OF SPACE.An agreement which does not convey a designated area of real property for the tenant's control or dominion will not be considered a lease exempt from B&O tax.
  23 WTD 218 03-0118   BUSINESS AND OCCUPATION TAX - EXEMPTION -LEASES -LICENSES TO USE - HOW NAMED.What the parties may call their relationship does not necessarily control.An agreement that conveys an interest in a certain designated area of real property with the exclusive right to control and occupy the conveyed premises during the term of the agreement may be considered a lease even if the parties term the agreement a license.
  26 WTD 50 06-0030   RETAIL SALES TAX - B&O TAX - RENTAL OF ROOM FOR EVENT - CATERERS.When a caterer rents space for an event incidental to catering the event, the contract should not be bifurcated, and the entire charge for the catering and space should be taxed under the retailing and retail sales tax classifications.When a caterer rents an event room not in conjunction with catering the event, the rental income should be reported under the service and other business activities classification.
  26 WTD 69 06-0122   SERVICE B&O TAX - EXEMPTION -SUBLEASE OF REAL ESTATE.Amounts derived from the lease of real estate are exempt from B&O tax.The exemption also applies to a sublease of real estate so long as there is a landlord - tenant relationship between the original tenant and the subtenant whereby the subtenant is given exclusive possession and control of the property conveyed.Whether a transaction is a sublease or a non-exempt license to use real estate is a question of fact to be determined under the principles set out in Rule 118.
  29 WTD 75 09-0213 12/15/10 RULE 118; RCW 82.04.390:  B&O TAX – RENTAL OF REAL ESTATE - TENANT LATE FEES.  The B&O tax exemption for the rental of real estate does not apply to tenant late fees because the purpose of the late fee is to compensate the taxpayer for losses it incurs when rent is not paid on time; the fees are not taken or received for the rental of real estate.  Thus, they are not “derived from” the rental of real estate within the meaning of RCW 82.04.390.
  31 WTD 24 11-0080 05/31/2012 WAC 458-20-135, WAC 458-20-118; B&O TAX – RENTALS – LICENSES – MINERAL LEASES. Royalties received under a mineral lease are for the grant of the right to extract natural products and are treated as a license or a profit a prendre, not as the rental of real property.
  32 WTD 69 12-0189 04/04/2013 RCW 82.04.050(2)(f) – B&O TAX – EXEMPTION -- RENTAL OF REAL ESTATE V. LICENSE TO USE REAL PROPERTY-- NON-CONTINUOUS OCCUPANCY – HOTEL ROOMS RENTED BY AIRLINES. An airline’s long-term contracts with hotels for rooms for its off-duty flight personnel were nontaxable non-transient rentals of real estate, as opposed to retail sales taxable licenses to use real property, even though the hotels did not provide Taxpayer with the same rooms for the entire 30-day period.
  32 WTD 232 13-0059 10/04/2013 RULE 119, RULE 118; RCW 82.04.040: RETAIL SALES TAX – B&O TAX
– CATERERS – LICENSE TO USE REAL PROPERTY.  Taxpayer’s income from wedding packages that include catering and a license to use real property is subject to retail sales tax and retailing B&O tax.
       
OTHER: