| WAC 194 |
Doing
business inside and outside the state. |
| SOURCE |
DOCUMENT |
DETER. NO |
DATE OF ISSUE |
DESCRIPTION |
| | |
|
|
| WAC: |
458-20-194 |
|
11/01/10 |
WAC 458-20-194 (Rule 194) explains the apportionment requirements of persons entitled to apportion income under RCW 82.04.460(1). It also describes Washington nexus standards for business activities subject to apportionment under RCW 82.04.460(1). Rule 194 applies to persons subject to the service and other activities, international investment income, licensed boarding home, and low-level radioactive waste disposal business and occupation (B&O) tax classifications, and who are not required to apportion their income under another statute or rule.
Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143) changed the apportionment and nexus provisions addressed in these rules, effective June 1, 2010. The Department amended these rules to recognize that the guidance provided in the rules does not apply after May 31, 2010.
|
| |
458-20-194 |
|
10/01/10 |
WAC 458-20-194 (Rule 194) explains the apportionment requirements of persons entitled to apportion income under RCW 82.04.460(1). It also describes Washington nexus standards for business activities subject to apportionment under RCW 82.04.460(1). Rule 194 applies to persons subject to the service and other activities, international investment income, licensed boarding home, and low-level radioactive waste disposal business and occupation (B&O) tax classifications, and who are not required to apportion their income under another statute or rule.
WAC 458-20-14601 (Rule 14601) provides tax reporting instructions for financial institutions doing business both inside and outside the state of Washington.
Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143) changed the apportionment and nexus provisions addressed in these rules, effective June 1, 2010. The Department is amending these rules to recognize that the guidance provided in the rules does not apply after May 31, 2010.
|
| |
458-20-194 |
|
01/01/2005 |
Doing business inside and
outside the state. Effective 1/1/06. |
| RCW: | |
|
|
| |
82.04.290 |
|
1993 |
Tax on international investment
management services or other business or service activities. |
| |
82.04.460 |
|
1993 |
Business within and without
state-Apportionment. |
| |
82.12.020 |
|
1975 |
Use tax imposed. |
| ETA: |
3110.2009 |
|
2/2/09 |
Cost Apportionment -- Treatment of Costs Incurred for Multiple Purposes |
| |
19.04.194 |
|
7/1/66 |
ENGAGING IN BUSINESS WITHIN THE STATE - Cancelled effective 1/30/06 |
| |
27.04.194 |
|
7/1/66 |
TESTING AND ENGINEERING SERVICES BY AN OUT-OF-STATE CORPORATION - Cancelled effective December 29, 2006 This document addresses a situation where a business located outside Washington has employees permanently assigned to a Washington location and also has teams of employees come into the state to perform engineering and testing services. It explains that amounts received for services rendered in this state are subject to B&O tax, notwithstanding that no profit is realized. There is no longer any need for this document. The ETA doesn't address separate accounting or cost apportionment under WAC 458-20-194. Further, the use of the term "reimbursement" implies the application of WAC 458-20-111, which does not apply to the situation described.
|
| |
269.04.194 |
|
9/23/66 |
OUT-OF-STATE ENGINEERING FIRM PERFORMING SERVICES IN THIS STATE WHICH ARE INCIDENTAL TO THOSE PERFORMED BY ITS OUT-OF-STATE OFFICE - Cancelled effective 1/30/06 |
| |
270.04.194 |
|
7/31/74 |
INTEREST INCOME DERIVED FROM THE EXTENSION OF CREDIT TO A PARTY IN ANOTHER STATE BY A WASHINGTON TAXPAYER WITH BUSINESS SITUS IN BOTH STATES - Cancelled effective 1/30/06 |
| |
280.04.193.194 |
|
9/30/66 |
COMMISSIONS EARNED ON INTERSTATE SALES - Cancelled effective 1/30/06 |
| |
324.04.194.224 |
|
10/20/67 |
APPLICATION OF BUSINESS AND OCCUPATION TAX TO ROYALTY INCOME EARNED THROUGH GRANT OF PATENT PRIVILEGES - Cancelled effective 1/30/06 |
| |
2032.04.194 |
|
8/3/06 |
Cost Apportionment - Treatment of Costs Incurred for Multiple Purposes Revised 10/19/06. |
| |
2032.04.194 |
|
10/19/06 |
Cost Apportionment - Treatment of Costs Incurred for Multiple Purposes (First Revision) Revised 2/2/09 See ETA 3110.2009 |
| INDUSTRY GUIDES: |
|
10/19/05 |
Rule 194 Cost Benefit Analysis |
| SPECIAL
NOTICES: |
|
|
|
| Subject
Title Reference: |
|
|
|
| Economic Nexus |
|
|
05/28/2010 |
New "Economic Nexus" in Washington State May Impact "Foreign Corporations" |
| Economic Nexus |
|
|
05/28/2010 |
New "Economic Nexus" in Washington State May Impact Franchisors |
| Apportionment |
|
|
05/28/2010 |
New Apportionment Method |
| Economic Nexus |
|
|
05/28/2010 |
New Apportionment Method |
| Economic Nexus |
|
|
05/28/2010 |
Tax Attorneys and CPAs New "Economic Nexus" in Washington State May Impact Your Clients |
| Economic Nexus |
|
|
05/28/2010 |
Registered Out-of-state Businesses Currently not Reporting Income from Service Activities - New Apportionment for Certain Income |
| Economic Nexus |
|
|
06/30/2010 |
New "Economic Nexus" in Washington State May Impact Businesses Receiving Royalty/Licensing Income from Patents |
| Economic Nexus |
|
|
07/09/2010 |
New "Economic Nexus" in Washington State May Impact Advertising Agencies Located Elsewhere |
| Economic Nexus |
|
|
09/10/2010 |
B&O Tax Reporting Requirement Continues After Business Activity Stops (Trailing Nexus) |
| Apportionment | |
12/21/2005 |
Apportionment - Approved Methods |
| DIRECTIVE: |
NONE |
|
|
|
| TAX TOPICS: | |
|
|
| RPM: |
NONE |
|
|
|
| WTD: |
1 WTD 241 |
86-267 |
|
NEXUS. Person with no place of
business or employees and engaging in no business activities in this state is
not taxable with respect to interest on loan payments the right to which was
purchased from a Washington bank, despite the presence of the buyers and loan
collateral in this state. |
| |
1 WTD 415 |
85-308A,86-20A |
|
SERVICE B&O TAX --
"SAFE HARBOR" ASSETS -- APPORTIONMENT OF SALES -- SITUS. Amounts
derived from outright sales of tax credits and benefits provided by ERTA 1981
are not from any services rendered and are not apportionable between states.
Such sales of intangible rights are fully taxable by the state where such
rights have their situs. |
| |
1 WTD 445 |
30-192ABC |
|
B&O Tax -- Disc Commissions
-- Apportionment. Commissions allocated to a DISC subsidiary by its parent in
accordance within federal tax law constituted taxable gross income within the
meaning of RCW 82.04.080 notwithstanding that the DISC lacked employees or
property with which to conduct business and the income was not subject to
apportionment under RCW 82.04.460 by reason of export sales from California
because the DISC maintained no place of business outside of Washington. |
| |
2 WTD 9 |
85-105B |
|
Notice is hereby given that the
findings and conclusions of Determination No...., issued May 29, 1986
relating to apportionment of commissions income earned by a Domestic
International Sales Corporation have been effectively overruled by Order of
the State Board of Tax Appeals, Docket No. 30192C, issued November 5, 1986, Simpson Export Sales Company v. Department of Revenue.A copy of the Board's
Order is attached hereto. 1WTD 445. Accordingly, the findings and conclusions
of Determination No. ... concerning apportionment of ... Inc.'s DISC
commissions have application only through November 5, 1986 and not
thereafter. |
| |
2 WTD 23 |
86-297 |
|
B&O TAX -- APPORTIONMENT --
MAGAZINE -- SALES -- OUT-OF-STATE PLACE OF BUSINESS. Apportionment under RCW
82.04.460 is proper only if the taxpayer maintains a place of business
outside of the state of Washington.Where a magazine subscription business terminated its out-of-state
office, apportionment no longer applied. |
| |
2 WTD 23 |
86-297 |
|
This
determination has been overruled in whole or part by 20 WTD 124 (2001) |
| |
2 WTD 439 |
87-098 |
|
BUSINESS AND OCCUPATION TAX --
NEXUS -- SERVICES PERFORMED FOR OUT OF STATE CLIENTS BY IN-STATE OFFICES OF A
BUSINESS BASED OUT OF STATE. An out-of-state audience research firm is
subject to tax on activities attributable to its in-state offices. This firm
set up temporary offices in Washington from which it conducted telephone
surveys for an out-of -state client. The data from the surveys was sent to
the firm's home office for compilation, analysis and preparation of a report.
The activities taking place in Washington are business and are sufficient
nexus to tax. |
| |
3 WTD 195 |
87-186 |
|
APPORTIONMENT -- PLACE OF
BUSINESS -- DUE PROCESS CLAUSE -- COMMERCE CLAUSE. Apportionment may not be
denied solely because a taxpayer does not maintain a place of business
outside this state. |
| |
4 WTD 267 |
87-346 |
|
B&OTAX -- SERVICE -- GROSS INCOME --
APPORTIONMENT -- SERVICE PROVIDED OUT-OF-STATE BY THIRD PARTY. A taxpayer
operating a hotel reservation system is entitled to apportion income it
receives from customers for their proportional share of services provided to
the taxpayer by a third party. The third party had a computer system which
interfaced with the taxpayer's computer system, both locatedout of state . The third party billed the
taxpayer who re-billed its customers. The only activity taking place in
Washington was accounting by the taxpayer. Because the taxpayer's
out-of-state facilities interfaced with the third party's system theycontributed to the service for which the
taxpayer billed its customers. Apportionment was thus appropriate. |
| |
4 WTD 267 |
87-346 |
|
THIS DETERMINATION HAS BEEN
OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 93-269ER,
14 WTD 153 (1995). |
| |
6 WTD 59 |
88-233 |
|
B&O TAX -- CLASSIFICATION --
SERVICE -- GROSS INCOME -- ROYALTY INCOME -- PATENTS -- DOMICILE OUTSIDE OF
WASHINGTON. Royalties derived form granting the right to use a patented
process are not taxable by Washington where the grantor's domicile, legal or
commercial, is outside of Washington. Patents are intangible personal
property whose situs is the domicile of the owner. ETB 355.04.194. |
| |
6 WTD 59 |
88-233 |
|
B&O
TAX -- ALLOCATION -- INTANGIBLE PROPERTY -- MOBILIA SEQUUNTUR PERSONAM.
Income derived from intangible property is attributed to the domicile of the
owner of the property under the doctrine of mobilia sequuntur personam. Cury v. McCanless, 307 U.S. 357
(1938). |
| |
7 WTD 91 |
88-476 |
|
SERVICE B&O TAX --
INTERSTATE DEDUCTION -- SERVICES RENDERED SUBSTANTIALLY OR WHOLLY OUT OF
STATE -- PLACE OF BUSINESS -- GEOPHYSICAL INVESTIGATION. Where Washington
taxpayer performs its geophysical investigation substantially or wholly in
Alaska and Canada by sending its employees there to do on-site investigation
and report writing there in conjunction with other firms there for
transmittal from there of the reports to out-of-state customers, its income
is not subject to Service B&O tax without regard to whether or not the
taxpayer has a place of business in the out-of-state location. |
| |
7 WTD 383 |
85-97A |
|
B&O TAX -- SALE OR LEASE --
TRANSFER OF PATENT RIGHTS. A transfer of patent rights constitutes a sale
(assignment) instead of a lease, where the assignee received all substantial
patent rights, has the right to assign and license the patent to others, and
the right to sue for infringement of the patent. Neither the terms used in
the agreement, the right of the assignee to terminate the agreement, nor the
fact the agreement is not recorded is dispostive. |
| |
7 WTD 383 |
85-97A |
|
B&O TAX -- CASUAL OR
ISOLATED SALE -- TYPE OF PROPERTY -- PATENT RIGHTS.One-time assignment (sale) of patent rights
by a taxpayer-manufacturer to its subsidiary, when the taxpayer was not in
the business of developing or selling patents, held to be a casual and
isolated sale since the patent was not the "type of property" which
the taxpayer held himself out as selling, and such sales were not
"routine and continuous." |
| |
8 WTD 7 |
89-286 |
|
SERVICE
B&O TAX -- APPORTIONMENT -- SEPARATE ACCOUNTING METHODS -- COST METHOD --
TOTAL INCOME. Commission income is apportioned by separate accounting methods
unless it is not practical, then the cost method may be used. If the cost is
used, the ratio of the cost of doing business in this state to the total cost
of doing business both within and without this state is multiplied by total
income. |
| |
8 WTD 189 |
89-448 |
|
B&O TAX -- SERVICES --
APPORTIONMENT -- COST METHOD -- OUT OF STATE -- THIRD PARTY COSTS. The cost
of doing business for the cost apportionment formula under Rule 194 includes
third party costs which are attributed to the location of the office for which
the expenses were incurred. |
| |
8 WTD 227 |
89-459 |
|
B&O TAX -- APPORTIONMENT --
BANK -- METHOD. A bank which had previously requested and received Department
approval to use a three factor formula to apportion income, permitted to
switch to a cost method. |
| |
8 WTD 227 |
89-459 |
|
B&O
TAX -- APPORTIONMENT --BANK -- COST-BASIS METHOD.Under cost method, total income is
apportioned by using an apportionment percentage which is obtained by
dividing in-state costs by total costs.Deductions, but not exemptions, are taken after application of
apportionment percentage. |
| |
8 WTD 227 |
89-459 |
|
B&O Tax -- Apportionment --
Bank -- Interest Costs. Under a cost method of apportionment, interest costs
incurred by a bank are allocated to location where funds are used;
administrative cost of loan are allocated to location where costs were
incurred. |
| |
8 WTD 227 |
89-459 |
|
This
determination has been overruled or modified in whole or part by Det No.
89-459A, 11 WTD 17 (1991) & Det. No. 01-006, 20 WTD 124 (2001). |
| |
8 WTD 341 |
89-503 |
|
PUBLIC UTILITY TAX -- MOTOR
TRANSPORTATION -- PLACE OF SERVICE -- INTERSTATE COMMERCE INTERSTATE BILL OF
LADING -- ABSENCE THEREOF. When a motor carrier is paid for hauling which
takes place entirely outside of Washington or for hauling across Washington's
boundaries,it is paid for hauling
entirely within Washington absent an interstate bill of lading, it is subject
to Motor Transportation (or Urban Transportation) public utility tax.It may, however, deduct amounts paid to
other motor carriers subject to tax. |
| |
8 WTD 345 |
89-509 |
|
SERVICE B&O TAX -- SERVICES
PERFORMED FOR OUT-OF-STATE CUSTOMER -- SERVICES RENDERED WITHIN WASHINGTON
AND OUT OF STATE -- PLACES OF BUSINESS IN BOTH STATES -- APPORTIONMENT.Where taxpayer has places of business in
Washington and Alaska which contribute to the performance of a
service-selling goods on a commission basis-for an Alaskan customer, the
commissions earned are taxable on an apportionment basis. The cost of
business method is used unless there is a practical separate accounting. |
| |
8 WTD 411 |
89-525 |
|
B&OTAX -- OUT- OF - STATE INDEPENDENT SALES
REPRESENTATIVE -- "PLACE OF BUSINESS" -- WASHINGTON
EMPLOYEE/SHAREHOLDER -- HOME USED AS OFFICE. "Place of business"
held to include the home of the Washington employee/shareholder of an
out-of-state independent sales representative. Formal office not required
since employee normally called on potential customers at their respective
business locations and did in fact work out of his home instead of the
taxpayer's Oregon office. |
| |
9 WTD 39 |
89-553 |
|
OUT-OF-STATE SERVICES --
APPORTIONMENT. A taxpayer who does not maintain a place of business outside
the state is entitled to apportion service income when the out-of-state
services performed are more than incidental. |
| |
9 WTD 280-15 |
90-132 |
|
APPORTIONMENT -- IN STATE AND
OUT-OF-STATE OFFICES -- ADMINISTRATIVE OFFICES IN WASHINGTON -- SEPARATE
ACCOUNTING SYSTEMS. Taxpayer received commission income from sales as
manufacturer's representative both in Washington and outside Washington. It
paid taxes based on a separate accounting method, although its headquarters
were located in Washington. Such separate accounting is acceptable when the
in-state administrative services are not rendered to the customer. |
| |
9 WTD 286-39 |
90-163 |
|
APPORTIONMENT -- SEPARATE
ACCOUNTING METHODS -- WHAT CONSTITUTES. To comply with statutory requirements
and to be accepted by the Department, separate accounting method must
accurately show the income attributable to activities engaged in Washington.Merely separating income by where the
underlying transaction occurred does not constitute separate accounting
methods when in-state activities contribute to the earning of the income. |
| |
11 WTD 17 |
89-459A |
|
B&O TAX -- APPORTIONMENT --
BANK -- INTEREST COSTS -- CLARIFICATION. Under the cost method of
apportionment, interest costs incurred by a bank are apportioned, in the same
manner as all other expenses, to the location were services associated with
that expense were performed. Interest expenses are apportioned to the
location that incursthe payroll and
property expenses in managing the borrowing activities that give rise to the
interest expense. |
| |
11 WTD 17 |
89-459A |
|
This determination has been
overruled or modified in whole or part by Det.No. 01-006, 20 WTD 124 (2001). |
| |
11 WTD 219 |
91-177 |
|
B&O TAX -- INSTALLMENT SALES
-- INTEREST INCOME FROM -- APPORTIONMENT.That portion of income derived from interest on installment sales
which is attributable to business activities within the state other than the
sale itself is subject to Service B&O tax.Where no credit activities take place at
taxpayer's out-of-state locations, credit interest derived from installment
sales made to out-of-state buyers or at out-of-state locations need not be
apportioned.Accord: Rena-Ware v.
State, 77 Wn.2d 514 (1970) & ETB 270.04.194. |
| |
11 WTD 497 |
91-309 |
|
B&O
TAX -- SERVICES-- ERISA PREEMPTION OF
STATE LAW.The Employee Retirement
Income Security Act broadly preempts any state laws deemed to
"relate" to qualified benefit plans.The activity of contributing to or
receiving benefits from plans is not subject to Washington's B&O
tax.However, income received by a
plan administrator for its management activity is subject to service B&O
tax.Applied to that activity, the
B&O tax is a tax on the activity of administering the plan and is
calculated on the gross income of the plan administrator only.As such, it is distinguishable from taxes
on the plans themselves or taxes calculated with reference to the plan's
assets. |
| |
11 WTD 551 |
92-004 |
|
B&O TAX -- SERVICE --
APPORTIONMENT.The situs of a royalty
payment is the situs of the royalty owner.Authors who operate their corporation solely from their Washington residence
and who sold both books in question after they moved to Washington are not
entitled to apportion income notwithstanding the fact that incidental
promotional services are rendered elsewhere.ACCORD:Det. No. 88-233, 6 WTD
59 (1988); Det. No. 87-186, 3 WTD 195 (1987); 88-233, 6 WTD 59 (1988). |
| |
12 WTD 147 |
92-117 |
|
B&O TAX -- ALLOCATION --
THIRD -- PARTY COSTS. Third-party costs in the nature of commissions to
out-of-state independent salespersons held not to be allocable to another
state when they were not incurred because of taxpayer's out-of-state
activities. Costs properly attributable to the Washington office from which
expenses were incurred. Accord: Det.No. 89-448, 8WTD 189 (1989). |
| |
12 WTD 147 |
92-117 |
|
This
determination has been overruled or modified in whole or part by Det.No.
01-006, 20 WTD 124 (2001). |
| |
12 WTD 417 |
92-252E |
|
SERVICE B&O -- APPORTIONMENT
-- THIRD PARTY COSTS. Payments to a foreign subsidiary to provide services
from an out-of-state facility for the benefit of the overall operation of a
corporation domiciled in Washington are included in the numerator as the cost
of doing business within the state when apportioning income under the cost
method. Accord: Det. No. 89-448, 8 WTD 189 (1989). |
| |
12 WTD 431 |
92-262E |
|
APPORTIONMENT -- INTERNAL
CONSISTENCY. The costs incurred by a Washington state business for the
acquisition of third party services must be attributed to the state which
generates the business to which the services relate.Thus, if a Washington business has a New
York office which generates business and uses the services of an
independentbusiness located in
Washington state to perform part of the New York office's services, the costs
associated with that contact are properly allocated to New York and vice
versa.This method, if adopted by all
states, results in no more than 100% of the taxpayer's gross receipts being
subjectto taxation. |
| |
12 WTD 431 |
92-262E |
|
APPORTIONMENT. A taxpayer is
entitled to apportion its gross receipts between Washington and other
state(s) only if the taxpayer is directly and actively engaged in business in
the other state(s) and from such activity it derives some part of its gross receipts. |
| |
12 WTD 431 |
92-262E |
|
APPORTIONMENT.
When a taxpayer's sole connection with another state is the payment of third
party service provider costs, the taxpayer is not entitled to apportion out
the costs associated with that service provider. PARTIAL ACCORD: Det. No
89-448, 8 WTD 189 (1989). |
| |
12 WTD 431 |
92-262E |
|
APPORTIONMENT -- NEXUS.When a Washington taxpayer contracts with
independent businesses in other states to perform services in those states
for the taxpayer's purpose of realizing or continuing valuable contractual
relationships there, nexus may be found.However, when the independent businesses are not chosen because of
their location or to enter and maintain a place in the market of the other
state, but rather for their independent expertise, then nexus is not
created.Citing: Standard Pressed
Steel Co. v. Dept. of Rev., 419 U.S. 560 (1975),Scripto, Inc. v. Carson, 362 U.S. 207
(1960), and Tyler Pipe v. Washington, 483 U.S. 232 (1987). |
| |
12 WTD 431 |
92-262E |
|
FAIR
APPORTIONMENT -- COMPLETE AUTO TRANSIT.An apportionment formula is required only when another state may
constitutionally impose a tax.When no
other state may constitutionally tax the activities of a Washington business,
the state of Washington may tax 100% of its gross receipts. |
| |
12 WTD 519 |
92-363 |
|
SERVICE B&O TAX --
APPORTIONMENT -- COSTS -- COMPUTATION -- COSTS GENERATING INCOME. Costs
attributable to a. . . facility located [out-of-state] were correctly
excluded from the apportionment formula, where the facility did not
contribute to generating the income sought to be apportioned. Accord: Det.No.
89-448 8 WTD 189 (1989). |
| |
13 WTD 180 |
93-172 |
|
APPORTIONMENT -- COST METHOD --
SEPARATE BUSINESS ACTIVITY. Income from a separate business activity is
apportioned using only the costs related to that business activity. |
| |
13 WTD 180 |
93-172 |
|
THIS DETERMINATION HAS BEEN
OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 01-006,
20 WTD 124 (1999). |
| |
13 WTD 219 |
92-372 |
|
APPORTIONMENT -- SEPARATE
ACCOUNTING METHOD. Separate accounting methods must accurately reflect that
portion of gross receipts from services rendered in Washington by using the
same standards to determine whether the receipts generated are from out-of-state
services or are from services performed in Washington when apportioning
income. Deductions are not allowed for out-of-state employees and
subcontractors unless amounts are included for Washington employees and
subcontractors. |
| |
13 WTD 271 |
93-132 |
|
BUSINESS AND OCCUPATION TAX --
OUT-OF-STATE SERVICES -- APPORTIONMENT. A taxpayer that does not maintain a
place of business outside Washington is entitled to apportion service income
when the out-of-state services performed are more than incidental. |
| |
13 WTD 369 |
93-240 |
|
PUBLIC
UTILITY TAX -- MOTOR TRANSPORTATION -- PLACE OF SERVICE -- INTERSTATE
COMMERCE INTERSTATE BILL OF LADING -- ABSENCE THEREOF.When a taxpayer is paid for hauling
entirely within Washington absent an interstate bill of lading, it is subject
to motor transportation (or Urban Transportation) public utility tax. Proof
that the property itself is the subject of an interstate or foreign
transaction, absent a through bill of lading across state lines, does not
qualify for deduction. |
| |
13 WTD 392 |
93-276 |
|
SERVICE B&O TAX --
COMMISSIONS -- OUT-OF-STATE SERVICES -- APPORTIONMENT. A taxpayer was allowed
to apportion commission income earned by its traveling sales staff where the
out-of-state services being performed by that staff involved out-of-state solicitations
for advertising placed into out-of-state directories. |
| |
14 WTD 82 |
93-325 |
|
B&O TAX -- APPORTIONMENT OF
SERVICE INCOME. A taxpayer may use separate accounting to apportion its gross
income to Washington if that accounting is accurate or clearly reflects
services performed in Washington. |
| |
14 WTD 191 |
94-023 |
|
SERVICE B&O TAX --
APPORTIONMENT -- COMPUTER SERVICES. Out-of-state corporation may apportion
monthly fees it receives from Washington subscribers who pay for the right to
access its out-of-state computer facilities in case of failures of the
subscriber's own computer systems. The apportionment of gross income is to
occur between Washington and other states where it has places of business
which contribute to the performance of services rendered in Washington. |
| |
14 WTD 194 |
94-031 |
|
APPORTIONMENT -- OUT-OF-STATE
SERVICES -- PLACE OF BUSINESS. Apportionment may not be denied solely because
a taxpayer does not maintain a place of business outside this state if it
performs substantial services outside Washington for out-of-state customers. |
| |
14 WTD 194 |
94-031 |
|
THIS DETERMINATION HAS BEEN
OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 01-006,
20 WTD 124 (1999). |
| |
17 WTD 296 |
95-240 |
|
SERVICE
B&O TAX – COPYRIGHTS – ALLOCATION -- COMMERCIAL DOMICILE.Fee income from licensing the use of
copyrighted material in this state by a corporation with its commercial
domicile located outside Washington is not subject to B&O tax.In general, intangible rights follow the
situs of the commercial domicile of the owner. |
| |
17 WTD 336 |
98-022 |
|
SERVICE B&O TAX --
APPORTIONMENT -- SEPARATE ACCOUNTING METHODS -- COST OF DOING BUSINESS --
CLIENT BILLING.A separate accounting
method, based upon the location of services billed to clients, accurately
apportioned service income.Analysis
of costs was unnecessary. |
| |
18 WTD 291 |
98-188 |
|
SERVICE B&O TAX – ROYALTY
CONTRACT --ASSIGNMENT OF DUTIES AND
OBLIGATIONS – CONSIDERATION.Royalty
payments received by Taxpayer for assuming Parent’s rights and obligations
under a licensing contract with a third-party licensee are subject to
Washington’s B&O tax. |
| |
18 WTD 342 |
98-195 |
|
B&O TAXES – SOFTWARE –
ROYALTIES/LICENSING FEES – APPORTIONMENT.Amounts received for the payment of software royalties or licenses are
allocated to the domicile of the software owner and are not apportioned. |
| |
19 WTD 19 |
98-196 |
|
SERVICE B&O - NEXUS APPORTIONMENT - SECURITIES
DEALER.A Washington-based securities
dealer is entitled to apportion its gross receipts between Washington and the
numerous other states in which it markets securities through independent
sales representatives that own and operate their own offices.The securities dealer has taxable nexus
with those other states by entering their marketplaces to sell its services
and products to customers in those states.Such out-of-state activities are more than incidental. |
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19 WTD 143 |
99-108 |
|
SERVICE B&O TAX –APPORTIONMENT.A joint venture may apportion its gross
revenues where it maintains places of business both within and without
Washington that contribute to the rendition of service within Washington. |
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19 WTD 153 |
99-121 |
|
B&O
TAX – APPORTIONMENT – OUT-OF-STATE BROKERS – SOLICITING BUSINESS &
COORDINATION FINANCING ARRANGEMENTS.A
leasing company that utilized out-of-state brokers to solicit business,
arrange and coordinate financing activities, and write up financing contracts
was entitled to apportion its income. |
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19 WTD 340 |
99-023 |
|
B&O
TAXES-- SERVICE & OTHER
ACTIVITIES TAX – SERVICES PERFORMED PRIOR TO ENTERING THE STATE –
MANAGEMENT.A Washington resident may
exclude from B&O taxes receipts derived from management services
performed at an out-of-state customer’s location prior to entering
Washington. |
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19 WTD 340 |
99-023 |
|
B&O TAXES – SERVICE &
OTHER ACTIVITIES TAX – SALE OF INTANGIBLE ASSET – SITUS.Amounts received by a Washington resident
from the sale of an intangible asset are allocated to the commercial domicile
of the owner. |
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19 WTD 355 |
99-220 |
|
B&O TAX -- MULTI-LEVEL
MARKETING NETWORK; COMMISSIONS ON OUT-OF-STATE SALES BY DOWN-STREAM
DISTRIBUTORS -- APPORTIONMENT.A
taxpayer who is engaged in business only in Washington, who derives
commission income from out-of-state sales by down-stream distributors in a
multi-level marketing network by virtue of his recruitment, training, and
motivational activities performed entirely in Washington, may not apportion
the commission income between Washington and other states where sales occur. |
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19 WTD 440 |
99-100 |
|
B&O TAX – NEXUS – TRAINED
CLIENT EMPLOYEES – AGENTS--
CONTRACTUAL RESPONSIBILITIES.Where a
management consultant firm trains client employees to train other client
employees on management . . . concepts and also enters into a written
agreement with those Trainers, conferring upon them certain rights and
responsibilities, the training activities of the Trainers is sufficient to
establish nexus between Washington and the out-of-state firm. |
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19 WTD 947 |
00-027 |
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SERVICE B&O TAX –
PASS-THROUGHS – APPORTIONMENT – PROPERTY MANAGEMENT SERVICES.A foreign corporation/taxpayer providing
real property management services was subject to service B&O tax on its
gross income without the right to deduct reimbursements it received from the
owners for on-site personnel salaries and other expenses.The taxpayer did not meet all requirements
of Rule 111 and ETA 90-1.However, the
taxpayer was entitled to apportion its gross income because the taxpayer
maintained places of business both within and without Washington that
contributed to the rendition of services within Washington. |
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20 WTD 1 |
99-223 |
|
B&O TAX -- SERVICES --
APPORTIONMENT -- COST METHOD -- OUT-OF-STATE.Under the cost of doing business for the cost apportionment formula
under Rule 194, a taxpayer’s out-of-state travel costs should be included in
the denominator and excluded from the numerator. |
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20 WTD 124 |
01-006 |
|
B&O
TAX – APPORTIONMENT – WHEN AVAILABLE.When a taxpayer renders services taxable under RCW 82.04.290,
maintains places of business both within and without the state, and those
places of business contribute to the rendition of those services, the
taxpayer shall apportion to Washington the portion of its total income
derived from services rendered in Washington. |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT –
PLACE OF BUSINESS.For the purposes of
RCW 82.04.460(1), a place of business does not mean a physical location.Rather, if a taxpayer conducts activities
in a state sufficient to create nexus under Washington standards, then the
taxpayer is deemed to have a "place of business" in that state for
apportionment purposes.OVERRULING:
Det. No. 86-297, 2 WTD 23 (1986); Det No. 92-117, 12 WTD 147 (1993). |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT –
SEPARATE ACCOUNTING PREFERRED.Separate accounting is the preferred method of apportioning
income.However, if separate
accounting is not accurate, then cost apportionment (formulary apportionment)
shall be used. |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT –
SEPARATE ACCOUNTING DISTINGUISHED FROM COST APPORTIONMENT.Cost apportionment is the formulary
apportionment method used by Washington.Cost apportionment focuses on costs and uses a formula based on those
costs to determine the income from Washington activities.This is distinctly different from separate
accounting, which focuses on income.Therefore, separate accounting concepts are not applicable to cost
apportionment. |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT –
INCOME SUBJECT TO COST APPORTIONMENT -- RELATED BUSINESS ACTIVITIES.Only income from related activities
partially performed in Washington and subject to the B&O tax under RCW
82.04.290 is apportionable under RCW 82.04.460.When a taxpayer engages in related business
activities subject to the B&O tax under RCW 82.04.290, the total income
from the related business activities is subject to apportionment.However, if a taxpayer engages in an
unrelated, discreet, out-of-state business activity, then the income from
that discreet, out-of-state business activity is not subject to Washington's
business and occupation tax. |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT –
INCOME SUBJECT TO COST APPORTIONMENT.When a bank, engages in lending activities and, related to that
activity, it also engages in short-term and long-term interest rate swaps,
servicing of loans, and sales of loans as well as receiving up-front fees,
late-payment penalties, pre-payment payments, and interest, the income from
these activities is related to the lending activity and is subject to
apportionment. |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT
–COSTS USED TO CALCULATE COST APPORTIONMENT PERCENTAGE.The denominator of the cost apportionment
formula is the total costs attributable to the related business activities
partially performed in Washington.The
numerator is the cost of doing the related business activities in
Washington.The cost of doing business
in Washington is not costs incurred in Washington, rather it is any cost,
regardless of where incurred, that relates, directly or indirectly, to the
Washington activities.OVERRULING:
Det. No. 89-459, 8 WTD 227 (1989); Det. No. 93-172, 13 WTD 180 (1993); and Det.
No. 94-031, 14 WTD 194 (1995), to the extent inconsistent with this
determination. |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT –
INTERIM APPORTIONMENT METHOD – FINANCIAL INSTITUTION.The decision in Det. No. 89-459A, 11 WTD 17
(1991) was intended to be an interim method of apportionment applicable only
to financial institutions pending the adoption of a uniform rule.Det. No. 89-459A was
overruled by Rule 14601, which became fully effective as of January 1, 2000. |
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20 WTD 124 |
01-006 |
|
B&O TAX – APPORTIONMENT –
FINANCIAL INSTITUTION.Because the
location where a financial institution manages its borrowing activity is not
indicative of the cost of doing business at that location, Det. No. 89-459A
did not express a proper cost apportionment method under RCW 82.04.460(1) and
is OVERRULED. |
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20 WTD 338 |
99-243 |
|
IN-STATE ALARM MONITORING –
OUT-OF-STATE CUSTOMERS.Taxpayer’s
activity of providing monitoring services to its out-of-state customers does
not fall within the description of “interstate commerce.”Although the services provided by Taxpayer
to its out-of-state customers are performed both in and out-of-state, these
services do not constitute commercial trading or the transportation of
persons or property across state lines. |
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21 WTD 258 |
01-177 |
|
RCW 82.04.290, RCW 82.04.250,
RCW 82.04.050, RCW 82.08.020:RETAIL
SALES TAX – RETAILING B&O TAX – SERVICE B&O TAX -- RETAIL SALE –
SITTING OR SHOOTING FEES.Taking photographs
for a fee, without developing or printing, is a professional and artistic
service subject to service B&O tax and is not subject to the retailing
B&O or retail sales tax.However,
a shooting fee is subject to retailing B&O tax and retail sales tax when
the shooting is directly related to subsequent printing services, is
performed by the same person, and is performed under a single contract or
invoice or concurrently executed contracts or invoices (provided the buyer
does not present a resale certificate). |
| |
21 WTD 258 |
01-177 |
|
RCW
82.04.2907: SERVICE B&O TAX -- SALES OF RIGHTS TO PHOTOGRAPHS. Prior to
July 1, 1998, income derived from a transfer or sale of a copyright or other
intangible property interest is subject to service B&O tax. Effective
July 1, 1998, RCW 82.04.2907 created a special classification for “income
from royalties or charges in the nature of royalties for the granting of
intangible rights, such as copyrights, licenses, patents, or franchise
fees.” |
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21 WTD 289 |
01-188 |
|
B&O TAX -- SERVICES TAXABLE
UNDER RCW 82.04.290 -- NEXUS.Rule
194, rather than Rule 193, addresses the taxation of service-taxable income
of a person doing business both inside and outside the state.Nexus examples in Rule 193 should not be
relied upon to determine whether a taxpayer who engages in both sales
activity and discrete service activity has sufficient nexus with a state for
the state to tax its service income. |
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21 WTD 289 |
01-188 |
|
SERVICES
TAXABLE UNDER RCW 82.04.290 -- NEXUS.Conducting an annual industry convention or seminar as a discrete
business activity, for which the taxpayer charges attendees a fee, generally
creates nexus with the host state to tax the fee income. |
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22 WTD 182 |
02-0144 |
|
SERVICE B&O TAX – INTERNET
SERVICES – APPORTIONMENT. Charges taxable under the other business or service
activities classification for internet services provided from locations in
Washington as well as places of business outside the state may be apportioned. |
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22 WTD 228 |
01-168E |
|
B&O
TAX – APPORTIONMENT – BORROWING OF FUNDS -- DEFERRED INSTALLMENT SALES BY
RETAILER.When a retailer did not lend
money, but sold its products on a deferred installment basis to its credit
card customers, the retailer’s costs of borrowed funds used to replace
inventory constituted an expense of its retailing activity, and cannot be
used in calculating cost apportion of its credit card finance charge
income. |
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23 WTD 13 |
02-0130 |
|
B&O TAX – ENGAGING IN
BUSINESS – SOS CERTIFICATE OF AUTHORITY.Even though a foreign corporation may not be transacting business
under RCW 23B.15.010, that fact has no bearing for determining whether it is
engaging in business in Washington for purposes of RCW 82.04.150. |
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23 WTD 32 |
02-0213 |
|
B&O TAX -- APPORTIONMENT -- An independent contractor who
engages in motivational and training activities for a single company in
various states during the year is entitled to apportion her income from
providing those services, even when the amount of her compensation is based
on factors unrelated to the length or size of specific events or her
activities at specific events. |
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24 WTD 1 |
99-063 |
|
APPORTIONMENT–NEXUS—INCIDENTAL SERVICES PERFORMED OUTSIDE THE
STATE.Taxpayers who provide services
both within and without the state may, under certain circumstances, apportion
their gross income.Maintenance of a
place of business outside this state is not a prerequisite for apportionment,
provided the services are more than incidental.In order for such activities to be more
than incidental, the taxpayer must have taxable nexus where the services are
performed.When a taxpayer
incidentally works outside Washington while attending trade shows does not
establish taxable nexus in such states, the income is not subject to
apportionment. |
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24 WTD 1 |
99-063 |
|
APPORTIONMENT--ROYALTIES--COMMERCE CLAUSE--MOBILIA SEQUUNTUR
PRESONAM DOCTRINE.The Department
allocates this state’s gross receipts tax on royalty income to a taxpayer’s
commercial domicile, in accordance with the mobilia
sequuntur personam doctrine. |
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25 WTD 25 |
05-0020R |
|
USE TAX – APPORTIONING MEASURE OF USE TAX.A Washington consumer who leases a motor
home from an out-of-state lessor for personal use in Washington and other
states cannot apportion the measure of its use tax obligation between
Washington and the other states where it uses the vehicle. |
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26 WTD 40 |
05-0376 |
|
SERVICE B&O TAX – ENGAGING IN BUSINESS – INDEPENDENT
CONTRACTORS -- NEXUS.For purposes of
service B&O tax liability, an out-of-state corporation that provides
independent contractor physicians to hospitals in Washington on a temporary
basis is engaging in business in Washington. |
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31 WTD 73 |
11-0292 |
09/27/2012 |
RULE 194 – NEXUS FOR SERVICE PROVIDERS: Out of state continuing education provider has nexus because its independent contractor speakers who make presentations at live seminars in Washington are “representative third parties” under Rule 194(g)(i). |
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