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WAC 197 When tax liability arises.    
SOURCE DOCUMENT DETER. NO DATE OF ISSUE DESCRIPTION
WAC: 458-20-197   06/02/1990 When tax liability arises.
    08/17/2007 When tax liability arises.
RCW: 82.08.020   2006 Tax imposed -- Retail sales -- Retail car rental.
  82.08.100   2004 Cash receipts taxpayers -- Bad debts.
  82.14.030   2008 Sales and use taxes authorized--Additional taxes authorized--Maximum rates.
  82.16.020   1989 Public utility tax imposed--Additional tax imposed--Deposit of moneys.
ETA: 3024.2011 10/03/2011 Public Works Contracts
  3024.2009 2/2/09 Public works contracts
  132.08.197 8/5/66 SALES TAX LIABILITY OF A SELLER ON BUYER'S REFUSAL TO PAY Cancelled 1/29/09. This ETA addresses a scenario where a buyer refused to pay retail sales tax to the seller because of a contract disagreement. The seller asked the Department to relieve the seller from its statutory obligation to collect the sales tax, and instead pursue the buyer for the tax. This document explains that the Department's general policy is not to relieve sellers of their statutory obligation to collect sales tax from the buyers, and that the Department chose not to pursue collection from the buyer. This ETA is no longer needed as RCW 82.08.050(10) explains that it is the Department's discretion whether or not to proceed directly against the buyer for collection of the sales tax.
  198.08.197 9/2/66 WHEN SALES TAX IS DUE ON PAYMENTS RETAINED UNDER PUBLIC WORKS CONTRACT Revised 2/2/09 See ETA 3024.2009
       
INDUSTRY GUIDES:      
SPECIAL NOTICES:      
Subject Title Reference:      
Warehouse   04/01/2002 Warehouse Sales Tax Exemption
DIRECTIVE: NONE      
RPM: NONE      
WTD: 2 WTD 407 87-80   WHEN TAX LIABILITY ARISES -- ACCRUAL BASIS TAXPAYER. A taxpayer who keeps accounting records on the accrual basis must report excise tax liability on the accrual basis.
  5 WTD 53 88-22   ACCRUAL BASIS TAXPAYER -- WHEN TAX LIABILITY ARISES -- FINANCIAL STATEMENTS. A taxpayer that makes year end adjustments to financial statements is not otherwise required to report the income subject to the adjustment in the previous year. Taxpayer bills customers in January for services rendered in December; taxpayer accrues the income in January, not December, for tax reporting purposes.
  5 WTD 129 88-141   ACCOUNTING METHOD -- WHEN TAX LIABILITY ARISES -- ACCRUAL BASIS TAXPAYER -- DISCOUNT. A taxpayer who keeps accounting records on the accrual basis must report B&O tax as accounts receivable are accrued. A subsequent sale, at a discount, of the accounts receivable, cannot adjust or modify the original measure of the tax.
  6 WTD 147 88-260   B&O TAX -- RETAILING -- SALES TAX -- WHEN TAX LIABILITY ARISES -- CASH BASIS -- PROMISSORY NOTE PAID AS CONSIDERATION -- ACCOUNT RECEIVABLE -- SPECIAL APPLICATION TO CONTRACTORS -- METHOD THREE OF RULE 199. A promissory note, while considered as consideration for the purchase of construction services, is not a cash payment but is deemed an account receivable. The taxpayer, as a construction contractor and on a cash receipts basis, is subject to Rule 197's special application to contractors for reporting gross proceeds of sale.
  6 WTD 171 88-264   ACCOUNTING METHODS -- CASH BASIS -- ACCOUNTS RECEIVABLE. A taxpayer who regularly employs the cash basis of accounting in keeping its books and is a service business not required to collect retail sales tax may report on the basis of cash receipts without an adjustment for accounts receivable.
  9 WTD 157 90-84   B&O TAX -- GROSS INCOME -- VALUE PROCEEDING OR ACCRUING -- PENSION TRUST FUND -- INVESTMENT ADVISOR -- FEE. Where a taxpayer manages a pension plan trust, hires an expert to advise how the funds therein ought to be invested, and the expert withdraws its own fee directly from the trust funds, the amount of such fee is "value proceeding or accruing" to the taxpayer if the taxpayer itself is legally entitled to receive the fee.
  9 WTD 259 90-124   B&O TAX -- DEDUCTION -- INTEREST -- MONEY MANAGEMENT -- OBJECTIVE STANDARDS.Interest earned on loans to affiliates is not deductible under RCW 82.04.4281 where the loans are a regular and normal part of the taxpayers' business activities.THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 93-269ER, 14 WTD 153 (1995).
  9 WTD 287 90-84A   B&O TAX -- GROSS INCOME -- VALUE PROCEEDING OR ACCRUING -- PENSION TRUST FUND -- INVESTMENT ADVISOR -- FEE. Where a taxpayer manages a pension plan trust, hires an expert to advise how the funds therein ought to be invested, and the expert withdraws its own fee directly from the trust fund, the amount of such fee is not "value proceeding or accruing"to the taxpayer if the taxpayer itself is not legally entitled to receive the fee.
  10 WTD 87 90-297   WHEN INCOME "ACCRUES" -- REFUND OF UNEARNED INCOME. Where a taxpayer receives funds to cover costs of performing services and under its contract must refund any amount not spent, the taxpayer is only legally entitled to the amount actually spent and is not taxable on the amount refunded. 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   WHEN INCOME "ACCRUES" -- GROSS INCOME OF THE BUSINESS -- WHAT CONSTITUTES. Amounts received by a taxpayer from the Social Security Administration under the requirement that they be set aside in trust for the exclusive benefit and use of another are not taxable to the taxpayer because the taxpayer neverbecame legally entitled to the funds. Such amounts do not constitute "gross income of the business" as provided in RCW 82.04.080. 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).
  12 WTD 561 93-006   B&O TAX -- GROSS INCOME -- VALUE PROCEEDING OR ACCRUING -- DENTIST -- MEASURE OF TAX. Where an independent contractor dentist, working for another dentist, receives as compensation 30 percent of gross billings attributable to his services, only that figure is B&O taxable to the first dentist. The remaining 70 percent is not "value proceeding or accruing" to the taxpayer dentist because he is not legally entitled to receive that amount.
  13 WTD 160 92-295   TAX LIABILITY -- CONTRACTOR -- ACCRUAL BASIS RECORD KEEPING. Tax liability arises for an accrual basis taxpayer when either: 1) the taxpayer became legally entitled to receive the consideration or 2) when the taxpayer in accordance with its regularly employed accounting system enters a charge against the purchaser. Accord: Det. No. 87-80,2 WTD 407 (1987).
  14 WTD 240 94-084   ACCOUNTING METHODS -- RECOGNITION OF INCOME.Progress payments made to contractors are taxable at the time of receipt unless it can be shown that the payments were received as trust funds.
  17 WTD 95 97-207   VALUE PROCEEDING OR ACCRUING --CASH RECEIPTS BASIS OF ACCOUNTING -- LATE PAYMENT PENALTY -- CANCELLATION. An out-of-state seller of tangible personal property who keeps her books on a cash receipts accounting basis is not subject to a 20% late-payment penalty if she pays her tax and files her excise tax return within twenty five days after the end of the month in which she receives payment.It is immaterial that the contract was performed, i.e. the goods were received by a customer in Washington, more than two months before payment was received.
  17 WTD 322 97-115   SALES TAX -- TRUST FUND ACCOUNTABILITY ASSESSMENT -- PUBLIC WORKS CONTRACT -- RETAINAGE -- APPLICATION OF.Retainage paid the Department from a public works contract must first be applied to tax, interest, and penalty liability arising directly out of the project for which it was withheld before it may be used for other state tax arrearages.
  17 WTD 322 97-115   SALES TAX -- TRUST FUND ACCOUNTABILITY ASSESSMENT -- PENALTIES AND INTEREST.A trust fund accountability assessment may include penalties and interest that accrue on the tax debt of a defunct corporation.
  17 WTD 354 98-056   CONSTRUCTIVE DELIVERY;USE TAX.Use tax is due if there is constructive delivery.Constructive delivery is deemed to have occurred when a product is held by the seller on behalf of the buyer, pending a buyer’s instructions for future delivery of the product.But, if the buyer notifies a seller that it will no longer require production and delivery of a product and the seller does not deliver the product but continues to invoice the buyer and the buyer continues to pay the seller as if the product were produced and delivered, the payments are not subject to use tax because there is no use.
  17 WTD 354 98-056   Retail sales tax is due upon the sale of tangible personal property.If a buyer does not pay retail sales tax at the time of purchase, the Department will assess “deferred retail sales tax.”If, however, a buyer cancels a contract for the production and delivery of tangible personal property but the seller continues to invoice the buyer for the delivery of the goods and the buyer chooses to continue to pay the invoices rather than pay the liquidated damages for breach of the contract,the payments are not subject to deferred retail sales tax.This is because there has been no sale of tangible personal property.The payments are compensatory in nature and the seller is required to pay B&O tax upon such receipts.
  17 WTD 359 98-065   RETAILING B&O TAX -- RETAIL SALES TAX -- GROSS PROCEEDS OF SALES -- EMPLOYEE THEFT OF INVENTORY -- EMPLOYEE MEALS.Where liquor was stolen by the taxpayer’s employees, such liquor cannot be used to impute income to the taxpayer.Liquor stolen by employees does not constitute “employee meals” because the taxpayer did not voluntarily give the liquor to the employees in exchange for their services.
  18 WTD 153 98-133   B&O TAX -- SALE -- VALUE PROCEEDING OR ACCRUING -- CONSIDERATION -- BARTER.The transfer of goods for valuable services constitutes a sale of the goods measured by the value of the services.
  18 WTD 220 98-183   B&O TAX -- VALUE PROCEEDING AND ACCRUING – FREE PRODUCT – CONSIDERATION.Product offered as consideration was not “free”, but consideration for services.The value of consideration in the form of product accruing or proceeding to the taxpayer constituted gross income.
  19 WTD 703 00-016   ACCOUNTING METHODS – ACCRUAL METHOD.When a taxpayer maintains its books and records on a purely accrual method, it must report its excise taxes on an accrual method.
  19 WTD 703 00-016   ACCOUNTING METHODS – ACCRUAL METHOD.The changes to Rule 199 in 1996 do not affect a taxpayer whose books and records are maintained exclusively on an accrual basis.
  19 WTD 703 00-016   ACCOUNTING METHODS – ACCRUAL METHOD.When a taxpayer utilizing an accrual accounting method consistently reported income in the wrong month and the Department’s Audit Division corrects the errors in a tax assessment, an adjustment for later periods may be necessary.If such an adjustment is necessary, taxpayers are encouraged to work with the Department’s Audit Division to determine the best method to accomplish the adjustment.
  20 WTD 385 00-170   B&O TAX – RECOGNITION OF TAXABLE INCOME.Taxpayer is not required to recognize and pay service B&O tax immediately on “latecomers” fees it receives over many years, the amount of which is entirely speculative and neither fixed nor determinable.
  24 WTD 269 04-0284   RETAIL SALES TAX – PREPAID CONTRACT FOR HOURS OF UNSPECIFIED SERVICES – REFUND OF RETAIL SALES TAX.A taxpayer who purchases a prepaid service contract for a set number of hours of computer services, under which it may use the hours for either retail or non-retail services, and is charged retail sales tax on the entire sales price, may not obtain a refund of retail sales tax when it actually uses some or all of the prepaid hours for non-retail services.
  26 WTD 256 05-0142   RCW 82.04.080, RCW 82.04.090: SERVICE B&O TAX -- ADVERTISING DISPLAY SERVICE -- BONA FIDE DISCOUNT -- NET CHARGE.Service B&O tax on advertising display service charges billed on a net basis is measured by the amount billed and legally due.
OTHER: