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January 2007

Det. No. 05-0104, 26 WTD 1 (2007) A construction company protests the assessment of additional retail sales taxes on amounts received from a landowner for construction services contending that they had previously created a joint venture and were engaged in speculative construction together.  We deny Taxpayer’s appeal.
Det. No. 05-0139, 26 WTD 6 (2007) A general agent for a life insurance company protests the amendment of a tax assessment two years after the Department of Revenue issued the original tax assessment.  In the amended assessment, DOR additionally assessed B&O tax on commissions the taxpayer received from the insurance company and paid to the taxpayer’s sub-agents.  We hold that the commission payments to the sub-agents are not excludable from the general agent’s gross income, but are taxable to him.  We further hold that the amended assessment is not time-barred due to a misrepresentation of a material fact by the general agent.  Finally, we hold the taxpayer is not an employee of the insurance company.  We affirm the assessment
Det. No. 05-0245, 26 WTD 16 (2007) A public utility district protests public utility taxes assessed on income derived through selling excess transmission capacity.   We deny Taxpayer’s petition.
Det. No. 05-0304, 26 WTD 21 (2007) A seed company claims to be a farmer and exempt from the payment of retail sales and use tax on its purchases of fertilizer.  We hold that Taxpayer is not a farmer and, therefore, is not exempt from the payment of retail sales tax on its purchases of fertilizers and sprays applied to crops it participates in raising.
Det No. 05-0313, 26 WTD 27 (2007) A sole proprietor of a service business protests the assessment of successorship liability.  We find the taxpayer is a successor and conclude that she is liable for the tax in the outstanding warrants filed against her predecessors.
Det No. 05-0343, 26 WTD 31 (2007) Taxpayer requests refund of REET paid at termination of synthetic lease. We deny Taxpayer’s refund request, concluding that REET was correctly charged on the satisfaction of the synthetic lease.  By the nature of a synthetic lease transaction, the transfer of property from the lender to the lessee is unable to qualify for exemption from REET as either the satisfaction of a financing arrangement or of a mere change in identity or form of ownership of an entity where there is no change in the beneficial ownership.

Det No. 05-0376, 26 WTD 40 (2007) The taxpayer, an out-of-state corporation that provides physicians to hospitals in Washington on a temporary basis, protests the imposition of B&O tax on its receipts.  The taxpayer argues:  1) it is not subject to Washington taxation because it does not do business in Washington; 2) if taxable, it is entitled to exclude amounts received for physician salaries under WAC 458-20-111 (Rule 111); and 3) the Department’s administration of Rule 111 in the temporary staffing context violates the Equal Protection Clause.  We conclude that the taxpayer is engaged in business in Washington and is liable for service B&O tax on its gross receipts.  The Department’s administration of Rule 111 does not violate the Equal Protection Clause, and the taxpayer’s receipts do not qualify for exclusion.  Accordingly, we deny the taxpayer’s petition.


Det No. 06-0030, 26 WTD 50 (2007) A catering business appeals the assessment of B&O tax on revenues from service charges it included as a separate line item in its billings, contending the revenues were voluntary gratuities that should not have been included in the selling price of the meals.  It also appeals future reporting instructions that it should report revenue from separately-stated room rental under the retailing/retail sales tax classification rather than under the service and other activities B&O classification.  We find the service charges were voluntary, conclude the revenue should not have been included in the selling price, and cancel the assessment of additional tax on those revenues.  We conclude that the room rentals are taxable under the retailing and retail sales tax classifications when renting the room is incidental to the catering and part of the same service and contract, but are taxable under the service and other business activities classification when the rental is not in conjunction with catering the event.


Det. No. 06-0037, 26 WTD 59 (2007) Taxpayer made a number of retail sales that were claimed as exempt sales to nonresidents.  The Audit Division disallowed some of the claimed exempt sales.  Based on the documentation and arguments presented, we conclude that only one of the disputed sales is exempt from tax. 


Det. No. 06-0122, 26 WTD 69 (2007) Taxpayer protests assessment of B&O tax on amounts received from two unrelated businesses for use of office space within taxpayer’s leased office suite.  We conclude that the amounts received by taxpayer are from the lease of real estate.  Because the B&O tax does not apply to the sale or lease of real estate, the petition is granted.


Det No. 06-0155, 26 WTD 73 (2007) Professional service corporation seeks waiver of penalties and interest it paid on a tax warrant based on allegation that former bookkeeper embezzled money from the business.  Because the taxpayer has not met the requirements for waiver of penalty or interest, we deny the refund request

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