Service income is attributed under the following hierarchy:
- Where the customer receive the benefit of the services.
- If you can reasonably determine the amount of a specific receipt that relates to a specific benefit received in a state, then attribute to that state. This may be determined by a reasonable proportional method (WAC 458-20-19402(301)(a)(i)).
- If you are unable to separately determine or use a reasonable method of proportionally attributing the benefit of the services in specific states and the benefit is received in multiple states, then use where the benefit of the service is primarily received. Primarily means, in this case, more than fifty percent.
Where the customer ordered the service (if unable to attribute under 1).
Where the bill is sent (if unable to attribute under 1 – 2).
Where the customer sends the payment from (if unable to attribute under 1 – 3).
To the customer’s address maintained in the seller’s records (if unable to attribute under 1 – 4).
- To the seller’s commercial domicile (if unable to attribute under 1 – 5).
A different attribution rule can be used for each transaction within an appropriate activity or tax classification. However, the department reserves the right to question taxpayers who seem to be using this method of attribution to improperly avoid payment of taxes.
Benefit of the service
The department expects that most taxpayers will attribute apportionable receipts based on attribution tier #1(a) above because the department believes that either the taxpayer will know where the benefit is actually received or a "reasonable method of proportionally attributing receipts" will generally be available. (WAC 458-20-19402(301))
Use the following steps to determine where the benefit of a service is received:
If the service relates to real property, then the benefit is received where the real property is located.
If the service relates to tangible personal property, then the benefit is received where the tangible personal property is located or will be located.
If the service does not relate to real or tangible personal property and the customer is engaged in business, then the benefit is received where the customer’s related business activity occurs.
- If the service does not relate to real or tangible personal property and the customer is not engaged in business, then the benefit is received based on the following:
- If the customer must be present (e.g., doctor appointments), then the benefit is received where the service is provided.
- If the service relates to a place, then the benefit is received at that place (e.g., wedding planning).
- If (a) or (b) do not apply, then the benefit is received where the customer resides.
The resolution of disputes between taxpayers and the department will be the same as other disputes. In a dispute, the taxpayer will have the burden to show that the department’s findings are incorrect. This would normally be done by demonstrating how the receipts are attributed under the statute.