WAC 111

Staffing Industry

B&O TAX - REIMBURSEMENTS - AGENCY RELATIONSHIP - DETERMINATION. See also ETA 2016.

A statement of purpose and intent with respect to issues involving employee placement businesses and their clients. Effective 4/26/90. The City of Tacoma vs The William Rogers Co, Inc. should be followed when determining the tax-reporting responsibilities of these businesses. ETA 90-001 Cancelled effective 8/20/03.

"Gross proceeds of sales."

"Gross income of the business."

"Value proceeding or accruing."

"Business"

Advances and reimbursements. Effective 7/1/70

Staffing Companies (Second Revision) See Revision on 5/22/07

Temporary Staffing Companies This advisory has been revised to also provide guidance to professional employer organizations, effective January 4, 2005. Cancelled and no longer in effect.

Staffing Companies (Third Revision) Correcting citation to 148 Wn.2d 169, 60 P.3d 79 (2002). Revised 2/2/09. See ETA 3100.2009

Business and Occupation Tax Credit on Research and Development Spending for Staffing Companies Revised 2/2/09. See ETA 3051.2009

REIMBURSEMENTS FOR TEMPORARY RELOCATION OF UTILITY FACILITIES Revised 2/2/09. See ETA 3028.2009

Reimbursements for performance bond premiums

Employee reimbursed gasoline costs

Payments for temporary relocation of utility facilities

Business and occupation tax credit on research and development spending for staffing companies

Loan application deposits

Staffing Companies

Staffing Companies. Effective January 1, 2010, reseller permits will replace resale certificates as the means to substantiate wholesale purchases. Chapter 563, Laws of 2009.

Amounts collected by a mortgagee to cover insurance premiums and real estate taxes owed by a mortgagor

Paymasters and Employers of Record. This ETA 3181 clarifies when a taxpayer qualifies as a paymaster able to exclude amounts received to pay the employer obligations of its clients from gross income. This guidance also illustrates the difference between a paymaster that is also an employer of record and a taxpayer who is engaged in the business of selling labor or services performed by its own employees.

B&O Deduction for Affiliated Qualified Employers of Record. This ETA clarifies when a person is a qualified employer of record eligible for a business and occupation (B&O) tax deduction from gross income for employee costs under RCW 82.04.43393 when the person is providing paymaster services. The ETA includes related examples.

EMPLOYEE REIMBURSED GASOLINE COSTS Revised 2/2/09. See ETA 3010.2009

ACTIVITIES PERFORMED BY NONPROFIT ASSOCIATIONS Cancelled effective June 29, 2007. This document is not needed as WAC 248-20-169 provides a comprehensive explanation of the tax-reporting responsibilities of nonprofit organizations.

INTEREST ON CONSTRUCTION LOAN TAXABLE AS A PART OF CONTRACT PRICE Cancelled effective 02/28/07 This document explains that mounts received by a contractor that are attributable to interest the contactor owes on a construction loan must be included in the measure of tax for the construction activity. The interest expense is a part of the contractor’s cost of business. Such amounts are excluded from the measure of tax only if they meet the requirements of WAC 458-20-111 (Advances and reimbursements). This document is not needed.

REIMBURSEMENTS FOR PERFORMANCE BOND PREMIUMS Revised 2/2/09. See ETA 3004.2009

LOAN APPLICATION DEPOSITS Revised 2/2/09. See ETA 3095.2009

Deduction of advances and reimbursement -While this document provides accurate information, it is no longer needed. WAC 458-20-111(Advances and reimbursements) currently explains that the terms “advance” and “reimbursement” apply only when a taxpayer has no personal liability, either primarily or secondarily, other than as agent for a customer or client for the payment of fees or costs. In addition, Det.

Paymaster Deduction

Professional Employer Organizations - Deduction

Temporary Staffing Businesses Must Collect Retail Sales Tax on Retail Services

Temporary Staffing Businesses Must Collect Retail Sales Tax on Retail Services - See Staffing Industry Guide

ADVANCES/REIMBURSEMENTS -- PAYMASTER -- EMPLOYER/EMPLOYEE -- DETERMINATION. Where a taxpayer's affiliate is the actual employer and the taxpayer's sole function is to act as a paymaster for the affiliate's employees, the taxpayer is a mere conduit for payment of the affiliate's payroll expense and amounts received for that purpose constitute nontaxable reimbursements.

BUSINESS AND OCCUPATION TAX: CONDUIT FOR PAYROLL -- NO PROFIT. Taxpayer failed to substantiate its argument that it was merely a conduit for the payroll of a related company. There was a written agreement by which the taxpayer agreed to perform services for the other company. The fact that no profit was made does not mean that business was not engaged in for business and occupation tax purposes.

BUSINESS & OCCUPATION TAX -- SERVICES --AFFILIATES -- EMPLOYEES -- COMMON PAYMASTERS. Persons who carry employees on their payroll and perform all reporting of such employees to federal and state regulatory agencies are liable for Service business tax upon any amounts recovered from providing such employees for use by affiliated companies. Accord: Valley Cement Construction, Inc. v. Department of Revenue, BTA Docket 71-70 (1973), affirmed, Court of Appeals, Division 1, No. 3302-1 (1976), unpublished.

SERVICE B&O -- SERVICE CHARGES -- ADVANCE-MENTS/REIMBURSEMENTS. Taxpayer liable only for Service B&O tax on amounts charged as override or service charge if it meets the requirements of Rules 111 and 159.

B&O - REIMBURSEMENTS. Where a corporation received from its subsidiaries payments which were in part accumulated in a fund to cover uninsured losses of the subsidiaries and in part applied to pay premiums on insurance policies purchased to cover subsidiary losses the receipts were taxable to the corporation pursuant to RCW 82.04.080 and 82.04.220. WAC 458-20-111 pertaining to tax free reimbursements does not apply because the corporation was primarily or secondarily liable for payment of the premiums and had not acted solely as an agent for its subsidiaries.

SERVICE B&O -- MEDICAL CENTER. A medical center is not a separate taxable business if it has no employees and performs no management or other services. Use of the medical center name on a checking account for accounting purposes only does not give rise to separate business tax liability.

PAYMASTER. Corporation acting solely as payroll agent for other businesses are not required to pay B&O tax on advances received for wages and taxes. RPM 90-1.

B&O TAX - EXCLUSION -ADVANCE AND REIMBURSEMENTS - REAL ESTATE BROKERAGE - EXPENSES REIMBURSED BY AGENTS. A real estate brokerage may not exclude reimbursements received from its salespersons for services provided by third parties (such as telephone, multiple listings) from gross income if it is either primarily or secondarily liable for the charges, unless solely as agent.

SERVICE B&O TAX -- PHYSICIANS -- SUBCONTRACTORS -- GROSS INCOME OF BUSINESS -- COMMON PAYMASTER DISTINGUISHED. Where taxpayer/professional services corporation contracts with hospital to provide medical services, gross income received is taxable, including income taxpayer pays to physician subcontractors it has retained to help provide services. There is no deductible reimbursement because taxpayer alone was liable for payment of fees earned by subcontractors.

REIMBURSEMENTS -- OFFICERS' SALARIES -- AFFILIATES. Payments among affiliates for wages and salaries of officers providing services for all corporations are subject to service business and occupation tax. ETB 90.04.203, see also Det. No. 88-28, 5 WTD 67 (1988).

EMPLOYEE PAYMASTER -- PERVASIVE CONTROL. Mere payrolling agent whose client retained elements of control listed in RPM 90-1 may exclude employee salaries and benefits. For periods before November 1, 1989, unregistered businesses pay on net under the statutory tax classification applicable for the nature of the work performed.

ADVANCEMENTS AND REIMBURSEMENTS -- PRIMARILY LIABLE -- DSHS GROUP HOME PAYMENTS. Amounts paid by the Department of Social and Health Services to the owner of a group home for developmentally disabled adults to cover operating costs are not advances or reimbursements under WAC 458-20-111, because the owner is primarily liable for the costs. 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).

ADVANCES AND REIMBURSEMENTS -- TRANSPORTATION COSTS. Amounts received by the owner of a group home from Department of Social and Health Services to purchase bus passes for residents are deductible reimbursements as the owner does not render bus service and no liability attaches to the owner. 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).

ADVANCEMENTS AND REIMBURSEMENTS -- LUNCHEONS -- SEMINARS -- MEETINGS. Amounts received by a nonprofit organization from its members or other persons for luncheons, seminars, or meetings are not true reimbursements when the organization is liable for payment of the services. The amounts received will be subject to tax under the proper category of the B&O tax.

B&O TAX -- DEDUCTION -- WINE TAX -- REIMBURSEMENT OF. The federal wine tax is a liquor tax for the purpose of applying Rule 195. Liquor taxes are not deductible from the measure of the B&O tax even by a party who only stores wine for the maker of the wine and is reimbursed by the maker for the tax.

B&O TAX -- GROSS INCOME -- AGENT -- MANAGEMENT SERVICES. A taxpayer corporation which has agreements with affiliated physicians/independent contractors to provide management services, is liable for Service B&O on amounts it receives, without any deduction for costs, taxes, or other expenses, whether the income is paid directly by the doctors or retained from their accounts receivables. The corporation is not liable for Service B&O on amounts collected for the physicians from patients if the money is collected only as agent for the doctors. Accord: Det. 88-377, 6 WTD 439.

BUSINESS AND OCCUPATION TAX -- ADVANCES AND REIMBURSEMENTS -- LOAN APPLICATION REFUNDABLE DEPOSITS. Refundable deposits from loan applicants to cover the financial institution's costs in processing loan applications (costs for credit reports, title insurance, property appraisals, etc.) held not excludable under Rule 111 when no evidence offered to indicate that the outside consultants recognized that they were to be paid only from funds received from the taxpayer's clients, or that the taxpayer would not be liable to them from compensation if customer funds were not received.

BUSINESS AND OCCUPATION TAX -- ADVANCES AND REIMBURSEMENTS WALTHEW -- LOAN APPLICATION REFUNDABLE DEPOSITS. The Walthew decision is applicable to attorney taxpayers bound by the Disciplinary Rules of the Code of Professional Responsibility, which prohibits them from incurring liability to third party providers in the course of litigation. Service providers other than attorneys will remain subject to the three Christensen requirements for excludability.

INSURANCE CHARGES -- TAXI CAB RENTALS -- RETAILING B&O -- RETAIL SALES TAX. Where taxi cab company/lessor is the insured on automobile liability policies and is obligated to pay premiums to the insurer, the money received from independent drivers/lessees for such insurance coverage is taxable under Retailing B&O and Retail Sales Tax as a recovery of taxpayer's own costs. The payments are not exempt advances and reimbursements. Accord: Det. No. 86-305, 2 WTD 65 (1986), Det. No. 88-377, 6 WTD 439 (1988).

SERVICE B&O TAX -- GROSS INCOME -- DEDUCTIONS -- AGENT. Taxpayer acting as an agent who solicits subscription renewals on behalf of magazines is liable for Service B&O tax on amounts it receives from subscribers and retains as its commissions and on amounts, if any, it receives directly from publishers for its services.

REIMBURSEMENTS - EMPLOYEES - SALARIES - AFFILIATES. When a taxpayer has contractual employees over whom it exercises control, and it arranges for them to work part-time for an affiliate, it cannot claim to be acting merely as an agent of its affiliate in paying them. Thus, the Rule 111 exclusion will be inapplicable for reimbursement by the affiliate for payroll expenses. Accord: Rho Company, Inc. v. Department of Rev., 113 Wn2d 561 (1989); Det. No. 91-062, 10 WTD 417 (1991); Det No. 88-28, 5 WTD 67 (1988).

REIMBURSEMENTS - OVERHEAD EXPENSES - AFFILIATES. When a taxpayer is primarily or secondarily liable - other than as an agent - for the costs of services contracted for, reimbursement by an affiliate is not excludable under Rule 111. Taxpayer was liable other than as an agent for payment of the overhead expenses at issue when taxpayer contracted for these services with no representation of agency, in part enjoyed these services, and was the entity of whom the service providers looked for payment Accord: Professional Promotion Services, Inc., v. Department of Rev., Docket No.

B&O TAX -- SERVICE -- THIRD-PARTY SERVICES -- PURCHASING AGENT. Where the taxpayer orally notified third-party service providers that it was acting solely as agent for log owners in procuring services, log tags and brands clearly identified the ownership of the logs to the third-party service providers, and the third-party providers submitted affidavits stating that they understood this relationship, amounts received by the taxpayer were excludable advance and reimbursements. Accord: Det. No. 88-255, 6 WTD 123 (1988).

B&O TAX -- SHARED OFFICERS -- AFFILIATES -- REIMBURSED TRAVEL EXPENSES. Amounts received by a corporation from a partnership for traveling expenses incurred by its executive officers while acting in its capacity as a partner of the partnership are not taxable income. Accord: Det. No. 88-28, 5 WTD 67 (1988).

SERVICE B&O -- RPM 90-1 -- PAYMASTER -- AFFILIATES. An exclusion as an advance and reimbursement was denied to a partnership involved in providing payroll functions for administrative employees when the partnership was the employer of record for state and federal purposes and did not clearly establish that all ten of the employee control factors remained with the affiliates. Accord: ETB 50.04.203, Det. 88-28, 5 WTD 67 (1988).

B&O TAX -- SALE AT WHOLESALE -- WARRANTY SERVICES -- PARTS --REIMBURSEMENT. Amounts received by a dealership from a manufacturer-warrantor for parts furnished in connection with warranty repair services are taxable under the wholesale classification of the B&O tax.

B&O TAX -- ESCROW AGENTS -- ADVANCES AND REIMBURSEMENTS -- LOAN COSTS. Escrow agent not liable other than as agent for third-party fees charged to clients for title insurance, credit reports, and appraisals to process mortgages. The escrow agent could exclude deposits for these client expenses deposited in its trust account.

B&O TAX -- ADVANCE AND REIMBURSEMENT -- SOLE LIABILITY FOR PAYMENT -- COMMISSIONS. Advance and reimbursement exclusion held to apply to amounts received by taxpayer from issuer of securities for payment of independent commissioned salespersons directly under contract with issuer, since issuer, and not taxpayer, was primarily and solely liable for their payment.

THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 01-006, 20 WTD 124 (2001).

B&O TAX -- ADVANCE AND REIMBURSEMENT -- LIABILITY FOR PAYMENT -- COMMISSIONS. Advance and reimbursement exclusion held not to apply to amounts received by taxpayer from issuer of securities for payment of independent commissioned salespersons under contract with taxpayer, since taxpayer was liable on its own right for payment of commissions.

B&O TAX -- GROSS INCOME OF THE BUSINESS -- EXCLUSION FROM MEASURE OF TAX. Where taxpayer provided evidence demonstrating that it was not liable for third-party services and that creditors looked solely to the escrow accounts for payment or would refuse entirely to perform the service, the funds deposited in escrow accounts were excluded from the measure of the taxpayer's tax base.

B&O TAX -- GROSS INCOME -- AGENCY. A medical partnership is not liable for service B&O tax on funds which it collected from patients and paid to an affiliated laboratory for services rendered because it was collecting the money as an agent only for the laboratory due to an agreement which absolved the partnership of liability for bills it did not collect. There is no requirement that such an agreement must be in writing.

ADVANCEMENTS AND REIMBURSEMENTS. Where the taxpayer has chosen to operate through independent contractor salespersons whose only contract is with the taxpayer, commissions received by the taxpayer from the issuers/sellers of the securities are not advances.

SERVICE B&O -- ADVANCE/REIMBURSEMENTS. Legal fees billed to the taxpayer as a matter of convenience for which the taxpayer is not primarily or secondarily liable are excludable from the taxpayer's Service B&O tax measure. This determination has been overruled or modified in whole or part by Det.No. 99-011R, 19 WTD 423 (2000).

B&O TAX -- DEDUCTION -- INTEREST -- FEDERAL OBLIGATION -- POINTS -- STUDENT LOANS. Payment of points by a student will not be construed as payment of a direct obligation of the U.S. government merely because their payment reduces the federal government's interest obligation to the taxpayer. Points paid by the student are an obligation that the federal government has intentionally chosen not to assume under this program.

B&O TAX -- EXCLUSION -- ADVANCES -- CREDIT REPORTS AND APPRAISAL FEES. The burden of proof is upon the taxpayer to go forward with evidence in support of its claimed deduction or exclusion. Taxpayer bank did not satisfactorily demonstrate that it had no liability for payment of appraisal and credit report fees.

SERVICE B&O TAX -- ADVANCE/REIMBURSEMENT -- PATIENTS' PAYMENT OF NON-PHYSICIAN COSTS -- MEDICAL CLINICS. Revenue from patient billings for non-physician services, supplies, drugs, etc. provided at medical clinics either owned or subsidized by a hospital is taxable to the hospital because it either rendered the services or was personally liable, either primarily or secondarily, to third party providers.

SERVICE B&O TAX -- EXCLUSION -- ADVANCE OR REIMBURSEMENT -- PHYSICIANS' FEES -- GUARANTEED MINIMUM PROFIT. Although a hospital guaranteed independent contractor physicians minimum profits, the amounts received from patients for physicians fees were pass-throughs or advances for the hospital because it had no personal liability to pay specific fees to the physicians except as an agent.

ADVANCES AND REIMBURSEMENTS -- SCHOOL DISTRICTS -- COMPETITIVE BIDDING. A taxpayer who agrees to pay a third party vendor, to whom a public school district is indebted for goods or for services rendered, and who is neither primarily nor secondarily liable for the goods or services rendered, may exclude from its gross receipts those amounts received by the taxpayer as "reimbursement" from the public school district.

REIMBURSEMENTS -- WORKERS' COMPENSATION INDUSTRIAL INSURANCE CLAIMS ADMINISTRATION. Administrative subsidiary providing bookkeeping services for a self-insured affiliated group may exclude reimbursements from affiliates for time-loss compensation and medical costs it paid as agent. It may not exclude payments for its administrative services and other costs for which it was liable.

RETAIL SALES TAX -- FREIGHT CHARGES -- ADVANCES AND REIMBURSEMENTS. In general, shipping charges incurred by a retailer prior to the completion of the sale are part of the costs of doing business and cannot be deducted from the amount subject to retail sales tax.

RETAILING B&O TAX -- PRIME CONTRACTOR -- PAYMENT TO THIRD PARTIES BY OWNER -- GROSS INCOME. Taxpayer is a prime contractor subject to assessment based on the total amount of construction costs even if the owner paid the third party suppliers and subcontractors directly. The taxpayer benefited from such payments because they reduced or eliminated the taxpayer's personal liability from the debts. The owner's payments were part of the contract's consideration received by the taxpayer and are considered gross income to the taxpayer.

GROSS INCOME OF BUSINESS -- TRUST ACCOUNTS OF MORTGAGE BROKERS. The gross income of business does not include specific amounts which a mortgage broker receives from a borrower to pay third-party costs and which RCW 19.146.050 prohibits the taxpayer from commingling with its operating funds.

GROSS INCOME OF THE BUSINESS -- "DOCUMENT PREPARATION" FEES, "CORRESPONDENT" FEES, ACCRUED INTEREST, AND GAIN ON SALE OF LOANS. Gross income of the business includes amounts received by a mortgage broker for document preparation fees, correspondent fees, accrued interest, and gain on the sale of loans because they are received in the taxpayer's own right.

B&O TAX -- BUSINESS -- ENGAGING IN BUSINESS -- GROSS INCOME. Amounts received by a union contractor to subsidize wage paid to its workers constitute gross income of the business subject to B&O tax. The subsidies were received as a direct result of the taxpayer being awarded a particular job, and thereby engaging in business activities. The union subsidies do not qualify as non-taxable advances or reimbursements because they do not meet all three requirements of Rule 111.

SERVICE B&O TAX -- MANAGEMENT CONTRACTS -- REIMBURSEMENTS -- RHO -- RPM 90-1. Where the paymaster company was the employer of record for state and federal agencies and exercised the majority of the control elements listed in RPM 90-1, the paymaster was found to be the employer of the workers and subject to tax on reimbursed payroll costs.

SERVICE B&O -- GROSS INCOME -- PROPERTY MANAGEMENT COMPANY -- AGENT -- PAYROLL. Rent used to pay a property management company's on-site employees is gross income of the management company. Reimbursements to the company for paying the apartment owners' on-site employees may be excluded. ETA 90-1.

SERVICE B&O TAX - TOUR OPERATOR - TRAVEL AGENT COMMISSIONS. The gross receipts of a tour operator are taxable as service B&O without any deductions except for pass-through expenses. Commissions paid to travel agents are not pass-through expenses. Therefore, a tour operator must include commissions paid to travel agents when reporting its gross receipts for service B&O tax purposes.

WHOLESALING B&O TAX—PASS-THROUGHS—DIRECT OR DROP SHIPMENTS. Because the taxpayer is liable to the manufacturers regardless of whether it receives payment from retailers on drop or direct shipments from the manufacturers to the taxpayer's retail customers, the taxpayer is liable other than as an agent, and the receipts are not excluded from gross income under Rule 111.

B&O TAX - PERVASIVE CONTROL - EMPLOYEES. An employer who furnishes employees tools, may not exclude the receipts for the employees under the authority of RPM 90-1.

COMMON PAYMASTER - MERE CONDUIT. Under Det. No. 88-9, 4 WTD 433 (1987), a common paymaster must act as a conduit only, and not provide other services.

B&O TAX - PROPERTY MANAGEMENT COMPANY - EMPLOYEE COMPENSATION - RETROACTIVE. Whether or not RCW 82.04.394 is retroactive is irrelevant if the property management company did not utilize a property trust account under RCW 18.85.310 or specify in its written property management agreement that the company was liable only as agent of the property owner.

RETAIL SALES TAX - RETAILING B&O TAX - PASS-THROUGH PAYMENTS - LOANED EMPLOYEES. When a general partner acts as the general contractor on a partnership construction project, the construction laborers under the general partner's payroll are not considered employees loaned to the partnership, and the payments it receives are not considered advances or reimbursements.

B&O TAX - ADVANCE OR REIMBURSEMENT - ORAL UNDERSTANDING. An informal understanding between employee-placement consultants that an employer-client is liable for either consultant‘s portion of a placement fee is not enough to support exclusion under Rule 111.

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.

B&O TAX -- ADVANCE OR REIMBURSEMENT -- ORAL UNDERSTANDING. An informal understanding that the client is liable for the third party's fees is not enough to support exclusion under Rule 111. Payments were excludable where taxpayer and subconsultants had oral understanding client alone would be liable, subconsultants had only looked to clients for payment, and subconsultants billed clients directly or in care of taxpayer.

B&O TAX -- ADVANCE OR REIMBURSEMENTS -- ENGINEERING SERVICE -- SUBCONSULTANT FEES -- LIABILITY FOR CHARGES -- ORAL UNDERSTANDING. A taxpayer may exclude payments received as an "advance" or "reimbursement" for a third party service provider only when the client alone is liable for payment of the fees or costs.

SERVICE B&O TAX -- SERVICES RENDERED AT COST -- REIMBURSEMENT OF PAYROLL COST -- GROSS INCOME OF THE BUSINESS. Where taxpayer's employees rendered billing, collection, management, technical and professional services to another entity which paid for the services in proportion to the actual cost to the taxpayer on an allocated basis, the amounts received by the taxpayer are subject to Service B&O tax. Whether or not the taxpayer makes a profit, or whether taxpayer only does the services for one entity, is immaterial and irrelevant.

B&O TAX -- RHO -- TAXPAYER'S INABILITY TO PERSONALLY RENDER THE SERVICE -- CONTRACTOR-SUBCONTRACTOR. Merely showing that the taxpayer lacked the technical skills to personally perform the services for which it received payment does not establish the second Rho element (the payments involve services the taxpayer did not or could not render), when the taxpayer contracted to provide the services, and the contract clearly contemplated that it would provide them by hiring or subcontracting personnel with the necessary expertise.

B&O TAX -- PROSPECTIVE RULING. When the Department is asked to rule prospectively on whether a taxpayer's receipts will qualify for pass-through treatment under Rule 111, it relies upon the facts stated by the taxpayer and any written agreements. It cannot base its ruling on the taxpayer's representation that the parties' actual relationships will be quite different from those set out in the written agreements.

B&O TAX - RHO - AGENCY -- THIRD-PARTY PAYEE'S AGREEMENT ABSOLVING TAXPAYER OF LIABILITY. The third Rule 111 element set out in Rho requires that the taxpayer have received and paid the funds as agent of its client. The agency relationship is created as a result of conduct between the taxpayer and its client. The taxpayer cannot make itself the agent of its client in procuring a service from a third party merely by getting the third party to agree to absolve the taxpayer of liability for paying the third party if the taxpayer is not paid by its client.

ADVANCES AND REIMBURSEMENTS - LIABILITY SOLELY AS AGENT. If the first two elements of Rule 111 exist, then an agreement between the service provider and the taxpayer limiting the taxpayer's liability when the customer fails to pay for the services satisfies the third element of Rule 111. However, such a limitation on liability does not create a presumption that the first two elements exist.

ADVANCES AND REIMBURSEMENTS - RHO. The decision in Rho holds that where an employer-employee relationship exists and there is an issue as to who is the employer, the Department must consider the actual intent of the parties and not just the contract, to determine the identity of the employer. The Rho decision did not find that an agency relationship exists whenever there is a three-party relationship.

ADVANCES AND REIMBURSEMENTS - ELEMENTS. When a taxpayer receives funds from its customer to pay a third party for services the taxpayer did not or could not provide and the taxpayer is liable to the third party solely as agent for its customer, the amounts received are not considered part of the taxpayer's gross income. If any of the elements are missing, the taxpayer must include the amounts received in its measure of tax.

ADVANCES AND REIMBURSEMENTS - INTENT OF PARTIES. Where the contract language is clear and there is no evidence to refute the contract language, the Department will rely on the contract language to determine if Rule 111 applies.

ADVANCES AND REIMBURSEMENTS - ELEMENTS - SUPERVISION AND CONTROL. In a non-employment placement situation, determining whether the taxpayer acted as an agent in paying third parties generally cannot be resolved by an analysis of supervision and control factors set out in Rho and ETA 90-001.

ADVANCES AND REIMBURSEMENTS - BURDEN. The taxpayer must claim, as well as carry the burden of showing qualification for pass-through treatment under Rule 111.

ADVANCES AND REIMBURSEMENTS - ELEMENTS. All three Rule 111 conditions set out in Christensen and Rho must be met for a receipt to qualify for pass-through treatment.

B&O TAX -- REAL ESTATE BROKERS -- DESK FEES. Amounts earned by a real estate broker from real estate associates for use of the broker's offices, equipment, and services are subject to the B&O tax rate specifically applicable to real estate brokers rather than the tax rate on royalties earned from granting intangible rights.

WHOLESALING B&O TAX -- SALES OF SPRAY TO FARMERS -- FARMER DEFINED. Sales of spray materials to farmers for the purpose of producing for sale any agricultural product are classified as wholesale sales. However, if a person uses agricultural products as ingredients in a manufacturing process, the person does not qualify as a farmer.

B&O TAX -- INSURANCE CHARGES - FRUIT WAREHOUSE. Receipts derived from separately stated insurance charges to growers, who own fruit stored in a warehouse, to cover the fruit packer's premiums for losses to the contents of the warehouse, are not "reimbursements," but taxable under the same classification as the receipts designated as warehouse charges.

DEDUCTIONS -- ADVANCES & REIMBURSEMENTS -- CAPITATION PAYMENTS. When a taxpayer receives funds to procure services from a third party for services the taxpayer did not or could not provide and the taxpayer is liable to the third party solely as agent for its customer, the amounts received are not considered part of the taxpayer's gross income.

DEDUCTIONS -- QUALIFIED MEDICAL SERVICE ORGANIZATIONS -- AGENCY. Qualified medical service organizations are entitled to deduct from their gross income amounts paid to physicians and hospitals rendering medical services to subscribers of the organization when the organization contractually acts solely as the agent of the physicians and hospitals.

RCW 82.04.080, RCW 48.96, RCW 48.17.010: SERVICE B&O TAX -- MOTOR VEHICLE SERVICE CONTRACTS -- GROSS INCOME -- AMOUNTS COLLECTED AS PREMIUMS AND REMITTED TO INSURER. A seller/provider of motor vehicle service contacts must include in its gross income amounts collected and remitted to an insurer of the service contracts because the seller/provider is not an insurance agent, but, as the obligor, is a party to the service contracts and remains personally liable on them, and not merely as an agent, to the contract holders.

ETA 90-001: B&O TAX -- EMPLOYER-EMPLOYEE -- BUSINESSES PROVIDING TEMPORARY WORKERS. A business that recruits and provides day laborers and other temporary workers to other businesses and non-business customers, and which has pervasive control over the workers under the criteria set out in ETA 90-001, will be treated as the employer for state excise tax purposes, and may not exclude receipts representing worker wages and employment taxes from the measure of its B&O tax.

ETA 90-001: B&O TAX; RETAIL SALES TAX -- BUSINESSES PROVIDING TEMPORARY WORKERS -- CLASSIFICATION OF REVENUES. A business that recruits and provides temporary workers to other businesses and non-business customers, and is considered the employer of the workers for excise tax purposes, shall classify gross receipts consistent with the procedures set out in ETA 90-001, and shall collect and report retail sales tax when appropriate.

B&O TAX - GROSS INCOME - ADVANCE & REIMBURSEMENT - CONSULTANTS -- INDEPENDENT THIRD-PARTY CONTRACTORS -- PAYMASTER. A Rule 111 pass-through was not allowed where a consultant was hired by clients to provide business consulting services, actually performed some of those consulting services himself, and billed clients in his own name for all consulting services provided.

B&O TAX -- ADVANCE & REIMBURSEMENT -- REGISTRATION FEE -- PAID BY LESSEE OF VEHICLE. When a lessor's motor vehicle registration fee is paid by the lessee of the vehicle pursuant to the lease agreement, such payment qualifies as "value proceeding" and "consideration" for the lease and is properly included in the retailing B&O and retail sales tax measure. Such a fee is not an advance or reimbursement because the lessor has primary liability for its payment.

B&O TAX - EXCLUSION - EMERGENCY ROOM PHYSICIAN FEES. Even though An ER physician organization's contract with a hospital contained an "agency" billing clause, Rule 111 exclusion will not be allowed when the contract, construed as a whole, also indicates that the organization was accountable to, and performing duties for and on behalf of, the hospital and the patients and their payments belonged to the hospital; the hospital, and not the patients alone, were responsible for the organization's payment.

B&O TAX - EXEMPTION - ADVANCES AND REIMBURSEMENTS - EMERGENCY ROOM PHYSICIANS. Hospital's contract with emergency room physicians held not to support a Rule 111 exemption when the hospital was liable for the emergency room doctors' payments whether or not patients paid their bills, and when the contract clearly provided that patients coming to the emergency room for treatment were the hospital's patients.

MISCELLANEOUS -- ERRONEOUS APPLICATION OF A RULE. The Department's erroneous granting to William Rogers, Co. of the benefit of the Rule 111 exclusion need not be perpetuated by granting unrelated third parties the same erroneous application.

PRINCIPAL-AGENT RELATIONSHIP. The court in William Rogers stated that before Rule 111 will apply, the person claiming the exclusion must prove that it acted as an agent.

ADVANCES AND REIMBURSEMENTS -- APPLICATION OF. WILLIAM ROGERS. The court's construction of the City of Tacoma's Rule 111 in William Rogers applies to the construction of the Department's Rule 111 because the rules are identical and the court interpreted the City's rule by referring to decisions interpreting the Department's rule.

UNDISCLOSED PRINCIPAL. If a taxpayer acts as an agent for an undisclosed principal, then the taxpayer is personally bound to perform any contract entered into for the undisclosed principal as the principal. Therefore, an agent for an undisclosed principal does not qualify for Rule 111 exclusion, because the agent is liable as the principal and not solely as an agent.

B&O TAX -- GROSS INCOME -- ADVANCE & REIMBURSEMENT -- SHARED EMPLOYEES. A corporation that reported all administrative workers as its employees for purposes of unemployment insurance, federal payroll taxes and workers' compensation claims, was not allowed to exclude reimbursed payroll costs received from its affiliates for services the workers performed for the affiliates. The employing corporation was found to be the sole contractual employer of the shared employees.

B&O TAX -- GROSS INCOME -- ADVANCE & REIMBURSEMENT -- ALLOCATED OVERHEAD EXPENSES. A taxpayer that paid for overhead expenses may only exclude amounts billed to and received from affiliates as advance and reimbursements under Rule 111 if the taxpayer contracted for the goods and services solely as agent of the affiliate. In this case the taxpayer contracted for the goods and services solely in its own name and was not allowed the exclusion.

B&O TAX -- TEMPORARY STAFFING BUSINESS - WHEN TEMPORARY STAFFING BUSINESS IS THE EMPLOYER. A temporary staffing business that is the employer of the temporary workers it provides may not exclude from its gross income subject to B&O tax, under Rule 111, receipts representing the wages and other labor costs of the temporary workers. The labor costs are a nondeductible cost of doing business, and their payment is not a "pass-through."

MISCELLANEOUS -- ERRONEOUS APPLICATION OF A RULE. A Department error in granting to one taxpayer the benefit of the Rule 111 exclusion need not be perpetuated by granting unrelated third parties the same erroneous application.

B&O TAX -- TEMPORARY STAFFING BUSINESS - AGENCY -- BURDEN. To show that payments to the temporary workers it provides its customers are "pass through" payments excludable from gross income under Rule 111, a temporary staffing business must prove that it made the payments pursuant to an agency relationship with its customers, and its liability to pay the funds must have constituted solely agent liability.

B&O TAX -- GROSS INCOME -- ADVANCE AND REIMBURSEMENT -- TEMPORARY STAFFING COMPANIES -- AGENT. Two temporary staffing companies were not allowed to exclude amounts received from their client to pay for worker payroll costs when the staffing companies were the actual employers of the workers.

B&O TAX -- GROSS INCOME -- ADVANCE AND REIMBURSEMENT -- TEMPORARY STAFFING COMPANIES -- AGENT -- INSURANCE. A temporary staffing company was not allowed to exclude amounts received from its client to pay for worker general liability insurance, worker life insurance and worker medical benefits, when the staffing company was the actual employer of the workers.

B&O TAX - TEMPORARY LABOR—TAX CLASSIFICATION - LACK OF RECORDS - PRESUMPTION. A residential housing contractor was correctly assessed deferred retail sales tax on all the charges it paid to TSCs for the use of laborers when no records documented the nature of work they performed because the Department is entitled to a presumption, under RCW 82.32.070, that temporary labor performed for a contractor was related to the contractor's main business activity - the building of homes.

EXCISE TAX LIABILITY - INSURANCE PREMIUMS PAID FOR BANKRUPT STAFFING AGENCY. When a taxpayer is required by RCW 51.16.060 to pay a bankrupt temporary staffing agency's industrial insurance premiums, that liability does not relieve a taxpayer from those B&O and retail sales tax liabilities otherwise due because there is no corresponding or offsetting relief in The Revenue Act.

B&O TAX - TEMPORARY LABOR - TAX CLASSIFICATION. A staffing company's B&O tax reporting classification is determined based on the services performed by the staffing company's employees. If the work performed is classified as a retailing activity under RCW 82.04.050, the staffing company must collect retail sales tax from its client, unless specifically exempt by law. A client of a staffing company has the corresponding liability to pay retail sales tax.

B&O TAX - AGENT -- TOBACCO PRODUCTS. A person who claims to be acting merely as agent in making purchases of tobacco products will have such claim recognized, for B&O tax purposes, only when the contract or agreement clearly establishes the relationship of principle and agent and the person's books and records comply with requirements of WAC 458-20-159.

TOBACCO PRODUCTS TAX - CLAIM OF AGENCY. The burden is on the taxpayer to establish the existence of an agency relationship. The Department will not recognize a claim that a person was acting merely as the agent of another in purchasing and receiving payment for tobacco products when the taxpayer provides no evidence that he or she was acting under the control of the purported principal.

TOBACCO PRODUCTS TAX - CLAIM OF AGENCY. It would be incompatible with the recordkeeping requirements of Chapter 82.26 RCW to recognize a claim that a person was acting merely as an agent in purchasing and receiving payment for tobacco products, when the person did not maintain any records documenting the name and address of the alleged principal or the dates and quantities of purchases allegedly made for the principal.

TOBACCO PRODUCTS TAX - DISTRIBUTOR. The Tobacco Products Tax is imposed only once, upon the "distributor," as defined in RCW 82.26.010. A person was liable for tax as the distributor of the tobacco products when the person was engaged in the business of selling tobacco products in this state, was the first person who handled for sale tobacco products that were within this state but upon which tax had not been imposed, and was not acting merely as an agent in purchasing and receiving payment for the tobacco products.

SERVICE B&O TAX - EXCLUSION - ADVANCE OR REIMBURSEMENT - CLINICAL COORDINATION SERVICES.

ADVANCES - PASS-THROUGH - ENTITLEMENT. An advance received by a taxpayer from its client for payment to a third party is not entitled to the Rule 111 "pass through" unless the taxpayer can first demonstrate that its role was that of an agent. If so, the second query will be "whether the taxpayer's liability to pay the advance ‘constituted solely agent liability.'" Common law, and not how the parties described themselves in their contract documents, control in determining whether an agency relationship existed.

ADVANCES - PASS-THROUGH - AGENCY - ESSENTIAL ELEMENTS. The essential elements of an agency relationship are mutual consent between a principal and agent, and control of the agent by the principal. Agency must be proven and cannot be presumed, and the burden of establishing an agency relationship is on the party asserting its existence. When a purported principal does not acknowledge that another entity is its agent, an agency relationship will not be found.

RCW 82.04.080: SERVICE B&O TAX - ADVANCE & REIMBURSEMENT - OVERHEAD EXPENSES. A brokerage company was not allowed to exclude from its gross income amounts received from account representatives as reimbursements for a pro-rata share of overhead costs incurred by the company.

RCW 82.04.080: SERVICE B&O TAX - ADVANCE & REIMBURSEMENTS - SECURITIES TRADING COSTS. A brokerage company was allowed to exclude from its gross income amounts received from clients as a reimbursement for costs paid to clearing brokers for executing a securities trade made on its client's behalf.

SERVICE B&O TAX - ADVANCES AND REIMBURSEMENTS - EXCLUSION - TEMPORARY STAFFING - LIABILITY FOR PAYMENT OF SALARIES. A corporation that provides independent contractor physicians to hospitals on a temporary basis is not entitled to a Rule 111 exclusion for amounts received from the hospitals, where the corporation is liable for payment of the physicians' salaries regardless of whether it receives payment from the hospitals.

SERVICE B&O TAX - ADVANCES AND REIMBURSEMENTS - EXCLUSION - TEMPORARY STAFFING -EQUAL PROTECTION.

INSURANCE AGENT/BROKER B&O TAX - COMMISSIONS - TAXABLE - NOT PASS-THROUGHS. A general insurance agent (the taxpayer) does not qualify for Rule 111 pass-through payments of commissions to its independent contractor sub-agents because (1) the taxpayer can and does render the service of selling insurance for the insurance company and (2) the taxpayer does not receive and pay the sub-agent commissions from the insurance company solely as its agent.

RULE 111, RULE 126, RULE 159; RCW 82.04.070; ETA 3134.2009: B&O TAX - FUEL SALE - FRANCHISE. Payments to fuel franchisee (taxpayer) that charged its customers for fuel pumped from other franchises, purchased the fuel from the other franchisees, and resold it to its customers, were not excludable as advances or reimbursements.

ADVANCES AND REIMBURSEMENTS -- GROSS INCOME OF THE BUSINESS -- PHYSICIANS. Amounts received by a physician for furnishing medicine or drugs as part of his treatment do not qualify as "reimbursements," even when separately charged.

RULE 111: ADVANCES AND REIMBURSEMENTS – ESCROW SERVICES. An escrow company could not exclude from gross income reconveyance fees and document preparation changes paid to third parties.

RULE 207, RULE 111; RCW 82.04.080: B&O TAX – GROSS INCOME – ADVANCES AND REIMBURSEMENTS – EXPENSES OF LITIGATION. Any court costs or litigation expenses which the attorney is prohibited from financing by RPC 1.8(e), other than as an agent for the client, is excluded from gross income. But, a lawyer’s general overhead, even if reimbursable, is not a pass-through cost because the lawyer assumes primary or secondary liability to those types of providers.

RULE 111; RCW 82.04.070: GROSS PROCEEDS OF SALES – ADVANCES AND REIMBURSEMENTS. A developer cannot exclude amounts it pays to contractors from the gross proceeds of sales where the evidence does not establish an agency relationship, and the developer was itself liable under the construction contracts to pay the contractors.

RCW 82.04.4452: HIGH TECHNOLOGY R&D CREDIT – PROFESSIONAL EMPLOYER ORGANIZATIONS. A Special Notice entitled “Professional Employer Organizations – Deduction” does not provide a blanket prohibition against all PEOs from qualifying for a tax credit or incentive.

RULE 111: B&O TAX – ADVANCES AND REIMBURSEMENTS. Wages directly paid by hotel owner to PEO are not deductible by a hotel management company as advance or reimbursement.

RCW 82.04.480: B&O TAX – GROSS INCOME OF THE BUSINESS. Wages directly paid by hotel owner to PEO constitute “gross income of the business” to a hotel management company, even though the management company did not actually receive wages.

RCW 82.04.540: B&O TAX – PROFESSIONAL EMPLOYER ORGANIZATION. A coemployment relationship may exist only between a PEO and a single client.

RCW 82.04.220; RCW 82.04.080: B&O TAX – GROSS INCOME OF THE BUSINESS – VALUE PROCEEDING OR ACCRUING – BUSINESS ENGAGED IN – LEGAL SETTLEMENTS. Legal settlements that are compensation for lost taxable business income are taxable in the same manner as the lost business income. Legal settlements that are compensation for personal injuries or (non-merchandise) property damages are not taxable.

RULE 111: ADVANCES OR REIMBURSEMENTS. Employee wages paid by a hotel owner to a payroll processing company are not deductible by a hotel management company under WAC 458-20-111 as advances or reimbursements.

RCW 82.04.080: GROSS INCOME OF THE BUSINESS. Employee wages paid directly by a hotel owner to a payroll processing company are taxable to a hotel management company as “gross income of the business” even though the hotel management company never actually received the employee wages.

RULE 111; RCW 82.04.255; RCW 82.04.080; ETA 3145.2009: GROSS INCOME OF THE BUSINESS – REAL ESTATE BROKERAGE RECEIPTS FROM ASSOCIATES AND COMMISSIONS SHARED WITH CLIENTS. Amounts received from associates for expenses and commissions received at closing that are shared with clients are included in the real estate brokerage’s gross income and subject to tax.

RULE 111: BUSINESS AND OCCUPATION TAX – ADVANCES AND REIMBURSEMENTS – COOPERATIVE ADVERTISING – SALES PROMOTION FEE REVENUE. The cooperative advertising exclusion test is derived from the authority of WAC 458-20-111 (Rule 111) and requires an agreement between a licensor and licensee that (1) the subject funds may only be used for advertising and sales promotion, (2) the subject advertising mention the trade name of products, and (3) the payer require proof of actual advertising cost.

RULE 111; RCW 82.04.080: B&O TAX - GROSS INCOME - ADVANCES AND REIMBURSEMENTS – A medical clinic cannot exclude amounts it pays to an independent contractor doctor from gross income of its business, because it has no agency relationship with its patients and, therefore, cannot show that its liability to pay the independent contractor doctor arose out of any such agency relationship.

RCW 82.04.080; RCW 82.04.220: GROSS INCOME – VALUE PROCEEDING OR ACCRUING – EMPLOYEE WAGES PAID DIRECTLY FROM CUSTOMER’S ACCOUNT. An employer, who contracts to have a customer pay its employees from its customer’s checking account, rather than paying its employees from its own bank account, is receiving value from its customer by having its payroll expenses paid. The payroll expenses were incurred by the employer and the payment of those payroll expenses by the customer are properly included in the employer’s B&O tax base.

RULE 111; RCW 82.04.080: GROSS INCOME – ADVANCEMENTS OR REIMBURSEMENTS – EMPLOYEE WAGES PAID DIRECTLY FROM CUSTOMER’S ACCOUNT. A taxpayer is not acting as an agent of its customer, when its customer, pursuant to contract, issues payroll payments to taxpayer’s employees from the customer’s checking account. Unless the taxpayer is an agent of its customer, those payments do not qualify for exclusion under Rule 111.

RCW 82.04.394: B&O TAX – EXEMPTIONS – PROPERTY MANAGEMENT COMPANY - ON-SITE PERSONNEL – EMPLOYEE WAGES PAID DIRECTLY FROM CUSTOMER’S ACCOUNT.

RULE 111; RCW 82.04.080: B&O TAX - GROSS INCOME - ADVANCES AND REIMBURSEMENTS - When a taxpayer is the employer of record of its affiliates’ employees, it is presumed to be the employer with liability for the employer obligations. To overcome this presumption, the taxpayer must provide the Department with evidence to establish that the client is the employer with liability for the employer obligations.

RCW 82.04.080: GROSS INCOME OF THE BUSINESS – PRESCRIPTION BENEFIT MANAGEMENT RECEIPTS. Amounts received from customers that are used to pay pharmacies are part of gross income subject to tax.

RULE 111: ADVANCES AND REIMBURSEMENTS – PERSONAL LIABILITY FOR PAYMENT OF PAYROLL EXPENSES. Where the available documentation indicated that the taxpayer was personally liable for payment of payroll expenses, as opposed to merely being liable as an agent, the taxpayer was properly precluded from excluding from the measure of its tax liability any amounts the taxpayer received for payment of such payroll expenses.

RULE 111; RCW 82.04.080: B&O TAX – GROSS INCOME – ADVANCES AND REIMBURSEMENTS – PAYMASTERS AND EMPLOYERS OF RECORD. A captive paymaster failed to establish it had no liability to pay the employer obligations except as agent of its affiliates, under ETA 3181.2013. The taxpayer did not establish it was as Form 2678 Agent for the clients under 26 USC Sec. 3504, and the employees were not given notice of the client’s status as the employer liable to the employees for all employer obligations.

RULE 110, RULE 111; RCW 82.04.070, RCW 82.08.010: BUSINESS AND OCCUPATION TAX – RETAIL SALES TAX – GROSS PROCEEDS OF SALES – SALES PRICE – DEDUCTIONS – DELIVERY CHARGES - THIRD-PARTY SHIPPER – LIABILITY FOR PAYMENT – PRIMARY – SECONDARY. The Department determined that the taxpayer failed to show it had no primary or secondary liability for delivery charges the taxpayer paid to a third-party shipper then billed back to its customers.

RULE 111; RCW 82.04.080: B&O TAX – GROSS INCOME – ADVANCES AND REIMBURSEMENTS – PAYMASTERS AND EMPLOYERS OF RECORD. Because the taxpayer failed to prove that it has no liability to pay employer obligations except as an agent of its affiliates, it does not qualify for exclusion of income.

RCW 82.04.43393: B&O TAX – DEDUCTION – PAYMASTER SERVICES – PROSPECTIVE APPLICATION. The deduction for paymaster services is new law and applies prospectively.

ADVANCES AND REIMBURSEMENTS -- PAYMASTER -- LOANED SERVANT -- EMPLOYER/EMPLOYEE. Taxpayer provided a driver to work for a second company driving trucks owned or leased by the second company. The taxpayer received payroll expenses plus a handling fee. Taxpayer was the nominal employer, but the second company exercised complete physical control over the driver and the driver worked exclusively for the second company. Held: the second company was the employer in fact, and the taxpayer was liable for business and occupation tax only upon the 15 percent handling fee.

BUSINESS & OCCUPATION TAX -- RETAIL SALES TAX -- EXCLUSION -- TRANSFER CHARGE. Florist made transfer charge for out-of-town delivery to cover costs of computer terminal, wire service membership dues, advertising expenses and a per-transaction transmission charge. Held: the transmission charge qualifies as the functional equivalent, in today's technology, of the telephone and telegraph charges mentioned in Rule 158; however, the transmission charge must be separately stated in order to qualify for exclusion from the measure of the sales and business and occupation tax.

B&O TAX --PHYSICIANS -- SHARED EXPENSES -- REIMBURSEMENT OF -- COMMON PAYMASTER DISTINGUISHED. Where two physicians share office space and expenses, a bookkeeping credit to one for the overhead responsibility of the other constitutes taxable gross income to the beneficiary. This situation is distinguishable from a common paymaster in that there exists no separate payor third party entity.

BUSINESS AND OCCUPATION TAX -- GROSS INCOME -- ADVANCES AND REIMBURSEMENTS -- PSRO REIMBURSEMENTS. PSRO reimbursements are payments for services rendered by the recipients of the payments. Therefore, they are not excludable from gross income as a reimbursement under Rule 111.

REIMBURSEMENT -- ARCHITECT -- UNDISCLOSED AGENCY -- LIABILITY TO THIRD PARTY PROVIDERS. In addition to evidence of agency, there must be evidence to indicate that an outside provider recognized that the architect/taxpayer was dealing with it only as an agent, and that it was legally entitled to be paid only by funds supplied by the taxpayer's clients, or that the taxpayer would not be legally liable to it for compensation if such funds were not received for any reason.

REIMBURSEMENTS -- COMMON PAYMASTER ACCOUNT. A common paymaster account is simply a conduit for paying operating expenses and monies paid to it are non-taxable reimbursements. 1 WTD 103 (1986).

SERVICE B&O TAX -- ADVANCE/REIMBURSEMENT -- PATIENT'S PAYMENT OF FEES -- PHYSICIAN -- TAXPAYER AS CONDUIT OF PAYMENT. Where taxpayer receives payment from a patient to pay the fees owed by the patient to a physician, the payment meets the definition of "advance." The taxpayer had no personal liability for payment of the fee to the physician except as a conduit for the payment. Held, the taxpayer's receipt of the fees as a conduit for transmission to the physicians is not subject to Service B&O tax.

ADVANCES/REIMBURSEMENTS -- COMMON PAYMASTER -- EMPLOYER/EMPLOYEE -- AFFILIATES. Where a taxpayer's affiliates are the actual employers and the taxpayer acts as common paymaster for the affiliates' employees, the taxpayer is a mere conduit for affiliates payroll expenses. The amounts received by the taxpayer from the affiliates for that paymaster purpose constitute nontaxable reimbursements per Rule 111.

SERVICE B&O TAX -- ADVANCES/REIMBURSEMENTS -- LOANED SERVANT -- HIRED BY TAXPAYER -- SERVICES TO AFFILIATES. Where taxpayer hired a controller to do its accounting and controller also does the accounting work for taxpayer's affiliates, the amounts paid by the affiliates to the taxpayer for disbursement to the controller or on his behalf are deemed payment to the taxpayer for rendering services by providing a loaned servant to the affiliates for conduct of their businesses. Such payments are subject to Service B&O tax.

SERVICE B&O TAX -- ADVANCES / REIMBURSEMENTS -- AFFILIATES -- LOANED SERVANTS -- CORPORATE OFFICERS IN AFFILIATED ENTITIES. Where a taxpayer is rendering services to affiliates by providing a loaned servant for the conduct of the affiliates' businesses, amounts received by the taxpayer in return from the affiliates is subject to Service B&O tax. Where taxpayer's two corporate officers who are its sole stockholders are also the principals in affiliated partnership and corporate entities, they are not deemed "loaned servants" when rendering services to the affiliated entities.

B&O TAX -- REIMBURSEMENTS -- COSTS -- GROSS INCOME OF BUSINESS. Amounts received by one corporation for expenses paid on behalf of a subsidiary do not qualify as "reimbursements" under Rule 111 unless the paying corporation is not primarily or secondarily liable for the fees or costs, other than as agent for the subsidiary.

RETAIL SALES TAX -- DEDUCTION -- CONTRACTOR -- BUILDING PERMIT FEES -- REIMBURSEMENT OF. The reimbursement of building permit fees to a construction contractor is not deductible from the measure of the contractor's retail sales tax absent a showing that the contractor has no primary or secondary liability for such fees.

SERVICE B&O TAX -- DEDUCTION -- ADVANCE/REIMBURSEMENT -- TOUR OPERATOR -- AGENT OF TOURIST -- PAYMENTS TO THIRD PARTY SERVICE PROVIDERS. Where a tour operator has a contractual arrangement with the tourist to be its agent in securing the services of third providers per packaged tours, the tour operator's payments to the service providers are deductible from the measure of the tax under Rule 111's advance/reimbursement principle.

B&O TAX -- DEDUCTIONS -- ADVANCES AND REIMBURSEMENTS -- AMOUNTS RECEIVED FOR LABOR COSTS -- LIABILITY OF TAXPAYER. Amounts received by a taxpayer for labor costs of its own employees is not a non-taxable advance or reimbursement, because the taxpayer is liable for the amounts.

B&O TAX -- EXCLUSION -- REIMBURSEMENTS -- "WASH SALES" --GROSS INCOME OF THE BUSINESS. Reimbursements from customers for amounts paid by the taxpayer on their behalf do not qualify as nontaxable "reimbursements" under Rule 111 unless the taxpayer is not primarily or secondarily liable for the fees or costs.

RETAIL SALES TAX -- ADVANCES -- REIMBURSEMENTS -- ESCROW AGENT -- DELIVERY COSTS --MESSENGER SERVICES. Charges made on a real estate settlement statement for a messenger services are subject to retail sales tax where the escrow agent is liable to pay the messenger service.

ADVANCE AND REIMBURSEMENTS -- ATTORNEY OVERHEAD COSTS. Payments by individually incorporated lawyers to a jointly owned professional service corporation for overhead expenses are not excludable as advances or reimbursements from the business and occupation tax.

B&O TAX -- ADVANCES AND REIMBURSEMENTS -- CONTRACT PHYSICIANS IN PUBLIC HOSPITALS -- PUBLIC HOSPITAL/PATIENT FINANCIAL RELATIONSHIP. Public hospital, as principal and not as agent for patients, engaged independent physician corporation to staff hospital facilities for a fixed fee subject to adjustments for hours worked.

B&O TAX -- ADVANCES AND REIMBURSEMENTS -- FEES AND COSTS. Fees and costs charged to customers of a bank for processing loan applications (costs for credit reports, title insurance, property appraisals, etc.) are not excludable under Rule 111 when the bank itself is liable for the payment of the costs. Accord: Christensen v. Department of Revenue, 97 Wn.2d 764 (1982).

B&O TAX -- DEDUCTIONS FOR ADVANCES AND REIMBURSEMENTS. Deductions from gross income are allowed for advances and reimbursements. Remand to the Department of Revenue was necessary to determine whether any payments received by an association from its parent insurance companies could be treated as reimbursements for claims that the association paid on behalf of its parent companies. WAC 458-20-111.

RHO -- AGENT -- SOLE LIABILITY. Advertising producer is not entitled to reimbursement exclusion when not solely liable as agent for payments by advertisers for performers controlled by producer.

SERVICE B&O TAX -- COMMISSIONS. A photographer who receives commissions for its representative is not entitled to exclude those amounts which are a cost of doing business.

B&O TAX -- ATTORNEYS -- ADVANCE AND REIMBURSEMENTS -- OVERHEAD CHARGES. Reimbursed expenses attributable to photocopying charges, long distance telephone charges, set-up fees, mileage, and traveling costs constitute the recovery of "overhead charges" and may not be excluded from gross income. . . . . See Also Christensen, O'Connor, Garrison & Havelka v. Department of Revenue, 97 Wn.2d 764, 649 P.2d 839 (1982).