WAC 114

"Sale at retail," "retail sale"

"Tuition Fee."

Deductions -- Fees, dues, charges.

Nonbusiness income - Bona fide initiation fees, dues, contributions, tuition fees and endowment funds. Repealed 11/1/95.

EXEMPTION OF DUES FROM BUSINESS AND OCCUPATION TAX Cancelled 1/29/09. This ETA explains that when an organization receives dues that are graduated based on the income of the member, the dues are not entitled to the deduction under RCW 82.04.4282. This ETA is based on an earlier version of RCW 82.04.4282 and does not consider the effect of the current statutory language on the facts involved. See WAC 458-20-183.

RETAIL SALES TAX -- SERVICE BUSINESS TAX -- BONA FIDE DUES -- CLUB MEMBERSHIP -- CONTRIBUTIONS -- EMERGENCY ASSESSMENTS.A one-time emergency assessment levied upon members in order to maintain an athletic club's solvency held to be deductible from its gross income under RCW 82.04.4282.

TAXATION OF MEMBERSHIP FEES - BENEFITS FROM MEMBERSHIP. Membership fees are taxed under RCW 82.04.4282. Bona fide fees are deducted from the measure of tax amounts, unless such fees or dues are in exchange for any significantamount of goods or services without any additional charge, or if the dues are graduated upon the amount of goods or services rendered.

TAXATION OF MEMBERSHIP FEES - CAPITAL ASSETS DISTINGUISHED. Capital assets enable a taxpayer to engage in business; capital assets are not the gross proceeds from sale. Capital stock is owned by the shareholder and is evidence of ownership.

B&O & RETAIL SALES TAX -- MEMBERSHIP DUES - SQUASH. A private social and luncheon club which also allowed its membership to utilize its squash facilities for no additional charge, was found subject to B&O and retail sales tax on a portion of its membership dues.

RESIDENTIAL PROPERTY OWNERS' ASSOCIATION -- DUES -- PARK AREAS -- SIGNIFICANT AMOUNT OF GOODS AND SERVICES.Amounts paid for the maintenance, repair, improvement and/or management of commonly-held park areas that are open to the public for no charge are not paid by the members of the managing organization for "significant amounts of goods and services" as required by Rule 114. Det. 86-55A, 2 WTD 353, (1987).

RESIDENTIAL PROPERTY OWNERS' ASSOCIATION -- DEFINITION -- COMMONLY-HELD PROPERTY -- DUES FOR MAINTENANCE.Dues received by a residential property owners' association for the maintenance, repair, improvement and/or management of the commonly-held (tennis courts and swimming pool) are NOT deductible from the B&O tax when not all of the owners of residential property within the area are owners of the property.

SERVICE B&O TAX -- DEDUCTIONS -- NONBUSINESS INCOME -- CONTRIBUTIONS AND GRANTS. Contributions, donations and grants are entitled to deduction from B&O taxation pursuant to RCW 82.04.4282 if the amounts are not received in return for any goods, services or business benefits.

B&O TAXES -- DEDUCTION -- GRANTS -- RESEARCH REPORTS. Where a federal agency awarded a taxpayer a grant for doing research and product development in certain designated areas and also required a written report on the results of that research, the income was subject to service B&O tax.

CONTRIBUTIONS -- DONATIONS. Voluntary contributions to a nonprofit organization which are not in exchange for any goods, services, or direct business advantage may be deducted from the measure of tax under the statute providing deduction for bona fide contributions or donations.

B&O TAX -- DEDUCTIONS -- CONTRIBUTIONS AND GRANTS. Donations, contributions, and grants are entitled to deduction from B&O - taxable income if the amounts are not received in return for any goods, services or business benefits.ACCORD: Det. No. 91-090, 11 WTD ____ (1991).

B&O TAX -- DUES -- NEWSLETTERS:The portion of an organization's dues used to provide a general interest newsletter for its members comes within the statutory deduction.This deduction is not affected by the size of the newsletter so long as the purpose of the newsletter is to inform members of common membership interest and concerns.Similarly, the deduction is not affected by members being informed that a portion of their dues provides a subscription to the newsletter.

B&O TAX -- DUES -- MEMBER DISCOUNTS: Where members are separately charged for the full cost of goods and services, the statutory deduction is not affected even though nonmembers pay higher charges for such goods and services.

RETAIL SALES TAX -- DEDUCTIONS -- INITIATION FEES -- BONA FIDE DUES.Bona fide initiation fees or dues are those amounts paid to join a club or association for the right to associate with other members or to support the organization's goals.Charges solely for the privilege of being able to receive goods or services in the future do not constitute bona fide initiation fees or dues.

RETAIL SALES TAX -- SERVICE B&O TAX -- CHARGES FOR RIGHT TO PURCHASE GOODS IN THE FUTURE.Charges for the mere opportunity to buy goods or services in the future for full consideration are subject to the service and other activities B&O tax.

SERVICE AND RETAILING B&O -- RETAIL SALES TAX -- BONA FIDE INITIATION DUES -- ATHLETIC CLUB.When an athletic club required customers to pay member enrollment fees to a fitness center to use the facility, but the membership gave them no other rights, the fitness center may not deduct the enrollment fees as initiation fees.

RETAIL SALES TAX -- A fitness club providing only services classified as retail may not deduct dues received from members who did not use facilities if the facilities were available to those members.

HEALTH AND FITNESS CLUBS -- INITIATION FEES -- INSTRUCTIONAL LESSONS -- SERVICE B&O TAX.The portions of initiation fees received by health and fitness clubs that pertain to instructional lessons are subjectto service business and occupation tax.

HEALTH AND FITNESS CLUBS -- INITIATION FEES -- RETAIL SALES TAX -- RETAILING B&O TAX.Payments by new members to join health and fitness clubs were not deductible as bona fide initiation fees because the payments were in exchange for the use of exercise facilities and services.

B&O TAX -- EXEMPTION -- DONATION -- GRANTS FOR MEDICAL RESEARCH.A grant received by the corporate affiliate of a VA Hospital for medical research may be excluded from the measure of the affiliate's B&O tax if the three requirements of ETB 572.04.169 are met.Amounts excluded include those used to defray administrative expenses, as well as amounts used directly for the qualifying charitable purpose.

B&O AND RETAIL SALES TAX -- TENNIS/FITNESS CLUBS -- INITIATION FEES - MEMBERSHIP DUES -- RETAIL SALES TAX.An exclusive private dining club, in which membership has value beyond the opportunity to purchase food and drink, may deduct membership fees and dues that are not in exchange for the goods and services it renders.

B&O TAX -- EXCLUSIVE DINING CLUBS -- INITIATION FEES - MEMBERSHIP DUES.The deduction under RCW 82.04.4282 for "bona fide" initiation fees and dues is available to an entity to the extent it can show the fees and dues are not in exchange for goods and services it renders.There is no requirement under the statute or Rule 183 that membership entitle a member to a proprietary interest or a voice in the operational control of the taxpayer, or that the taxpayer fit a particular profile.

DUES -- VALUE OF SERVICES -- ACTUAL USAGE METHOD -- MARKET STUDY.Dues charging organizations which elect the "actual usage of facilities" method for determining their tax measure and who perform comparable worth market study must include the entire range of market facilities, regardless of quality, in order to derive an "average" charge for such facilities.

DUES -- TAX MEASURE -- COSTS OF PRODUCTION -- "SIGNIFICANT AMOUNTS" DEFINED.Dues charging organizations which use the cost-of-production method of determining tax measures under Rule 114 must include all costs in separate computations for all kinds of significant goods and services rendered. "Significant amounts" is both qualitative and quantitative and includes everything for which a person pays a charge in the commercial marketplace.

DUES -- RECORDS -- ACTUAL USE OF FACILITIES -- BURDEN.Dues charging organizations must maintain actual records of use of facilities by dues paying members in order to use valuation method no. 2 of Rule 114 for determining proper tax measure.The burden rests with such organizations exclusively.

B&O TAX -- SALES TAX --- DUES BONA FIDE -- GOLF -- TAX MEASURE -- VALUATION FORMULAS.A private golf and country club which receives membership dues from golf "playing" and nonplaying "social" members may elect to report B&O tax and retail sales tax under alternative method 2(a) of Rule 114, if it maintains actual records of play by its membership.The department will not insist upon some other method for determining the value of golf provided.

DUES -- COMPARABLE WORTH -- MARKET STUDY -- CHARGES TO NONMEMBERS.Rule 114 does not provide for an independent market study by the department to determine comparable worth of services rendered by dues receiving organizations, nor provide that such value is determined by the charges for such services made to non-dues paying persons who receive such services.

DUES -- "BONA FIDE" -- DEDUCTION -- "SELLING PRICE."Income from "bona fide" dues is deductible for B&O tax and is not part of the "selling price" of anything for retail sales tax purposes."Bona fide" dues, however substantial in amount, are tax deductible.

B&O TAX -- SALES TAX -- DUES -- GOLF -- VALUATION FORMULA -- REASONABLE CHARGE -- COST OF PRODUCTION.The allocation of a reasonable charge for golf from golf club members' dues, which exceeds the total cost of providing golf for dues paying members is an expressly allowable tax reporting method under Rule 114.

B&O TAX -- DEDUCTION -- DUES -NEWSLETTERS -- LOBBYING -- MEETINGS/SEMINARS.The providing of general interest newsletters and general lobbying for the benefit of all members, as well as providing facilities for business meetings and seminars to the general membership does not make an association's dues from members taxable as non-"bona fide" dues or defeat the statutory deduction for such bona fide dues.

B&O TAX -- RETAILING -- EXEMPTION -- VOLUNTARY DONATIONS -- MEALS PROVIDED TO HOMEBOUND PERSONS.Voluntary donations which do not entitle the donor to receive any significant goods or services in return for the donation are not subject to the B&O tax.Where the homebound persons were provided meals regardless of the amount donated or even if no donation was made established that the donations were voluntary and bona fide.Held, the donations are exempt from Retailing B&O tax.

RETAIL SALES TAX -- SALE -- CONSIDERATION -- VOLUNTARY DONATION -- ETB 516.The term "sale" means any transfer of ownership of, title to, or possession of property for a valuable consideration, and includes the furnishing of food, drink or meals for compensation whether consumed upon the premises or not. Consideration is the inducement, cause, motive, price, or impelling influence which induces a party to enter into a contract to sell. The bona fide voluntary donations were neither consideration nor compensation for the meals because the meals were available without charge. ETB 516.

VALIDITY -- AUTHORITY FOR ADMINISTRATIVE RULE. The Department will not entertain general challenges to its authority to adopt rules in accord with the Administrative Procedure Act; such rules, including Rule 114, duly adopted, have the force and effect of law unless overturned by a court of record not appealed.

DUES -- STATUTORY AMENDMENT -- CLARIFICATION -- INCONSISTENT ADMINISTRATION.Confusion caused by inconsistent tax rulings or instructions prior to statutory amendment to clarify the distinction between deductible and nondeductible dues income does not serve to invalidate rule provisions consistently applied after the statutory amendment and until an administrative rule was promulgated.

B&O TAX -- DEDUCTIONS -- BONA FIDE DUES -- GRADUATED DUES -- DUES PAID FOR SERVICES. Dues which are graduated or paid in return for goods and services are not "bona fide" by nature and are not entitled to the statutory deduction for bona fide dues under theexpress provisions of Rule 114.

AMENDMENT -- RETROACTIVITY -- REMEDIAL EFFECT -- ESTOPPEL.Amendment of an existing administrative rule to clarify and explain the application of existing statutory tax provisions is remedial in nature and such amendments may be applied retrospectively when they pertain to practice, procedure, and remedies and do not affect substantive rights. The doctrine of estoppel to apply the remedial rule measures will not apply where the Department has made no explicit representation to the claimant contraryto the rule's remedial provisions.

BUSINESS -- ENGAGING IN BUSINESS -- OWNERSHIP OF BUSINESS -- PROPRIETARY INTEREST -- DUES PAYING MEMBERS -- BENEFITS TO MEMBERS -- RETAIL SALES.Organizations which received dues from members who have a proprietary interest in the organization, in return for services and benefits defined by law as "retail sales" are engaged in business separate and apart from their members and are taxable upon such dues income under Rule 114. Payment of such dues is not merely a cost sharing arrangement between owners of the business.

DUES -- AMENDMENT -- RETROACTIVE EFFECT -- CLARIFICATION.The amendment to an administrative regulation (Rule 114) to clarify existing statutory law and to provide reasonable guidelines for its application in many varied factual situations does not constitute the retroactive application of that law.

RETAIL SALES TAX -- GOLF -- DUES.Charges for playing golf, whether designated as "dues" or by any other designation were statutorily defined as retail sales before and after 1979 amendments to a B&O tax deduction statute which distinguished between tax deductible dues and charges for goods and services. There is no retail sales tax deduction for any income derived from dues. The portion of "dues" income derived from providing golf to members was and is subject to retail sales tax before and after 1979.

B&O TAX -- DEDUCTION - DUES -- TAX COMPUTATION -- VALUATION METHOD -- RECORDS -- COST OF PRODUCTION. A dues receiving organization, which does not retain actual records of usage of its facilities, correctly computes its taxable dues income under the cost-of-production method in Rule 114; the rule makes no provision for estimating the actual usage of facilities.

DUES -- SCOPE OF RULE -- AUTHORITY. Rule 114, governing the proper tax reporting procedures and valuation methods for the tax reporting of dues income is the proper implementation of statutory law in a clear and enforceable manner; the scope of the rule's guidelines and formulary valuation methods is authorized by, and properly expresses statutory law.

RETAIL SALE TAX -- SELLING PRICE -- BUYER -- SELLER -- DUES -- DESIGNATION OF CHARGES.The statutory definitions of "sale," "selling price," "buyer," and "seller," as well as the taxing scheme of the Revenue Act cannot be subverted by designating such things by different names such as "owner/members" or "dues." The amendment of administrative rules to clarify such matters does not constitute a new or different position from that intended and resulting from statutory law.

B&O TAX -- DEDUCTIONS -- COMPUTATION METHODS -- BONA FIDE DUES.For tax purposes, the fact that a significant amount of "dues" income may be apportioned as tax deductible under the Rule 114 alternative apportionment methods, absent legislative limitations, is immaterial.

B&O TAX -- GROSS INCOME -- DUES -- TAX MEASURE -- FORMULARY APPORTIONMENT -- RULE RETROACTIVITY. The alternative tax computation formulas provided by Rule 114 for determining tax measures are available for taxpayers who derive dues income, retroactively until 1979.

B&O TAX -- DEDUCTION -- COSTS OF PRODUCTION -- FORMULARY APPORTIONMENT -- STANDARD ACCOUNTING PROCEDURES. Rule 114 provides an optional "costs of production" apportionment method distinguishing taxable dues from bona fide, deductible dues; this method provides for standard accounting procedures which must be followed.

B&O -- DEDUCTION -- GOLF -- PRIVATE GOLF COURSES -- PUBLIC GOLF COURSES -- MARKET COMPARISON -- AVERAGE COMPARABLE CHARGES -- GREENS FEES.Greens fees of both public and private golf courses must be considered for purposes of determining "the average comparable charges for such goods and services by other commercial businesses" where taxpayer, a private golf course, elects the "actual records of facilities usage" method to determine its Retailing B&O and retail sales tax liability in respect to rounds of golf provided to its members.

B&O TAX RETAIL SALE -- RECREATION AND AMUSEMENT BUSINESSES -- TENNIS -- DUES -- COST SHARING -- HOME OWNER'S ASSOCIATION DISTINGUISHED.A separate, non-profit corporate entity which provides tennis and swimming to its owner/members for a charge designated as "dues", is engaging in a taxable business. RCW 82.04.4298 only provides a deduction for amounts collected to fund recreation facilities which are commonly owned by an association of owners of residential property.

B&O TAX -- DUES -- BONA FIDE DUES DISTINGUISHED FROM DUES PAID FOR SERVICES -- NOTICE. Since July 1979, RCW 82.04.4282 clearly provided that amounts designated as "dues" which are graduated upon or paid for services rendered are not deductible.

AMENDMENT -- RETROACTIVITY -- ESTOPPEL. Amendment of an existing administrative rule to clarify and explain the application of existing statutory tax provisions is remedial in nature and such amendments may be applied retrospectively when they pertain to practice, procedure, or remedies and do not affect substantive rights. The doctrine of estoppel to apply the remedial rule measures will not apply where the Department has made no explicit representation to the claimant contrary to the rule's remedial provisions.

RETAIL SALES TAX -- DUES -- MEASURE OF TAX. Assessment based on one of the methods of reporting listed in Rule 114 is valid unless the taxpayer can show either the calculations or the figures used were incorrect. An assessment will not be reduced because on a taxpayer alleges other clubs here received proportionately lower assessments.

BUSINESS AND OCCUPATION TAX - EXEMPTION - EDUCATIONAL INSTITUTION - TUITION AND FEES COLLECTED BY HOSPITAL. A hospital was not entitled to an educational institution exemption from business and occupation tax under WAC 458-20-114 for tuition and fees collected from students in a nursing degree program administered jointly by the hospital and two colleges, since the hospital did not meet the definition of an educational institution. However, the hospital was still not liable for tax on the tuition and fees where it simply collected the money and passed it on to the colleges.

B&O TAX --DEDUCTION -- TUITION FEES -- BIBLE COLLEGE. Educational institutions, as statutorily defined, may deduct tuition fees from the measure of their B&O tax.For those qualifying via accreditation, it is not required that such status be conferred by the state. The curriculum of this Bible college is found to be of a sufficiently general academic nature to quality for deduction of tuition fees. Effect of 1985 amendment of RCW 82.04.170 discussed.

B&O TAX - RETAIL SALES TAX - DUES - CAPITAL EXPENDITURES - METHOD OF COMPUTING.Because the alternative apportionment methods provided by Rule 114 are mutually exclusive, a taxpayer may not, after utilizing one method, further apply a second method to further bifurcate the amount initially determined to be taxable into taxable and nontaxable amounts.

SALES TAX -- MEMBERSHIP FEES -- OPPORTUNITY TO PURCHASE GOODS AND SERVICES. A membership fee which merely entitles a member to purchase certain goods and services is not itself subject to sales tax. Such a fee does not meet the statutory definition of a sale at retail.

DUES -- EFFECT OF FORMER LAW -- DEDUCTIBLE AMOUNTS.Under written instructions effective until January 1, 1979, entitling the taxpayer to report gross receipts under the Service classification of the B&O tax, the taxpayer could deduct gross membership fees/dues only in amounts which were not for, or graduated upon, the benefits or services rendered. A taxpayer may establish that portion of such gross receipts entitled to tax deduction which represent bona fide membership dues not received in return for taxable services or benefits.

DUES -- COMPUTATION OF DEDUCTIONS -- VALIDITY OF RULE -- VALUATION FORMULA -- USAGE OF FACILITIES METHOD.The optional formulary methods for computing the portion of gross dues/fees receipts entitled to tax deduction, as set forth in Rule 114, are fair, appropriate, and nonprejudicial. These alternative valuation methods are available to all dues receiving taxpayers for all periods. The actual usage of facilities method may be applied by using published external studies of average values tantamount to determining the value of comparable facilities under Rule 114.

BONA FIDE DUES -- DEDUCTIBILITY -- DETERMINATION OF VALUE -- PROOFS.A taxpayer who receives dues/fees from providing both taxable services and benefits as well as intangible, noncompensatory benefits may establish the taxable versus nontaxable portions for all tax reporting periods. Portions of income which are deductible bona fide dues for retailing B&O tax are also deductible for retail sales tax.

DUES -- SALE AT RETAIL -- PRIOR RULINGS OF DEPARTMENT OF REVENUE -- PROSPECTIVE LIABILITY.The payment of dues and fees in return for recreational. . .privileges is a sale at retail under law and revenue rules.A taxpayer who has received written instructions from the Department as to the reporting thereof may rely upon such advise for tax reporting purposes until such written instructions are rescinded. After receiving new written instructions post-January 1, 1979 dues and fees for . . . are subject to retailing B&O tax and retail sales tax.