WAC 168

RETIREMENT HOMES

CONGREGATE CARE FACILITIES Cancelled 07/17/02

A Podiatric Physician’s Guide to Washington Excise Taxes

Nonprofit Organizations Guide

Tax Guides - Hospitals

CHAMPUS - Employee Benefit Plan - Superior Court, Thurston County - Letter Opinion - Empire Health Services, et al v. State of Washington, Depart. of Revenue, et al Thurston County Cause No. 99-2-00312-5.

Definitions - Boarding Homes

Definitions - Nursing Homes

Definitions - Adult family homes

Definitions - Hospitals

Tax on manufacturers and processors of various foods and by-products -- Research and development organizations -- Travel agents -- Certain international activities -- Stevedoring and associated activities -- Low-level waste disposers -- Insurance agents, brokers, and solicitors--Hospitals -- Commercial airplane activities -- Timber product activities -- Canned salmon processors.

Tax on Selected Business Services, Financial Businesses, or Other Business or Service Activities.

Tax on provision of room and domiciliary care to boarding home residents.

Exemptions -- Qualifying blood, tissue, or blood and tissue banks.

Exemptions -- Qualified organ procurement organizations.

Exemptions -- Adult family homes.

Exemption -- Compensation for patient services or attendant sales of drugs dispensed pursuant to prescription by certain nonprofit organizations.

Deductions -- Compensation from public entities for health or social welfare services -- Exception.

Health or social welfare organization" defined for RCW 82.04.4297 -- Conditions for exemption -- "Health or social welfare services" defined.

Deductions - Compensation received under the federal medicare program by certain hospitals or health centers

Deductions -- Certain amounts received by boarding homes.

Retail Sales Tax Imposed

Exemptions -- Sales of food and food ingredients

Exemption - Temporary medical housing

Exemptions -- Use of food and food ingredients

Sales and Use Taxes Authorized - Additional Taxes Authorized - Maximum Rates

Hospitals, nursing homes, boarding homes, adult family homes, and similar health care facilities.

Hospitals, medical care facilities, and adult family homes.Effective 6/17/94

Hospitals, nursing homes, assisted living facilities, adult family homes, and similar health care facilities. WAC 458-20-168 (Rule 168). This rule explains the B&O, retail sales, and use tax responsibilities of persons operating hospitals, nursing homes, and similar health care facilities. Rule 168 has been revised to include legislative changes, the repeal of the quality maintenance fee, and the expiration of the hospital safe patient handling credit. The rule has also been reformatted to make it easier to find specific information.

Hospitals, nursing homes, assisted living facilities, adult family homes and similar health care facilities explains the application of B&O, retail sales, and use taxes to persons operating such businesses. Rule 168 has been revised to remove language explaining RCW 82.04.4485 that allowed hospitals to take a B&O tax credit for the cost of purchasing mechanical lifting devices and other equipment meant to minimize patient handling by health care providers. This exemption expired December 30, 2010 and is now past statute.

These rules all refer to resale certificates. Proposed action is to add standard language to recognize reseller permits for sales made on or after January 1, 2010.

Tax Attorneys and CPAs New "Economic Nexus" in Washington State May Impact Your Clients

Nonprofit Boarding Homes

Tax Exemptions for Temporary Medical Housing Provided by Health or Social Welfare Organizations

Tax Due on Commercial Use of Molds by Orthotic and Prosthetic Manufacturers

New Apportionment Method

Temporary B&O Tax Rate Increase Small Business Credit Increase Active Non-Reporting Change

Nursing Facility Operators-Quality Maintenance Fee

B&O Tax Deduction for Physicians and Clinics that Dispense Drugs by Infusion or Injection

Hospital Safe Patient Handling B&O Tax Credit

B&O Tax Reporting Requirement Continues After Business Activity Stops (Trailing Nexus)

Registered Out-of-state Businesses Currently not Reporting Income from Service Activities - New Apportionment for Certain Income

Blood and Tissue Bank Definitions Expanded

Nursing Facility Quality Maintenance Fee Repealed Effective July 1, 2007

Aircraft Excise Tax and Property Tax Exemption on Aircraft Used by Nonprofits as Air Ambulance

For Profit Hospitals Reporting Change

Eyeglass Frames and Medical Items

Massage Services

Taxability of Licensed Boarding Homes

New "Economic Nexus" in Washington State May Impact "Foreign Corporations"

For Profit Hospitals Reporting Change

Nursing Facility Quality Maintenance Fee Rate Reduced

Important Changes for Non-Profit Org & Local Government

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.

B&O TAX -- DEDUCTION -- NON-PROFIT HOSPITALS -- STATUTORY CONSTRUCTION.Statute granting B&O tax deduction to non-profit health care providers for amounts received from services to patients cannot be read to grant the deduction to for-profit health care providers.Accord:Group Health Co-op v Tax Comm'n, 72Wn.2d 422 (1967), Budget Rent-A-Car v. Dept. of Rev., 81Wn2d 171 (1972), Burlington Northern v. Johnston, 89Wn.2sd 321 (1977), Kirk v Moe, 114 Wn.2c 550 (1990), 82 C.J.S. Statutes335 at 673

B&O TAX -- DEDUCTION -- HOSPITAL SERVICES -- CLINICS AND DEPARTMENTS.That portion of a nonprofit hospital's income from radiology services is deductible from its B&O tax when the department is staffed, equipped, and administered by the hospital notwithstanding the fact that part of the department is housed in an adjacent building and serves outpatients referred by doctors practicing in the building.ACCORD: Group Health Co-op v. Tax Commission, 72 Wn.2d 422 (1967); Det. No. 87-876, 4 WTD 399 (1987); Swedish Hospital Medical Center v. Department of Rev., Superior Court Docket No.

RENTAL OF REAL ESTATE -- PROVIDING CONGREGATE CARE FACILITIES TO MENTALLY ILL ADULTS. Facilities which provide residential care to mentally ill adults are "similar institutions" to nursing and rest homes for purposes of Rule 168. Therefore, revenues attributable to professional services rendered to residents are taxable under the Service and Other classification of the business and occupation tax. Amounts the taxpayer receives from the county for providing lodging are revenues from the rental of real estate exempt from the business and occupation tax.

B&O TAX--SERVICE -- NURSING HOME CARE -- BEAUTY SHOP INCOME.Income from services of nursing home-owned beauty shop operated for residents only by nursing home employees does not qualify for deduction from B&O taxable income, because it is not an "integral part of the services" rendered by a nursing home.

RESEARCH & DEVELOPMENT INCOME -- HOSPITALS.RCW 82.04.260 requires taxation of the "research and development" activities of every nonprofit corporation and association.The legislature did not provide a deduction or exemption.However, RCW 82.04.4289 provides a deduction for compensation received for services to patients and attendant sales of prescriptions by nonprofit hospitals.Additionally, RCW 82.04.4297 provides a deduction for revenue received from public entities for "health and socialwelfare services."

EXEMPTION FOR MEDICAL SERVICE REVENUE EARNED BY CLINICS.Hospitals that also operate outpatient clinics, physically and operationally separate from the hospital facility are not entitled to thebusiness and occupation tax exemption of RCW 82.04.4289 for revenue derived from the clinic operation.Accord:Group Health Co-op v. Tax Commission,72 Wn.2d 422 (1967); Det. No. 87-376, 4 WTD 399 (1987).1993, [NOTE: EFFECTIVE JULY 1,1993 RCW 82.04.4289 WAS AMENDED TO REMOVE ALL REFERENCES TO HOSPITALS. SEC. 305, CHAPTER 492, LAWS OF WASHINGTON 1993.]

EXEMPTION FOR HEALTH & SOCIAL WELFARE SERVICE REVENUE RECEIVED BY CLINICS FROM PUBLIC ENTITIES.Hospitals that also operate outpatient clinics, physically and operationally separate from the hospital facility are entitled to the business and occupation tax exemption of RCW 82.04.4297 for revenue received from public entities for"health and social welfare services." Group Health Co-op v. Tax Commission, 72 Wn.2d 422 (1967); Det. No. 87-376, 4 WTD 399 (1987).

B&O TAX -- MEDICAL CLINIC -- DEDUCTION -- APPLICABILITY. RCW 82.04.4289 does not provide for-profit health care providers any deduction for amounts received as compensation for services rendered to patients.

BUSINESS AND OCCUPATION TAX -- DEDUCTION FOR COMPENSATION FROM PUBLIC ENTITIES FOR HEALTH & SOCIAL WELFARE SERVICES.Income received from public entities for providing ambulance service is subject to the B&O tax deduction of RCW 82.04. 4297 when the ambulance service company is a qualifying "health or social welfare organization."

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.

MEDICAL CLINICS -- PHYSICIANS -- INDEPENDENT CONTRACTORS.Physicians were independent contractors when contracting with a hospital to provide services at either hospital-owned clinics or physician-owned clinics which were subsidized by the hospital because the physicians exercised full control over making medical judgments, set their own fees and hours, obtained their own patients, and received gross payments without deductions for employment taxes.

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.

B&O TAX - DRUGS - SALE OF -ADMINISTRATION.Only those drugs sold and physically administered by the seller are taxable under the services and other activities classifications of the B&O tax.Drugs sold to patients or their caregivers for either patient self -administration or administration by a caregiver other than the seller are taxable under the retailing classification of the B&O tax.

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 - 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.

ADULT FAMILY HOMES EXEMPTION - STATUTORY CONSTRUCTION.RCW 82.04.327 references DSHS rules generally which govern the licensing of adult family homes.Where a reference is to the law generally which governs a specified subject, the reference is regarded as including not only the law on that subject in force at the date of the referential act, but also that law as it exists from time to time thereafter.

ADULT FAMILY HOMES EXEMPTION.RCW 82.04.327, which exempts from B&O tax the gross income derived from services of adult family homes, applies only to private homes.It does not apply to home care agencies that merely go into private homes to provide services.

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.

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.When a health care provider receives payments on a per member basis for all covered services under a group health plan (capitation payments) and is itself liable for any third-party service that may be provided to members, such payments are not dedu

B&O TAX - DEDUCTION - CHAMPUS REVENUES.CHAMPUS revenues are "amounts received under an employee health benefit plan" and are, thus, ineligible for the RCW 82.04.4297 deduction.

B&O TAX - PUBLIC AND NONPROFIT HOSPITAL CLASSIFICATION - "SERVICES TO PATIENTS" -- INTEREST ON PATIENT ACCOUNTS.Because it was the legislature's intent to extend tax treatment under this classification to services rendered by nonprofit hospitals to its inpatients, i.e., "services to patients," interest charges are not taxable under this rate because it is not a hospitalization service.

B&O TAX - DEDUCTION - MEDICARE/MEDICAID COINSURANCE AND DEDUCTIBLES.Amounts received as coinsurance and deductibles directly from a hospital's patients are not deductible under RCW 82.04.4297 because they are not amounts received "from the United States or any instrumentality thereof or from the state of Washington or any municipal corporation or political subdivision thereof."

B&O TAX - DEDUCTION - HEALTH OR SOCIAL WELFARE ORGANIZATION - EMPLOYEE BENEFIT PLAN - CHAMPUS PAYMENTS.CHAMPUS held to be an employee health benefit plan for the military, and its payments to hospitals are ineligible for the RCW 82.04.4297 deduction.

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.

B&O TAX - DEDUCTION - "TUITION FEES"/"BONA FIDE TUITION FEES" -- RADIOLOGY SCHOOL TUITION.When a hospital's radiology school is not accredited, does not offer a program of a general academic nature, or otherwise qualify under RCW 82.04.170or RCW 82.04.4282, it will be considered to be a trade or specialty school for which no deduction is permitted. Lacey Nursing v. Dept. of Revenue, 128 Wn.2d 40, 49-50 (1995).

B&O TAX - SPECIAL RATE -- PUBLIC AND NONPROFIT HOSPITALS - "SERVICES TO PATIENTS" - PHYSICIAN TRANSCRIBING FEES. Transcribing service is provided by Taxpayer to physicians, who pay for it.It is a cost of doing business of physicians with hospital privileges.The transcribing service is not a hospitalization service rendered to patients, and the fact that the doctors may be required to provide the transcriptions for the hospital's records does not change this analysis.

B&O TAX - SPECIAL RATE -- PUBLIC AND NONPROFIT HOSPITALS - "SERVICES TO PATIENTS" - DEPARTMENTS AND SERVICES.As demonstrated by the phrase "services to patients" in Rule 168(3)(a), the Department has determined that the legislative intent of RCW 82.04.260(12), as discussed above, was to extend the special rate to hospitalization services rendered by nonprofit hospitals to inpatients.

B&O TAX - SPECIAL RATE -- PUBLIC AND NONPROFIT HOSPITALS - "SERVICES TO PATIENTS" - EDUCATIONAL OFFERINGS.Under the rationale of Group Health, educational offerings open to, or provided to, the general public at the hospital will properly qualify as being an "integral, interrelated, and essential part" of the hospital operation if they are unique and incidental to the provision of hospitalization services (i.e., services which will be, have been, or are currently being provided to the students or participants).

B&O TAX - DEDUCTION -- GOVERNMENT-PAID SERVICES FOR HUMANS. A laboratory service is deductible from the B&O tax if it is pursuant to any of the "health and social welfare services" enumerated in RCW 82.04.431(2), which include and are limited to "(a) mental health, drug, or alcoholism counseling or treatment; . . . (c) health care services; (d) therapeutic, diagnostic, rehabilitative, or restorative services for the care of the sick, aged, or physically, developmentally, or emotionally-disabled individuals."

B&O TAX - SPECIAL PUBLIC AND NONPROFIT HOSPITAL RATE -- LABORATORY SERVICES FOR PATIENTS AT ANOTHER HOSPITAL.

B&O TAX - SPECIAL PUBLIC AND NONPROFIT HOSPITAL RATE-FAMILY PRACTICE CLINIC.168(3)(a).Because a hospital's family practice clinic does not render services to hospital inpatients, and because it is not an "integral, interrelated, and essential part" of the hospital under the Group Health analysis, its revenues are not eligible for the special public and nonprofit hospital rate after July 1, 1993.

B&O TAX - SPECIAL PUBLIC AND NONPROFIT HOSPITAL RATE -- "SERVICES TO PATIENTS" - HOSPITAL CLINICS AND SERVICES.As demonstrated by the phrase "services to patients" in Rule 168, the Department has determined that the legislature's intent was to extend the special rate to hospitalization services previously entitled to the RCW 82.04.4289 deduction, which includes hospitalization services rendered by nonprofit hospitals to inpatients.Additionally, for departments and services available to both inpatients and outpatients (e.g., emergency rooms, radiology services, and laboratories) the publ

B&O TAX - DEDUCTION - RESEARCH AND PHYSICIAN TRAINING GRANTS.Because grants for research and physician training are not for the purposes described under RCW 82.04.431(2)(a), (c), and (d) - i.e., various services and treatments rendered to patients -- they are not deductible by a hospital under RCW 82.04.4297 as "health and welfare services."

B&O TAX - SPECIAL PUBLIC AND NONPROFIT HOSPITAL RATE- EDUCATIONAL OFFERINGS AND SERVICES OPEN TO, OR PROVIDED TO, THE GENERAL PUBLIC.Educational offerings and services open to, or provided to, the general public will qualify as being an "integral, interrelated, and essential part" of the hospital operation only if they are unique and incidental to the provision of hospitalization services (i.e., services which will be, have been, or are currently being provided to the students or participants.).The mere fact that only a hospital might offer these educational services in a community is

Only those educational programs and services offered by a hospital that would be very difficult or impossible to duplicate by a non-hospital because of the specialized body of knowledge, facilities and equipment required will qualify as a hospitalization service.Other educational programs and services will not be eligible for the public and nonprofit hospital classification rate when any physician, clinic, or even trained lay persons could offer them.

B&O TAX - BUSINESSES TAXABLE UNDER TITLE 48 RCW:A business that claims exemption from the B&O tax pursuant to RCW 82.04.322 must first show that it is a health maintenance organization, health care service contractor, or certified health plan to qualify.

B&O TAX - EXEMPTIONS -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING - BOARDING HOMES -- 30 DAY PRESUMPTION.The statutory presumption that occupancy of real property for a continuous period of one month or more constitutes a lease of real property does not apply to assisted living facilities.

B&O TAX -EXEMPTIONS -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING -- BOARDING HOMES -- EXCLUSIVE CONTROL - PRIMARY PURPOSE.Although some indicia of a lease are present in the assisted living context, the primary purpose of the taxpayer's assisted living facilities is to provide daily living assistance and care to the aged or infirm.Accordingly, the rental of real estate exemption does not apply.

CONGREGATE CARE CASES OVERRULED.In published determinations, we previously held that two congregate care facilities were entitled to the rental of real estate exemption for amounts attributable to lodging if they could segregate with reasonable accuracy the amounts received from real estate rental from amounts received for personal and professional services.Det. No. 90-252, 10 WTD 41 (1990); Det. No.

SERVICE B&O TAX - B&O TAX EXEMPTION -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING - 30 DAY PRESUMPTION.The statutory presumption that occupancy of real property for a continuous period of one month or more constitutes a lease of real property does not apply to assisted living facilities.

SERVICE B&O TAX -B&O TAX EXEMPTION -- LEASE VS. LICENSE TO USE REAL PROPERTY - ASSISTED LIVING - EXCLUSIVE CONTROL VS. RIGHT TO USE - PRIMARY PURPOSE.Although some indicia of a lease are present in the assisted living context, the primary purpose of the taxpayer's assisted living facilities is to provide daily living assistance and care to the aged.Accordingly, the rental of real estate exemption does not apply.

CONGREGATE CARE CASES OVERRULED.In published determinations, we previously held that two congregate care facilities were entitled to the rental of real estate exemption for amounts attributable to lodging if they could segregate with reasonable accuracy the amounts received from real estate rental from amounts received for personal and professional services.Det. No. 90-252, 10 WTD 41 (1990); Det. No.

MEDICARE+CHOICE - PREMIUMS - DEDUCTION.Public hospital district may deduct its receipt of premiums received under the Medicare+Choice program under RCW 82.04.4311 because they are amounts "received as compensation for health care services covered under the federal Medicare program."They are not amounts received as patient co-payments or patient deductibles.

B&O TAX - SPECIAL RATE -- PUBLIC AND NONPROFIT HOSPITALS - "SERVICES TO PATIENTS" - FAMILY PRACTICE CLINIC.As demonstrated by the phrase "services to patients" in Rule 168(3)(a), the Department has determined that the legislative intent of RCW 82.04.260(12) was to extend the special rate to hospitalization services previously entitled to the RCW 82.04.4289 deduction.This includes hospitalization services rendered by nonprofit hospitals to inpatients and those services that are an "integral, interrelated, and essential part" of the hospital using the Group Health analysis.Family Practice

RETAIL SALES TAX -- EXEMPTION -PURCHASE OF MEALS - NONPROFIT HOSPITAL.A nonprofit hospital's purchase of meals from third party vendors, which the hospital provided to its senior citizen, disabled, or low-income patients, qualifies for the RCW 82.08.0293(3)(b) exemption from retail sales tax.

RCW 82.04.4289:B&O TAX - MUNICIPAL CORPORATION - NURSING HOME - PUBLIC HOSPITAL DISTRICT- RELIGIOUS OR CHARITABLE ORGANIZATION. A public hospital district is a municipal corporation and not a religious or charitable organization, and nursing home revenue received by the public hospital district is therefore not exempt under RCW 82.04.4289.The fact that the public hospital district has been designated a 501(c)(3) corporation by the Internal Revenue Service is immaterial.

RCW 82.04.4337:B&O TAX -- DEDUCTIONS - CERTAIN AMOUNTS RECEIVED BY LICENSED BOARDING HOMES.The deduction RCW 82.04.4337 grants to licensed boarding homes for "amounts received as compensation for providing [certain care or services] under contract with the Department of Social and Health Services authorized by chapter 74.39A RCW to residents who are Medicaid recipients" is limited to payments received from DSHS.The deduction does not apply to copayments the Medicaid recipients are required to make.

RULE 168, RULE 151, RULE 18801, RULE 224; RCW 82.04.290, RCW 82.08.020: B&O TAX -- MEDICAL CLINIC -- PRESCRIPTION DRUGS -- TRUE OBJECT. A medical clinic that administers chemotherapy drugs is taxable under the Service & Other B&O tax classification. Under the true object test, the clinic is performing a medical service, rather than engaging in the sale of tangible personal property subject to retailing B&O tax.

RCW 82.08.945 - RETAIL SALES TAX - EXEMPTIONS - KIDNEY DIALYSIS DEVICE. A monitoring device used in kidney dialysis that is an integral accessory and part of the device prescribed to treat renal failure and related conditions is a kidney dialysis device exempt from retail sales tax under RCW 82.08.945.

RCW 82.04.080(1); RCW 82.04.260(10): GROSS INCOME - PUBLIC/NONPROFIT HOSPITAL B&O TAX - MEDICAL SERVICES PROVIDED UNDER AN EMPLOYEE MEDICAL PLAN. Taxpayer’s gross income includes all income from transactions under its employee medical plan where it provides medical services to its employees, exclusive of any deductions, and regardless of whether such income represents gains on such transactions

RCW 82.04.080(1); DET. NO. 88-250, 6 WTD 113 (1988): GROSS INCOME - PUBLIC/NONPROFIT HOSPITAL B&O TAX - EFFECT THAT SOURCE OF COMPENSATION HAS ON TAXABILITY. For purposes of B&O tax, the source of compensation does not affect tax liability. Taxpayer owes B&O tax on amounts it receives from employees for services rendered to them under the employee medical plan. Taxpayer cannot deduct labor costs from the measure of its B&O tax liability.

RCW 82.04.290(2): SERVICE B&O TAX - FEDERAL PREEMPTION - 10 USC 1103(a) - 32 CFR 199.17(a)(7) - HEALTH CARE PROVIDER’S RECEIPTS FROM TRICARE INSURANCE CARRIERS. The TRICARE program is a comprehensive managed health care program for the delivery and financing of health care services in the Military Health System. 32 CFR 199.17(a). State and local laws relating to TRICARE regional contracts, and premium taxes imposed on TRICARE insurance carrier contractors, are preempted by 10 USC 1103(a) and 32 CFR 199.17(a)(7).

RCW 82.04.290(2): SERVICE B&O TAX - FEDERAL PREEMPTION - 42 CFR 422.404 - HEALTH CARE PROVIDER’S RECEIPTS FROM MEDICARE ADVANTAGE (MA) PLANS. MA Plans are types of Medicare health plans offered by private companies that contract with the Centers for Medicare & Medicaid Services (CMS) to provide Medicare benefits. 42 CFR - 422.2. Pursuant to 42 CFR - 422.404, states are prohibited from taxing payments CMS makes to MA Plans on behalf of MA enrollees.

RCW 82.04.290(2): SERVICE B&O TAX - FEDERAL PREEMPTION - FEDERAL EMPLOYEES HEALTH BENEFITS ACT (FEHBA) - 5 USC 8909(f)(1) - HEALTH CARE PROVIDER’S RECEIPTS FROM FEHBA INSURANCE CARRIERS. FEHBA establishes a comprehensive program of health insurance for federal employees. FEHBA contains a preemption provision, 5 USC 8909(f)(1), forbidding states from imposing a direct or indirect tax on insurance carriers with respect to payments made to them from the FEHB fund.

RCW 82.04.4297: B&O TAX -- FEDERAL MEDICAID CONTRIBUTION. A nonprofit hospital may not deduct the Federal Medicaid contribution to another state from its Medicaid payments to measure its B&O tax.

RCW 82.04.4311: B&O TAX - NONPROFIT HOSPITAL -- MEDICAID & CHIP EXEMPTION. Out of state Medicaid and CHIP payments to a nonprofit hospital are not exempt from B&O tax.

RCW 82.04.290(2); RCW 82.04.4286: SERVICE B&O TAX - FEDERAL PREEMPTION - 10 USC 1103(a) - 32 CFR 199.17(a)(7) - HEALTH CARE PROVIDER’S RECEIPTS FROM TRICARE INSURANCE CARRIERS. Service B&O tax imposed on a health care provider’s receipts from TRICARE insurance carriers, pursuant to RCW 82.04.290, is not a tax imposed on the premiums or other payments that TRICARE insurance carriers receive from the TRICARE program; therefore, the tax is not preempted pursuant 10 USC 1103(a) and 32 CFR 199.17(a)(7).

RCW 82.04.290(2); RCW 82.04.4286: SERVICE B&O TAX - FEDERAL PREEMPTION - FEDERAL EMPLOYEES HEALTH BENEFITS ACT (FEHBA) - 5 USC 8909(f)(1) - HEALTH CARE PROVIDER’S RECEIPTS FROM FEHBA INSURANCE CARRIERS. Service B&O tax imposed on a health care provider’s receipts from insurance carriers who participate in the FEHB program is not a direct or indirect tax imposed on a FEHBA carrier with respect to payments made from the FEHB fund and, therefore, is not preempted by 5 USC 8909(f)(1).

BUSINESS AND OCCUPATION TAX -- EXEMPTION -- REVENUES COLLECTED BY OUTPATIENT CLINIC AND PHARMACY. Revenues collected by a hospital's Family Practice Residency Program clinic and the clinic's pharmacy were subject to business and occupation tax, even though the clinic was attached to the hospital, where the clinic only treated outpatients, operated only during regular working hours, and had its own business office and billing system.This type of clinic did not qualify for the exemption from business and occupation tax accorded to hospitals by RCW 82.04.4289. RCW 70.41.020.

B&O TAX -- DEDUCTION -- HOSPITAL SERVICES -- CLINICS AND DEPARTMENTS.Under Group Health Co-op. v. Tax Commission, 72 Wn.2d 422, 433 P.2d 201 (1967), compensation for services to patients is not deductible from the measure of business and occupation tax even when those services are provided by hospital departments and clinics if:the same services are offered by outlying clinics; services are primarily provided to outpatients; services are provided only during regular business hours; the services are provided in a separate location from the main hospital building.

B&O TAX -- DEDUCTION -- HOSPITAL SERVICES -- PAYMENT NOT RECEIVED FROM PATIENTS. Income received by a hospital from the director of one of its clinics found to qualify for the hospital service deduction where the director desired his patients to receive one consolidated billing rather than a separate billing from the hospital. He contracted to pay the hospital a percentage of his gross income "to cover hospital operating expenses". This found to be compensation for services to patients and therefore deductible.

B&O 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.

B&O TAX -- DEDUCTIONS -- INVESTMENTS -- INTEREST -- REAL ESTATE CONTRACTS. The interest on a real estate contract is not a deduction as an investment under the statute.O'Leary v Dept. of Revenue, 105 Wn.2d 679 (1986).

B&O TAX -- SERVICE -- EXEMPTION -- EMPLOYEE -- PRIMARY CONTRACTOR -- SUBCONTRACTOR -- PHYSICIAN -- PATIENT. Where a taxpayer, operator of a hospital and health center, bills the patient for physician's professional services rendered, the amounts received and transmitted to the physicians are not subject to Service B&O tax liability by the taxpayer unless the physicians were employees or subcontractors of the taxpayer. The physicians were held to be primary contractors with the patients and paid Service B&O tax on fees received.

B&O TAX -- SERVICE -- PHYSICIANS -- CLINICS -- DRUGS.Income from charges for drugs administered by a physician or clinic to patients is subject to service B&O tax rather than Retailing B&O because it is part of the medical services rendered by the physician or clinic.Accord:Det. No. 87-340A, 5 WTD 251 (1988)

B&O TAX -- RETAILING -- PHYSICIANS -- CLINICS -- DRUGS.Income from mere sales of drugs by physicians or a clinic to patients for off-premises self-administration is subject to Retailing B&O tax, provided taxpayer's records and bills to patients distinguish such sales from drugs administered by physicians or medical staff. F.I.D.