WAC 193-C

Sales in own name--Sales as agent.

Records to be preserved--Examination--Estoppel to question assessment--Unified business identifier account number records.

Imports and exports--sales of goods from or to person in foreign countries.

STORAGE AND HANDLING OF GRAIN FOR EXPORT Cancelled effective 6/30/2004

SALES OF FLOUR TO GOVERNMENT FOR EXPORT Cancelled 06/30/04.

Foreign Trade Zones Revised 2/2/09 See ETA 3108.2009

SERVICE CHARGES ON GOODS PURCHASED FOR EXPORT Cancelled 06/30/99

Foreign trade zones

DOMESTIC INTERNATIONAL SALES CORPORATIONS (DISC) Cancelled 1/29/09. This ETA addresses the taxation of DISCs. DISCs were a status under the Internal Revenue Code and are no longer authorized. This ETA is obsolete.

FOREIGN SALES CORPORATIONS Cancelled 1/29/09. This ETA addresses the taxation of foreign sales corporations (FSCs). FSCs were a status under the Internal Revenue Code and are no longer authorized. This ETA is obsolete.

EXPORT -- COMMENCEMENT OF MOVEMENT -- STREAM OF EXPORT COMMERCE. The export movement of goods sold to foreign buyers may commence before the goods are placed upon foreign bound transportation vehicles, but such sales must always satisfy the criteria of Rule 193A in order to be tax exempt.Determination 83-203 clarified.

Business and Occupation Tax -- Exports -- Floating Log Storage. Logs set aside by a domestic firm to fill a specific order from a foreign purchaser are not in the export stream, for purposes of the business and occupation tax exemptions, when the logs are stored by floating them in a holding area without committing them to a particular carrier or releasing possession.Nature of Action:A log exporter sought recovery of business and occupation taxes paid on logs held in floating storage pending shipment to a foreign purchaser.

Business and Occupation Tax -- Implementing Regulations -- Scope. Under statutes which limit business and occupation tax deductions to those required by the United States Constitution, the Department of Revenue has no power to expand exporting exemptions by regulation.RCW 82.04.4286; WAC 458-20-193C.

SALES AND DELIVERIES TO OUT-OF-STATE BUYERS -- FREIGHT COLLECT -- WHOLESALING B&O TAX -- EXEMPTION. Seafood products sold by a Washington seller which are shipped freight collect or freight prepaid to out-of-state buyers and destinations are exempt from wholesaling B&O tax.Accord:Det. 89-355, 8 WTD 83 (1989).

B&O TAX -- NEXUS -- IMPORT/EXPORT EXEMPTION.Where a [foreign] manufacturer sells airline galleys to foreign airline carriers and has them assembled, delivered, and repaired in this state by its Washington affiliate, the selling activity is B&O taxable.The Washington manufacturer's activities in this state are sufficient to constitute nexus, and the galleys have been taken out of the unbroken stream of commerce.Accord: Det. No. 89-471, 8 WTD 251 (1989).

EXPORTS -- DEDUCTION -- COMMENCEMENT OF EXPORT. Process of exportation must have begun for export deduction to apply.When a Washington seller/manufacturer delivers a component part to another manufacturer for inclusion in a product which will be exported when finished, export deduction does not apply.

SERVICE B&O -- FOREIGN SALES CORPORATIONS -- PROFIT ADJUSTMENT.Adjustments under IRS guidelines for transfer pricing involving foreign sales corporations are not taxable for goods delivered outside of Washington.

SERVICE B&O -- BUY-SELL FSC -- 85% SAFE HARBOR -- ECONOMIC PROCESS COSTS.A buy-sell foreign sales corporation may not deduct economic process costs or exclude payments for its services unless those services were provided outside of Washington or the payments qualify as advances or reimbursements under Rule 111.

B&O TAX -- DEDUCTION -- EXPORT -- ENTRY INTO EXPORT STREAM -- STORAGE.Goods have not entered the export stream - or acquired tax immunity - when they have been delivered to an entity for storage prior to actual overseas shipment to specified buyers.

B&O TAX -- DEDUCTION --EXPORT -- ENTRY INTO EXPORT STREAM.For there to have been "entry into the export stream" and "unbroken continuity of movement" for purposes of the export deduction, any delay in shipping goods must be "reasonable and in furtherance of the intended transportation."

B&O TAX – SALES OF GOODS VS. COMMISSION INCOME – AGENT – IMPORTER.The commissions paid customers to an agent are taxed under the service and other activities classification.Because title to the goods did not flow to or through the agent, the income received by the agent was not for goods, but was commission income taxable under the service and other activities classification.Invoices, contracts, and payment records are evidence of the nature of the transaction.

B&O TAX – SALES OF GOODS VS. COMMISSION INCOME – AGENT – IMPORTER.To determine whether an importer takes title to goods it purchases and sells as the owner or acts as an agent receiving commission income, documents of sale to the U.S. customers offer the best evidence.Actual payment for the goods by the customers indicate exempt purchases from the owner, while commission payments for the services of an agent would be taxable.Letters of credit conditioned upon providing title indicate the party required to provide title has title.

B&O TAX -- COMMERCE -- EXPORTS -- LOGS -- STORAGE YARD -- COAST PACIFIC TRADING, INC., cited.Tax upheld where taxable transaction--the sale of the logs--was completed before the logs were towed from storage to be loaded aboard ship.Logs found not to have entered "export stream" even though they were sold to foreign purchasers and delivered to the towing company with instructions to transport the logs to a particular port for shipment on a named carrier.Tax on foreign sales is valid unless logs are delivered to the foreign buyer at shipside.

B&O TAX -- DEDUCTION -- EXPORT SALE -- VEHICLE OF TRANSPORTATION. Though rule allowing B&O tax deduction for export sales was drafted in contemplation of the more typical sale in which exported goods are shipped via some vehicle of transportation, a sale of a vehicle of transportation itself may qualify as a deductible export sale so long as it can be established at the time of sale that there is (a) certainty of export, and (b) actual entrance into the export stream.

B&O TAX – WHOLESALING – IMPORT-EXPORT CLAUSE -- IMPORTS FROM FTZ.Because imported goods are no longer considered to be “in transit” when they enter their state of destination under Michelin, the assessment of B&O tax on a seller who delivers goods manufactured in an FTZ from foreign ingredients to its Washington customers is not constitutionally prohibited. ETA 2011-3S.32 announces the withdrawal of 24 WTD 230. Refer to ETA 2028 for issues applying to taxpayers who are similarly situated to taxpayer in 24 WTD 230.

B&O TAX – WHOLESALING -- IMPORTS – FEDERAL TRADE ZONE (“FTZ”) – FEDERAL TRADE ZONES ACT -- FEDERAL PREEMPTION.A B&O selling tax imposed by this state on a foreign company’s sales into this state from an FTZ does not subvert the intent of, diminish the advantages conferred by, or impede the purposes of the Federal Trade Zones Act.ETA 2011-3S.32 announces the withdrawal of 24 WTD 230. Refer to ETA 2028. Refer to ETA 2028 for issues applying to taxpayers who are similarly situated to taxpayer in 24 WTD 230.

B&O TAX – WHOLESALING – IMPORTS – FTZ -- DELIVERY TO WASHINGTON BUYER FROM FTZ.Coast Pacific Tradingdoes not permit Rule 193C to be interpreted as authorizing a deduction from a seller’s B&O tax when the seller delivers goods to Washington buyers from an out-of-state FTZ. ETA 2011-3S.32 announces the withdrawal of 24 WTD 230. Refer to ETA 2028 for issues applying to taxpayers who are similarly situated to taxpayer in 24 WTD 230.

The taxpayer in this determination manufactured products in a Foreign Trade Zone (FTZ) located in another state. From there, it sold and delivered products directly to its customers in Washington. The taxpayer protested imposition of wholesaling B&O tax on those sales, arguing that Washington's B&O tax on goods coming from an FTZ was preempted by the federal FTZ Act, prohibited by the Import-Export Clause of the United States Constitution, and also prohibited by the Department's own rule, WAC 458-20-193C.

B&O TAX -- INTERSTATE/FOREIGN SALES -- TAX EXEMPTION -- UNIFORM COMMERCIAL CODE (U.C.C.) -- INAPPLICABILITY. The excise taxability of sales to buyers located outside this state is governed by the Revenue Act of Title 82 RCW, not the provisions of U.C.C.. law, chapter 62A.2-319. Rules 193A and C contain proofs of interstate/foreign deliveries required to perfect entitlement to tax exemption.

B&O TAX -- EXEMPTION -- WHOLESALING -- EXPORT SALES -- BROKERS LISTED AS PURCHASERS.Although in the final analysis a taxpayer must be taxed in accordance with the actual established substantive nature of its sales, Rule 193C prescribes the method by which sellers must establish throughout their own documentation that the nature of those sales warrant an exemption from tax.

B&O TAX -- RETAIL SALES TAX -- DEDUCTION -- EXPORTS -- FOREIGN BUYERS -- DELIVERING IN WASHINGTON. The mere issuance of documentation to Canadian customers to allow them to cross the U.S.-Canadian border without duty is not sufficient under Rule 193C to establish certainty of export.

B&O TAX -- IMPORTS -- STREAM OF COMMERCE. Where taxpayer imports vehicles into Washington and prepares them for resale in this state, the activity is B&O taxable.Vehicles are not in unbroken stream of commerce, and taxpayer's activities in this state are sufficient to constitute nexus.

EXPORTS -- COMMENCEMENT OF MOVEMENT -- STREAM OF EXPORT COMMERCE.The export movement of goods sold to foreign buyers may commence before the goods are placed upon foreign-bound transportation, but such sales must always satisfy the criteria of Rule 193C in order to be tax exempt.Where taxpayer fails to show that it has actually placed the goods in the stream of export commerce, the criteria are not met.Carrinton Co. v. Dept. of Rev., 84Wn. 2d 444 (1974); Determination No., 88-155, 5 WTD 179 (1988).

WHOLESALING B&O TAX -- EXEMPTION -- EXPORT SALES -- COMMENCEMENT OF MOVEMENT -- DOCUMENTATION. The export movement of goods sold for delivery in a foreign country may commence before the goods are placed upon foreign bound transportation vehicles, but such sales must always satisfy the documentation requirements of Rule 193C for tax exemption.