WAC 194-01

Minimum nexus thresholds for apportionable activities;

WAC 458-20-19401 Minimum nexus thresholds for apportionable activities, WAC 458-20-19402 Single factor receipts apportionment – Generally, WAC 458-20-19403 Apportionable royalty receipts attribution, WAC 458-20-19404 Financial institutions – Income apportionment and WAC 458-20-19405 CPI-U adjustments to minimum nexus thresholds for apportionable activities The amendments to these rules: *Repeal Rule 19405 and put this language into a new Excise Tax Advisory (ETA); *Delete multiple references to Rule 19405 in Rules 19401 through 19404; and *Recognize provisions of SSB 6333, Sec.

458-20-19401 Minimum nexus thresholds for apportionable activities Part I of Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143) changed the apportionment and nexus requirements for apportionable activities, effective June 1, 2010. The Department has adopted the following emergency rule to explain how these requirements apply: WAC 458-20-19401 (Rule 19401) Minimum nexus thresholds for apportionable activities Changes from the previous emergency rule filed January 28, 2011 under WSR 11-04-068 were made as follows: Rule 19401 – Changes to same language as proposed final rule.

WAC 458-20-19401 Minimum nexus thresholds for apportionable activities – Washington’s business and occupation (B&O) taxes may be imposed only if a business has substantial nexus with this state. This rule explains the minimum nexus thresholds for the B&O taxation of businesses engaged in apportionable activities. Part I of Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143) changed the apportionment and nexus requirements for apportionable activities, effective June 1, 2010. The Department has adopted the following emergency rules to explain how these requirements apply.

Minimum nexus thresholds for apportionable activities Part I of Chapter 23, 2010 Laws 1st Special Session (2ESSB 6143) changed the apportionment and nexus requirements for apportionable activities, effective June 1, 2010.

Minimum nexus thresholds for apportionable activities Part I of Chapter 23, 2010 Laws, 1st Special Session (2ESSB 6143) changed the apportionment and nexus requirements for apportionable activities, effective June 1, 2010. The Department has adopted emergency rules to explain how this legislation applies while it engaged in rule making for permanent rules. The Department is at this time adopting WAC 458-20-19401 (Rule 19401) Minimum nexus thresholds for apportionable activities.

Apportionment of Income by Stockbrokers and Security Houses ETA 3161.2011 Apportionment of Income by Stockbrokers and Security Houses. This Excise Tax Advisory (ETA) explains how stockbrokers and security houses should apportion their income for B&O tax purposes. It discusses when and under what circumstances single factor receipts formula, cost apportionment, and the “60/40 convention” methods of apportionment apply.

Director Fees are Subject to the Business and Occupation (B&O) Tax

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

Economic Nexus in Washington State Applies to Securities Brokers/Dealers and Fund Managers

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

Purchases of Standard Financial Information by Qualifying International Investment Management Companies

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

New "Economic Nexus" in Washington State May Impact Franchisors

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

New Apportionment Method

New "Economic Nexus" in Washington State May Impact Businesses Receiving Royalty/Licensing Income from Patents

RCW 82.04.293 B&O TAX – INTERNATIONAL INVESTMENT MANAGEMENT SERVICES. Because a registered investment advisory firm actively managed its clients’ portfolios and had full discretion to buy and sell securities without client approval, its services have the requisite management components that qualify as “investment management services.”

RCW 82.04.293 B&O TAX – INTERNATIONAL INVESTMENT MANAGEMENT SERVICES. Registered investment advisory firm primarily provided investment management services because it actively managed client portfolios and had authority to buy and sell securities on its clients’ accounts. The firm met the “primarily” standard because a majority of its services involved those qualifying activities.

RULE 19401; RCW 82.04.460, RCW 82.04.067: SERVICE AND OTHER ACTIVITIES B&O TAX – ENGINEERING AND REPAIR SERVICES – APPORTIONMENT. When a taxpayer cannot provide evidence that it paid business activities taxes outside of Washington, and fails to provide evidence that it has substantial nexus outside of Washington, the taxpayer is not entitled to apportion its income outside of Washington.

RULE 19401; RULE 19405; RCW 82.04.067: B&O TAX – SUBSTANTIAL NEXUS – PAYROLL THRESHOLD. During each calendar year at issue, Taxpayer paid more than the threshold amount in payroll expenses to its one Washington employee, and, therefore, created substantial nexus with Washington during those years.

RCW 82.04.067: B&O TAX – SUBSTANTIAL NEXUS – ECONOMIC NEXUS. A Taxpayer that has more than $250,000.00 in total service-taxable receipts in Washington has substantial nexus with Washington.

Due Process Clause of Amendment XIV of the U.S. Constitution: B&O TAX – NEXUS – DUE PROCESS REQUIREMENTS. Where a taxpayer makes minimum contacts with Washington and the method of attributing income to Washington is rationally related to the value of the taxpayer’s business, the requirements of the Due Process Clause are met, and the taxpayer may be subject to taxation in Washington.

RULE 19401; RULE 19402; RULE 19404; RCW 82.04.067(1)(c)(iii): B&O TAX – SUBSTANTIAL NEXUS – RECEIPTS FROM THIS STATE. To determine what constitutes “receipts from this state” for determining substantial nexus, the states apportionment rules govern. For loan servicing fees, the fees are attributed to Washington under Rule 19404 if the borrower on the loan being serviced is located in Washington.

RCW 82.04.067: B&O TAX – SUBSTANTIAL NEXUS – RECEIPTS THRESHOLD. Substantial nexus is established for a taxpayer when that taxpayer has receipts in Washington beyond the threshold amounts as established in RCW 82.04.067.