Emergency financial assistance grants | Washington Department of Revenue

Federal, state, and local government agencies provide businesses with financial assistance to lessen the impacts of national and/or state declared states of emergency. Businesses who receive these funds do not need to report or pay business and occupation (B&O) tax, retail sales tax, or public utility tax on qualifying grant income.

Requirements for the tax exemption

To qualify for the tax exemption, the following three conditions must be met:

The official proclamation of either a:
- National emergency by the President of the United States.
- State of emergency by the Governor of Washington.
Financial assistance provided by a federal, tribal, state, or local government entity.
Grant clearly established to address the impacts of the declared emergency.

Qualifying grant funds

A qualifying grant includes the amount or debt relief received to address the impacts of conditions from a national or state declared emergency. Generally, the amount or debt relief received includes:

Grants received directly from a government entity.
Grants received through a non-governmental entity that is authorized by a governmental entity to distribute funds.
Debt relief received from a private entity that has received a direct financial benefit, including receiving funds from a governmental entity for a declared emergency.

What types of income do not qualify for the tax exemption?

The tax exemption does not apply to amounts received:

Under a procurement contract for providing specific goods or services.
For manufacturing, extracting, or selling products on a per-item basis.
Based on the quantity, volume, or weight of products sold or transported.
From production subsidies.

Note: This guidance does not address advanced or accelerated payments that are received in the medical industry, and which must be repaid to insurers if not earned. Such amounts need to be reported and could be subject to B&O tax at the time of receipt.

Can I request a refund?

You may not request a refund of tax you paid on emergency financial assistance grant income prior to Feb. 19, 2021.

Taxes paid prior to February 19, 2021, on emergency financial assistant grant income are not eligible for a refund.

Retail sales tax due on purchases

This exemption does not extend to purchases of goods and retail services made with emergency assistance funds. These purchases remain subject to retail sales or use tax.

Other grants

For information about the taxability of grant income for other purposes, see our Grant income webpage.

References

RCW 82.04.767 – Exemptions - Qualifying grants - National emergency or state of emergency (B&O exemptions).

RCW 82.16.320 – Exemptions - Qualifying grants - National emergency or state of emergency (Public utility tax exemptions).