Beginning with business activities occurring on or after April 1, 2020, a surcharge applies to the amount of tax payable under the Service and Other Activities B&O tax classification by select advanced computing businesses. The surcharge is equal to the gross income of the business subject to B&O tax under the Service and Other Activities classification, multiplied by the rate of 1.22%. This is in addition to the Service and Other Activities B&O tax rate of 1.5%. (For a total of 2.72%)
The amount of surcharge owed by a business or an affiliated group will not be more than $9 million annually.
Tax return reporting
Businesses must report and pay the surcharge on a quarterly basis. The parent company, or other designated entity, will report the surcharge for all affiliated businesses using the "Advanced Computing" account. All affiliated businesses of a select advanced computing group will continue to report under the Service and Other Activities classification (1.5%) on their regular reporting frequency.
For businesses that report under one or more B&O tax classifications, the surcharge applies only to business activities subject to B&O tax under the Service and Other Activities classification.
The parent company for any select advanced computing business or affiliated group, or any other affiliate responsible for paying the surcharge, should contact the department at 360-705-6218 or firstname.lastname@example.org to ensure the affiliated group is properly registered with the department.
Advanced computing businesses grossing $25 billion or less worldwide
Advanced computing businesses (or advanced computing affiliated groups) that do not meet the annual revenue threshold of more than $25 billion are not subject to the surcharge. However, if the advanced computing business (or affiliated group) had $1 million or more in taxable income reportable under the Service and Other Activities B&O classification in the prior calendar year, they will be subject to the Service and Other Activities B&O tax rate of 1.75%. (See Workforce Education).
Persons who are primarily engaged in business as a "financial institution" as defined in RCW 82.04.29004 (as that section existed on January 1, 2020) are not considered to be select advanced computing business for the purpose of this surcharge, and therefore, are not subject to the surcharge.
Persons who are primarily engaged within this state in any of the following activities are not considered to be select advanced computing businesses, and are not subject to the surcharge:
- The provision of commercial mobile service, as that term is defined in 47 U.S.C. Sec. 332(d).
- Operation and provision of access to transmission facilities and infrastructure that the person owns or leases for the transmission of voice, data, text, sound, and video using wired telecommunications networks.
In addition, the surcharge does not apply to any hospital as defined in RCW 70.41.020, including any hospital that comes within the scope of chapter 71.12 RCW if the hospital is also licensed under chapter 70.41 RCW.
Advanced computing means designing or developing computer software or computer hardware, whether directly or contracting with another person, including modifications to computer software or computer hardware, cloud computing services, or operating an online marketplace, an online search engine, or online social networking platform.
Affiliate and affiliated means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person.
Affiliated group means a group of two or more persons that are affiliated with each other. Person includes individuals and business entities as defined in RCW 82.04.030.
Cloud computing services means on-demand delivery of computing resources, such as networks, servers, storage, applications, and services, over the internet.
Control means the possession, directly or indirectly, of more than fifty percent of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise.
Primarily is determined based on gross income of the business and means more than 50% of the gross income of the business comes from that activity.
Select advanced computing business means a person who is a member of an affiliated group with at least one member of the affiliated group engaging in the business of advanced computing, and the affiliated group has worldwide gross revenue of more than $25 billion in the immediately preceding calendar year.