Washington Tax Decisions

A Washington couple acting as one single independent distributor selling nutritional supplements for an incorporated [out-of-state] direct seller organization seeks refund of taxes assessed when the Department reclassified their reported gross income. Taxpayers dispute a decision by the Department to reclassify their income to the service and other activities B&O tax classification resulting in additional tax liability. Taxpayers state they relied on oral instructions from the Department to report their income as wholesaling, and contend they properly reported their income under the retailing, wholesaling, and royalties B&O tax classifications throughout the review period. We deny the petition.

A provider of information technology services protests a tax assessment of additional service and other activities B&O tax from attributing additional gross income from two service contracts to Washington. Taxpayer argues that the gross income should be attributed to multiple states where the parties to the contracts allegedly contemplated the benefits from such contracts would be received. Taxpayer also argues that the Department should attribute the gross income from a third contract differently than Taxpayer originally attributed the gross income from that contract. We remand for application of a reasonable method of proportionally attributing gross income from the first two contracts, but deny the petition as it pertains to the third contract.

A parent company that provides a variety of “general and administrative services” to various affiliated companies protests the method used by the Department’s Audit Division to calculate an assessment of B&O tax. Specifically, Taxpayer argues that (1) the Audit Division included amounts that do not constitute gross income in Taxpayer’s tax base, (2) the Audit Division used an unreasonable method of proportionally attributing Taxpayer’s income from certain categories of services, and (3) it is entitled to a waiver of penalties. We grant the petition in part, deny in part, and remand for adjustment to the tax assessment.

A Washington corporation . . . protests the assessment of retail sales tax and retailing B&O tax based on an estimate of cash sales. While conceding the inaccuracy of electronic records, the business asserts that handwritten records provided are complete and accurate, and alternatively argues that the estimate used by the Audit Division is too high. [W]e affirm the conclusion that these records are not accurate and that the Audit Division reasonably exercised its authority to use an estimate. We also find that the estimate was reasonably calculated and find no evidence to establish that estimate rests on untenable grounds or constitutes an abuse of discretion. The Taxpayer also asserts that non-business income was incorrectly treated as business income. Because insufficient detail was provided to substantiate a non-business source for the remaining items, we affirm their categorization as business income. We affirm the assessment as issued and deny the Taxpayer’s petition.