Washington Tax Decisions

Taxpayer disputes the assessment of additional REET on the transfer of a low-income housing development, arguing the enacting legislation for RCW 82.45.010(3)(s) was retroactive and applied to its property transfer. We grant Taxpayer’s petition.

Two pharmacy benefit managers protest B&O tax assessed on their business activities on multiple grounds. First, they argue that amount received from affiliated entities should be exempted from B&O tax under RCW 82.04.320 as gross income from “insurance business” upon which a gross premiums tax has been paid to the state. The pharmacy benefit managers also argue the Department is bound by the holding of an unpublished Washington Court of Appeals opinion that RCW 82.04.320 is not limited to insurance companies under the doctrine of collateral estoppel. Next, they argue that payments received as “reimbursement” for amounts paid to pharmacies for dispensing prescription drugs should be excluded from gross income as “pass-through payments” under WAC 458-20-111. Finally, the two taxpayers assert that the Department improperly reclassified amounts they derived from the sale of prescription drugs as subject to B&O tax under the “service and other activities” tax classification. We deny the petition in part, grant it in part, and remand it for adjustment to the tax assessments.

A . . . company that produces aluminum ingots from recyclable aluminum disputes the Department’s tax assessment because the company asserts that it is an aluminum smelter and qualifies for the preferential B&O tax rate. The company further asserts that its nexus with Washington ended on December 31, 2015. . . . We deny the petition because the company is not a direct service industrial customer, it does not process alumina into aluminum, and its wholesale sales are subject to economic nexus standards.

An operator of a passenger railway protests the assessment of retail sales tax on its revenue, arguing it does not offer day trips for sightseeing purposes. We deny the petition.

An out-of-state valve manufacturer protests the Department’s assessment of wholesaling B&O tax. The manufacturer argues that its valves were received outside of Washington, and therefore are not subject to Washington’s B&O tax. We deny the petition.

A software developer protests imposition of the reseller [permit] misuse penalty on purchases made without the imposition of retail sales tax while holding both a reseller permit and a [high technology tax] deferral certificate [that it used for machinery and equipment purchases]. We deny Taxpayer’s petition.

A distributor of grocery items asserts that its approved refund claim was improperly subject to offset amounts arising in a concurrent audit of the company’s Washington tax liability. The company asserts that any offsets should be limited to the type of tax at issue in the refund and by the nonclaim period that would apply to the assessment of the taxes used for the offset. We find that there is no basis to limit the offsets to the specific type of tax at issue in the refund request. As to the offset, because the provisions of WAC 458-20-229 specifically anticipate the review of new information to reduce a refund claim, we find the offset at issue was proper. The Taxpayer’s petition is denied.