Washington Tax Decisions

Taxpayers that [facilitate third-party merchant sales] dispute the assessment of delinquent penalties related to their failure to timely file annual reconciliation returns to correct reporting of their apportionable income. Taxpayers say they initially did not believe they had apportionable income, so they did not report apportionable income on their original excise tax returns. Because they did not report apportionable income on their original returns, Taxpayers assert, there was no apportionable income to later reconcile, and thus no duty to file annual reconciliations. Absent a duty to file annual reconciliations, Taxpayers argue, penalties associated with failure to timely file annual reconciliations do not apply to them.

Taxpayers argue alternatively that penalties should be waived on the asserted grounds that Taxpayers entered into certain managed audit agreements with the Department, where the parties agreed on set amounts of tax, interest, and total penalties, which did not include delinquent penalties related to untimely filed annual reconciliations. We deny the petitions.

A manufacturer, wholesaler, and retailer of medical supplies petitions for refund of retail sales tax under the warehouse remittance incentive on grounds that it qualifies for the incentive as a wholesaler. We deny the petition.

A landscaping business protests an assessment by the Department. The Department estimated sales to arrive at Taxpayer’s gross income using Taxpayer information and industry averages. Taxpayer asserts that the estimates do not take into consideration the circumstances of his business but did not provide source documents to verify income. We deny the petition.

A manufacturer of replacement components for industrial equipment, which also incorporates replacement components in repairs of industrial equipment, seeks review of the Department’s disallowance of the manufacturing machinery and equipment sales and use tax exemption. The taxpayer asserts that the Department incorrectly concluded that only fabricating components for sale independent of repair constitutes manufacturing and qualifies for the exemption. The Department concludes that the taxpayer’s fabrication of components for both purposes—to incorporate during repair and for sale independent of repair—is manufacturing in a manufacturing operation, qualifying for the machinery and equipment sales and use tax exemption. The Department grants the petition.

An individual protests the Department’s denial of a refund request for retail sales tax paid to an out-of-state seller on the purchase of an EV which qualifies for an exemption from the tax. We deny the petition.

A real property owner that harvested timber from his property disputes the Department’s disallowance of claimed harvesting and marketing deductions, and assessment of additional timber tax liability, delinquent penalty, and interest. The owner asserts that the Department incorrectly disallowed the claimed deductions as charges for land clearing or stump removal. Because the owner did not provide records from which the Department may separate Taxpayer’s costs for qualifying and non-qualifying activities, the Department correctly determined that the owner was eligible to claim a 35 percent deduction for harvesting and marketing costs. We deny in part and grant in part, the petition.