Washington Tax Decisions

Sellers of digital signature and document workflow services (“Taxpayers”) protest the reclassification of receipts for telephone support and training and seminars from the wholesaling business and occupation (B&O) tax classification to the retailing B&O tax classification, and the assessment of retail sales tax, on grounds that these receipts are for services not subject to retailing B&O tax and retail sales tax. Taxpayers also assert that the Department incorrectly assessed retail sales tax on sales to customers exempt from retail sales tax, and that the measure of taxes erroneously includes receipts for out-of-state seminar sponsorship. Taxpayers’ petition is denied in part and granted in part. We deny the petition with respect to Taxpayers’ claim that receipts for telephone support and training and seminars are not subject to retailing B&O tax and retail sales tax. We grant the petition to the extent Taxpayers have provided records showing that retail sales tax was assessed on sales to customers exempt from retail sales tax and taxes were assessed on receipts from seminar sponsorship not subject to Washington taxes. We remand this matter to the Audit Division for adjustment.

A business that operates a hotel in Washington seeks a refund of retail sales tax it paid to a water treatment company on charges related to servicing the water in the hotel’s HVAC system. The business argues that the water treatment company provided consulting, testing, and analysis services, which are professional services not subject to retail sales tax. However, because the water treatment company was hired to service the water in the HVAC system, and the water in the system is tangible personal property, we conclude that the services are, indeed, subject to retail sales tax. As such, the business is not entitled to a refund of the tax. Petition denied.

A[n out-of-state] corporation (“Taxpayer”) that sells digital advertising space through its online exchange protests an assessment by the Department. The Department disallowed deductions from Taxpayer’s gross income subject to Washington’s B&O tax. Taxpayer contends it is a marketplace facilitator and only the income it classifies as commissions is subject to tax. We deny the petition.

A Taxpayer’s erroneous belief that the OTP tax was the responsibility of the seller of the product and lack of knowledge about the taxes applicable to the sale of these products does not excuse liability for the OTP tax.

A Taxpayer’s mistake about the due date resulted in initiating a payment on the day after the actual due date. This late payment was the result of a misunderstanding or lack of knowledge, which is expressly defined as a circumstance that is not considered to be beyond the control of a taxpayer and so will not support a waiver of penalties.
 

An out-of-state corporation engaging in online retail sales to customers in Washington and wholesale sales to retailers in Washington disputes the assessment of B&O tax and retail sales tax based on lack of nexus. We deny the taxpayer’s petition.

The owner of an apartment building protests the Department of Revenue’s (Department) assessment of Real Estate Excise Tax (REET), arguing that the transfer of the real property was exempt from REET as a mere change in form or identity. Alternatively, Taxpayer argues that the transfer is exempt as a distribution to a partner. We deny the petition.

An out-of-state limited liability company that leased railroad cars protests the retail sales tax and retailing business and occupation tax assessment on its income from leasing its railroad cars to private companies that used them to transport their own goods. The leasing company argues that its income is not subject to Washington taxes because its customers received the railroad cars outside of Washington. We grant in part and deny in part the petition.

The scope of a manufacturing operation is site-specific, and the activities and qualifying use of the equipment must occur at a site that qualifies as a manufacturing operation. To be eligible for exemption the taxpayer must establish that the activities at a specific location constituted a qualifying manufacturing operation. Packaging activities at a separate facility were not substantiated as constituting a qualifying manufacturing operation and so were not eligible for exemption.
 

An owner of real estate protests the Department’s assessment of real estate excise tax (“REET”). The owner argues that the Department improperly denied his prior REET refund request because the real property at issue was transferred as part of an excluded marital dissolution. We deny the petition.