Washington Tax Decisions

A Washington manufacturer disputes B&O tax assessed on receipts from patent licenses, payroll receipts for employees who worked for affiliates, and use/deferred sales tax assessed on building improvements for a building that was used to transfer fuel to rail cars and later used to blend fuel. Because receipts from the patents were not casual or isolated, they were subject to B&O tax. Through its employees, the manufacturer provided services to the affiliates and was subject to tax on the affiliates’ payment for those services. The building improvements do not qualify for the M&E exemption. Petition denied, but remanded to reclassify licensing income

A company, specializing in concrete underlayment work, protests the assessment of use tax on materials used in government contracting. The Taxpayer asserts that it had no direct contractual relationship with the government entity, and acted as a subcontractor and reported tax based on instructions and information provided by the prime contractor on the projects. The Taxpayer’s petition is denied.

A road contractor, that did not pay a cement vendor retail sales tax on materials used for a county road project, appeals the improper use of its reseller permit penalty imposed on the materials purchased.... [W]e grant the petition.

A trucking company objects to the assessment of retail sales tax on (1) lease payments it made to related companies that exceeded the equipments’ purchase price, and (2) the denial of the interstate/foreign deduction from PUT on hauls it made of imported goods between Washington ports and Washington destinations. It further asserts that the Department is [precluded] from assessing these taxes because the Audit did not assert them in prior audits. The assessment is sustained.

A collective garden disputes the assessment of retail sales tax on medical cannabis products and asserts that no taxable transactions occurred, but if they did, such products are exempt from retail sales tax as a prescription drug and/or medicine of botanical origin. Petition is denied.

A nonprofit physicians association protests a tax assessment that disallowed deduction of a portion of their dues under RCW 82.04.4282. We hold that the portion of the dues received for the value of significant services rendered to its members through its Coordinated Quality Improvement Program is disqualified from the bona fide dues deduction. We affirm the assessment.

Taxpayer requests reconsideration of Det. No. 13-0255. Taxpayer is a health care insurance company. Taxpayer’s affiliated companies provide services to Taxpayer. Similarly, Taxpayer provides services to its affiliates. Taxpayer paid service and other B&O tax on the amount it received for services provided to the affiliates, which was offset by the amount Taxpayer owed the affiliates for services they provided to Taxpayer. Audit assessed service and other activities B&O tax on total consideration Taxpayer received, which was the amount received from the affiliates plus the value of the services provided by the affiliates. We sustain Det. No. 13-0255, which sustained the assessment and deny the refund of tax paid.

A business that sells savory pies, sausage rolls, and sweet pastries, objects to assessment of retail sales tax on sales of those items, contending they are tax-exempt bakery items, and argues that the Department improperly disallowed an exempt food tax deduction. The business further argues that it is entitled to relief because it allegedly relied to its detriment on a Special Notice issued by the Department. Taxpayer’s petition is granted in part and denied in part. We remand to Audit for possible adjustment.

An out-of-state taxpayer providing mutual fund investment management services appeals the assessment of B&O tax, under the service and other business activities classification, on income the Department [attributed] to Washington. The taxpayer contends none of its income should be [attributed] to Washington because its sole customer, a financial services company, receives the benefit of the taxpayer’s services [out-of-state], where the customer is located. The taxpayer’s petition is denied. We conclude that the individual investors in the mutual funds managed by the taxpayer are the ultimate benefit recipients of the taxpayer’s investment management services...

Two individuals dispute TFAAs on the basis that the TFAAs include uncollected retail sales tax and the individuals did not willfully fail to pay or cause collected retail sales tax not to be paid to the Department. Petition denied in part and granted in part.