Could a chiropractic corporation obtain penalty and interest waivers after a payment-processor cyberattack disrupted its cash flow and it allegedly received oral advice to await a payment plan?

Plain-English summary

The Washington Department of Revenue held that a chiropractic clinic could not obtain waiver of its remaining assessment penalty and interest merely because a cyberattack on its billing and payment processor disrupted insurance claims and cash flow. The clinic also could not rely on its recollection of oral Department advice to wait for contact about a payment plan.

The clinic's 2023 annual return was due April 15, 2024. It filed on April 30 without payment, explaining that the processor attack had interrupted insurance payments and that a newborn had contributed to the filing delay. After the Department assessed tax, penalties, and interest, the clinic paid in late July. The Department later approved a 24-month waiver of the 9% delinquent penalty, but that waiver did not apply to the separate assessment penalty challenged in this determination.

Washington permits penalty relief when a circumstance beyond the taxpayer's control directly causes the late payment. The processor attack was external and unexpected, but the clinic's asserted reason it could not pay was lack of cash. Rule 228 lists financial hardship as a circumstance that generally does not qualify, even when a customer or other contracting party owes the taxpayer money. The newborn-related mistake likewise did not establish a qualifying circumstance.

The clinic said a Department representative told it by telephone to file without payment and wait to be contacted about a payment plan. Department records confirmed a call but contained no record of that instruction. Washington law protects reliance on specific official written advice in qualifying circumstances; it does not authorize waiver based on a taxpayer's recollection of oral instructions. Interest could be waived only for written Department instructions directly causing nonpayment or for an assessment due-date extension made solely for Department convenience. Neither condition was present. The petition was denied.

What this means for you

Healthcare providers

A clearinghouse or processor outage can severely disrupt revenue, but a cash-flow shortfall does not automatically satisfy Washington's penalty-waiver standard. Preserve evidence of the operational event, direct causation, and why timely filing or payment remained impossible.

Small businesses

File and pay what you can by the deadline, and request extensions or payment arrangements promptly. A later payment does not itself erase statutory penalties or interest.

Taxpayers contacting the Department

Ask for consequential reporting or payment instructions in writing. A call log showing that a conversation occurred may not prove what facts were presented, what advice was given, or whether it was understood and followed.

Accounting teams

Understand how payments are applied. The determination notes that Washington applies payments to interest and penalties first, regardless of a taxpayer's direction, so a stated payment of the “tax portion” may leave tax principal accruing interest.

Common questions

Q: Does a third-party processor cyberattack qualify as a circumstance beyond the taxpayer's control?

A: Not automatically. Here, the attack prevented claims and payments, but the clinic's resulting inability to pay was financial hardship, which Rule 228 generally excludes from waiver.

Q: What did the clinic's 24-month waiver cover?

A: The Department waived the 9% delinquent penalty. It expressly did not waive the separate assessment penalty at issue in the petition.

Q: Can oral advice from a Department employee support penalty or interest relief?

A: No on this record. The law did not permit waiver based on the clinic's recollection of a telephone instruction, and there was no written evidence of the claimed advice.

Q: When may Washington waive interest?

A: The determination identifies two grounds: written Department instructions that directly caused the failure to pay before assessment, or a due-date extension made solely for Department convenience and not requested by the taxpayer. Neither applied.

Q: Did the Department dispute that the cyberattack occurred?

A: No. The denial turned on the legal character of the resulting cash-flow problem and the lack of proof that a qualifying circumstance directly caused late payment.

Citations and references

• RCW 82.32.090(2) (5%, 15%, and 25% assessment-penalty stages)
• RCW 82.32.105(1) and WAC 458-20-228(9) (penalty waiver)
• RCW 82.32.105(3) and WAC 458-20-228(10) (interest waiver)
• RCW 82.32A.020 and ETA 3065.2009 (written versus oral Department advice)
• RCW 82.32.080(5)(a) (application of payments)
• Det. No. 87-189, 3 WTD 223 (1987)
• Det. No. 06-0267, 26 WTD 159 (2007)

Source

• Landing page: Washington Tax Decisions ZIP files
• Original PDF: 45WTD124.pdf
• Source archive: Volume 45 ZIP (member wtdvol45/45WTD124.pdf)

Original ruling text

Det. No. 25-0060, 45 WTD 124 (June 9, 2026)

124

Cite as Det. No. 25-0060, 45 WTD 124 (2026)
BEFORE THE ADMINISTRATIVE REVIEW AND HEARINGS DIVISION
DEPARTMENT OF REVENUE
STATE OF WASHINGTON
In the Matter of the Petition for Correction
of Assessment of
...

)
)
)
)
)
)

DETERMINATION
No. 25-0060
Account No. . . .

[1]
WAC 458-20-228; RCW 82.32.105; PENALTIES AND INTEREST –
WAIVER – CIRCUMSTANCES BEYOND THE CONTROL OF THE
TAXPAYER – FINANCIAL HARDSHIP. Taxpayer’s payment processor
suffering a cyberattack and failing to timely process claims is not grounds for waiving penalties and interest.
[2]
WAC 458-20-228; RCW 82.32.105; ETA 3065.2009; PENALTIES AND
INTEREST – WAIVER – ORAL INSTRUCTIONS. The law does not permit the Department to waive penalties or interest based on Taxpayer’s recollection of oral instructions. Headnotes are provided as a convenience for the reader and are not in any way a part of the decision or in any way to be used in construing or interpreting this Determination. Margolis, T.R.O. – A chiropractic professional services corporation seeks abatement of the assessment penalty and interest on grounds that the corporation’s billing and payment processor suffered a cyberattack preventing the corporation from submitting claims or getting paid, and the corporation was advised to wait for contact from the Department regarding a payment plan. Because the corporation failed to prove that circumstances beyond its control caused the late payment and reliance on oral instructions is not a basis upon which the Department can grant a penalty waiver, we deny the petition. 1 ISSUES

1. Whether, under RCW 82.32.105 and WAC 458-20-228, Taxpayer qualifies for waiver of
   the assessment penalty and interest on grounds that its billing and payment processor suffered a cyberattack, so Taxpayer did not have funds to timely pay its tax liability.

1 Identifying details regarding the taxpayer and the assessment have been redacted pursuant to RCW 82.32.410.

Administrative Review & Hearings Division
P O Box 47460 Olympia, WA 98504-7460
dor.wa.gov Phone (360) 534-1335

Det. No. 25-0060, 45 WTD 124 (June 9, 2026)

125

2. Whether, under RCW 82.32.105, WAC 458-20-228, and ETA 3065.2009, Taxpayer’s
   assertion that they were told via telephone they would be contacted with respect to a payment plan is grounds for waiver of penalties and interest. FINDINGS OF FACT
   . . . (Taxpayer) is a . . . Washington provider of chiropractic services. . . . On February 21, 2024, . . . (Payment Processor), a billing and payment processor, was the subject of a cyberattack, which prevented health care providers from submitting claims and receiving payment. Taxpayer’s Annual 2023 return was due on April 15, 2024. 2 On April 30, 2024, Taxpayer filed the return without payment. The return shows a gross amount of $ . . . under the service and other activities business and occupation (B&O) tax classification, which at the 1.5% rate, results in tax due of $ . . . . The return states that Taxpayer would like to be considered for a 24-month penalty waiver, and includes the following explanation: I am sorry for the delay. I just had a baby at the beginning of April so this report completely snuck up on me. We also have been subject to the cyber-attack on
   [Payment Processor] (we are a chiropractic clinic) so we haven’t had insurance payments since Feb 21st. We are really hurting for cash until that starts coming in again. On May 13, 2024, the Department issued a Notice of Balance Due against Taxpayer for $ . . . , due June 12, 2024. This amount is composed of $ . . . in service and other activities B&O tax, a $ . . . 5-percent assessment penalty, a $ . . . 9-percent delinquent penalty, and $ . . . in interest. Taxpayer failed to pay by June 12, 2024. On June 13, 2024, the Department increased the assessment penalty to $ . . . (15-percent), and on July 13, 2024, the Department increased the assessment penalty to $
   . . . (25-percent). On July 31, 2024, Taxpayer paid $ . . . , and sent a message to the Department that reads, in pertinent part, as follows: 3 I submitted this request before the tax portion of our amount due was paid. I have now paid the tax portion and would love if you could reconsider waiving the penalties and interest. We are not the kind of people who are intentionally late on things or don’t pay something but we had an unexpected circumstance happen in February of this year that completely decimated our cash flow. On Feb 21st 2024 a cyber attack happened to [Payment Processor] which is our clearing house that we use to submit insurance claims. We were unable to submit insurance claims OR get paid for claims already submitted until the end of May 2024. This was a very scary time for our business and the reason that we were unable to pay our B&O tax.

https://dor.wa.gov/file-pay-taxes/filing-frequencies-due-dates/filing-due-dates/2023-excise-tax-return-due-dates (last accessed March 3, 2025). 3 RCW 82.32.080(5)(a) provides that the Department must apply payments to interest and penalties first, without regard to any direction of the taxpayer. Thus, tax liability remained after the payment, and interest continued to accrue on that remaining tax liability. 2

Administrative Review & Hearings Division
P O Box 47460 Olympia, WA 98504-7460
dor.wa.gov Phone (360) 534-1335

Det. No. 25-0060, 45 WTD 124 (June 9, 2026)

126

On September 5, 2024, the Department’s Taxpayer Account Administration Division (TAA) responded to the message, explaining that the request for a 24-month waiver was approved (noting that it does not apply to the assessment penalty), and waived the $ . . . 9-percent delinquent penalty. On September 10, 2024, Taxpayer petitioned for correction of the assessment penalty and interest. Taxpayer does not contest that the subject penalties and interest were properly imposed; it merely seeks a waiver of the penalties and interest. Taxpayer asserts that the Payment Processor cyberattack resulted in Taxpayer being unable to submit insurance claims or get paid for claims already submitted until the end of May 2024, which impacted its cash flow and its ability to pay anything other than rent and payroll and prevented Taxpayer from timely paying the Department. Taxpayer also asserts that it called the Department on April 30, 2024 – approximately two weeks after the subject return was due – to discuss the overdue balance. Taxpayer asserts that the Department representative they spoke to told Taxpayer to file the return with no payment and someone would contact Taxpayer to set up a payment plan, but nobody contacted Taxpayer. As a result, additional liability accrued. While Department records confirm a telephone call took place on April 30, 2024, no notes or other records with respect to the call indicate that a Department agent advised Taxpayer to wait for contact regarding a payment plan for the 2023 period. ANALYSIS RCW 82.32A.030 provides that taxpayers have the responsibility to pay taxes in a timely manner. If the Department obtains information from which it appears a person has not paid the amount of tax properly due, then the Department is required to assess any additional amounts found due against that person and is also required to add interest to the tax due. RCW 82.32.050. RCW 82.32.090(2) states that there is assessed a penalty of 5-percent when the Department determines that a taxpayer has substantially underpaid a tax that was due. If payment is not received by the due date specified in the notice, there is assessed a total penalty of 15-percent and, if payment is not received on or before the thirtieth day following the due date specified in the notice, there is assessed a total penalty of 25-percent. “Substantially underpaid” means the taxpayer has paid less than 80 percent of the tax due and the underpayment is at least $1,000.00. Id.

1. Waiver on Grounds of Cyberattack
   The Department has limited authority to waive or cancel penalties under RCW 82.32.105. Generally, the Department will not waive penalties unless the failure that triggered the penalty was the result of “circumstances beyond the control of the taxpayer.” RCW 82.32.105(1). WAC 458-20-228 (Rule 228) explains that “[c]ircumstances beyond the control of the taxpayer are generally those which are immediate, unexpected, or in the nature of an emergency. Such circumstances result in the taxpayer not having reasonable time or opportunity to obtain an extension of the due date or otherwise timely file and pay.” Rule 228(9)(a)(ii). The burden is on the taxpayer to establish that “the circumstances were beyond its control and directly caused the late payment.” Rule 228(9)(a)(i). Administrative Review & Hearings Division P O Box 47460 Olympia, WA 98504-7460 dor.wa.gov Phone (360) 534-1335

Det. No. 25-0060, 45 WTD 124 (June 9, 2026)

127

In this matter, Taxpayer argues that a cyberattack suffered by Payment Processor resulted in Taxpayer not having sufficient cash to timely pay its tax liability. Examples of what generally constitutes circumstances beyond the control of the taxpayer are provided in Rule 228(9)(a)(ii), none of which apply to the situation under consideration. 4 Rule 228(9)(a)(iii) also gives examples of circumstances that are generally not considered to be a basis for waiving penalties. 5 This includes financial hardship. In Det. No. 87-189, 3 WTD 223 (1987), the taxpayer was in the healthcare business, received approximately 40 percent of its income from the state of Washington, and the state’s payments were frequently months delinquent. We concluded that the state’s late payment of amounts due to the taxpayer could not justify a penalty waiver, explaining as follows: It makes no difference that the state is the contracting party with the taxpayer. Our holding would be the same even if the contracting party were a private business. In other words, a person’s tax liability is an absolute; it is no defense that other third 4

Examples of circumstances beyond the control of the taxpayer in Rule 228(9)(a)(ii) include:

(A) The return payment was mailed on time but inadvertently sent to another agency. (B) Erroneous written information given to the taxpayer by a department officer or employee caused the delinquency
....
(C) The delinquency was directly caused by death or serious illness of the taxpayer, or a member of the taxpayer’s immediate family . . . . (D) The delinquency was caused by the unavoidable absence of the taxpayer or key employee, prior to the filing date. “Unavoidable absence of the taxpayer” does not include absences because of business trips, vacations, personnel turnover, or terminations. (E) The delinquency was caused by the destruction by fire or other casualty of the taxpayer’s place of business or business records. (F) The delinquency was caused by an act of fraud, embezzlement, theft, or conversion on the part of the taxpayer’s employee or other persons contracted with the taxpayer, which the taxpayer could not immediately detect or prevent, provided that reasonable safeguards or internal controls were in place. See (a)(iii)(E) of this subsection. (G) The department does not respond to the taxpayer’s request for a tax return (or other forms necessary to compute the tax) within a reasonable period of time, which directly causes delinquent filing and payment on the part of the taxpayer. This assumes that, given the same situation, if the department had provided the requested form(s) within a reasonable period of time, the taxpayer would have been able to meet its obligation for timely payment of the tax. In any case, the taxpayer has responsibility to insure that its return is filed in a timely manner (e.g., by keeping track of pending due dates) and must anticipatively request a return for that purpose, if one is not received . . . . Examples in Rule 228(9)(a)(iii) of circumstances that are generally not beyond the control of the taxpayer and will not qualify for waiver or cancellation of penalty include: (A) Financial hardship; (B) A misunderstanding or lack of knowledge of a tax liability; (C) The failure of the taxpayer to receive a tax return form, EXCEPT where the taxpayer timely requested the form and it was still not furnished in reasonable time to mail the return and payment by the due date, as described in (a)(ii)(G) of this subsection; (D) Registration of an account that is not considered a voluntary registration, as described in subsection (5)(a)(iii) and (b) of this section; (E) Mistakes or misconduct on the part of employees or other persons contracted with the taxpayer (not including conduct covered in (a)(ii)(F) of this subsection); and (F) Reliance upon unpublished, written information from the department that was issued to and specifically addresses the circumstances of some other taxpayer.

5

Administrative Review & Hearings Division
P O Box 47460 Olympia, WA 98504-7460
dor.wa.gov Phone (360) 534-1335

Det. No. 25-0060, 45 WTD 124 (June 9, 2026)

128

parties owe the taxpayer money with which the taxes could have more easily been made. Here, Taxpayer alleges that cash flow problems prevented timely payment. However, financial hardship is not grounds for waiver, regardless of whether Payment Processor suffered a cyberattack and failed to timely process claims. Thus, we find that the cyberattack was not a circumstance beyond Taxpayer’s control that qualifies Taxpayer for waiver. See also, Det. No. 060267, 26 WTD 159 (2007). Further, we note that Taxpayer’s waiver request submitted with its return explains that the late filing was also due to an error on account of a newborn, but mistakes are generally not considered beyond the control of the taxpayer per Rule 228(9)(a)(iii)(E). Because Taxpayer failed to prove that “circumstances beyond the control of the taxpayer” directly caused the late payment, we conclude that Taxpayer does not qualify for waiver of the assessment penalty. RCW 82.32.105(3) and Rule 228(10) provide that the Department will waive or cancel interest imposed under chapter 82.32 RCW only where the failure to pay the tax prior to the issuance of the assessment was the direct result of written instructions given the taxpayer by the Department, or the extension of the due date for payment of an assessment was not at the request of the taxpayer and was for the sole convenience of the Department. Since we find no evidence of either of these circumstances in the petition or record, these provisions provide no grounds for abatement of interest.

2. Waiver on Grounds of Oral Advice
   Taxpayer argues that it was given oral advice to wait for contact regarding a payment plan, which resulted in the accrual of additional liability. Rule 228(9)(a)(ii)(B) provides, in pertinent part, that
   [a] penalty generally will not be waived when it is claimed that erroneous oral information was given by a department employee. The reason for not canceling the penalty in cases of oral information is because of the uncertainty of the facts presented, the uncertainty of the instructions or information imparted by the department employee, and the uncertainty that the taxpayer fully understood the information given. . . [.] Excise Tax Advisory (ETA) 3065.2009 6 discusses oral instructions related to tax liability as follows: RCW 82.32A.020 provides that the taxpayers of Washington have:: [sic] The right to rely on specific, official written advice and written tax reporting instructions from the department of revenue to that taxpayer, and to have interest, penalties, and in some instances, tax deficiency assessments waived where the taxpayer has so relied to their proven detriment.

6

ETAs are interpretive statements authorized by RCW 34.05.230.
Administrative Review & Hearings Division
P O Box 47460 Olympia, WA 98504-7460
dor.wa.gov Phone (360) 534-1335

Det. No. 25-0060, 45 WTD 124 (June 9, 2026)

129

RCW 82.32A.020 does not authorize, nor does any other law permit, the Department to waive tax, interest, or penalties on the basis of a taxpayer’s recollection of oral instructions by an agent of the department. The Department gives consideration, to the extent of discretion vested in it by law, where it can be shown that failure of a taxpayer to report correctly was due to written instructions from the Department or any of its authorized agents. The Department cannot give consideration to claimed misinformation resulting from telephone conversations or personal consultations with a Department employee. There are three reasons for this ruling: (1) There is no record of the facts which might have been presented to the employee for consideration. (2) There is no record of instructions or information imparted by the employee, which may have been erroneous or incomplete. (3) There is no evidence that such instructions were completely understood or followed by the taxpayer. (Underlining in original.) Because we find no written evidence that Taxpayer was advised to pay nothing and wait for contact regarding a payment plan, and the law does not permit the Department to waive penalties or interest based on Taxpayer’s recollection of oral instructions, we find no grounds for relief. DECISION AND DISPOSITION Taxpayer’s petition is denied. Dated this 10th day of March 2025.

Administrative Review & Hearings Division
P O Box 47460 Olympia, WA 98504-7460
dor.wa.gov Phone (360) 534-1335