Washington State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Washington, with full citations and the original source on every page.
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Could a clinic claim Washington's prescription-drug B&O deduction when Medicare's three-decimal reimbursement rate was rounded up to the nearest cent on invoices?
Yes. CMS required standard rounding, Medicare fully reimbursed the billed amounts, and those amounts therefore did not exceed the federal reimbursement rate.
Did federal law preempt Washington service B&O tax on a physician group's receipts from insurers participating in FEHBA and Medicare Advantage plans?
No. The physician group was a healthcare provider, not a FEHBA carrier, Medicare Advantage organization, or direct recipient of federal program payments. Tax on its own gross receipts was not a…
Was an LLC's redemption of a member's 52.5% interest exempt from Washington REET, and could a later appraisal reduce the assessment?
REET applied because beneficial ownership changed and no federal nonrecognition exemption was proved. The tax base was reduced to the appraised value of the one parcel actually owned.
Were Pilates classes nontaxable instructional lessons when instructors taught technique and required skills before participants advanced levels?
No. Their primary purpose was improving fitness, strength, flexibility, posture, and health, so they were retail physical-fitness services despite instructional elements.
Did federal FEHB and Medicare Advantage preemption bar Washington B&O tax on a health-care provider's receipts from participating insurance carriers?
No. The provider was not a protected carrier or plan receiving federal-fund payments, and a possible economic pass-through did not turn its own gross-receipts tax into an indirect carrier tax.
Could a motel claim the nontransient lodging exemption without contemporaneous records linking identified guests to stays of at least 30 continuous days?
No. Agreements reconstructed from former guests' memories about a year later and room-income reports without guest names did not prove continuous qualifying stays. The motel therefore owed retail…
Did a Washington wholesaling affiliate create taxable nexus for an out-of-state online retailer merely through common branding, packaging, and a store locator?
No. For the 2008-2013 period, the affiliate's wholesale promotion to independent retailers was not significantly associated with maintaining the online retailer's Washington market, so the petition…
Were construction and property-management transactions taxable when the same individual wholly owned both Washington companies?
Yes. Each entity was a separate taxpayer, construction labor supplied to the property owner was taxable contracting, and unsupported bonus and capital-contribution claims did not reduce the assessment.
Were separately stated computer installation, repair, cleaning, and update charges nontaxable because the provider mainly offered help-desk and consulting services?
No. Each separately stated retail activity was taxable on its own, the bundle's de minimis rule did not apply, and the provider did not prove any charge was custom software work.
Could a flooring contractor avoid retail sales tax and the 50% reseller-permit misuse penalty on undocumented wholesale sales and tax-free purchases of consumable and government-contract supplies?
No. The contractor lacked reseller permits or other proof for claimed wholesale sales and used its own permit to buy taxable consumables and government-contract materials. Unintentional misuse still…
Could a taxpayer waive a late-payment penalty because it waited for an audit adjustment and was orally told waiver would not be a big issue?
No. The taxpayer first raised the adjustment after the assessment due date, which was not a circumstance beyond its control. Washington law protected reliance on official written advice, not an…
Did an online supplement seller have Washington nexus through resident technology and customer-service employees even if their market impact was allegedly immaterial?
Yes. Physical presence through employees and company computer equipment established substantial nexus without an additional market-maintenance inquiry. Retail sales tax fell on Washington buyers,…
Did Washington's medically prescribed oxygen exemption cover sales of complete hyperbaric chamber systems?
No. A chamber's primary use was not generating or storing prescribed oxygen; it was taxable durable medical equipment, though a separately prescribed oxygen concentrator could qualify.
Did out-of-state registration prevent Washington use tax on a vehicle bought by a Washington LLC and regularly driven and stored in Washington?
No. Because no sales tax was paid and the vehicle was regularly used in Washington by a Washington resident, the LLC owed Washington use tax.
Was a road contractor liable for Washington's 50% reseller-permit misuse penalty when cement was bought tax-free but evidence showed no permit was furnished or checked?
No. Sales or use tax remained due because public-road contractors consume materials, but the penalty required misuse of the permit. The vendor confirmed no project permit was received, the parties…
Were an insurer's affiliate-service receipts and its broker-dealer's variable-annuity receipts exempt from Washington B&O tax as insurance business?
No. The receipts were not exclusively incidental to insurance business subject to gross-premiums tax, and variable annuities were treated primarily as securities products.
Could a medical-imaging firm exclude from B&O tax the part of globally billed patient fees that it paid to radiologists for interpreting images?
No. The firm was neither a collection agent for the radiologists nor a procurement agent for patients, so the payments were taxable gross income followed by a business expense.
Did retailer employees create Washington B&O nexus for an out-of-state bank by promoting and initiating its private-label credit cards?
Yes. The bank directed the programs and supplied approved marketing, so retailer employees acted as its representatives. Washington cardholder receipts remained apportioned to Washington absent…
Could a berry wholesaler rely on a Washington no-tax letter ruling when its actual employee contacts and delivery practices differed from the facts it submitted?
No. A letter ruling binds the Department only under the stated facts, and three material statements did not match the wholesaler's actual practices. Closing its tax account also made it unregistered…
Did owning and visiting a Washington vacation home make an out-of-state couple Washington residents for use tax on their vehicle?
No. Their Washington stays were temporary or transient, the vehicle was registered in their home state, and it did not require Washington registration, so the nonresident exemption applied.
Did Washington's 50% reseller-permit misuse penalty apply to untaxed goods picked up out of state and to untaxed goods delivered in Washington?
Only in part. Out-of-state pickup sales generated use tax when the goods entered Washington, so the misuse penalty did not apply. For Washington deliveries after June 2010, the buyer failed to prove…
Did alleged embezzlement and poor bookkeeping by an employee justify waiving a substantial-underpayment penalty, interest, or tax?
No. The taxpayer did not prove the alleged misconduct with reliable evidence or show reasonable safeguards and internal controls. The facts also did not satisfy the narrower statutory grounds for…
Where were commercial chassis received for Washington B&O sourcing, and did advertised in-state warranty service create nexus?
Chassis sent at the buyers' direction to out-of-state body shops were received there through the buyers' constructive possession, so those sales were not Washington sales. One chassis delivered in…
Did an insurance-producer license place direct-marketing commissions in the lower insurance-producer B&O classification, and could the marketer deduct transfer-pricing payments to an affiliate?
No to both. The company analyzed customer lists and prepared mailings for the insurer but did not sell, solicit, or negotiate insurance with policyholders, so its income was service B&O income.…
Were monthly swap-meet booth charges exempt real-estate rent or taxable licenses to use property for Washington B&O tax?
They were taxable licenses because vendors lacked exclusive possession and control, but Washington canceled the past assessment because a prior audit had expressly instructed the operator otherwise.
Did operating an auto body shop at a failed car dealer's location and taking two machines make the new operator liable for the dealer's unpaid Washington taxes?
No. The Department did not prove the operator acquired more than 50% of the defunct dealer's tangible or intangible asset value, so the successorship assessment was canceled.
Could a project owner claim credit for sales tax it paid on subcontractor invoices addressed to its prime contractor?
Not directly. The prime contractor held the refund right, but the owner could obtain the credit if the contractor expressly assigned that right and the amount was documented.
Could a yacht owner reduce Washington watercraft excise tax below the statutory value based on later repair costs?
No. Because the latest purchase price was known and accepted, Washington required that price to be adjusted under the Department's depreciation schedule.
Did an EFT authorization pay an auto dealer's collected sales tax when its bank swept the account before the transfer settled?
No. The confirmation proved authorization, not receipt of funds; the chief executive and chief financial officer were liable for the unpaid trust tax, while a third member was not.
Is a business successor liable for predecessor taxes that were due before the asset sale but not formally assessed until afterward?
Yes. June taxes were already overdue, and July taxes became immediately due when the business was sold. Because those taxes remained unpaid ten days after closing and the Department assessed them…
Was a co-owner's quitclaim of her 50% property interest a REET-exempt gift when the other owner agreed to take full financial responsibility for the mortgage?
No. The agreement relieved the transferring owner of her share of the mortgage obligation, which was consideration for the quitclaim. The fact that the other owner had already made all mortgage…
Could Washington impose royalties B&O tax on a German pharmaceutical company with no physical presence in the state, and did the U.S.-Germany tax treaty prevent the tax?
Yes, Washington could impose the tax, and the treaty did not prevent it. The company's Washington-based royalty receipts exceeded the economic-nexus thresholds for apportionable activities, for…
Could a nonprofit martial-arts school deduct its membership dues from B&O income by characterizing them as donations or payments only for membership privileges?
No. Members received significant martial-arts instruction and use of the training facility in exchange for their dues. The school did not prove that any portion was paid solely for membership, and…
Could an accredited private vocational school deduct tuition from B&O income because it was authorized to award associate degrees and required some general-education courses?
No. The school was regulated as a private vocational school, and the governing rule expressly excluded private and degree-granting private vocational schools from the educational-institution…
Was an LLC vice president personally liable for collected sales tax she did not control, and could Washington still collect from the marital community?
She was not personally liable because she lacked control over the collected funds and did not willfully fail to remit them. Her husband and their marital community remained jointly and severally liable.
Did a winery owe use tax on free tasting samples, and could it claim the qualified-nonresident sales-tax exemption for sealed single bottles sold with proper documentation?
Both answers were yes. Free wine samples and class materials were taxable at retail value because the winery used them without paying sales tax. But sealed single-bottle sales were not presumed to…
Did an out-of-state web developer remain subject to Washington B&O tax for 2014 after exceeding the 2013 payroll nexus threshold by only a small amount?
Yes. Once the company had substantial nexus in 2013, RCW 82.04.220(2) automatically deemed it to have nexus for the following tax year. The small amount by which it exceeded the 2013 threshold and…
Could a liquor retailer avoid B&O tax based on alleged oral Department advice, deduct the 17% license fee from spirits sales tax, or exclude lower-proof spirits?
No. Only proven specific official written advice can support assessment relief; the seller produced none. The 17% fee was a seller expense included in selling price, and distilled beverages did not…
Was the listed president and sole owner of a defunct used-car LLC personally liable for collected sales tax despite saying his brother ran daily operations?
Yes. Secretary of State, Department, and bank records identified him as president, sole officer, and sole owner. That written evidence outweighed his unsupported claim that he only lent credit and…
Do payments to independent audio-visual technicians working for customers in Washington count toward the B&O economic-nexus payroll threshold?
Yes. The technicians represented the out-of-state company in interactions with its Washington clients by directly performing the promised services. Their nonemployee compensation counted as…
Could an accrual-basis cedar-home manufacturer postpone reporting required pre-shipment payments until the entire sales contract was complete?
No. The sales agreement entitled the manufacturer to each balance payment five days before the related shipment, so the payments had to be reported then. The completed-contract rule was a special…
Were savory meat pies and sausage rolls exempt Washington bakery items, and did the prepared-food 75% rule tax the seller's sweet pastries?
Savory pies and rolls sold as meals were taxable prepared food, not ordinary sweet bakery items. Their inclusion pushed prepared-food sales over 75%, making other food taxable when utensils were…
Did independent distributors who demonstrated products and solicited Washington orders create B&O tax nexus for an out-of-state wellness-products company with no Washington property or employees?
Yes. The distributors acted as the company's Washington representatives by demonstrating its products, soliciting orders, and earning commissions. Their independent-contractor status did not prevent…
Could an electrical contractor keep wholesale treatment without reseller permits or other transaction records proving its customers were resellers?
No. The seller bore the burden of proving wholesale sales and provided no reseller permits, exemption certificates, data elements, purchase orders, or other supporting facts. Washington treated the…
Did a securities broker-dealer qualify for Washington's preferential international investment-management B&O tax rate?
No. Its primary compensated activity was executing securities transactions, not managing investments; incidental research or advice did not supply the required management component.
Does a Washington meat wholesaler owe litter tax when it resells unopened boxes and does not itself create any litter?
Yes. Raw meat is food for human consumption, so its wholesale sale is subject to Washington litter tax even when the wholesaler never opens or repackages the boxes and generates no litter itself.
Could an interpreter referral service exclude payments to independent interpreters by calling itself their collection agent?
No. Hospitals, schools, and other clients contracted to pay the referral service, not the individual interpreters. The service's separate contracts made it liable to pay the interpreters, so those…
Were solid-waste transfer-station tip fees received by a Washington political subdivision exempt as an exclusively governmental activity?
No. Participating in a transfer station funded more than 50 percent by user fees and operating in an area served by private businesses was an enterprise activity. Export costs were not excludable…
Did a contractor avoid sales or use tax by calling its cash acquisition of a predecessor's vehicles and equipment a business reorganization?
No. The assets were acquired for cash rather than exchanged for a continuing beneficial interest, and being a tax successor did not make the transaction a reorganization.
Did blanket certificates for prescription drugs and exempt medical products protect a seller's clearly taxable sales of equipment and supplies?
No. The certificates covered only purchases qualifying under the named drug and medical-item exemptions. They did not apply to taxable cots, beds, tools, hardware, blades, or similar products.
Could a construction company obtain a use-tax refund for six vehicles allegedly transferred between wholly owned sister subsidiaries?
No refund was allowed because the company produced no records proving the seller had paid prior sales tax, both entities shared the same corporate parent, or their beneficial interests were adjusted…
Could a heavy-equipment business reduce taxable sales with poorly documented, backdated credit memos and avoid a penalty after disregarding prior reporting instructions?
No. The credit memos lacked reliable contemporaneous support, and the business repeated recordkeeping and finance-charge errors covered by specific written instructions.
Were electronically delivered credit-bureau products digital automated services, and where were those sales sourced?
The credit reports, marketing datasets, and decision platforms were taxable digital automated services after July 25, 2009, not exempt business-use digital goods. Sales were sourced where customers…
Did a logger's feller-buncher qualify for Washington's machinery-and-equipment exemption when it primarily cut and bunched standing trees?
No. Cutting standing timber was extraction, not manufacturing, and later delimbing and cutting to length were performed by another contractor. The logger also lacked records proving more than 50%…
Is a federal contractor's Washington use tax on custom cabinets it fabricates and installs measured by component cost or the finished cabinets' value?
The finished cabinets' value. The contractor manufactured the cabinets off-site and became their statutory consumer when it installed them in federal projects. Use tax therefore applied to the…
How did Washington apportion an out-of-state software company's sponsorship revenue from conferences held outside Washington?
Before June 1, 2010, the conference sponsorship income was assigned outside Washington; after that date, it required a reasonable proportional attribution of where sponsors received the benefit.
Could a taxpayer retain its 2013 R&D spending B&O tax credit after an employee filed the wrong survey and the required Washington survey was late?
No. An employee's mistake and the taxpayer's misunderstanding were not circumstances beyond its control. The taxpayer also had not timely requested the separate 90-day extension, so the late survey…
Could an out-of-state party-supply seller separate its internet sales from nexus created by an independent sales representative and avoid interest and penalties based on alleged oral Department advice?
No. The representative's regular Washington visits and sales solicitation established nexus, and the seller did not prove its internet sales were unconnected to that market-building activity.…
Were supplements sold through a physician-owned weight-loss program exempt because the physician supervised the program and told coaches participants must take them?
No. The seller produced no order, formula, or recipe issued by the physician for the supplements. Supervision and instructions to coaches did not prove that customers purchased under a prescription.
Were accounting credits that reimbursed affiliated service companies for work outside Washington B&O gross income, despite FCC rules and no recorded profit?
Yes. Credits were compensation for services regardless of their account label or profitability. Because the companies withheld detailed records, the Department could estimate B&O and use-tax…
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These are official tax letter rulings and advisory opinions issued by Washington's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.