Specific B&O tax applications

Following is a discussion of specific applications of the B&O tax for a variety of industries. Please also refer to the web site information contained in these discussions. In addition, you may refer to the "decision trees" that may be helpful in identifying the correct reporting classification for various industries.

Construction

Construction laborers will be presumed to be engaged in retail activities unless otherwise documented. Construction laborers typically perform cleanup, manual hauling of materials at construction sites and perform other skilled and/or unskilled labor. If the construction laborers are engaged by a custom contractor, a reseller permit may be accepted by the staffing business. In this instance, sales tax would not be collected on the income. Instead, the charges would be subject to the Wholesaling B&O tax. For a detailed discussion of the taxability of construction services, please refer to the Construction Tax Guide.

Processing for hire

Workers dispatched to a manufacturer at a manufacturing site, who engage in impressing logos/labels/stickers onto packing or products or otherwise engaged in altering or improving the manufactured product are performing a manufacturing activity. The income received by the staffing business is reportable under the Processing for Hire B&O tax classification. In this case, the staffing business should document the nature of these activities and report the income from these workers under the Processing for Hire classification of the B&O tax.

Processing for hire does not include merely inspecting, sorting, counting, moving, packing, loading, or unloading or operating machinery that performs these tasks even when they are performed at a manufacturing facility.

Note: Processing for hire applies only when producing tangible personal property. It does not apply to construction services.

Processing for hire - special application for staffing businesses: Due to the difficulties in determining the extent to which workers are merely altering tangible personal property rather than creating something new, different, or useful, staffing businesses may elect to report under Wholesaling all income derived from providing temporary workers to manufacturing customers whose labor directly alters such property. This is in lieu of reporting some income under Wholesaling and some income under Processing for Hire. If the staffing business chooses to make inquiry with its client to determine the worker's labor rises to the level of processing for hire, it may separately account for the processing for hire income and report accordingly.

Warehousing activities

RCW 82.04.280(2)(b) provides a tax rate of .00484 for businesses engaged in operating a cold storage warehouse or storage warehouse. A "storage warehouse" means a building or structure, or any part thereof, in which goods, wares, or merchandise are received for storage for compensation.

The gross income received by a staffing business for workers dispatched to a warehousing business are not classified under the Warehousing B&O tax classification because the staffing business does not operate the warehouse. The Warehousing classification applies only to persons operating a cold storage warehouse or storage warehouse. Instead, the Service and Other Activities classification applies to income derived by providing workers to a warehousing operation. This is true even though the workers may operate forklifts or otherwise move merchandise at a storage facility.

Insurance agent activities

If a staffing business provides a licensed insurance agent to an insurance broker to perform services under the authority of the insurance agent's license, the income received by the staffing business is subject to the Insurance Agents and Brokers B&O tax. In all cases, the staffing business must look to the activity engaged in by the worker, regardless of the nature of the customer's business.

If a staffing business provides a receptionist, or other unlicensed worker to perform office services within an insurance broker's office, the associated charges are subject to the Service and Other Activities B&O tax classification.

Travel agent activities

If a staffing business provides a person who arranges travel, the income received for these services is subject to B&O tax under the Travel Agents Tour Operators B&O tax classification.

If a staffing business provides a receptionist or other worker to perform office services for a travel agency, the income received for this service is subject to the Service and Other Activities B&O tax.

Landscape/lawn maintenance activities

If a staffing business provides a worker to a landscape maintenance business, the income received for such staffing would be subject to Wholesaling B&O tax provided the customer presents the staffing company with a valid reseller permit. The Retailing B&O tax and retail sales tax apply to such charges if the customer does not provide a reseller permit or other evidence that the worker's services are being resold by the customer (see Wholesaling).

Janitorial services

If a staffing business provides a worker to perform routine janitorial services to a janitorial business, or any other person, such charges are subject to the Service and Other Activities B&O tax. Routine janitorial services include washing interior and exterior window surfaces; cleaning and waxing floors; cleaning interior walls and woodwork; cleaning in place of rugs, drapes and upholstery; dusting; disposing trash; and cleaning and sanitizing bathroom fixtures.

The term "janitorial services" does not include, among others:

• Cleaning exterior walls of buildings.
• Cleaning septic tanks.
• Special clean up jobs required by construction, fires, floods, etc.
• Painting.
• Papering.
• Repairing.
• Furnace or chimney cleaning.
• Removing snow.
• Sandblasting.
• Cleaning plant or industrial machinery or fixtures.

Computer software services

Income received for providing a worker to repair or alter computer hardware is taxable as a retail sale when the services are provided for the owner of the equipment. Retailing B&O tax applies and retail sales tax must be collected from the customer. Income received for services provided to the person who will resell the service to others is taxable under the Wholesaling tax (see Wholesaling).

Income received from customers or for providing a worker to install pre-written software (also referred to as "standard" and "canned" software - software created for sale to more than one person) is taxable as a retail sale. Retailing B&O tax applies and retail sales tax must be collected. Wholesaling tax applies if workers are provided to customers who will resell the service (see Wholesaling).

Income received for providing a worker to create custom software (software created for a single customer) or to "customize" pre-written software is taxable as a professional service, subject to the Service and Other Activities B&O tax. Retail sales tax does not apply to such charges. To "customize" pre-written software means any alteration, modification or development of applications using or incorporating pre-written computer software for a specific person. It also includes individualized configuration of software to work with other software and computer hardware, but does not include routine installation of pre-written software.

Stevedoring

Income received from engaging in stevedoring and associated activities is subject to business tax at the rate .00275. Stevedoring and associated activities means all activities of a labor, service, or transportation nature where cargo is loaded/unloaded from vessels involved in waterborne interstate or foreign commerce.

Specific activities taxable under the stevedoring classification are:

• Wharfage.
• Handling.
• Loading.
• Unloading.
• Moving of cargo to a convenient place.
• Documentation services.
• Imported automobile handling.
• Terminal stevedoring.
• Incidental vessel services.

Providing workers to engage in these activities is subject to B&O tax under the Stevedoring tax classification.