Attributing service income

Service income is attributed under a hierarchy. This means you only move to the next step if you are unable to attribute under the current step.

The department expects most taxpayers will attribute apportionable receipts based on attribution tier #1 because the taxpayer will either have enough information to know where the customer receives the benefit of the service, or there is generally a reasonable method of proportionally attributing receipts available.

The hierarchy for service income is as follows:

1. Where the customer receives the benefit of the services.
   • If you can reasonably determine the amount of a specific receipt that relates to a specific benefit received in a state, attribute to that state. This may be determined by a reasonable proportional method.
   • If you are unable to use the above method and your customer receives the benefit in multiple states, but you can reasonably determine the amount of a specific receipt that relates to a benefit received in Washington, you must attribute that receipt to Washington. This may also be determined by a reasonable proportional method .
   • If you are unable to use either of the above methods and your customer receives the benefit in multiple states, attribute to where the customer primarily (more than 50%) receives the benefit of the service.
2. Where the customer ordered the service.
3. Where the bill is sent.
4. Where the customer sends the payment from.
5. To the customer’s address maintained in the seller’s records.
6. To the seller’s commercial domicile.

You may use a different attribution method for each transaction within an apportionable activity if doing so will more fairly represent the attribution of your receipts. However, the department has the right to question taxpayers who appear to be using this method of attribution to distort their apportionable income and avoid payment of taxes.

Benefit of the service

Use the following steps to determine where the benefit of a service is received:

1. If the service relates to real property, the benefit is received where the real property is located.
2. If the service does not relate to real property and the customer is engaged in business, the benefit is received at either the customer's market or the customer's business location(s). The customer's related business activities occur in the customer's market if the taxpayer's service is any of the following:
   • Promoting the customer's products (goods and services).
   • Engaging in or completing sales of the customer's products.
   • Obtaining or facilitating payment of amounts owed to the customer from the sale of its products.
   • Establishing or maintaining the customer's market.
3. If the customer is not engaged in business, the benefit is received based on the following:
   • If the customer must be present (e.g., doctor appointments), then the benefit is received where the service is provided.
   • If the service relates to a place, then the benefit is received at that place (e.g., wedding planning).
   • If neither of the above points apply, then the benefit is received where the customer resides.

Dispute resolution

The resolution of disputes between taxpayers and the department will be the same as other disputes. In a dispute, the taxpayer will have the burden to show that the department’s findings are incorrect. You must keep documentation to demonstrate the attribution method used fairly apportions your receipts. You must make these records available upon request from the department.