Throw-out income

Throw-out income is a component of the receipts factor that is excluded from the denominator if both the following are true:

• The income is not considered taxable in another state.
• At least some of the activity is performed in Washington.

See the Apportionment – the basics section for more information on taxable in another state.

Determining throw-out income

To determine throw-out income, you will need to determine whether you are taxable in each state or country where you engage in business. Income attributed to a state or country you are taxable in is not considered throw-out income.

Below are the criteria used in determining throw-out income.

• Receipts threshold – You must calculate gross receipts for each state or country. This includes income reported under all tax classifications. If you have at least $100,000 in gross receipts in a state or country, you are considered taxable in that state or country.
• Business activities tax – If you are subject to a business activities tax in a state or country, you are considered taxable in that state or country. The term business activities tax does not include retail sales tax, use tax, or similar transaction taxes imposed on the sale or acquisition of goods or services.
• Physical presence – If you have a physical presence in a state or country, you are considered taxable in that state or country.
• Organized or commercially domiciled – If you are organized or commercially domiciled in a state or country, you are considered taxable in that state or country.
• Taxable in prior year (trailing nexus) – If you met any of the above criteria in a state or country in the immediately preceding calendar year, you are considered taxable in that state or country.

If you do not meet any of the above criteria but there was work related to the apportionable income performed in Washington, the income attributed to that state or country is considered throw-out income.

In determining whether your business has exceeded the receipts threshold, you must include gross income from all tax classifications along with apportionable income attributed to each state or country.

Example

Company A is an in-state entity with following facts:

*Gross receipts means income from all tax classifications.

Based on the information above, we can determine the following:

• Company A is taxable in Idaho and Nebraska because they have more than $100,000 annual gross income in those states.
• Company A is taxable in Colorado because they are subject to a business activities tax there.
• Company A is taxable in Florida because they were taxable there in the prior year.
• Company A is taxable in Oregon because they have a physical presence.
• Since Company A is taxable in Colorado, Florida, Idaho, Nebraska, and Oregon, the apportionable income attributed to those states is not considered throw-out income.

This leaves Illinois. Since there was work performed in Washington, but no other criteria are met, the income attributed to Illinois is considered throw-out income.

Validating your throw-out income

It is important to validate your throw-out income when filing your annual reconciliation. You can do this by selecting “I don’t know whether I have throw-out income” or “I need to calculate my throw-out income” when completing the throw-out income pages.

Alternatively, you can provide your calculations as an attachment using our Throw-out Income Spreadsheet.

Note: If we do not receive throw-out income calculations it may delay processing of your annual reconciliation.