WAC 164

Special Business Tax Classification for Insurance Agents Repealed 6/30/2000

Bail Bond Agency Guide to Excise Taxes

Insurance Industry

"Gross income of the business."

Tax on buyers, wholesalers, manufacturers, and processors of various foods and by-products--Research and development organizations--Nuclear fuel assemblies--Travel agents--Certain international activities--Stevedoring and associated activities--Low-level waste disposers--Insurance agents, brokers, and solicitors--Hospitals.

Tax on selected business services, financial businesses, or other business or service activities.

WAC 458-20-212 Insurance adjusters; and WAC 458-20-164 Insurance producers, adjusters - Title insurance agents - Surplus line brokers The Department has amended WAC AC 458-20-164 (Rule 164) Insurance producers, adjusters – Title insurance agents – Surplus line brokers to update information currently provided in the rule.

Insurance agents, brokers and solicitors.Effective 10/4/92

Insurance Companies Tax Obligations

Tax Attorneys and CPAs New "Economic Nexus" in Washington State May Impact Your Clients

New "Economic Nexus" in Washington State May Impact "Foreign Corporations"

Registered Out-of-state Businesses Currently not Reporting Income from Service Activities - New Apportionment for Certain Income

B&O Tax Reporting Requirement Continues After Business Activity Stops (Trailing Nexus)

New Apportionment Method

Real Estate Brokers - Shared Commissions and Expenses

Insurance Agents

B&O TAX -- MANAGING GENERAL AGENT.The income received by one who is licensed as a resident general agent by the insurance commissioner and who performs the independent management functions set forth in WAC 458-20-164 is subject to business and occupation (B&O) tax at the special rate provided by RCW 82.04.280(5) for managing general agents.

INSURANCE AGENT -- COMMISSION INCOME.Commission income earned by insurance agents is taxable under the Insurance Agents and Brokers classification unless the agent is a bona fide employee of the insurance company.

INSURANCE AGENT - SERVICING FEES.Commission income from policies written in the present year and that received for renewals of policies written in past years is subject to B&O tax under the Insurance Agents and Brokers classification unless the income is earned in the capacity of an employee.

INSURANCE AGENT -- INDEPENDENT CONTRACTOR STATUS -- COMMISSION INCOME.Commission income earned by an insurance agent is taxable under the insurance agents and brokers classification unless the agent is a bona fide employee of the insurance company.

INSURANCE AGENTS CLASSIFICATION.Commissions received from the sale of single premium tax deferred annuities issued by an insurance company that required approval by the Insurance Commission and could be sold only by licensed insurance agents are taxable under insurance agent's B&O tax rate.

B&O TAX - EMPLOYEE STATUS OF FULL-TIME LIFE INSURANCE AGENTS.Based on the facts, the taxpayer was not an employee of the insurance company for B&O tax purposes.The statutory regulation of insurance agents in the state of Washington does not prevent them from being independent contractors for tax purposes. Curtis T. Mohr vs Department of Revenue.

INSURANCE AGENT -- EMPLOYEE OR INDEPENDENT CONTRACTOR STATUS -- COMMISSION INCOME.Commission income earned by an insurance agent is taxable under the insurance agents and brokers tax classification unless the agent is a bona fide employee of the insurance company.The insurance agent failed to overcome presumption of Rule 164 that he is a B&O taxable independent contractor.According to the criteria of ETB 546, the agent is not an employee of an insurance company.Accord: Det. No. 86-279, 1 WTD 291 (1986) and ETB 546.04.164.

INSURANCE -- AGENT -- AMOUNTS ENTITLED TO RECEIVE.An employer's payment of workers' compensation premiums to the Department of Labor and Industries does not constitute a contract of insurance.

INSURANCE -- AGENT -- AMOUNTS ENTITLED TO RECEIVE -- VOLUNTARY EMPLOYEE BENEFIT PLAN (VEBA).The gross income of an insurance agent can include fees or other amounts arising out of the sale of insurance contracts that are subject to the insurance premiums tax.The special insurance agents, brokers, solicitors B&O tax classification is the proper B&O tax rate for fees an insurance agent receives for administering a self-funded voluntary employee benefit plan (VEBA) because the fees are amounts the agent was entitled to receive with respect to its licensed insurance agent activities.

B&O TAX - INSURANCE COMMISSIONS - WHOLESALE BROKER - SUB-AGENTS.A wholesale insurance agent who accepts applications for insurance that come through sub-agents cannot deduct the commissions retained by the sub-agents from the measure of its B&O tax, if the wholesale broker alone has the contractual right to receive the commissions from the insurer.SEE: Det. No. 88-370, 7 WTD 5 (1988); Det. No. 88-383, 7 WTD 11 (1988).

B&O TAX - INSURANCE COMMISSIONS - WHOLESALE BROKER - SUB-AGENTS.A wholesale insurance agent who accepts applications for insurance that come through sub-agents cannot deduct the commissions retained by the sub-agents from the measure of its B&O tax, if the wholesale broker alone has the contractual right to receive the commissions from the insurer.SEE: Det. No. 88-370, 7 WTD 5 (1988); Det. No. 88-383, 7 WTD 11 (1988).

B&O TAX - INSURANCE COMMISSIONS - WHOLESALE BROKER - RETAIL AGENTS.A wholesale insurance broker is taxable on the full amount of the commission paid on insurance it markets even when the retail broker on the transaction collects the gross premium and deducts a share of the commission prior to remitting the balance to the wholesale broker, when the wholesale broker alone has a contractual relationship with the insurance company, and the retail broker's commission is set under an agreement solely between the two brokers.See: Det. No. 88-370, 7 WTD 5 (1988); Det. No.

LIFE INSURANCE AGENTS -- SALES OF VARIABLE ANNUITIES - FINANCIAL BUSINESS.Only if the death benefits are more than incidental will sales of variable annuities be subject to the insurance laws.Because the usual variable annuity is primarily a securities product, sales of such annuities are taxed as sales of securities under the financial business rate.

LIFE INSURANCE AGENTS -- SALES OF NON-VARIABLE ANNUITIES.The sale of annuities providing for a fixed amount per period over the lifetime of an annuitant are included in the licensed activities of insurance agents.Where the taxpayer is licensed under chapter 48.17 RCW and meets the requirements of the statute for the insurance agent's rate, sales of non-variable annuities are taxed under the insurance agent's rate.

INSURANCE AGENT -- COMMISSION INCOME.Commission income earned by insurance agents is taxable under the insurance agents and brokers classification unless the agent is a bona fide employee of the insurance company.

INSURANCE AGENT -- COMMISSION INCOME. Commission income earned by insurance agents is taxable under the insurance agents and brokers classification unless the agent is a bona fide employee of the insurance company.

INSURANCE AGENT -- COMMISSION INCOME.Commission income earned by insurance agents is taxable under the insurance agents and brokers classification unless the agent is a bona fide employee of the insurance company.

INSURANCE COMMISSIONS -- SURPLUS LINE BROKER.RCW 82.04.320 does not exempt surplus line brokers from B&O tax on their commissions earned from placing surplus line coverage.

INSURANCE COMMISSIONS - WHOLESALE BROKER - RETAIL AGENTS.A wholesale insurance broker is taxable on the full amount of the commission paid on insurance it markets even when the retail broker on the transaction collects the gross premium and deducts a share of the commission prior to remitting the balance to the wholesale broker, when the wholesale broker alone has a contractual relationship with the insurance company, and the retail broker's commission is set under an agreement solely between the two brokers. See: Det. No. 88-370, 7 WTD 5 (1988); Det. No. 88-383, 7 WTD 11 (1988).

RCW 82.04.080, RCW 48.96, RCW 48.17.010:SERVICE B&O TAX -- MOTOR VEHICLE SERVICE CONTRACTS -- GROSS INCOME -- AMOUNTS COLLECTED AS PREMIUMS AND REMITTED TO INSURER.A seller/provider of motor vehicle service contacts must include in its gross income amounts collected and remitted to an insurer of the service contracts because the seller/provider is not an insurance agent, but, as the obligor, is a party to the service contracts and remains personally liable on them, and not merely as an agent, to the contract holders.

B&O TAX - GENERAL INSURANCE AGENT - ENGAGING IN BUSINESS - NOT AN EMPLOYEE.In light of the criteria in Rule 105, the facts overwhelmingly support the finding and Rule 164's presumption that the taxpayer is engaged in business and subject to the B&O tax on his gross income, and is not an employee of the insurance company.

INSURANCE AGENT/BROKER B&O TAX - COMMISSIONS - TAXABLE - NOT PASS-THROUGHS.A general insurance agent (the taxpayer) does not qualify for Rule 111 pass-through payments of commissions to its independent contractor sub-agents because (1) the taxpayer can and does render the service of selling insurance for the insurance company and (2) the taxpayer does not receive and pay the sub-agent commissions from the insurance company solely as its agent.Instead, under the contract with the insurance company, the taxpayer is personally and primarily liable to the sub-agents for the commissions.

INSURANCE AGENT -- COMMISSION INCOME.Commission income earned by insurance agents is taxable under the Insurance Agents and Brokers classification unless the agent is a bona fide employee of the insurance company.Accord:1 WTD 291 (1986).

RCW 82.04.260: INSURANCE PRODUCER B&O TAX – SURETY BAIL BONDS. RCW 48.11.080 defines “surety insurance” as including bail bond insurance. Therefore, if a bail bond company is licensed as an insurance producer under Chapter 48.17 RCW, the gross income of the business earned by Taxpayer as a result of its issuance of surety bail bond insurance is taxable at the insurance producers B&O rate.

RULE 164; RCW 82.04.060: INSURANCE PRODUCERS – EXCLUSIONS FROM GROSS INCOME - AMOUNTS HELD FOR THE INSURER. When a licensed bail bond company is required by law to put a percentage of its premium income in a trust account and only pays itself its commission income after first paying the premium payments to the insurer, the bail bond company is permitted to deduct those premium payments from its gross commission income.

BUSINESS AND OCCUPATION (B&O) TAX--INDEPENDENT RESIDENT MANAGING GENERAL AGENT--MANAGERIAL FUNCTIONS.A person claiming to fall within the classification for a resident managing general agent must demonstrate that he or she is licensed as such by the insurance commissioner and perform the independent managerial functions listed in WAC 458-20-164 (Rule 164). Subsection 2(c), which requires that such a person "directly contracts for or hires all selling agents", is satisfied where the general agent hires selling agents for the insurance company.

B&O TAX -- GROSS INCOME OF BUSINESS --INSURANCE -- GENERAL AGENT -- SUB-AGENT'S COMMISSIONS.General agent not liable for B&O tax on commissions earned by sub-agents where sub-agents' contracts were with the insurance company and the general agent, and only the sub-agents had the contractual right to the commissions.The fact that the sub-agents' contracts stated the general agent shall pay their commissions was not controlling.

B&O TAX -- DEDUCTION -- DEFERRED INCOME -- GROSS INCOME OF BUSINESS.The B&O tax applies to commission income which an agent receives or becomes entitled to receive, including income deferred for retirement.The federal tax treatment of retirement contributions and payments is not controlling for state tax purposes.Accord:88-205, 5 WTD 387 (1988).

INSURANCE COMMISSIONS -- BROKER -- SUB-AGENTS.An insurance broker who employs independent sales agents cannot deduct the commissions paid to agents from the measure of the B&O tax, if the broker alone has the contractual right to receive the commissions from the insurer.An agent who is not an employee of the broker, but is an independent contractor, is liable on commission income received unless the soliciting agent has a contractual relationship with the insurer.

B&O TAX -- INSURANCE AGENTS -- BROKERS -- PYRAMIDING TAX.RCW 82.04.255 provides an exemption for real estate agents and brokers and does not apply to an insurance agent who is affiliated with a brokerage agency.Davenport, Inc. v. Department of Revenue, distinguished.