WAC 170

Cancelled 7/17/2002 - Use Tax on Government Contracting Projects--The United States Supreme Court sustained the government contracting tax applications for Washington in 1983, even though the ultimate economic burden of the tax is borne by the United States Government (Washington v. US, 75 L.Ed 2d 264, (1983)). These directives were issued while the Department was negotiating with federal agencies regarding direct payment of use tax owed by contractors on contracts awarded prior to October 1, 1983.

Proper Tax Classification For Concrete Pumping Repealed 6/30/2000 - This document is out of date and no longer serves a useful purpose. It explains that the Thurston County Superior Court in Sunnen Crane Service, Inc. v. Department of Revenue, Cause No. 85-2-01075-0 found that crane-lifting operations directly related to construction are wholesale or retail activities. It then states that concrete pumping is to be similarly treated. The Sunnen Crane decision is an inappropriate basis upon which to determine the taxability of either crane lifting or concrete pumping.

Construction Guide

"Sale", "casual or isolated sale"

"Sale at retail", "retail sale"

"Services rendered in respect to"--Taxation of hybrid or subsequent agreements.

"Gross proceeds of sales."

"Value proceeding or accruing."

"Consumer."

Business and occupation tax imposed.

Tax on Retailers

Tax on Wholesalers

Tax on Public Road Construction -- Government Contracting.

Tax on Selected Business Services, Financial Businesses, or Other Business or Service Activities.

Exemptions -- Amounts derived from sale of real estate.

Resale certificate--Burden of proof--Tax liability--Rules--Resale certificate defined.

Retail Sales Tax Imposed

Buyer to pay, seller to collect tax--Statement of tax--Exception--Penalties.

Exemption - Weatherization of a residence

Use Tax imposed.

Sales and Use taxes authorized -- Additional taxes authorized -- Maximum rates.

Constructing and repairing of new or existing buildings or other structures upon real property.

CONSTRUCTION COMPANY AS AGENT FOR OWNER Cancelled effective 02/28/07 This document addresses a situation where a taxpayer was hired to perform all construction work the owner might request over a three-year period. The owner deposited monies into special accounts, from which the taxpayer alone was authorized to make withdrawals to purchase materials and labor.

LABOR AND SERVICES OF A SUBCONTRACTOR Cancelled effective 02/28/07 This document explains that where a taxpayer furnishing and installing concrete forms and form supports is contractually responsible for the quality of the finished concrete work, the taxpayer is subject to the wholesaling B&O tax as a subcontractor and is not in the business of “furnishing scaffolding.” There is no need for this document.

DEEDING OF LAND TO CONTRACTOR BUILDING HOUSE FOR LANDOWNER - This document explains that the charge for building a house is a retail sale even if the landowner first deeds the land to a contractor, who after construction then sells or deeds the property back to the original landowner. This issue is specifically addressed in RCW 82.04.050 (2)(c) and WAC 458-20-170 (Constructing and repairing of new or existing buildings or other structures upon real property). Cancelled by ETA 2003 -2s 6/30/00.

SALES TAX COMPUTED ON A CONTRACT PRICE INCLUDING SALES TAX PAID BY CONTRACTOR Revised 2/2/09 See ETA 3138.2009

Public works contracts

Public Works Contracts

Dump Truck Operators This ETA explains the public utility tax (PUT), business and occupation tax (B&O), and retail sales tax reporting responsibilities for various services commonly provided by dump truck operators. This ETA previously issued on May 24, 2013, is being reissued in order to clarify how to distinguish the taxability of persons hauling for hire from persons hauling construction debris.

Form oil purchased by building contractors

Amounts awarded for costs not included in the contract

Amounts paid under a penalty clause

Business & occupation tax: Contract assignments

Condominiums

B&O Tax Exemption for Property Managers (RCW 82.04.394)-On-Site Personnel Working at Multiple Properties. RCW 82.04.394 provides a B&O tax exemption for amounts received by a property management company from the owner of a property for gross wages and benefits paid to on-site personnel. ETA 3111 explains how this B&O tax exemption provided to property management companies applies when on-site personnel work at multiple properties. The Department has updated this ETA to recognize provisions of 2ESSB 6143 Part XII (Chapter 23, Laws of 2010 1st Special Session).

Measure of Retail Sales Tax on a Time and Materials Contract When the Contractor Includes the Retail Sales Tax Paid on Rented Equipment

Off-site component fabrication by speculative builders

Sales Tax Sourcing for Installed Manufactured and Modular Homes

FORM OIL PURCHASED BY BUILDING CONTRACTORS Revised 2/2/09 See ETA 3053.2009

SPECULATIVE BUILDERS IN JOINT VENTURES Cancelled 1/29/09. The ETA addresses a situation where a taxpayer alleged that a joint venture existed between the taxpayer (a land developer), a speculative builder, and three contract vendors. The ETA explains that a taxpayer must prove the existence of a joint venture, and in this case did not do so. This document does not provide any needed guidance. Other documents issued by the Department (e.g., Det. 05-0104, 26 WTD 001, and Det.

RETAIL SALES TAX: CONTRACT REIMBURSEMENTS Revised 2/2/09 See ETA 3061.2009

AMOUNTS PAID UNDER A PENALTY CLAUSE Revised 2/2/09 See ETA 3062.2009

BUSINESS & OCCUPATION TAX: CONTRACT ASSIGNMENTS Revised 2/2/09 See ETA 3067.2009

CONSTRUCTION ON LAND OWNED BY CONTRACTOR'S PRINCIPAL STOCKHOLDER -This document explains that construction by a corporation on land owned by a stockholder of the corporation is taxable as a retail sale. This issue is specifically addressed in WAC 458-20-170 (Constructing and repairing of new or existing buildings or other structures upon real property). Cancelled by ETA 2003 -2s 6/30/00.

TURNKEY PROJECTS SOLD TO HOUSING AUTHORITIES - This document includes incorrect information. Referring to turnkey contracts to build for housing authorities, this document explains that the landowner/contractor is taxed as a speculative builder if the right of possession does not transfer at the time the parties enter into the construction contract. These persons are generally subject to the government contracting tax classification. Cancelled by ETA 2003 -2s 6/30/00.

CONDOMINIUMS Revised 2/2/09 See ETA 3075.2009

JOINT VENTURE AGREEMENT: A PRIME CONTRACT OR A SUBCONTRACT Cancelled effective 02/28/07 This document states a series of facts and concludes that a joint venture existed. However, the ETA does not state the criteria for determining if a joint venture exists. Numerous Determinations have addressed the criteria to be treated as a joint venture. See, e.g. : Det. No. 87-93, 2 WTD 411, 416 (1987); Det. No. 88-14, 5 WTD 19, 24 (1988); Det. No. 88-155, 5 WTD 179 (1988); Det. No. 90-108, 9 WTD 231 (1990); Det. No. 98- 8, 17 WTD 236 (1998); Det. No. 98-214, 19 WTD 201 (2000); and Det. No.

CONDITIONS UNDER WHICH A CONTRACTOR-OWNER RELATIONSHIP EXISTS Cancelled effective 02/28/07 This document addresses the situation where a contractor and an owner enter into an agreement to transfer employees from the contractor to the owner during the period of construction, and when the construction was completed transfer the employees back to the contractor. The ETA explains that it is the Department’s position to examine the conduct of the parties and the agreement between them to determine whether an employer-employee relationship exists.

LESSEE AS SPECULATIVE BUILDER -Cancelled effective December 29, 2006. This document quotes language from the statutory definitions of “consumer” (RCW 82.04.190) and “retail sale” (RCW 82.04.050) as the basis for determining that a lessee who constructs a building on property to which the lessee holds a thirty year lease is a speculative builder. It is not needed.

INTEREST ON CONSTRUCTION LOAN TAXABLE AS PART OF CONTRACT PRICE Cancelled effective 02/28/07 This document explains that mounts received by a contractor that are attributable to interest the contactor owes on a construction loan must be included in the measure of tax for the construction activity. The interest expense is a part of the contractor’s cost of business. Such amounts are excluded from the measure of tax only if they meet the requirements of WAC 458-20-111 (Advances and reimbursements). This document is not needed.

TAX LIABILITY ON MATERIALS PURCHASED BY CONTRACTORS IN IDAHO FOR USE IN WASHINGTON - This document explains that Idaho vendors are not permitted to accept resale certificates from Washington contractors because under Idaho law all construction contractors are defined as consumers of construction materials. The document further provides that the construction contractor can avoid the Idaho tax only by taking delivery of the materials outside Idaho.

Environmental Remedial Action Sunsets

New Law Limits Property Management B&O Tax Exemption

Farm Worker Drinking Water Special Notice

Solar Water Systems - Tax Exemption

The Tax Application for Tree and/or Stump Removal from Existing Orchards

Department Authority to Disregard Tax Avoidance Transactions

New Law Expands Property Management B&O Tax Exemption

Sales Tax Collection Requirement on Sales of Manufactures Housing

RETAILING B&O TAX--SALES TAX LIABILITY--ARCHITECTURAL SERVICES -- RENDERED IN RESPECT TO CONSTRUCTION--SEPARATE CONTRACTS FOR SAME CONSTRUCTION PROJECT--PURE ARCHITECTURAL SERVICES--DESIGN WORK ONLY--SERVICE B&O TAX. Where the taxpayer performs architectural services and construction services contemporaneously on the same project pursuant to separate contracts for each type of service, the income is subject to Retailing B&O tax and sales tax consequences even if the customer is separately billed for each type of service.

RETAIL SALES -- AMOUNTS PAID BY CONTRACTOR AND "REIMBURSED" BY BUYER -- SUBJECT TO SALES TAX. Amounts subject to sales tax, that are paid by a contractor and "reimbursed" by the buyer are properly subject to sales tax, and such tax cannot be credited against the sales tax due on the contractor's fee.

RCW 82.04.050 -- RETAIL SALES -- SERVICES "IN RESPECT TO" CONSTRUCTION. The statute does not require that services rendered " in respect to" construction be rendered within a written contract for construction in order to be taxable as retail sales; therefore the Department of Revenue cannot impose that requirement.

CONTRACTOR -- PERFORMANCE BOND--GROSS CONTRACT PRICE--PAID BY OWNER. Where the owner pays the performance bond for a construction contract, and the contract states a gross contract price that does not include the bond, the payment is not subject to the sales or use tax and is not part of the construction contract.

WHOLESALING/RETAILING B&O TAX -- ENGINEERING SERVICES -- WHEN RENDERED IN RESPECT TO CONSTRUCTION. Engineering services rendered "in respect to construction," that is, as part of a construction contract or contemporaneously applied and rendered at the construction site, are subject to Wholesaling or Retailing B&O tax, not Service B&O tax.

RCW 82.04.050 -- SALES TAX -- USE TAX -- CONSTRUCTION CONTRACTOR -- SUPPLIES CONSUMED. Items such as drill bits and blades used by a contractor in a construction project are considered consumed by the contractor, not resold to the contractor's customer. Sales tax is owed by the contractor on such consumables, notwithstanding the fact that the project owner pays sales tax on the total contract price which includes the consumable supplies. ACCORD: ETB 276, Det. No. 89-248, 10WTD282 (1991), Det. No. 89-112, 7WTD201 (1989).

RETAILING B&O TAX--USE TAX--REPAIRS OF REAL PROPERTY FOR CONSUMERS. The repair of real property for consumers is an activity taxable as a retail sale. The use of property by the contractor in performing that function is subject to use tax, despite the fact that the repairs are a retail sale and subject to the retail sales tax.

SPECULATIVE BUILDERS--USE TAX. Substantive ownership interest in land as a matter of record and notice to the whole world is the decisive factor to be determined under Rule 170. Actually acquiring title by deed clearly constitutes ownership under the rule. Housing construction on land owned by the taxpayer is subject to sales or use tax. Speculative builders must pay the tax upon all materials they purchase and on all charges made by their subcontractors. Accord: Reliable Builders, Inc. v. Department of Revenue, Docket No.

SALES TAX -- USE TAX -- ASBESTOS ABATEMENT CONTRACTOR -- SUPPLIES USED BY. Bags used by an asbestos abatement contractor for the disposal of hazardous materials are supplies consumed by that contractor. They are not resold to the contractor's customer. The contractor is liable for sales tax on its purchase of such supplies. Partial Accord: Det. No. 89-112, 7 WTD 201 (1989)

CONSTRUCTION MANAGEMENT SERVICES -- SERVICES IN RESPECT TO CONSTRUCTION -- RETAIL SALE. A taxpayer who contracts to perform construction management services for a consumer, and who provides an on-site crew to supervise construction, who reviews the progress of construction, who has the authority to agree to on-site change orders on behalf of the owner and who performs some construction work itself on the same project, provides services in respect to construction, as well as actual construction itself, and as such makes a retail sale of those services to the consumer.

RETAILING B&O TAX -- PRIME CONTRACTOR. Taxpayer corporation which contracted with a real property owners and subcontractors to construct buildings was a prime contractor when the taxpayer provided construction supervision, labor and accounting services; issued resale certificates as a general contractor; required subcontractors to provide it insurance coverage as contractor; and identified itself in contracts and correspondence as the contractor with contractor duties.

RETAILING B&O TAX -- PRIME CONTRACTOR -- PAYMENT TO THIRD PARTIES BY OWNER -- GROSS INCOME. Taxpayer is a prime contractor subject to assessment based on the total amount of construction costs even if the owner paid the third party suppliers and subcontractors directly. The taxpayer benefited from such payments because they reduced or eliminated the taxpayer's personal liability from the debts. The owner's payments were part of the contract's consideration received by the taxpayer and are considered gross income to the taxpayer.

SPECULATIVE BUILDERS -- RETAIL SALES TAX -- USE TAX -- OWNERSHIP OF PROPERTY. When determining "ownership" of real property for purposes of distinguishing between "prime contractors" and "speculative builders," record title is but one of the factors to be considered, together with the "attributes of ownership" set forth in Rule 170(2)(a). Overruling Det. No. 92-204, 12 WTD 391 (1993) to the extent inconsistent herewith.

RETAIL SALES TAX -- RETAILING B&O TAX -- CUSTOM CONSTRUCTION -- SPECULATIVE CONSTRUCTION -- BENEFICIAL OWNERSHIP -- ATTRIBUTES OF OWNERSHIP. The mere holding of bare title to property is not determinative of ownership. Ownership is to be determined by the intent of the parties as evidenced by objective factors. Where title holder held title merely for security purposes, and all parties dealt with property as though taxpayers were the owners, taxpayers qualified as speculative builders.

SALES TAX -- TRUST FUND ACCOUNTABILITY ASSESSMENT -- PUBLIC WORKS CONTRACT -- RETAINAGE -- APPLICATION OF. Retainage paid the Department from a public works contract must first be applied to tax, interest, and penalty liability arising directly out of the project for which it was withheld before it may be used for other state tax arrearages.

SALES TAX -- TRUST FUND ACCOUNTABILITY ASSESSMENT -- PENALTIES AND INTEREST. A trust fund accountability assessment may include penalties and interest that accrue on the tax debt of a defunct corporation.

B&O TAX -- SALES/USE TAX -- SPECULATIVE BUILDER -- LICENSING OF. For excise tax purposes, ones status as a speculative builder is not determined by whether that person has been conferred a contractors license by the Department of Licensing.

CONSTRUCTION MANAGEMENT SERVICES -- CLASSIFIED AS RETAIL SALES. Construction management services are classified as retail when those services are provided in respect to construction, which means that construction of new or existing buildings or other structures either has begun or the consumer has obligated itself to build them or to have them built.

SERVICES RELATED TO CONSTRUCTION -- EXAMPLE IN RULE. An example or illustration in an administrative rule is a model to help taxpayers understand the application of a rule. Rule 170 does not require services to be contained in a construction contract in order for those services to be "retail sales".

RETAIL SALES TAX RESALE CERTIFICATES CONSTRUCTION: When a contractors customers use the contractors resale certificate to purchase materials and/or labor for use in home construction and pay the vendors directly, the contractor is liable for retail sales tax due on the transactions if the customers fail to pay retail sales tax to the vendors. Such transactions are considered retail sales of materials and/or labor by the contractor to the customers because of the use of the resale certificate.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT ARCHITECTURAL SERVICES. In addition to services that involve the actual physical construction of buildings and structures, services in respect to such constructing activity are subject to retail sales tax and retailing B&O tax. In general, services that are directly related to or in direct reference to the activity of constructing a building constitute services in respect to constructing activity.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT ARCHITECTURAL SERVICES. Services that involve what are commonly identified as contract administration services under standard AIA contracts, without more, do not constitute services in respect to constructing.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT ARCHITECTURAL SERVICES. In general, supervisory, management, or other services that direct or control how or when constructing activity take place are directly related to the activity of constructing buildings and structures. In contrast, most architectural, administration, inspection, or other related services--which may be related to the general process of construction--are not directly related to the physical activity of constructing itself.

RETAIL SALES TAX -- WHOLESALING -- SERVICES RENDERED IN RESPECT TO CONSTRUCTION -- PUBLIC ROAD CONSTRUCTION -- GOVERNMENT CONTRACTING. A person hired for his skill, knowledge, and expertise in operating a water truck to compact soils at construction sites is rendering services in respect to construction. The person is not merely renting equipment with an operator to perform work under the specific direction of a lessee.

RETAIL SALES TAX B&O TAX SPECULATIVE BUILDER TITLE SECURITY. A speculative builder means a person who constructs buildings for sale on land owned by the builder. To determine ownership of the land, record title is only one factor to consider. Legal title to secure financing may be considered a mortgage. Det. No 97-189, 17 WTD 148 (1997) and Det. No. 94-154, 15 WTD 46 (1994).

RETAIL SALES TAX -- SPECULATIVE BUILDER JOINT VENTURE PROFIT AND LOSS. Joint ventures can be taxed as speculative builders provided the parties meet the joint venture requirements including the right to share profits and losses as well as control. If one party agrees to be liable to the other party for all of the losses, they are not sharing losses, and not operating as a joint venture.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT CONSULTING SERVICES. In general, supervisory, management, or other services that direct or control how or when constructing activity take place are directly related to the activity of constructing buildings and structures. In contrast, most design, contract administration, inspection, accounting, educational, or other related services--which may be related to the general process of construction--are not directly related to the physical activity of constructing itself.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT CONSULTING SERVICES. Services that solely involve consulting with and educating owners on acting as their own general contractors do not constitute services in respect to constructing.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT CONSULTING SERVICES. In addition to services that involve the actual physical construction of buildings and structures, services in respect to such constructing activity are subject to retail sales tax and retailing B&O tax. In general, services that are directly related to or in direct reference to the activity of constructing a building constitute services in respect to constructing activity.

COST PLUS CONSTRUCTION CONTRACTS INCLUDABLE EXPENSES Where the entity providing the cost plus services is liable for an expense, that amount is included in the total project cost even if the expense is paid by another individual.

RETAILING B&O TAX VS. PUBLIC ROAD CONSTRUCTION B&O TAX SERVICES IN RESPECT TO CONSTRUCTING -- WATER DRAINAGE SYSTEMS -- Contractor who installs lines that collect water from downspouts on houses to drain the downspouts into sewer catch basins properly taxed under the retailing classification. Such lines handle runoff from roofs, not the streets and roads in which the lines are constructed.

RETAIL SALES TAX RETAILING B&O TAX FULL CONTRACT PRICE REAL ESTATE COMMISSIONS. A real estate commission paid by a homebuyer to a real estate broker employed by the contractor/seller is included in the full contract price of the house, and seller is liable for retail sales tax and retailing B&O tax on the commission amount unless the seller can show it was not obligated to pay the commission.

DEFERRED RETAIL SALES/USE TAX -- SERVICES NOT RENDERED IN RESPECT TO CONSTRUCTION. An independent contractor hired to manage an office for a construction company was not rendering services in respect to construction because her services did not directly relate to constructing. For example, she did not work at construction sites and did not perform construction activities. Further, she was not responsible for the performance of the constructing; i.e. she did not supervise or direct the constructing. Therefore, payments for her services were not subject to deferred retail sales tax/use tax.

SERVICES IN RESPECT TO CONSTRUCTING ADMINISTRATIVE SERVICES ARCHITECTURAL SERVICES. The review of the progress of capital upgrades is not a service in respect to constructing where the service is included within the overall management service provided because the review was not the predominant activity performed under the management services contract.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT. In addition to services that involve the actual physical construction of buildings and structures, services in respect to such constructing activity are subject to retail sales tax and retailing B&O tax. To be rendered in respect to construction the services must directly relate to the constructing, the provider of the services must be responsible for the performance of the constructing, and the predominant activity must involve services in respect to constructing.

In this case, although some of the projects involved administrative and other services not directly related to the construction, the most significant, important, or predominant activities involved the supervision or direction of the constructing activity. Because the predominant activities were directly related to the constructing activity and the taxpayers agent was responsible for the performance, services rendered on those projects were subject to retail sales tax.

RETAIL SALES TAX -- RETAILING B&O TAX JOINT VENTURE SPECULATIVE BUILDING. Taxpayers and their co-venturers formed joint ventures because they acquired and contributed land, money, skill, knowledge, and experience to their home-building enterprises while sharing profits and losses without receiving absolute payments for services they respectively rendered. Consequently, retail sales tax and retailing B&O tax were not due on the full contract prices of houses the taxpayers and their co-venturers sold because they were speculative builders.

RETAIL SALES TAX -- RETAILING B&O TAX -- SERVICES IN RESPECT TO CONSTRUCTING -- CONSTRUCTION MANAGEMENT FOR COMMERCIAL TENANTS. Construction management services provided to tenants in commercial construction projects, that are limited to review, inspection, advising the tenant, and acting as a facilitator in promoting the tenants interests, and do not include performance, supervision, direction, or responsibility for the performance of the constructing activities, do not constitute services in respect to constructing.

RETAILING VS. SERVICE SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT SERVICES. Where the taxpayers construction management services were necessary for the timely completion of the renovation but did not entail the direction or management of the actual construction process or actual building activities, the taxpayer was not responsible for constructing. As such, the taxpayers gross income was subject to service, rather than retailing B&O tax

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING DEVELOPMENT FEES FUNCTIONALLY INTEGRATED. When a taxpayer agrees from a construction projects inception that the taxpayer will develop and construct the project, the development activities are considered functionally integrated with the construction activities. Under such circumstances, the fees from the development and construction phases of the project are subject to retail sales and retailing B&O taxes.

RETAIL SALES TAX RETAILING B&O TAX SERVICES IN RESPECT TO CONSTRUCTING CONSTRUCTION MANAGEMENT. In addition to services that involve the actual physical construction of buildings and structures, services in respect to such constructing activity are subject to retail sales tax and retailing B&O tax.

RETAILING B & O -- RETAIL SALES TAX -- PRIME CONTRACTOR -- SUBCHAPTER S CORPORATION -- CONSTRUCTION ON LAND OWNED BY CORPORATION'S SOLE SHAREHOLDER -- ETB 436. Construction by a corporation on land owned separately by its sole shareholder is a sale at retail, not speculative building.

RETAIL SALES TAX -- SPECULATIVE BUILDER -- NO PROFIT -- FORECLOSURE -- DEPRESSED ECONOMY. There is no provision in the law for a speculative builder's exemption from the retail sales tax merely because the building which has been constructed is not resold as planned, because the investment does not yield a profit, or because the project is an entire loss because of bank foreclosure.

SALES TAX -- CONTRACTOR -- SPECULATIVE BUILDER -- ALLOCATION -- CLARIFIED. When speculative builder sells or contracts to sell property upon which he is presently constructing a building, the rule provides that retail sales tax applies to "that portion of the sales price allocable to construction done after the agreement." "Allocable" does not mean "as may be allocated by the parties in their agreement," but refers to the portion of the sales price actually related to construction that occurs after the agreement

RETAIL SALES TAX -- CONSTRUCTION CONTRACT -- SETTLEMENT- AGREEMENT -- MEASURE OF TAX -- INTEREST. Interest paid to a contractor because of late payments is not included as part of the selling price subject to retail sales tax. Where settlement award did not show how much, if any, of an award was for interest, retail sales tax due on total amount as part of the contract costs.

RETAIL SALES TAX -- CONSTRUCTION CONTRACT -- SETTLEMENT- AGREEMENT -- MEASURE OF TAX. Retail sales tax due on lump-sum settlement award paid to contractor in contract dispute. Taxable amount reduced by amount of sales tax separately state on unpaid invoices.

JOINT VENTURE -- TAX LIABILITY OF EACH PARTY TO JOINT VENTURE. Joint venturers are jointly and severally liable for everything chargeable to the joint venture.

CONSTRUCTION CONTRACT -- JOINT VENTURE -- FACTS INDICATING. The following facts indicated the taxpayer and another party constructed a house as a joint venture rather than as "prime" and "sub" contractors or as an employer and a employee: 1) both parties had met with the architect and owner to discuss the plans; 2) both of the parties' names were on the contract itself; 3) draws from the bank had both of the parties' names on them; and 4) the parties split the profit.

CONSTRUCTION CONTRACT -- JOINT VENTURE -- TAX CONSEQUENCES OF.

CONSTRUCTION CONTRACT -- JOINT VENTURE -- REGISTRATION OF CONTRACTORS -- ETB 46. A joint venture is deemed registered under chapter 18.27 RCW if any one of the parties to the joint venture is registered.

JOINT VENTURE -- NATURE OF RELATIONSHIP. A joint venture is in the nature of a partnership, and the rights, duties, and liabilities of the parties are generally tested by the same rules. ( Barrington v. Murry cited.)

USE TAX PUBLIC ROAD CONSTRUCTION vs. CUSTOM CONSTRUCTION DUTY TO KEEP AND PRESERVE RECORDS. Whether a contractor/taxpayer who performed work on road projects was engaged in custom construction or in public road construction depended on whether the road projects were done on state-owned land or on land owned by a city, county, or other political subdivision of the state or the federal government. The taxpayer failed to keep and preserve records to support his claim that the road projects were custom construction.

JOINT VENTURE TAX LIABILITY OF EACH PARTY TO JOINT VENTURE. Members of a joint venture engaged in speculative construction are jointly and separately liable for payment of retail sales tax on obligations of the joint venture, and the fact that one member managed the project and ordered materials and subcontract work in that members name does not relieve the other members of liability for unpaid sales tax on the materials and subcontracts when the managing member incurred the third-party expenses in the capacity of a partner.

[2] RULE 170, RULE 223; RCW 82.04.250, RCW 82.04.050, RCW 82.08.020; ETA 276: RETAIL SALES TAX RETAILING B&O TAX MEASURE OF TAX --PRIME CONTRACTOR. Payment by a consumer of a contractors liability is includable in the contractors tax measure. When a contractor rents certain equipment, the contractor is acting as a consumer and is personally liable for retail sales tax on the equipment rental. However, a prime contractors purchase of labor and materials to construct a building for a consumer is a purchase for resale, and retail sales tax is not due on those purchases.

[1] RULE 170; RCW 82.04.250, RCW 82.04.050, RCW 82.08.020: RETAIL SALES TAX RETAILING B&O TAX PRIME CONTRACTOR CONSTRUCTION UPON LAND OWNED BY A CORPORATE OFFICER. Where a construction company performed construction services on land owned by its corporate office, it was deemed a prime contractor.

RETAIL SALES TAX RETAILING B&O TAX MEASURE OF TAX --PRIME CONTRACTOR FORM OVER SUBSTANCE. Payment by a consumer of a contractors liability is includable in the contractors tax measure. Taxpayers are free to choose the form of their business relationship, and where their conduct is consistent with that form, there is no reason to disregard the form chosen by the taxpayers.

RETAIL SALES TAX RETAILING B&O TAX PRIME CONTRACTOR CONSTRUCTION UPON LAND OWNED BY A CORPORATE OFFICER. Where a construction company performs construction services on land owned by its corporate office, it is deemed a prime contractor.

PARTNERSHIP ABILITY OF A GENERAL PARTNER TO BIND THE PARTNERSHIP. The action of a general partner who enters into an agreement within the scope of the partnerships business is the action of the partnership itself, binding the partnership, even if the general partner executes the agreement in his own name.

MANUFACTURING B&O TAX USE TAX STEVEDORING COMPANY DOCKSIDE RAMP. Where a stevedoring company that leases a port facility adjacent to a navigable body of water builds a large ramp on the leased property, moves the ramp to the waters edge, and attaches it to the realty, it has not engaged in a taxable manufacturing activity. Use tax is due only on the materials used to construct the ramp.

RETAIL SALES TAX LIMITED LIABILITY COMPANY (LLC) -- GENERAL CONTRACTOR LIABILITY ON LLC PAYMENTS. A general contractor who is a member of a limited liability company (LLC) and who seeks to avoid taxation on a payment it receives from the LLC must establish that the payment was a profit-sharing payment, a pass-through payment deductible in accordance with WAC 458-20-111 (Rule 111), or is otherwise exempt.

RETAILING B&O TAX RETAIL SALES TAX CONSTRUCTION CONTRACT DESIGN FEES. A contract for services, such as design work, will be combined with a construction contract and taxed as a single activity if at the time of the first contract it was contemplated by the parties that the same person would be awarded both contracts.

RCW 82.04.051: RETAIL SALES TAX CONSTRUCTION MANAGEMENT SERVICES SERVICES RENDERED IN RESPECT TO CONSTRUCTION. To be rendered in respect to construction activities, the services themselves must directly relate to the constructing and the provider of the services must be responsible for the performance of the constructing.

RCW 82.04.220: B&O TAX -- GROSS INCOME OF THE BUSINESS PARTNERSHIP DISTRIBUTION. Partners need not pay tax on payments received from the partnership as distribution of contributions or profits. Payments partners receive for providing services are subject to tax. Det. No. 90-74, 9 WTD 143 (1993).

RETAIL SALES TAX CONSTRUCTION MANAGEMENT EARNED INCOME v. PARTNERSHIP DISTRIBUTION INTERPRETATION OF A PARTNERSHIP AGREEMENT. Extrinsic evidence may be considered only to elucidate the meaning of the words of a contract, and not for the purpose of showing intention independent of the document. In re Marriage of Scweitzer, 132 Wash.2d 318, 937 P.2d 1062 (1997).

RETAIL SALES TAX -- DEFINITION OF RETAIL SALE -- JANITORIAL SERVICES -- CONSTRUCTION CLEAN-UP. Cleaning services billed to a speculative builder for re-cleans of finished homes held for sale were janitorial services and not subject to retail sales tax.

B&O TAX AND RETAIL SALES TAX CONSTRUCTION AND DESIGN BUSINESS SERVICES RENDERED IN RESPECT TO CONSTRUCTION. A determination of whether services were rendered in respect to construction is made on a case by case basis and requires looking at the six factors enumerated in Det No. 88-39, 5 WTD 125 (1988).

B&O TAX -- EXCLUSION -- ON-SITE PERSONNEL HIRED BY PROPERTY MANAGEMENT COMPANIES. The RCW 82.04.394 exclusion from the B&O tax for amounts received by property management companies and used to pay on-site personnel is not ambiguous and applies only when the on-site personnel primarily perform services at a single owner's property.

RETAIL SALES TAX LIABILITY FOR TEMPORARY WORKERS SPECULATIVE BUILDERS. The taxpayers, speculative builders, are liable for retail sales tax with respect to amounts paid for temporary workers because the workers performed labor classified as retailing.

B&O TAX -- RETAIL SALES TAX -- DEFAULT BY PRIME CONTRACTOR -- DIRECT PAYMENT BY CUSTOMER TO SUBCONTRACTOR. If a customer invokes a right to pay subcontractors directly in the event of insolvency by the prime contractor pursuant to terms in the customers contract with the prime, any payments made to the subcontractors on behalf of the prime remain wholesale sales from the subcontractors to the prime.

CUSTOM CONSTRUCTION -- SPECULATIVE BUILDER INDICIA OF OWNERSHIP OF LAND. The issue of ownership of property is determined by an analysis more rigorous than a simple search of record title. Looking at all the attributes of ownership contained in Rule 170(2)(9) we conclude that Taxpayer 1 performed construction activities on real property owned by Taxpayer 2 and thus acted as a custom contractor.

RETAIL SALES TAX -- PRIME CONTRACTOR -- CONSTRUCTION -- GROSS SALES PRICE. Lacking better evidence of a prime contractor's construction charges, the measure of sales tax is the gross sales price of the property less non construction costs (land and real estate selling costs).

RETAIL SALES TAX -- SPECULATIVE BUILDER -- PRIME CONTRACTOR -- CONSTRUCTION -- TAX PAID AT SOURCE. Contractors may deduct the construction purchases on which retail sales tax had been paid when they report the resale of those purchases.

RETAIL SALES TAX -- SPECULATIVE BUILDER -- CONSTRUCTION -- TITLE. The holder of record title is one of the factors considered in conjunction with other the attributes of ownership in identifying the owner of real property in construction cases.

RETAILING B&O TAX -- RETAIL SALES TAX -- JOINT VENTURER VS. PRIME CONTRACTOR. Where the preponderance of evidence showed that the parties did not intend to form a joint venture, the parties did not have equal control over the construction project, and the parties did not share project profits and losses, a joint venture was not created.

RCW 82.04.050(2)(b); RCW 82.08.020: RETAIL SALES TAX – RETAILING B&O TAX - PRIME CONTRACTOR. An LLC construction business (the taxpayer) was a prime contractor and not a speculative builder when it constructed residential buildings on land owned by other separately registered and organized LLCs, which were also owned by the taxpayer’s principals.

RULE 170; RCW 82.04.030, RCW 82.04.050: JOINT VENTURE – CUSTOM CONSTRUCTION. The taxpayers created joint ventures with various landowners in five of the seven agreements at issue, because those arrangements meet the five elements of a joint venture established by common law. The other two projects at issue are not joint ventures, because the contracts provided demonstrate a lack of intent to form a joint undertaking between the parties. In these two projects, the taxpayers are subject to retail sales tax because they built homes on land owned by their consumers.

B&O TAX -- SERVICE V. WHOLESALING -- CRANE SERVICES -- CONSTRUCTION PROJECT. Persons who rent or lease equipment with an operator for construction purposes to prime or subcontractors are deemed themselves to be subcontractors. A provider of a crane with an operator for construction projects is B&O taxable under Wholesaling. Use of the crane must be reasonably related to construction, but the actual installation/attachment requirement of previous determinations is rejected.

MISCELLANEOUS -- STATUTORY CONSTRUCTION -- "INCLUDES" -- MEANING. The term "includes" is a term of enlargement, not one of limitation. Band of Indians vs. State, 102 Wn.2d 1,682 P.2d 909 (1984).

Rule 170: SPECULATIVE BUILDER – ATTRIBUTES OF OWNERSHIP. A speculative builder is defined as a person who constructs buildings for sale or rental on land owned by the speculative builder. A construction company that builds on land purchased by the company’s shareholders, paid for by the shareholders with financing guaranteed personally by the shareholders is not a speculative builder, because it is building on land owned by its shareholders and not on land that it owns

RULE 170; RCW 82.08.020; RCW 82.04.070: RETAIL SALES TAX – RETAILING B&O TAX – GROSS INCOME – FULL CONTRACT PRICE - NO DEDUCTIONS: As the prime contractor, the taxpayer was required to report retailing B&O tax on the gross contract prices it charged its customers and collect retail sales tax from its customers measured by their full contract prices. There is no authority that allows the taxpayer to deduct amounts it paid the subcontractors from the gross or full contract prices it charged it customers when it reported its B&O tax and sales tax

RCW 82.08.050: RETAIL SALES TAX – CORPORATE DISREGARD – ALTER EGO DOCTRINE -- PROTECTIVE ASSESSMENT. Where a corporate entity is disregarded and shareholders are held liable for unpaid retail sales tax on purchases for which the corporate entity made payment, the Department may also issue a protective assessment for the unpaid taxes against the corporate entity.

RCW 82.08.050: RETAIL SALES TAX – CORPORATE DISREGARD – ALTER EGO DOCTRINE.

RCW 82.08.050: RETAIL SALES TAX – BUYER'S LIABILITY. When a retail sale is made and the retail sales tax is not paid by the buyer, the Department may proceed against the buyer or seller for payment of unpaid sales tax. The buyer is the person who is legally obligated to pay the seller in any transaction. Where a taxpayer retained construction and labor services and was identified as the purchaser on sales invoices, the taxpayer was the buyer and liable for payment of retail sales tax due on the sales even though a corporate entity made payment on the invoice.

RULE 170: SPECULATIVE BUILDER – ATTRIBUTES OF OWNERSHIP. A speculative builder is a person who constructs buildings or structures on land it owns. A contractor that builds homes on land owned by a subsidiary is not a speculative builder.

RULE 170; RCW 82.04.050, RCW 82.04.051: RETAIL SALE – SERVICES RENDERED IN RESPECT TO CONSTRUCTION. “Services rendered in respect to” construction means those services directly related to construction that are performed by a person who is responsible for the performance of the construction. Here, the evidence established that a developer was responsible for the performance of the construction.

RULE 102, RULE 170; RCW 82.08.130, RCW 82.04.050, RCW 82.32.070, RCW 82.32A.030: – RETAIL SALES TAX – TAX PAID AT SOURCE DEDUCTIONS – RECORDS TO SUPPORT SUCH DEDUCTIONS. Taxpayer failed to maintain and provide the Department with records to support tax paid at source deductions it claimed. In addition, contrary to law, taxpayer erroneously claimed tax paid at source deductions against the measure of retailing business and occupation (B&O) tax it reported to the Department.

RULE 170; RCW 82.04.051: RETAIL SALES TAX – CONSTRUCTION MANAGEMENT SERVICES – SERVICES RENDERED IN RESPECT TO CONSTRUCTING. A contractor who is on-site, full-time, and directs and supervises a remodeling project is engaged in “services rendered in respect to constructing” and its activities are subject to the retail sales tax.

RCW 82.04.050: B&O TAX – RETAIL SALES TAX – GOVERNMENT CONTRACTING. Taxpayer who was obligated to perform cleanup measure imposed by the Environmental Protection Agency (EPA) was not engaged in government contracting. The work was not done on land owned by the U.S. government, and the EPA was not the purchaser of the work. Instead, the work occurred on Taxpayer’s land and Taxpayer was the entity making the purchases and on whom the retail sales tax was assessed.

RCW 82.04.051: B&O TAX – RETAIL SALES TAX – SERVICES IN RESPECT TO CONSTRUCTION.

RULE 170; RCW 82.04.051: RETAIL SALE – SERVICES IN RESPECT TO CONSTRUCTION. To qualify as a “service rendered in respect to construction’ the service must: (1) be “directly related” to the constructing, and (2) the person who performs the services must be “responsible for the performance” of the constructing. Performance of services “directly related” to construction are not “services in respect to construction” if the taxpayer is “not responsible for the performance” of the construction.

RULE 170 – RETAIL SALES TAX – CUSTOM v. SPECULATIVE CONSTRUCTION – HOME BUILT ON LAND OWNED BY CORPORATE PRESIDENT. When a construction company performs construction upon land owned by its corporate president, it is constructing upon land owned by another person and is thus taxable as a seller, and not as a "speculative builder.”

RCW 82.04.050 AND RCW 82.04.190 -- RETAIL SALES TAX -- RETAILING B&O -- CONSTRUCTION CONTRACT -- SALE -- SPECULATIVE BUILDER -- RIGHT TO POSSESSION -- ETB 449. When a speculative builder sells or contracts to sell property upon which he is presently constructing a building, all construction done subsequent to the date of such sale or contract constitutes a retail sale. The "sale" does not take place when a purchase agreement is executed, but when the purchasers have the "right of possession" to the real property being constructed . (Riley Pleas v. State and Rigby v. State cited.)

RETAIL SALES TAX -- PRIME CONTRACTOR. Prime contractors are required to collect retail sales tax from consumers, measured by the full contract price.

CONSTRUCTION AND SERVICES CONTRACTS -- "IN RESPECT TO" CONSTRUCTION. When a construction and service (feasibility) contract are awarded to the same contractor, the Department looks to a number of factors to determine whether the service contract was "in respect to" construction and taxable as a retail sale.

B&O TAX--RETAIL SALES TAX--RE JOINT VENTURE -- CONSTRUCTION CONTRACT -- FORMATION -- TAX CONSEQUENCES. A joint venture was found not to exist where no evidence of its creation was presented. A subsequent written joint venture agreement was not given retroactive effect. The transactions were thus treated as custom construction rather than speculative building. The guidelines set forth in 2 WTD 411 (1987) applied.

SPECULATIVE BUILDERS -- RETAIL SALES TAX -- INDEPENDENT CONTRACTOR -- LABOR. Speculative builders must pay retail sales tax to independent contractors performing labor and services on speculative construction projects.

SPECULATIVE BUILDER -- INDEPENDENT CONTRACTOR -- LABOR AND SERVICES. Person performing labor and services on speculative building projects held to be an independent contractor and sales tax due on the charges therefore. The fact that the independent contractor was the builder's son found to be irrelevant since billings and payments to this individual were treated like any other independent contractor performing work on the projects.

SUBCONTRACTOR -- "IN RESPECT TO" -- "EJUSDEM GENERIS" -- " PILOT CAR" AND "FLAGGING". Using the "ejusdem generis" canon of construction, where general words follow specific enumerations, the general words will be construed as applying only to things of the same general class. Thus, taxpayer's activities of "flagging" and " pilot car" are not included in Rule 170 as services rendered in respect to construction.

RETAIL SALES TAX -- SPECULATIVE BUILDER -- WHAT CONSTITUTES -- JOINT VENTURERS -- ETB 275.08.170. A "speculative builder" means a person who constructs buildings for sale or rental upon real estate owned by the builder. The deeding of a half interest in land owned by one joint venturer to a co-venturer, a contractor, for security purposes only did not make the contractor or their joint venture the owner of the land.

RETAIL SALES TAX -- CONSTRUCTION CONTRACT --JOINT VENTURE -- FACTORS DETERMINING.

SALES TAX--SETTLEMENT -- CLAIM FOR WORK PERFORMED -- CLAIM FOR TORTUOUS DAMAGES. The taxpayer is liable for sales tax on the amount of a law suit settlement paid to a contractor. The contractor made a claim against the taxpayer for both extra work performed and destruction of business, a tort. There was no basis for determining that any portion of the settlement was attributable to tortuous damages. Therefore, the entire amount of the settlement was attributed to the claim for work performed and held subject to sales tax. Excise Bulletins 413.04.109 and 444.08.170.

RETAIL SALES TAX -- DEDUCTION -- CONTRACTOR -- BUILDING PERMIT FEES -- REIMBURSEMENT OF. The reimbursement of building permit fees to a construction contractor is not deductible from the measure of the contractor's retail sales tax absent a showing that the contractor has no primary or secondary liability for such fees.

Business and Occupation Tax--Deduction for Retainage. When, pursuant to RCW 60.28.010, a government retains a portion of the contract price owed a contractor as security for payment of subcontractors, materialmen, and taxes, the amount retained is not deducted from gross income for purposes of computing the contractor's business and occupation tax liability.

RETAIL SALES TAX -- SPECULATIVE BUILDER -- CUSTOM CONTRACTOR -- DISTINCTION. A speculative builder is one who builds homes for sale or rent on land it owns. A custom contractor is one who builds homes for consumers on their land.

RETAIL SALES TAX -- RECORDS -- SEPARATELY STATED -- PRESUMPTION. Retail sales taxes paid to a builder must have been separately stated on the invoice, and the invoice be made available to the Department, before a determination can be made that the tax has been paid. Otherwise, under the provisions of RCW 82.32.070 and 82.08.050, it is conclusively presumed that the tax has not been paid.

RETAIL SALE -- SERVICES RENDERED IN RESPECT TO CONSTRUCTION. Charges for designing testing and furnishing tangible personal property and charges for engineering services for monitoring the installation of the property by a third-party contractor are subject to retail sales tax where the charges are part of one contract awarded to the same contractor. Such services are rendered "in respect to" the construction. Washington Water Power Co. and Chicago Bridge & Iron cited.

RETAIL SALES TAX -- LEASE OF CRANE WITH OPERATOR -- RENTAL PAYMENTS. Inasmuch as the Court of Appeals has found that the rental of a crane or similar equipment with operator can be a lease just as is the rental such equipment without an operator, the former situation, if established, like the latter, is a retail sale and the rental payments are subject to sales tax.

RETAIL SALES TAX -- USE TAX -- BUILDING -- CONSTRUCTION OF -- BY OWNER. An owner of real property on which a building is constructed is a consumer and is required to pay retail sales tax to the building contractor.

CONTRACTING -- GENERAL CONTRACTOR -- AGENCY -- BOISE CASCADE -- REQUIREMENTS. The requirements of agency in tort and/or contract law are not the same as those necessary in tax. In order to be considered an agent for state tax purposes, a contractor must be " so assimilated" into the owner as to be considered one of its constituent parts. Boise Cascade Corp. v. State, 3 Wn.App. 78 (1970), review denied, 78 W.2d 995 (1970).

CONTRACTING -- SERVICES IN RESPECT TO CONSTRUCTION -- PROFESSIONAL SERVICES. When services are rendered in respect to construction, and arranged by the general contractor, they will be considered part of the contract and subject to retailing B&O and retail sales tax, even though performed before the contract was signed.

USE TAX -- SUBCONTRACTORS -- CONSUMABLE SUPPLIES -- CONCRETE FORM COATING. Concrete form coating found to be consumed in the process of curing concrete after it was poured in the coated forms and not a component part of the finished structure.

CONSTRUCTION -- ACTING AS TRUSTEE FOR BUYER. A transfer between a contractor and a buyer is not the "mechanical performance of the obligation" of a trust, it is a retail sale under the law of the state of Washington. Senfour Investment Company v. King County, 66 Wn.2d 67, 401 P.2d 319 (1965).

RETAIL SALES TAX--ENGINEERING SERVICES--SERVICES RENDERED IN RESPECT TO CONSTRUCTION--SUPERVISORY SERVICES. Engineering services rendered in Washington in respect to the installation of turbines, even though the services were only supervisory services, are sufficient to subject the entire contract charge to retailing B&O tax. Accord: Det. No. 88-239, __ WTD __, (1988).

RETAIL SALES TAX -- LEASE OF CRANE WITH OPERATOR -- RENTAL PAYMENTS. Inasmuch as the Court of Appeals has found that the rental of a crane or similar equipment with operator can be a lease just as is the rental of such equipment without an operator, the former situation, if established, like the latter, is a retail sale and the rental payments are subject to sales tax.

RETAIL SALES TAX -- TANGIBLE PERSONAL PROPERTY -- SPECULATIVE BUILDER -- PURCHASE FOR RESALE -- TURN KEY PROJECT. Retail sales or use tax does not apply to the purchases of tangible personal property, as furniture, equipment, etc., purchased by a speculative builder as part of a "turn key" project, if the property was purchased solely for resale in the regular course of business without intervening use by the builder.

RETAILING B&O TAX -- RETAIL SALES TAX/USE TAX -- CONSTRUCTION -- ACTING AS A PARTNER OR PRIME CONTRACTOR. When taxpayer supervises construction, etc., on a project owned by a partnership of which it is a member, it is acting as a partner when it receives no compensation for its efforts other than its partner share of the profits. Where the taxpayer receives an amount for its efforts otherwise, it is subject to tax as would be any other independent provider of materials or services. Accords: 87-254, 3 WTD 431 (1987); ETB 73.

RETAILING B&O TAX--WHOLESALING B&O TAX--PRIME CONTRACTOR--SUBCONTRACTOR--PRINCIPAL/ AGENCY RELATIONSHIP--JOINT VENTURE. Where one entity bids and wins a construction contract and retains another entity to perform the work, a contractor/subcontractor relationship is established with Retailing/Wholesaling B&O tax consequences respectfully. Principal/agency relationship between the parties or joint venture status not found to be present.

B&O TAX -- GOVERNMENT CONTRACTING -- MAINTENANCE OF LAWNS AND GROUNDS -- GOLF COURSE. A person who mows and waters the grass and otherwise maintains the grounds and golf course at a U.S. Army base is a landscape gardener B&O taxable under the Service category. (Changed by 1993 Legislation)