Washington Tax Decisions

Two [out of state] nonprofit hospitals seek a refund of business and occupation (B&O) tax paid on . . . Medicaid payments and . . . Children’s Health Insurance Program (CHIP) for medical care provided in Washington. They also seek a refund of B&O tax on medical services that they provided to their employees covered by the hospitals’ self-insurance plans. Because no exclusion applies to payments from . . . Medicaid and CHIP, and the medical services provided to the hospitals’ employees were taxable activities, we deny their petitions.

Two out-of-state companies providing extended warranties to vehicle purchasers in Washington protest a letter ruling that their sales of the warranties were subject to business and occupation (B&O) tax. One of the entities also appeals an assessment of B&O tax on these sales. They claim that their receipts were gross premiums in respect to insurance business upon which a premiums tax was paid. . . . Petitions denied.

A financing company (“Taxpayer”) petitioned for waiver of delinquent and substantial underpayment penalties in an Audit assessment claiming that the late payment of tax resulted from Taxpayer’s reliance on incorrect written instructions contained in a Department of Revenue (the “Department”) form. We deny the petition.

A Taxpayer, acting as a subcontractor on a federal government dock building contract, incorrectly used its reseller permit when making purchases of materials. As a result it did not pay any retail sales tax on this project, and it also did not subsequently pay any use tax. Because the Taxpayer’s basis for requesting a waiver of the reseller permit misuse penalty was that it was unaware of its proper usage in this type of contract, there is no basis under RCW 82.32.291 for waiver of the penalty.

A hospital appeals the assessment of use tax and/or deferred sales tax on purchases of various medical equipment and other medical items in cases where it had not paid retail sales tax at the time of purchase from the vendors. The Taxpayer asserts that a list of 45 purchases represent items that are tax exempt under various statutes for medical items, or exempt as a service. As the Taxpayer’s claims of exemption are mainly based on statutes that were amended before the audit period, and an outdated administrative rule, the appeal is denied except as to eight specified items.

An out-of-state student loan servicer (Taxpayer) appeals a tax assessment, contending that because it has no physical presence and does not solicit business to establish a market in Washington, it has no nexus with Washington. Taxpayer further contends that the income it received from loan lenders for “servicing” loans cannot constitute “receipts” from Washington. We conclude Taxpayer has adequate nexus with Washington under the Commerce Clause and the Due Process Clause of the U.S. Constitution, and that a portion of Taxpayer’s income from lenders may constitute receipts attributable to Washington, thereby subjecting Taxpayer to taxation in Washington. Taxpayer’s petition is denied.

Taxpayer operates a consulting service that acts as an owner’s representative during the design and construction process of large commercial projects. Taxpayer requested a ruling affirming that it provided a professional service subject to the service and other activities B&O tax and the income could be apportioned. Taxpayer protested the Department’s ruling that it provided services “in respect to construction” that was not apportionable and subject to either the wholesaling B&O tax or retailing B&O and retail sales tax classifications. We grant Taxpayer’s petition.

A taxpayer, who applied for a Voluntary Disclosure Agreement (VDA), protests the imposition of late payment penalties imposed after the Department of Revenue (Department) [cancelled] the VDA.