Washington Tax Decisions

An out-of-state wholesaler protests the assessment of wholesaling B&O tax on sales of its goods to Washington retailers, claiming it lacked nexus with the State of Washington prior to September 2015. We conclude Taxpayer has nexus with Washington and B&O tax, interest, and penalties were properly assessed. Taxpayer’s petition is denied.

A vehicle restoration business disputes the denial of Interstate and Foreign Sales deductions, and resulting assessment of retail sales tax, on income it derived from progress payments paid for restoration work performed on vehicles for nonresidents. The vehicles were located in this state when the progress payments were made, prior to out-of-state delivery to nonresidents, or delivery of the vehicles to common or bona fide carriers consigned to out-of-state delivery to nonresidents. Because the payments were made for interstate sales to nonresidents, we conclude that the business is allowed to take the Interstate and Foreign Sales deduction for income derived from such progress payments during the audit period.

However, if Taxpayer is later unable to show that completed sales meet the statutory requirements to qualify for the nonresident sales tax exemption, Taxpayer will be liable for any unpaid sales tax on those sales. We grant the petition, and remand to the operating division for adjustments to the assessment

A dairy farm protests retail sales tax assessed on construction of a farmhouse, claiming the structure is exempt from retail sales tax under RCW 82.08.02745 as it houses agricultural employees. The petition is granted.

Two affiliated Washington state auto dealerships located in . . . County and . . . County, respectively, petition for adjustment of their assessments as follows: 1) both dealerships dispute the assessment of use tax and/or deferred sales tax on certain “service kits” they purchased, arguing that the purchase price of the kits can be bifurcated between retail and wholesale components and should not be taxed as bundled transactions; [and] 2) both dealerships dispute the assessment of use tax and/or deferred sales tax on car wash services they purchased, arguing that the purchases were for resale. . . . We grant the petitions as to the issue of the service kits and remand to the Audit Division, and deny the petitions as to the remaining issue.

A business that made purchases under the Rural County Investment Project Tax Deferral under RCW 82.60.070, but never finished the investment project, appeals assessments of use tax/deferred retail sales tax, interest, and penalties. The business asserts the . . . purchases of machinery and equipment [that initially] qualified for the M&E exemption in RCW 82.08.02565 and 82.12.02565, are subject to use tax measured by the items’ values once such items failed to qualify for the exemption. If liable for deferred retail sales tax, Taxpayer argues that WAC 458-20-24001A(108)(b)(i) requires a waiver of interest and penalties. Petition denied in part and granted in part.