Washington B&O Tax Alert – Annual B&O Tax Apportionment Reconciliation Due October 31st

For business and occupation (B&O) tax purposes, taxpayers earning apportionable revenue calculate their taxable Washington revenue by applying a “receipts factor” apportionment methodology. Taxpayers computing B&O tax in this manner are required to complete and file an Annual Reconciliation of Apportionable Income form with the Department of Revenue.

When is the Annual Reconciliation of Apportionable Income Form Due?

The form must be submitted to the Department of Revenue by October 31st of each year. Failure to timely file the reconciliation form may result in penalties.

Who Must File?

In-state taxpayers that earn income from apportionable business activities performed for customers located inside and outside of Washington may apportion such revenue to Washington for B&O tax purposes.

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Common State and Local Tax Issues for Hospitals

Overview

Healthcare organizations across the United States face unique complexities regarding state taxes when doing business in Washington. Unlike most states, Washington does not impose an income tax on businesses. Businesses are, however, subject to the Washington business and occupation (B&O) tax. The B&O tax is a tax on gross receipts for the privilege of doing business in the state. The tax is imposed on every legal entity with activities in Washington. Washington does not exempt nonprofits from the B&O tax, nor does it exempt them from sales and use tax as many states do. As a result, nonprofit healthcare, religious, and other organizations in Washington are generally subject to the same taxes as for-profit businesses.

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Washington B&O Tax Alert: Annual B&O Tax Apportionment Reconciliation Due October 31

Taxpayers who do business both inside and outside of the State of Washington, and who earn revenue from performing services or licensing intangibles, are now required to complete an Annual B&O Tax “Reconciliation of Apportionable Income.”

The form must be submitted to the Department of Revenue by October 31st of each year. Failing to file the reconciliation may result in penalties.

The Department of Revenue allows businesses to use the prior year’s apportionment factor for reporting current year liabilities. This simplifies the business’ reporting method, but requires the business perform a true up at the end of the year. The true up helps determine the current year’s factor,

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A Rose by Any Other Name: When is a Grant Deductible for Washington B&O Tax Purposes?

By Bob Heller, JD, LLM

For those in the nonprofit community with activities in Washington, it often bears repeating that there is no general nonprofit exemption from the State’s business and occupation (“B&O”) tax. The B&O tax is a tax imposed on gross revenue for the privilege of doing business. The State’s definition of “business” is very broad, such that it is hard to imagine any human endeavor that isn’t captured by the definition. Therefore, it is prudent for a nonprofit organization to consider all amounts it receives as taxable and then look for a specific exemption or deduction that may apply.

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Update: B&O traps for real property lessors

By Joe Haberzetle, JD, LLM

Note: the information in this article had additional updates on February 19, 2018. View the updated article here.

In our May 2014 article, we discussed the difficulties commercial and residential landlords encounter in determining the extent to which amounts received from tenants are subject to Washington B&O tax. While rental income is generally exempt from B&O tax, receipts from ancillary fees and services provided to tenants may not be exempt. A recently published Department of Revenue administrative appeal determination provides new insight on this thorny issue.

The question presented in the determination was whether promotional dues received by mall owners from their tenants were subject to B&O tax.

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