Summary of Washington State and Local Tax Updates Due to Coronavirus

The Washington State Department of Revenue and some Washington city tax authorities have recently issued guidance on taxpayer relief related to the COVID-19 pandemic. The updates are evolving quickly in response to the crisis, and we encourage you to periodically check if additional relief may be available. Below is a summary of the guidance issued as of March 27 from the Department of Revenue and the Seattle, Bellevue, and Tacoma tax authorities.

Washington State

The following is a summary of the Department of Revenue guidance. Although it is implied there will be no penalties where an extension is granted (or automatically provided),

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Changes to Washington’s Real Estate Excise Tax Could Result in Surprise Tax Liabilities from Controlling Interest Transfers

Updated 9/18/2019, 9:15 PM

What Changed?

The Washington legislature recently enacted legislation that dramatically changes aspects of the state’s Real Estate Excise Tax (REET). Unless real property is classified as timberland or agricultural land, the REET rate structure will be changing on January 1, 2020. The current flat rate of 1.28% for the state portion of the REET will be replaced with a graduated rate.

The new rates will be:

  • 1.1% on the first $500,000 of the selling price;
  • 1.28% on the portion of the selling price between $500,000 and $1.5 million;
  •  2.75% on the portion of the selling price between $1.5 million and $3 million;

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Washington Legislature Enacts B&O Tax Rate Increase and Real Estate Excise Tax Changes

The 2019 Washington legislative session has ended, but it was a busy year in terms of tax related bills. The enacted legislation includes business and occupation (“B&O”) tax increases on certain service businesses and financial institutions, changes to the international investment management B&O tax classification, and a move to a graduated real estate excise tax.

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Complying with Consumer Use Tax Notifications

Recently, you may have received a notice from out-of-state sellers identifying various online purchases for which you were not charged sales tax.

Here is what you need to know concerning the notice:

A change in state tax law, effective January 1, 2018, requires out-of-state sellers and marketplace facilitators (e.g., Amazon.com) with sales of $10,000 or more to Washington consumers to send annual notices to customers. These notices must detail any taxable purchases made in the preceding calendar year where Washington sales tax was not collected. This information is also required to be sent to the Department of Revenue.

The notice will direct the recipient to the Department of Revenue’s website to file and pay the required use taxes due on the purchase of taxable items.

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When is a Grant Subject to B&O Tax in Washington? New FASB Guidance May be Helpful in Determining

Earlier this year, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-08, Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. In issuing the guidance, the FASB noted that many not-for-profit organizations have trouble characterizing grants and similar agreements as either exchange contracts or as contributions for purposes of revenue recognition in their financial statements. Several aspects of the new guidance involve considerations that bear a striking similarity to those used when evaluating the taxability of grants and similar contracts for Washington business and occupation (“B&O”) tax purposes.

Grants and the B&O Tax

As noted in a previous article,

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