Article Archives: Grant Shaver

Last May, Clark Nuber published an overview of Washington state’s capital gains tax that takes effect on January 1, 2022. Shortly after the act was signed into law by Governor Inslee, a lawsuit was filed by the Freedom Foundation, represented by Seattle law firm Lane Powell. The lawsuit alleges the new tax violates the Washington State Constitution, as well as the Commerce Clause of the U.S. Constitution, by taxing the sale of capital held out-of-state by Washington residents.

A second lawsuit was filed on May 20, 2021 by former Washington state Attorney General Rob McKenna (now with the law firm Orrick Harrington &

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Posted by: Grant Shaver · Bob Heller in B&O Tax.

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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As detailed in the original article published by Clark Nuber, in July 2020, the Seattle City Council passed City Ordinance 126108 establishing a new Seattle payroll expense tax that takes effect January 1, 2021.

Updates to the Original Tax

Following the passage of that ordinance, the Department of Finance and Administrative Services (FAS) conducted a rulemaking process and then published a Director’s Rule for the payroll tax. As a part of that process, FAS staff received numerous questions from businesses about how to apply the payroll expense allocation methodology included in the ordinance, especially in situations where employees split their time between work in Seattle and work in other jurisdictions.

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Posted by: Grant Shaver · Bob Heller in B&O Tax.

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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On July 6, 2020, the Seattle City Council passed City Ordinance Number 126108, imposing a payroll expense tax on persons engaging in business in Seattle. The ordinance took effect at the start of 2021 and sunsets at the end of 2040.

The tax is imposed on businesses and organizations with $7 million or more of Seattle annual “payroll expense.” However, for the period of January 1, 2019 through December 31, 2023, non-profit healthcare entities are exempted from the tax on the payroll expense of employees with annual compensation below $400,000.

The following will discuss the non-profit healthcare entity exemption and provide examples of the payroll tax in action.

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Posted by: Grant Shaver in Multistate Tax.

The state and local tax complications around telecommuting are well recognized. However, these issues have taken on an increased prevalence and significance during the COVID-19 pandemic. Questions surrounding state income and sales tax nexus, employee income tax withholding, individual income tax filing requirements, unemployment, and workers’ compensation have only grown since governments began implementing mandatory stay-at-home orders.

Many companies are now facing situations like the following example: A recently hired employee was shipped a computer and a webcam so he could begin working from home. Although your company is located in Seattle, the new employee is still living in Chicago, since he was unable to move before the lockdown began.

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