By Chelsea Marmor and Open Weaver Banks

The Administrative Review and Hearings Division at the Washington Department of Revenue (the Division) determined that administrative activities qualify as business activities for purposes of applying Washington’s throw-out rule under the Washington business and occupation (B&O) tax. The taxpayer, a single member LLC, performed airplane certifications on aircraft worldwide. While the certifications were performed outside of Washington, the taxpayer’s member took calls, arranged scheduling, and managed travel and billing from his home office in Washington. Washington’s throw-out rule excludes gross income from the denominator of the receipts factor if at least some of the activity that generated the gross income was performed in Washington. The taxpayer argued that the activities that generated the gross income were the certifications performed outside of Washington and not the administrative activities performed at the member’s home office. The Division disagreed, determining that the taxpayer performed activities in Washington in support of the taxpayer’s business contracts and, therefore, the throw-out rule exclusion applied to such gross income. Det. No. 16-0226, 36 WTD 344.