Apportionment: Sales factor

The Washington Department of Revenue Appeals Division ruled that for B&O apportionment purposes under the “services and other activities” tax classification, an out-of-state automated teller machine (ATM) card transaction processor’s receipts are properly sourced to the location of its financial institution customers’ ATM transaction activities. The Appeals Division found that location to be the location of an ATM machine where an individual cardholder “swiped” his/her ATM card and the ATM transaction was completed, and not the customer’s billing address. The Appeals Division concluded that the Department of Revenue’s method of attributing the benefit of the taxpayer’s service to the location of the taxpayer’s customers’ activities did not violate the Commerce Clause and Due Process Clause of the US Constitution and was a reasonable method under Washington law. Finally, the Appeals Division ruled that the card service fees were not royalties because they were not related to an intangible right such as a license, a trademark or a similar item, but rather were charged for access to a payment system that was vital to the business activities of the taxpayer’s customers. (Det. No. 16-0026, 37 WTD 201 (2018)).