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The Washington Supreme Court recently adopted the “primary purpose of the purchaser” test to determine whether a transaction should be broken down into its component parts or considered as a whole. In Qualcomm, Inc. v. Department of Revenue, the court overturned the state court of appeals and held that a taxpayer’s vehicle tracking service was subject to buiness and occupation (B&O) tax as an information service, and not as a network telephone service. The court reasoned that the purchaser was buying an integrated management tool that happened to include data transmission, not a telephone service coupled with tracking hardware and software.Continue Reading Keep on Truckin’: Washington Supreme Court Analyzes the Primary Purpose of Vehicle Tracking Service

In a recent decision by the Washington Supreme Court, the court found that a taxpayer had nexus in Washington for B&O tax purposes even though the taxpayer’s sole presence in the state consisted only of infrequent visits by sales employees to customers. Lamtec Corp. v. Dep’t of Revenue, Docket No. 83579-9 (Wash. Jan. 20, 2011) (en banc). In holding that Lamtec had B&O nexus in Washington, the court stated that, “to the extent there is a physical presence requirement, it can be satisfied by the presence of activities within the state” (emphasis added).

Lamtec, a manufacturer of insulation and vapor barrier in New Jersey, sold its products wholesale to customers via telephone. Lamtec had no facilities, offices, or employees located in Washington. However, several times a year, Lamtec sales employees visited customers in Washington to provide information regarding Lamtec products. The sales employees did not solicit sales. The Washington Department of Revenue (Department) asserted that Lamtec had nexus in Washington and issued an assessment to Lamtec for the period in which it was not registered.  Lamtec challenged the assessment.Continue Reading Washington Supreme Court Finds Nexus, Confuses the Rest of Us

The Washington legislature has enacted the state’s first-ever amnesty program. The legislation (L. 2010, SB6892) allows the Department of Revenue to waive most interest and penalties on delinquent state and local sales and use tax, state business and occupation (B&O) taxes, and state public utility taxes. The amnesty program began on February 1, 2011, and will end on April 30, 2011.  Washington expects the program to generate $24.4 million for the state and $3.9 million for local governments.Continue Reading Washington B&O Amnesty: Does It Stink?

The Washington Court of Appeals has held that a statutory amendment barring the filing of 24 years of business and occupation (B&O) tax refund claims violates a taxpayer’s due process rights and is therefore unconstitutional. Tesoro Refining & Mktg. Co., No. 39417-1-II (Wash. Ct. App. Dec. 21, 2010). Tesoro Refining and Marketing Company (Tesoro), a Delaware corporation, operates an oil refinery in Washington. Tesoro manufactures and sells bunker fuel (a residual fuel oil that remains after gasoline and distillate fuel are extracted from crude oil) primarily to vessels engaged in foreign commerce for consumption outside the territorial waters of the United States. 

Prior to 2009, Washington law permitted a company that manufactured and sold a qualifying fuel (such as bunker fuel) to deduct amounts derived from the sale of the fuel against its manufacturing B&O tax liability. Tesoro did not take the deduction on its originally filed tax returns and later filed a refund claim for B&O taxes paid on bunker fuel manufactured and sold from 1999 to 2004. The Department of Revenue denied the refund claim after finding that the deduction applied only to the wholesaler and retailer B&O tax and not to the manufacturer B&O tax. Tesoro appealed the Department’s determination to the superior court. While the case was pending, in 2009, the Washington legislature amended the B&O tax deduction statute limiting the applicability of the B&O tax deduction to retailers and wholesalers of qualifying fuels prospectively and retroactively. The superior court held that Tesoro was not entitled to the deduction and granted summary judgment to the Department. Tesoro appealed the superior court’s decision.Continue Reading Washington Court of Appeals Holds Retroactive Application of a Statute Unconstitutional