Weekly Round-Up: Welcome to Washington State (Even if You Never Bother to Visit)


State and local tax lawyers are familiar with the physical presence nexus standard. However, with certain taxpayers, that familiarity is useless under Washington's new economic nexus standards because tax may apply if the seller's customers benefit in Washington from the purchased services, and the seller's Washington receipts exceed a threshold amount, Garry G. Fujita, of  Davis Wright Tremaine, explains in this week's issue of the Weekly State Tax Report.

These new standards became effective June 1, 2010, in an omnibus tax bill that adopted economic nexus for "targeted" businesses-service businesses, financial businesses, and businesses that receive royalty and similar income, Fujita writes.

According to the House Finance chair, the law will "level the playing field for Washington-based companies" by extending Washington's business and occupation tax to out-of-state companies, Fujita states. This would result in relief of the tax burden on local businesses and make the out-of-state businesses pay "their fair share" on the business conducted in Washington. 

However, economic nexus would not shift the tax burden as intended if the state continued to apply the well-seasoned cost apportionment formula.

So, the Legislature adopted the single sales factor apportionment to export gross receipts by Washington taxpayers and import gross receipts from out-of-state taxpayers. Taxpayers familiar with net income tax have seen a similar approach; some states might double weight the sales factor (e.g., California) or take an "all in" approach like Washington, relying only on the single sales factor (e.g., Oregon).

For an in-depth look at these new developments in Washington, check out Fujita's complete article in this week's issue of the Weekly State Tax Report.

In other developments…

Connecticut Revenue Commissioner admits that "Amazon" Tax has raised zero revenue , by Joseph Henchman of the Tax Foundation.

Unclaimed Property Advisory: The Delaware Secretary of State Promulgates Important Unclaimed Property VDA Guidance , by Alston & Bird LLP.

Kentucky Court of Appeals Rules Taxpayer's Late-Filed Tax Credit Application Must Be Accepted , Sutherland SALT reports.

Compiled by Priya D. Nair
Follow us on Twitter at: @SALTax
Join BNA's State Tax Group on LinkedIn