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An out-of-state company has nexus with Washington and is subject to state business and occupation tax because independent contractor speakers who made presentations at live seminars in Washington for the company were representative third parties. Under Washington tax law, a "representative third party" includes an agent, independent contractor, or other representative of the taxpayer who provides services on behalf of the taxpayer directly to customers.  The volunteer speakers who made presentations at the live seminars in-state were providing services on the company’s behalf directly to the company’s customers.  As a result, the speakers created nexus in Washington for the company for business and occupation tax purposes. (Tax Determination No. 11-0292, Washington Department of Revenue, September 27, 2012)


An out-of-state mail order company was determined to have substantial nexus in Washington due to the activities of one of its in-state sister entities. The sister company sold gift cards to customers that could be used to place catalog orders from any of the 3 retail entities, distributed the out-of-state company’s catalogs, and assisted the out-of-state company’s customers with returns. When gift cards were sold, the cash was received by and recorded in the financial records of the selling entity. The cash receipts were subsequently transferred to the parent company. When the gift cards were redeemed, the sale was recorded in the financial records of the redeeming company. As a result, the in-state sister entity was facilitating sales on behalf of the out-of-state company. All of the in-state entity’s activities were significantly associated with the out-of-state company’s ability to establish or maintain a market for sales in Washington. In addition, the 3 retail entities shared significant management activities. The three retail subsidiaries and the parent continued to share the same offices, and shared the same Chief Executive Officer, Secretary, and President. Pursuant to a shared services agreement, the parent provided the following services to the retail subsidiaries: executive management, financial services, advertising services, management information system services, regulatory affairs, procurement of all inventory items which are resold by the subsidiaries, management of gift card program, and miscellaneous other services. Therefore, the out-of-state company has substantial nexus in Washington for purposes of retail sales tax and retail and wholesale business and occupation tax. (Tax Determination No. 10-0057, Washington Department of Revenue, December 2011)


The Washington Department of Revenue has determined that business and occupation tax is due on an out-of-state mail order pharmacy’s sales to an in-state affiliated insurance company’s benefit plan subscribers. The insurance company’s and/or its representatives distributed brochures containing information about the benefits of ordering from the pharmacy to subscribers, contained descriptive information and a link to the pharmacy’s’ website on its website, and enabled subscribers to order drugs from the pharmacy from within its secure site. Although the pharmacy claimed that the insurance company’s actions were done solely to establish and maintain a market for its health plans and that it is not performing services on behalf of the pharmacy at the pharmacy’s direction and control, as evidenced by a written agreement between the two corporations, the court determined that an agency or representative relationship was created based on the practice of the parties. Since the in-state affiliate acted as an agent or representative engaged in establishing or maintaining a market in Washington for the out-of-state pharmacy, the pharmacy was found to have substantial nexus with the State. (Tax Determination No. 08-015ER, Washington Department of Revenue, March 25, 2010)


An out-of-state manufacturer of vapor barriers and insulation facings established nexus in Washington state for business and occupation (B&O) tax purposes. Even though the company did not have an office in the state and made no direct sales, by having the company’s employees visit customers to establish and maintain a market was enough activity in Washington to create nexus. The court stated that the language of Quill, 504 U.S. 298 (1992), was limited to sales tax and did not support the company’s contention that physical presence was required to establish nexus in the context of B&O taxes. Furthermore, the activities of the company’s employees within Washington were significantly associated with its ability to establish and maintain its market, particularly in light of a business model that entailed maintaining a small number of high-volume customers long term. The Washington Court of Appeals also held that the company’s customers received the products in Washington. An applicable rule specifies that B&O tax applies to interstate sales of tangible personal property when goods originating outside Washington are received by the purchaser in Washington and the out-of-state seller had nexus with Washington. (Lamtec Corp v. Department of Revenue, Washington Court of Appeals, Division II, No. 35716-8-11, August 4, 2009)


The sales made by an in-state affiliate in Washington did not create substantial nexus for the out-of-state company. The out-of-state company was in the business of selling products over the telephone and internet using television infomercials. The in-state affiliate, however, sold the same products at retail outlets in the state. It was determined that although the brand name of the products overlapped, the activities of the in-state affiliate were not significantly associated with establishing or maintaining a market for the out-of-state company’s products in a representative capacity. Therefore, the put-of-state company is not subject to Washington Business and Occupation Tax. (Tax Determination No. 08-0128, Washington Department of revenue, May 14, 2008, released January 28, 2009)



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