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A company providing architectural design and construction services was denied a refund of Washington sales tax on the design services because they were provided and rendered in respect to the construction servicesthat was also performed by the company. A taxpayer generally must collect Washington retail sales tax and retailing B&O tax on charges to construct, repair, or improve new and existing buildings. Taxpayers providing design services are usually not required to collect Washington retail sales tax but must pay service and other activities B&O tax on those services. When design services are rendered "in respect to" construction, the design service is considered a retail service and the service provider is required to collect Washington retail sales tax andpay retailing B&O tax on those services. In this case, the contract language indicated that the parties contemplated that the service provider would handle both the construction and design services. Additionally, the manner in which the company marketed its ability to render both design services and construction services indicated that the parties contemplated that the company would perform both components of the work.(Determination No. 15-0135, Washington Department of Revenue, March 31, 2016)

(05/05/2016)

A business that provides cloud-based fax, messaging, and email services was liable for Washington retailing Business and Occupation (B&O) tax and sales tax because the cloud-based services did not qualify as nontaxable data processing services. The fax and message delivery were performed partly through faxes through communications channels provided by third party communications providers. In Washington, faxing services constitute telecommunicationswhich is subject to the retail sales tax and retailing B&O. The fax and messaging services were not data processing, since the customers’ primary goal was to generate and send personalized transmissions to their own customers, not the extraction or processing of data. The email services were not data processing, since the taxpayer was not hired for the primary purpose of extracting or reformatting customer data. The email services qualified as taxable digital automated services because they used one or more of the taxpayer’s software applications.The taxpayer did not qualify for exemption under the Internet Tax Freedom Act because the taxpayer did not supply email. Rather, the taxpayer offered an email service that uses email provided by third parties. The taxpayer did not qualify for exemption based on storage capacity since it did not provide personal storage used by individual consumers.(Determination No. 14-0307, Washington Department of Revenue, February 29, 2016)

(03/24/2016)

An out-of-state wholesaler of vehicle chassis did not create nexus in Washington for business and occupation (B&O) tax purposes with respect to one type of chassis it sold because all chassis sold were delivered to body shops outside of Washington to be incorporated into vehicles that were then delivered by the body shops to dealers in Washington. According to the sample sales invoices provided by the wholesaler, all of the chassis were received outside of Washington. Accordingly, the sales of the chassis occurred outside Washington and were, therefore, not subject to Washington B&O tax.  However, the wholesalerdid create nexus in Washington with respect to another type of chassis it sold because warranty services were offered by the wholesaler through a third-party in Washington.Rule 193(102)(d)(vii)(B) expressly includes “[b]eing available to provide services associated with the product sold (such as warranty repairs, installation assistance or guidance, and training on the use of the product), if the availability of such services is referenced by the seller in its marketing materials, communications, or other information accessible to customers” as an activity establishes nexus. The wholesaler and affiliates shared the same web site and there was no distinction between them in terms of offering of products and services.  (Determination No. 15-0279, Washington Department of Revenue, January 31, 2016)

(02/23/2016)

The Washington Department of Revenue has announced that nexus continues for the remainder of the calendar year and the following calendar year for all taxes reported on the excise tax return which includes retail sales tax and business & occupation tax when either the nexus standard for (a) apportionable activities and for sales subject to wholesaling business and occupation (B&O) tax or (b) other business activities, is met  The one-year trailing nexus is effective as of June 1, 2010.(Special Notice, Washington Department of Revenue, February 2, 2016)

(02/23/2016)

On February 11, 2016, the U.S. Senate approved a permanent extension of the Internet Tax Freedom Act (ITFA) that is included in H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015. The bill also establishes an end date of June 30, 2020 for the seven states that currently impose a tax on internet access: Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin. President Obama is expected to sign the permanent extension of the ITFA into law. The House of Representatives had previously passed H.R. 235, the Permanent Internet Tax Freedom Act, on December 15, 2015.  For our previous news item on this topic, visit Internet Tax Freedom Act Extended Through October 1, 2016.

 

UPDATE: On February 24, 2016, President Barack Obama signed into law the permanent extension of the Internet Tax Freedom Act.

 

(Trade Facilitation and Trade Enforcement Act of 2015)

(02/23/2016)

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