Company Liable for Deferred Washington Sales Tax Under Community Empowerment Zone Program

A manufacturer that was granted a community empowerment zone (CEZ) deferral of Washington sales tax was liable for the deferred taxes because it failed to hire the number of employees required by the program. Under Washington’s CEZ program, an applicant must hire at least one qualified employment position for each $750,000 of investment and the persons hired must be residents of a CEZ where the project is located. In this case, three of the four individuals the taxpayer was required to hire were not actually employed by the taxpayer but were employed by an independent contractor. Additionally, there is no authority that would allow the taxpayer to prorate the amount of CEZ deferral based upon the one qualified employment position it hired. As a result, all deferred taxes are immediately due for the taxpayer. (Determination No. 16-0074, Washington Department of Revenue, December 1, 2016)

Posted on January 19, 2017