Gross Receipts:
Washington DOR Adopts Changes to Rule Addressing Sourcing of Services for B&O Tax Purposes

Amended Rule section WAC 458-20-19402, Wash. Dept. of Rev. (5/15/24). Based on “interim guidance” and certain stakeholder feedback regarding its rule addressing the sourcing of services for Washington business and occupation (B&O) tax purposes (i.e., WAC 458-20-19402), the Washington Department of Revenue (Department) adopted changes clarifying the apportionment analysis on how to attribute receipts from services relating to the customer’s business activities, including a lengthy list of illustrative examples. Regarding the B&O tax cascading rules, the amendments explain that most taxpayers are expected to be able to attribute apportionable receipts because they will either have access to books and records that contain sufficient information from which to determine where the customer actually received the benefit of their service, or will be able to use a “reasonable method of proportionally attributing receipts” that fairly apportions, and does not distort the apportionment of, where the customer received the benefit of their services. To this end, if a taxpayer is affiliated with another entity that has information indicating where the customer received the benefit of the taxpayer’s service, the amended rule explains that the Department “will presume, unless the facts indicate otherwise, that the taxpayer is able to access that information from the affiliated entity.” The amended B&O tax sourcing rule was adopted May 15, 2024 and becomes effective June 15, 2024 – and it “may be used to determine tax liability on and after the effective date, until the codified version is available from the code reviser’s office.” Please contact us with any questions.