Hearing On Proposed New Rules Could Dramatically Impact B&O Taxes For Service Industry Businesses

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The Washington State Department of Revenue (“Department”) has recently announced that it will be holding a hearing on April 19 in Olympia on two proposed permanent rules implementing single factor receipts apportionment. Proposed Rule 19402 is the general rule that will apply to most businesses that report under apportionable business and occupation (“B&O”) tax classifications, which includes the “service and other” classification. Proposed Rule 19403 addresses apportionment of royalty income.

Under the single factor receipts apportionment, a business’s Washington taxable gross income is determined by multiplying “apportionable gross income” by a “receipts factor,” the numerator of which is gross income “attributable” to Washington business activities. The denominator of the receipts factor is world-wide gross income from the same class of activity.

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