EXPEDITED ADOPTION
Title of Rule: Amendatory section WAC 458-20-195 Taxes, deductibility.
Purpose: The purpose of the rule is to explain the circumstances under which taxes may be deducted or excluded from the measure of tax under the business and occupation (B&O) tax, retail sales tax, and public utility tax.
Statutory Authority for Adoption: RCW 82.32.300.
Statute Being Implemented: RCW 82.04.4285, 82.04.070, 82.04.080, 82.08.010, and 82.16.010 as they apply to whether taxes are included or not included in the measure of tax.
Summary: This rule explains the circumstances under which state, local, or federal taxes may be deducted or excluded when calculating the B&O tax, retail sales tax, and public utility tax. The rule also provides nonexclusive lists of specific taxes that are deductible, and those that are not deductible.
Reasons Supporting Proposal: The rule is being revised to incorporate the amendment of RCW 82.04.4285 by chapter 176, Laws of 1998.
Name of Agency Personnel Responsible for Drafting: D. Douglas Titus, 711 Capitol Way South, #303, Olympia, WA, (360) 664-0687; Implementation: Claire Hesselholt, 711 Capitol Way South, #303, Olympia, WA, (360) 753-3446; and Enforcement: Russell W. Brubaker, 711 Capitol Way South, #303, Olympia, WA, (360) 586-0257.
Name of Proponent: Department of Revenue, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: The rule explains when certain taxes may be deducted or excluded when determining the measure of state retail sales, B&O, or public utility taxes. The goal of the rule is to distinguish between the specific deduction authorized for motor vehicle taxes authorized by RCW 82.04.4285 and the exclusion from the measure of tax for taxes imposed on a buyer but collected by the seller as agent of a governmental entity. The anticipated effect of this rule is that the taxpayer will be able to easily and accurately identify the circumstances under which a tax is not included in the measure of tax.
Proposal Changes the Following Existing Rules: This is a revision to an existing rule.
WAC 458-20-195 identifies certain federal and state taxes which are or are not deductible in
determining the measure of state tax. In addition, the proposed draft reflects the amendment to
RCW 82.04.4285 providing for the deduction of motor fuel taxes from the measure of the B&O
tax by chapter 176, Laws of 1998. Some of the listed taxes have been repealed since the rule
was last adopted. It also updates the lists of federal, state, and local taxes which may or may not
be deductible or excludable. The revision organizes the rule to more effectively distinguish
between the specific deduction authorized by RCW 82.04.4285 for motor vehicle taxes and the
general exclusion from the measure of tax for taxes imposed on a buyer but collected by the
seller as agent of a governmental entity.
THIS RULE IS BEING PROPOSED TO BE ADOPTED USING AN EXPEDITED RULE-MAKING PROCESS THAT WILL ELIMINATE THE NEED FOR THE AGENCY TO HOLD PUBLIC HEARINGS, PREPARE A SMALL BUSINESS ECONOMIC IMPACT STATEMENT, OR PROVIDE RESPONSES TO THE CRITERIA FOR A SIGNIFICANT LEGISLATIVE RULE. IF YOU OBJECT TO THIS RULE BEING ADOPTED USING THE EXPEDITED RULE-MAKING PROCESS, YOU MUST EXPRESS YOUR OBJECTIONS IN WRITING AND THEY MUST BE SENT TO D. Douglas Titus, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail dougt@dor.wa.gov , AND RECEIVED BY June 5, 1999.
March 25, 1999
Claire Hesselholt, Rules Manager
Legislation and Policy Division
OTS-2943.1
AMENDATORY SECTION(Amending Order ET 83-1, filed 3/30/83)
WAC 458-20-195
Taxes, deductibility.
(((A))) (1) Introduction. This rule explains
the circumstances under which taxes may be deducted from the gross amount reported as the
measure of tax under the business and occupation tax, retail sales tax, and public utility tax. It
also lists deductible and nondeductible taxes.
(2) Deductibility((, generally)) of taxes. In computing tax liability, the amount of
certain taxes may be excluded or deducted from the gross amount reported as the measure of tax
under the business and occupation (BO) tax, the retail sales tax, and the public utility tax. ((Such)) These taxes may be deducted provided they (((1))) have been included in the gross
amount reported under the classification with respect to which the deduction is sought, and
(((2))) have not been otherwise deducted through inclusion in the amount of an allowable
deduction taken under such classification for another reason, ((i.e.)) e.g., interstate commerce((,
etc)).
The amount of taxes which are not allowable as deductions or exclusions must in every case be included in the gross amount reported. License and regulatory fees are not deductible. Questions regarding the deductibility or exclusion of a tax that is not specifically identified in this rule should be submitted to the department of revenue for determination.
(((B))) (3) Motor vehicle fuel taxes. ((So much of the sale price of motor vehicle fuel
as constitutes the amount of tax imposed by the state of Washington or the United States
government upon the sale thereof may be deducted by every seller thereof from the gross
proceeds of sales reported under the business and occupation tax.
(C) Other taxes)) RCW 82.04.4285 provides a B&O tax deduction for certain state and federal motor vehicle fuel taxes when the taxes are included in the sales price. These taxes include:
| State motor vehicle fuel tax . . . . . . . . . . . . | chapter 82.36 RCW; |
| State special fuel tax . . . . . . . . . . . . | chapter 82.38 RCW; |
| Federal tax on diesel and special motor fuels . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4041; |
| Federal tax on inland waterway commercial fuel . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4042; |
| Federal tax on gasoline and diesel fuel . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4081. |
This deduction applies only where the amount of such taxes is received by the taxpayer
as collecting agent and is paid by the agent directly to the state, its political subdivisions, or to
the federal government. When the taxpayer is the person upon whom a tax is primarily imposed,
no deduction or exclusion is allowed, since in such case the tax is a part of the cost of doing
business. The mere fact that the amount of tax is added by the taxpayer as a separate item to the
price of goods ((he sells)) sold, or to the charge for services ((he renders)) rendered, does not in
itself, make such taxpayer a collecting agent for the purpose of this deduction. Examples of
deductible taxes include:
| FEDERAL-- | |
| Tax on telegraph, telephone, radio and cable messages . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4251; |
| Tax on transportation of persons . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4261; |
| Tax on transportation of property . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4271; |
| STATE-- | |
| Leasehold excise tax collected from lessees . . . . . . . . . . . . | chapter 82.29A RCW; |
| Retail sales tax collected
from buyers . . . . . . . . . . . . | chapter 82.08 RCW; |
| Use tax collected from buyers . . . . . . . . . . . . | chapter 82.12 RCW. |
(5) Specific taxes((,)) which are not deductible. ((The deductions under paragraphs B
and C above apply to the following excise taxes among others)) Examples of specific taxes
which may be neither deducted nor excluded from the measure of the tax include the following:
26 U.S.C.A. Sec. 4251; | |
in firearms . . . . . . . . . . . . | ||
foreign insurers . . . . . . . . . . . . | ||
taxes . . . . . . . . . . . . | chapter 66.24 RCW; | |
state . . . . . . . . . . . . | ||
| FEDERAL-- | |
| A.A.A. compensating tax . . . . . . . . . . . . | 7 U.S.C.A. Sec. 615(e); |
| A.A.A. processing tax . . . . . . . . . . . . | 7 U.S.C.A. Sec. 609; |
| Aviation fuel . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4161; |
| Employment taxes . . . . . . . . . . . . | 26 U.S.C.A. chapter 21-25; |
| Estate taxes . . . . . . . . . . . . | 6 U.S.C.A. chapter 11; |
| Firearms, shells and cartridges . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4181; |
| Gift taxes . . . . . . . . . . . . | 26 U.S.C.A. chapter 12; |
| Importers, manufacturers and dealers in firearms . . . . . . . . . . . . | 6 U.S.C.A. Sec. 5801; |
| Income taxes . . . . . . . . . . . . | 26 U.S.C.A. Subtitle A; |
| Insurance policies issued by foreign insurers . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4371; |
| Liquor taxes . . . . . . . . . . . . | 6 U.S.C.A. chapter 51; |
| Sale and transfer of firearms tax . . . . . . . . . . . . | 26 U.S.C.A. Sec. 5811; |
| Sporting goods . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4161; |
| Superfund tax . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4611; |
| Tires . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4071; |
| Tobacco excise taxes . . . . . . . . . . . . | 26 U.S.C.A. chapter 52; |
| Wagering taxes . . . . . . . . . . . . | 26 U.S.C.A. chapter 35; |
| STATE AND MUNICIPAL-- | |
| Ad valorem property taxes . . . . . . . . . . . . | Title 84 RCW; |
| Alcoholic beverages licenses and stamp taxes (Breweries, distillers, distributors and wineries) . . . . . . . . . . . . | chapter 66.24 RCW; |
| Boxing, sparring and wrestling tax . . . . . . . . . . . . | chapter 67.08 RCW; |
| Business and occupation tax . . . . . . . . . . . . | chapter 82.04 RCW; |
| Cigarette tax . . . . . . . . . . . . | chapter 82.24 RCW; |
| Gift and inheritance taxes . . . . . . . . . . . . | Title 83 RCW; |
| Insurance premiums tax . . . . . . . . . . . . | chapter 48.14 RCW; |
| Municipal utility taxes . . . . . . . . . . . . | chapter 54.18 RCW; |
| Parimutuel tax . . . . . . . . . . . . | RCW 67.16.100; |
| Public utility tax . . . . . . . . . . . . | chapter 82.16 RCW; |
| Real estate excise tax . . . . . . . . . . . . | chapter 82.45 RCW; |
| Tobacco products tax . . . . . . . . . . . . | chapter 82.26 RCW; |
| Use tax when not collected as agent for state . . . . . . . . . . . . | chapter 82.12 RCW. |
[Statutory Authority: RCW 82.32.300. 83-08-026 (Order ET 83-1), § 458-20-195, filed 3/30/83; Order ET 70-3, § 458-20-195 (Rule 195), filed 5/29/70, effective 7/1/70.]