2010 Legislative Updates that May Impact Your Association
Candy is now subject to retail sales tax
As of June 1, 2010, candy products (including gum) are subject to retail sales tax. The new legislation also introduced a tax credit for candy manufacturers. The manufacturer can receive a $1000 credit for each employment position maintained for a calendar year.
To see a list of taxable candy products, visit our website at
dor.wa.gov/consumerproducts.
Bottled water is subject to retail sales tax until July 1, 2013
From June 1, 2010 through June 30, 2013, bottled water is subject to retail sales tax. The legislature did include two instances when bottled water would be exempt from sales tax:
· Bottled water purchased with a prescription to treat a medical condition.
· Bottled water purchased because there is no other readily available source of potable water.
Consumers must pay sales tax at the time of purchase unless they have the water delivered (certain restrictions apply). A refund may be requested from the Department once they have paid at least $25 in sales tax on bottled water.
For more information, including a definition of bottled water, visit our website at
dor.wa.gov/consumerproducts.
Carbonated beverages subject to tax As of July 1, 2010 through June 30, 2013, carbonated beverages are subject to a wholesale tax of 2 cents per 12 ounces. The first $10 million in sales of carbonated beverages bottled by a bottler during a calendar year are exempt from the tax. Once a product has been subject to the tax, it is exempt from the tax on subsequent sales.
For more information, including a definition of carbonated beverages, visit our website at
dor.wa.gov/consumerproducts.
Director’s fees subject to B&O tax
Effective, July 1, 2010 compensation received for serving as a corporate director, including the reimbursement of expenses, is subject to Washington State business and occupation (B&O) tax under the
service and other activities classification. The state will not assess taxes on unreported income prior to July 1, 2010, nor will they authorize refunds on taxes paid before that date. Director’s fees are apportionable if a director reports taxes to more than one state.
For more information, visit our website at
dor.wa.gov/newlegislation. Scroll to B&O tax, then expand
corporate board of director fees.
Property management subject to B&O tax As of June 1, 2010, the business and occupation (B&O) tax exemption for property management companies was narrowed to amounts received by a:
· “Nonprofit property management company” from the owner of a property, or
· A property management company from a “housing authority.”
For more information, visit our website at
dor.wa.gov/newlegislation. Scroll down to B&O tax, then expand
Property management salary exemption repealed.
New economic nexus standards As of June 1, 2010, Washington State’s new “economic nexus” standards require some businesses earning apportionable income from Washington customers to be subject to taxes whether or not they maintain offices or employees in the state. The “economic nexus” standard replaces the “physical presence” standard and only applies only to “apportionable income.”
The same law also updates the apportionment method to
single factor sales apportionment and establishes “Trailing nexus” for one year after a taxpayer stops doing business in Washington.
See the comprehensive website with updated rules and apportionment methods at
dor.wa.gov/economicnexus.
Temporary B&O tax rate increase As of May 1, 2010, the business and occupation (B&O) tax rate for service businesses temporarily increases in Washington State. The increased rate expires on July 1, 2013.
The change impacts those reporting under tax classifications “service and other activities” (including real estate brokers) and “gambling contests of chance (less than $50,000 a year).” Also, the B&O tax rate for gambling contests of chance ($50,000 a year or greater) temporarily increases to 1.93% with a July 1, 2013 expiration date.
Complete information, including exceptions to the rate change, is available at dor.wa.gov/newlegislation. Scroll down to B&O tax and expand
Temporary B&O tax increase. Small Business Credit increases for qualifying businesses As of May 1, 2010, an increased “small business credit” applies to businesses with B&O tax liability below an established level. The credit varies depending on the amount of B&O tax due after all other B&O tax credits are taken. This credit does
not expire.
The new law doubles the credit for qualifying businesses that report under the service B&O tax classifications of:
· Service and other activities.
· Gambling contests of chance
· For-profit hospitals.
· Scientific research and development.
Complete information, including certain exceptions, is available at
dor.wa.gov/newlegislation. Scroll down to B&O tax and expand Temporary B&O tax increase. Addressing tax avoidance
As of May 1, 2010, the Department of Revenue will disregard specific transactions or arrangements that are designed to unfairly avoid taxes. The rules apply to tax periods beginning January 1, 2006.
New legislation clarifies that the Department has the power to impose tax where taxpayers have tried to avoid taxes by elevating the form of the transaction over the substance of the activity. The new laws close loopholes used to avoid the payment of use tax, real estate excise tax (REET), business and occupation tax (B&O).
Special notices and more information are available at
dor.wa.gov/newlegislation. Scroll down to Miscellaneous to expand
Tax Avoidance.