PROPOSED RULES
Original Notice.
Preproposal statement of inquiry was filed as WSR 00-08-110.
Title of Rule: Amendatory section WAC 458-20-195 Taxes, deductibility.
Purpose: The purpose of the rule is to explain the circumstances under which state, local, or federal 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 which are not deductible.
Reasons Supporting Proposal: To rectify incorrect statutory citations, and to provide additional examples of various taxes which are or are not deductible.
Name of Agency Personnel Responsible for Drafting: D. Douglas Titus, 1025 Union Avenue, Room 400, Olympia, WA, (360) 570-6112; Implementation: Claire Hesselholt, 1025 Union Avenue, Room 400, Olympia, WA, (360) 570-6124; and Enforcement: Russell Brubaker, 1025 Union Avenue, Room 400, Olympia, WA, (360) 570-6131.
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 to determine the measure of state retail sales, B&O, or public utility taxes. The purpose of the rule is to distinguish between the specific deduction authorized for motor vehicle fuel 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 deductible.
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 deducible in determining the measure of state tax. The proposed draft corrects inaccurate statutory citations in the current rule. It also updates the lists of federal, state, and local taxes which may or may not be deductible or excludable. The revision also organizes the rule to more effectively distinguish between the specific deduction authorized by RCW 82.04.4285 for motor vehicle fuel 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.
No small business economic impact statement has been prepared under chapter 19.85 RCW. A small business economic impact statement is not required because the rule and the proposed amendments do not impose any requirements or burdens upon small businesses that are not already specifically required by statute.
RCW 34.05.328 does not apply to this rule adoption. The proposed rule is an interpretive rule as defined in RCW 34.05.328.
Hearing Location: Capitol Plaza Building, 4th Floor, Large Conference Room, 1025 Union Avenue, Olympia, WA, on July 11, 2000, at 1:30 p.m.
Assistance for Persons with Disabilities: Contact Ginny Dale no later than ten days before the hearing date, TDD 1-800-451-7985, or (360) 570-6176.
Submit Written Comments to: Doug Titus, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail dougt@dor.wa.gov, by July 11, 2000.
Date of Intended Adoption: July 21, 2000.
June 6, 2000
Claire Hesselholt
Rules Manager
Legislation and Policy Division
OTS-4110.1
AMENDATORY SECTION(Amending WSR 99-13-053, filed 6/9/99,
effective 7/10/99)
WAC 458-20-195
Taxes, deductibility.
(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 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. These taxes may be deducted provided they have been
included in the gross amount reported under the classification
with respect to which the deduction is sought, and have not been
otherwise deducted through inclusion in the amount of ((an))
another allowable deduction ((taken under such classification for
another reason, e.g., interstate commerce)), such as credit
losses.
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.
(3) Motor vehicle fuel 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 (including leaking underground storage tank taxes), except train and aviation 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 for use in highway vehicles and motorboats . . . . . . . . . . . . | 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 a municipality, 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 sold, or to the charge for services 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 (( |
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 -- |
|
| Aviation fuel tax collected from buyers by a distributor as defined by RCW 82.42.010 . . . . . . . . . . . . | chapter 82.42 RCW; |
| Leasehold excise tax collected from lessees . . . . . . . . . . . . | chapter 82.29A RCW; |
| Oil spill response tax collected from taxpayers by marine terminal operators . . . . . . . . . . . . | chapter 82.23B RCW; |
| Retail sales tax collected from buyers . . . . . . . . . . . . |
chapter 82.08 RCW; |
| Solid waste collection tax collected from buyers . . . . . . . . . . . . | chapter 82.18 RCW; |
| State enhanced 911 tax collected from subscribers . . . . . . . . . . . . | chapter 82.14B RCW; |
| Use tax collected from buyers . . . . . . . . . . . . |
chapter 82.12 RCW; |
MUNICIPAL -- |
|
| City admission tax . . . . . . . . . . . . | RCW 35.21.280; |
| County admissions and recreations tax . . . . . . . . . . . . | chapter 36.38 RCW; |
| County enhanced 911 tax collected from subscribers . . . . . . . . . . . . | chapter 82.14B RCW; |
| Local retail sales and use taxes collected from buyers . . . . . . . . . . . . | chapter 82.14 RCW. |
| 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.
(( |
| Distilled spirits, wine and beer taxes . . . . . . . . . . . . | 26 U.S.C.A. chapter 51; |
| Diesel and special motor fuel tax for fuel used for purposes other than motor vehicles and motorboats . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4041; |
| Employment taxes . . . . . . . . . . . . | 26 U.S.C.A. chapters 21-25; |
| Estate taxes . . . . . . . . . . . . | (( |
| 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 . . . . . . . . . . . . | (( |
| Income taxes . . . . . . . . . . . . | 26 U.S.C.A. Subtitle A; |
| Insurance policies issued by foreign insurers . . . . . . . . . . . . | 26 U.S.C.A. Sec. 4371; |
| (( |
|
| 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 (( |
|
| Ad valorem property taxes . . . . . . . . . . . . | Title 84 RCW; |
| Alcoholic beverages licenses and stamp taxes (Breweries, distillers, distributors and wineries) . . . . . . . . . . . . | chapter 66.24 RCW; |
| Aviation fuel tax when not collected as agent for the state . . . . . . . . . . . . | chapter 82.42 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; |
| (( |
|
| Hazardous substance tax . . . . . . . . . . . . | chapter 82.21 RCW; |
| Litter tax . . . . . . . . . . . . | chapter 82.19 RCW; |
| Pollution liability insurance fee . . . . . . . . . . . . |
RCW 70.149.080; |
| Parimutuel tax . . . . . . . . . . . . | RCW 67.16.100; |
| Petroleum products - underground storage tank tax . . . . . . . . . . . . | chapter 82.23A RCW; |
| 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; |
MUNICIPAL -- |
|
| Local use tax when not collected as agent for cities or counties . . . . . . . . . . . . | chapter 82.14 RCW; |
| Municipal utility taxes . . . . . . . . . . . . | chapter 54.28 RCW; |
| Municipal and county real estate excise taxes . . . . . . . . . . . . | chapter 82.46 RCW. |
[Statutory Authority: RCW 82.32.300. 99-13-053, § 458-20-195, filed 6/9/99, effective 7/10/99; 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.]