PERMANENT RULES
Effective Date of Rule: Thirty-one days after filing.
Purpose: WAC 458-20-163 explains the exemptions and deductions allowed "Insurance companies, including surety companies, fraternal benefit societies, fraternal fire insurance associations, beneficiary corporations or societies and Washington state health insurance pool." It also states that insurance companies are subject to the retail sales or use taxes on their purchases of tangible personal property and certain services, and that they must collect sales tax on sales of tangible personal property, including salvaged property.
The department has amended the rule to:
| • | Add an introductory subsection (1) to explain the subject matter of the rule; |
| • | Explain that RCW 82.04.322 provides a B&O tax exemption for any health maintenance organization, health care service contractor, or certified health plan in respect to premiums or prepayments that are taxable under RCW 48.14.0201; and |
| • | Recognize that the B&O tax deduction provided by RCW 82.04.4329 for assessments paid by a member to the Washington state health insurance pool was repealed by chapter 443, Laws of 2005, effective July 1, 2006. |
Citation of Existing Rules Affected by this Order: Amending WAC 458-20-163 Insurance companies, including surety companies, fraternal benefit societies, fraternal fire insurance associations, beneficiary corporations or societies and Washington state health insurance pool.
Statutory Authority for Adoption: RCW 82.32.300 and 82.01.060(2).
Adopted under notice filed as WSR 07-10-058 on April 27, 2007.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 1, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 1, Amended 0, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 1, Amended 0, Repealed 0.
Date Adopted: August 17, 2007.
Janis P. Bianchi
Assistant Director
Interpretations and
Technical Advice Division
OTS-9691.1
AMENDATORY SECTION(Amending WSR 91-05-040, filed 2/13/91,
effective 3/16/91)
WAC 458-20-163
Insurance companies, including surety
companies, fraternal benefit societies, fraternal fire
insurance associations, beneficiary corporations or societies
and Washington state health insurance pool.
(1) Introduction.
Income earned by insurance companies, including surety
companies, fraternal benefit societies, fraternal fire
insurance associations, beneficiary corporations or societies,
and the Washington state health insurance pool is generally
subject to the service and other activities business and
occupation (B&O) tax, unless the law provides an exemption or
deduction. This section identifies exemptions and deductions
available to these businesses. It also explains the reporting
responsibilities for retail sales and use taxes for retail
purchases and retail services.
(2) Exemptions. ((The business and occupation tax does
not apply to:)) The law provides the following B&O tax
exemptions. These amounts do not need to be reported on the
excise tax returns filed with the department of revenue.
(a) RCW 82.04.320 provides an exemption to any person
with respect to insurance business upon which a tax based on
gross premiums is paid to the state of Washington. (((RCW 82.04.320.))) It should be noted, however, that the law
provides expressly that this exemption does not extend to "any
person engaging in the business of representing any insurance
company, whether as general or local agent, or acting as
broker for such companies" or to "any bonding company . . .
with respect to gross income derived from the completion of
any contract as to which it is a surety, or as to any
liability as successor to the liability of the defaulting
contractor." The exemption also does not apply to any
business engaged in by an insurance company other than its
insurance business. Thus an insurance company is subject to
the retailing or wholesaling ((business and occupation)) BO
tax on sales of salvaged property unless the sales are casual
or isolated sales as described in WAC 458-20-106 (Casual or
isolated sales -- Business reorganizations). Also see WAC 458-20-102 (Resale certificates) for resale certificate
requirements for wholesale sales.
(b) RCW 82.04.322 provides an exemption to any health maintenance organization, health care service contractor, or certified health plan in respect to premiums or prepayments that are taxable under RCW 48.14.0201.
(c) RCW 82.04.370 provides an exemption to fraternal benefit societies or fraternal fire insurance associations organized or licensed pursuant to Title 48 RCW and as defined in RCW 48.36A.010.
(((c))) The statute also exempts beneficiary corporations
or societies organized under and existing by virtue of Title
24 RCW, if such beneficiary corporations or societies provide
in their bylaws for the payment of death benefits.
((This)) The exemption provided by RCW 82.04.370,
however, is limited to gross income from premiums, fees,
assessments, dues or other charges directly attributable to
the insurance or death benefits provided by such persons. It
is not intended that all the varied, regular business
activities (e.g., sales of food, liquor, admissions, and
amusement devices receipts) of these societies or
organizations be ((exempted from the business and occupation))
exempt from BO tax. Only that portion of income which can be
demonstrated as directly attributable to charges made for
insurance or providing death benefits is exempt.
(((2))) (3) Deductions. ((Effective May 18, 1987)) For
periods prior to July 1, 2006, a BO tax deduction was
provided by RCW 82.04.4329 to a member of the Washington state
health insurance pool ((may take a deduction from the measure
of the business and occupation tax)) for assessments paid by
that member to the pool. (((See RCW 82.04.4329.) The
deduction amount should be shown in the deduction column of
the business and occupation tax section on the combined excise
tax return, where it will be subtracted from the gross
amounts, to arrive at a net taxable amount upon which the
actual business and occupation tax is computed. If the
deduction cannot be fully used because the assessment total
exceeds the gross receipts reported in the business and
occupation tax section of the tax return, the member may carry
forward the unused portion of the deduction to future
reporting periods until the deduction is fully taken. The
explanation of the deduction should be "Amount paid to
Washington state health insurance pool, per RCW 82.04.4329 and
WAC 458-20-163.")) This deduction ((does)) did not apply to a
member who ((has)) had deducted such assessments from the
insurance premiums tax, RCW 48.14.020.
(((3))) (4) Retail sales and use tax responsibilities. Insurance companies are subject to the retail sales tax or use
tax upon retail purchases, certain retail services, or
articles acquired for their own use.
When insurance companies make sales to consumers of salvaged property (e.g., from automobile collisions, fire loss, burglary, or theft recoveries) or any other tangible personal property, they must collect and report retail sales tax on those sales.
[Statutory Authority: RCW 82.32.300. 91-05-040, § 458-20-163, filed 2/13/91, effective 3/16/91; 87-19-007 (Order ET 87-5), § 458-20-163, filed 9/8/87; 83-07-033 (Order ET 83-16), § 458-20-163, filed 3/15/83; Order ET 70-3, § 458-20-163 (Rule 163), filed 5/29/70, effective 7/1/70.]