WSR 06-17-006



[ Filed August 3, 2006, 3:56 p.m. ]


The department of revenue has issued Excise Tax Advisory 2032.04.194 Cost Apportionment -- Treatment of Costs Incurred for Multiple Purposes (ETA 2032).

WAC 458-20-194 Doing business inside and outside the state (Rule 194), specifies how multi-state businesses providing services subject to the "service and other activities" and certain other B&O tax classifications apportion their income. Businesses that apportion under RCW 82.04.460(1) must use separate accounting, if it is accurate. If separate accounting is not accurate, cost apportionment must be used.

As a general rule, costs of producing income not apportioned under RCW 82.04.460(1) are not relevant to the cost apportionment calculation provided in Rule 194. Rule 194 explains that shared costs (those supporting both apportionable and nonapportionable activities) must, however, be included in the cost apportionment formula without segregating the service portion of the costs. Rule 194 does provide for the limited use of alternative methods of allocating costs. The department has been asked whether it would consider an alternative apportionment method under Rule 194 (4)(i) if it can be demonstrated that including shared costs results in a cost apportionment calculation that does not fairly reflect the taxpayer's business activity in Washington. This ETA identifies a scenario where an alternative method of cost apportionment may be appropriate.

A copy of this document is available via the internet at or a request for copies may be directed to Roseanna Hodson, Interpretations and Technical Advice Unit, P.O. Box 47453, Olympia, WA 98504-7453, phone (360) 570-6119, fax (360) 586-5543.

Alan R. Lynn

Rules Coordinator

Washington State Code Reviser's Office