Washington Sales/Use Tax: Department releases notices on new economic nexus law, market-based single sales factor, and related implications for banks
Special Notice, Wash. Dept. of Rev. (5/28/10); Special Notice, Wash. Dept. of Rev. (5/28/10). The department explains new law [S.B. 6143; See previously issued MTS Alert for more details on this law] establishing minimum nexus standards for engaging in business within Washington for state business and occupation (B&O) tax purposes that deal with certain service activities and the receipt of royalty income. This new law became effective June 1, 2010, and applies to gross income generated on or after June 1, 2010. According to the department, the new law may impact franchisors by requiring "some businesses earning apportionable income from Washington customers to be subject to taxes whether or not they maintain offices in the state or have any physical presence." The department then lists examples of in-state activities that give rise to earning such "apportionable income."
The department also explains that the new law "updates the apportionment method from 'cost apportionment' to single factor sales apportionment and establishes a 'trailing nexus' for one year."
A separate department notice explains how this new "economic nexus" standard in Washington may impact financial institutions, including out-of-state banks and credit card issuers.
