Washington Tax Alert: New law contains economic nexus, single sales factor, and tax avoidance penalty provisions

S.B. 6143, signed by gov. 4/23/10. New law adopts the following significant business tax law changes as part of a broad set of revenue raising measures:

- An "economic nexus" standard and single receipts factor apportionment for business and occupation (B&O) tax purposes applicable to "income … generated from engaging in apportionable activities," which include specified services and the business of receiving income from royalties; - A temporary B&O tax surcharge on certain service businesses, real estate brokers, and contests of chance, and - A tax avoidance provision with potential retroactive application and a related 35% penalty.

Special Notice, Wash. Dept. of Rev. (4/19/10). The department has issued a notice explaining another provision in this new law, which states that Washington's sales tax "bad debt" deduction may only be claimed by the actual seller for credit/refund claims filed after June 30, 2010, thereby superseding the result in the 1994 Puget Sound case.