Washington ~ Business and Occupation Tax: Out-of-State Bakery’s Sales Representatives Established Nexus

CCH Tax Day Report

An out-of-state bakery was liable for wholesaling business and occupation (B&O) tax on sales of baked goods delivered to Washington customers because the taxpayer had nexus with Washington and its sales were properly sourced to Washington. A person has nexus even if it lacks property or employees in the state as long as it has an agent or other representative that engages in activities that are significantly associated with the person’s ability to establish or maintain a market in Washington. Here, the taxpayer contracted with independent sales representatives to solicit sales on its behalf. Therefore, despite the fact that the taxpayer reserved the right to accept the terms of purchaser orders at its out-of-state location, its sales representatives were performing services to establish and maintain taxpayer’s sales in Washington. The goods were also received in Washington by its Washington customers, as “receipt” occurs when the customer takes physical possession of, or has control over, tangible personal property. The taxpayer’s baked goods were delivered to buyers in Washington via common carrier.

Determination No. 16-0149, Washington Department of Revenue, December 23, 2016, ¶204-153



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