Washington ~ Sales and Use, Business and Occupation Taxes: Taxpayer With In-State Employees Had Substantial Nexus

CCH Tax Day Report

A taxpayer that sold non-prescription dietary supplements through an internet website was not eligible for a refund of Washington retail sales tax and retailing business and occupation (B&O) tax because it had substantial nexus with Washington. The taxpayer had several employees within Washington and therefore had a physical presence in the state. When a person has either property or employees in the state, there is no need to inquire whether the person’s”activities in Washington are significantly associated with the person’s ability to establish or maintain a market for its product in this state.”

Though the taxpayer claimed that the imposition of retail sales tax and B&O tax violated the Commerce Clause because they were not fairly related to the services provided by the state, the taxpayer’s in-state employees benefited from government services, such as police and fire protection. Furthermore, the retailing B&O tax and the retail sales are not taxes on the benefits the taxpayer receives from Washington.

Determination No. 15-0302, Washington Department of Revenue, April 28, 2017, ¶204-204

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