Today the Washington State Department of Revenue (the “Department”) released an “Economic Nexus Worksheet/Calculator.” You can find it here:
The tool is designed to help certain out of state businesses determine if they have “economic nexus” with Washington and must register their businesses with the state and report and pay taxes on the Washington portion of their income.
If you do business in Washington State but are located outside of the state, you may not be aware that the Washington State legislature adopted an economic nexus standard for out-of-state service and intellectual-property businesses for business and occupation tax purposes in its last legislative session. The intent was to collect more in taxes from out of state businesses.
Although having the tool helps understand how the Department of Revenue construes the new economic nexus law, the results from using the tool are not necessarily binding on the Department. Because it is only a tool and not part of the statutes or regulations, it is worth mentioning the caveat that if there is a mistake, either in favor of the taxpayer or the state, the offended party may not be able to rely on the tool to defend against an assessment or against a refund. The state Supreme Court has shown reluctance to follow DOR interpretations that do not comply with the statute. Nelson v. Appleway Chevrolet, Inc., 160 Wash.2d 173, 157 P.3d 847 (2007). Indeed, even a regulation on the books for nearly 20 years will not be followed by the Supreme Court if the court determines it to be inconsistent with the statute. Tesoro Refining and Marketing Co. v. State, Dept. of Revenue, 164 Wash.2d 310, 190 P.3d 28 (2008).
Please call us if you have any questions.