Wash. Court of Appeals published opinion — D2 60254-7-II Published Opinion.pdf

In 2019, the Department initiated an audit for the tax period of January 1, 2015, through

December 31, 2018. In January 2020, the Department issued a tax assessment of $480,853.78 in

B&O taxes, penalties, and interest based on AMC’s exclusion of “income related to the payroll for

AMC’s onsite employees” from its gross income. CP at 262.

AMC had paid Washington’s B&O tax on the management fee it received for its services.3

However, AMC maintained that the payments to its onsite employees were non-taxable

reimbursements that should be excluded from its gross income—and B&O tax liability

calculation—under Rule 111.4,5 The Department determined that AMC did not qualify under Rule

111 and disallowed the exclusion.

AMC appealed the assessment to the Department’s Administrative Review and Hearings

Division. The Administrative Review and Hearings Division upheld the assessment. AMC then

sought reconsideration of the determination, which the Department denied.

3
AMC does not dispute the B&O tax paid on its management fee.
4
Rule 111 allows a taxpayer to exclude “from the measure of tax amounts representing money or
credit received by a taxpayer as reimbursement of an advance in accordance with the regular and
usual custom of his business or profession.” WAC 458-20-111.
5
AMC also claimed it qualified as a “Statutory Paymaster” under RCW 82.04.43393 and Excise
Tax Advisory (ETA) 3196.2015 or a “PEO Paymaster” in accordance with ETA 3192.2014, thus
allowing the payments to its onsite employees to be excluded. CP at 262, 263. AMC appears to
have abandoned these theories on appeal because they do not raise them on appeal; thus, this
opinion will not address them.

7
For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.

No. 60254-7-II