A quick reminder to businesses that engage in apportionable business activities in the state of Washington: you must file an Annual Reconciliation of Apportionable Income with the Washington State Department of Revenue, regardless of whether or not an adjustment to the tax amounts reported throughout the year is required. The Annual Reconciliation of Apportionable Income for 2023 is due on or before October 31, 2024.
Apportionable business activities include income reported under any of the 19 apportionable tax classifications, the most common of which is the Service & Other Activities business and occupation (B&O) tax classification.
Washington considers the Annual Reconciliation of Apportionable Income a “Thirteenth Return” if the business reports on a monthly filing frequency. As such, failure to file an Annual Reconciliation of Apportionable Income in a timely manner by the due date will result in penalties and interest added to any B&O tax that may be due on your reconciliation. If you file your Washington state excise tax returns electronically, you may file your annual reconciliation utilizing the Department of Revenue’s My DOR Services. If any additional tax is due, the Department will accept payment via electronic funds transfer or a check. If you are due a credit, the credit will be transmitted via electronic funds transfer or a check.
Earlier this year, Washington amended Wash. Admin. Code § 458-20-19402 to clarify the analysis businesses should undergo in determining how to attribute receipts from services related to the customer’s business activities. This clarification included a modification to how services related to tangible personal property are attributed, as well as a modification to the attribution of services related to a customer’s business activities which may vary between sourcing the customer’s market or the customer’s business location. This amendment also included the addition of illustrative examples and the presumption that related entities will have access to certain information related to benefits received.
In addition to the rule changes, the Annual Reconciliation of Apportionable Income filing has grown increasingly complex in recent years due to shifting thresholds and the expanded information required by the Washington Department of Revenue. These changes may leave you rethinking how you are filing. For more information or assistance completing the reconciliation process, please get in touch with our state and local tax (SALT) leader, Sonjia Barker, or your Perkins advisor.