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 2022 is due on or before October 31, 2023.
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 timely file an Annual Reconciliation of Apportionable Income by the due date will result in penalties and interest added to any B&O tax that may be due on your reconciliation. Additionally, businesses are finding that if their Washington income is reclassified to an apportionable tax classification pursuant to a Department of Revenue review, penalties of up to 39 percent may be assessed.
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, or you may use the Department of Revenue’s form, Annual Reconciliation of Apportionable Income, which is available at www.dor.wa.gov. The Department will accept payment via electronic funds transfer or a check if any additional tax is due. If you are due a credit, the credit will be either transmitted via electronic funds transfer or a check.
The Annual Reconciliation of Apportionable Income filing has become more complex in recent years with changing thresholds and additional information that the Washington Department requests. You may be rethinking the best way to file since Washington is also in the midst of revising their administrative rule on sourcing service receipts: specifically, how to determine where the benefit of the service is received. For more information or assistance completing the reconciliation process, please get in touch with our SALT Director, Sonjia Barker, or your Perkins advisor.