WAC 458-20-146
National and state banks, mutual savings
banks, savings and loan associations and other financial
institutions.
Business and Occupation Tax
The gross income of national banks, states banks, mutual
savings banks, savings and loan associations, and certain
other financial institutions is subject to the business and
occupation tax according to the following general principles.
Services and other activities. Generally, the gross
income from engaging in financial businesses is subject to the
business and occupation tax under the classification service
and other activities. Following are examples of the types of
income taxable under this classification: Interest earned
(including interest on loans made to nonresidents unless the
financial institution has a business location in the state of
the borrower's residence which rendered the banking service),
commissions earned, dividends earned, fees and carrying
charges, charges for bookkeeping or data processing, safety
deposit box rentals. See WAC 458-20-14601 Financial
institutions -- Income apportionment.
The term "gross income" is defined in the law as follows:
"Gross income of the business" means the value proceeding
or accruing by reason of the transaction of the business
engaged in and includes gross proceeds of sales, compensation
for the rendition of services, gains realized from trading in
stocks, bonds, or other evidences of indebtedness, interest,
discount, rents, royalties, fees, commissions, dividends, and
other emoluments however designated, all without any deduction
on account of the cost of tangible property sold, the cost of
materials used, labor costs, interest, discount, delivery
costs, taxes, or any other expense whatsoever paid or accrued
and without any deduction on account of losses.
The law allows certain deductions from gross income to
arrive at the taxable amount (the amount upon which the
business and occupation tax is computed). Deductible gross
income should be included in the gross amount reported on the
excise tax return and should then be shown as a deduction and
explained on the deduction schedules. The deductions
generally applicable to financial businesses include the
following:
(1) Dividends received by a parent from its subsidiary
corporations (RCW 82.04.4281).
(2) Interest received on investments or loans primarily
secured by first mortgages or trust deeds on nontransient
residential properties. (See WAC 458-20-166 for definition of
"transient.") (RCW 82.04.4292.)
(3) Interest received on obligations of the state of
Washington, its political subdivisions, and municipal
corporations organized pursuant to the laws thereof. (RCW 82.04.4291.) A deduction may also be taken for interest
received on direct obligations of the federal government, but
not for interest attributable to loans or other financial
obligations on which the federal government is merely a
guarantor or insurer.
(4) Gross proceeds from sales or rentals of real estate
(RCW 82.04.390). These amounts may be entirely excluded from
the gross income reported and need not be shown on the return
as a deduction.
Retailing. Sales of tangible personal property and
certain services are defined as "retail sales" and are subject
to the business and occupation tax under the classification
retailing. Such sales are also subject to the retail sales
tax which the seller must collect and remit to the department
of revenue (department). Transactions taxable as sales at
retail are not subject to tax under service and other
activities.
Following are examples of transactions subject to the
retailing classification of the business and occupation tax
and to the retail sales tax: Sales of meals or confections,
sales of repossessed merchandise, sales of promotional
material, leases of tangible personal property, sales of check
registers, coin banks, personalized checks (note: When the
financial institution is not the seller of these items but
simply takes orders as agent for the supplier, the supplier is
responsible for reporting as the retail seller. The financial
institution has liability for reporting the retail sales tax
on sales made as an agent only if the supplier is an
out-of-state firm not registered with the department), escrow
fees, casual sales (occasional sales of depreciated assets
such as used furniture and office equipment -- subject to retail
sales tax but deductible from the business and occupation tax;
see WAC 458-20-106 Casual or isolated sales -- Business
reorganizations).
Sales for resale. When a financial institution buys
tangible personal property for resale to its customers without
intervening use, the sales tax is not applicable. In this
case the financial institution should give the vendor a resale
certificate for purchases made before January 1, 2010, or a
reseller permit for purchases made on or after January 1,
2010, to document the wholesale nature of any sale as provided
in WAC 458-20-102A (Resale certificates) and WAC 458-20-102
(Reseller permits). Even though resale certificates are no
longer used after December 31, 2009, they must be kept on file
by the seller for five years from the date of last use or
December 31, 2014.
Use Tax
The use tax complements the retail sales tax by imposing
a tax of like amount on the use of tangible personal property
purchased or acquired without payment of the retail sales tax.
Thus, when office equipment or supplies are purchased or
leased from an unregistered out-of-state vendor who does not
collect the Washington state retail sales tax, the use tax
must be paid directly to the department. Space for the
reporting of this tax will be found on the excise tax return. (For more information, see WAC 458-20-178 Use tax.)
When tax liability arises. Tax should be reported during
the reporting period in which the financial institution
receives, becomes legally entitled to receive, or in accord
with the system of accounting regularly employed enters the
consideration as a charge against the client, purchaser or
borrower. Financial institutions may prepare excise tax
returns to the department reporting income in periods which
correspond to accounting methods employed by each institution
for its normal accounting purposes in reporting to its
supervisory authority.
[Statutory Authority: RCW 82.32.300, 82.01.060(2), chapters 82.04, 82.08, 82.12 and 82.32 RCW. 10-06-069, § 458-20-146,
filed 2/25/10, effective 3/28/10. Statutory Authority: RCW 82.32.300. 83-07-032 (Order ET 83-15), § 458-20-146, filed
3/15/83; Order ET 70-3, § 458-20-146 (Rule 146), filed
5/29/70, effective 7/1/70.]