Washington Administrative Code › Title 458 - Revenue, Department of › Chapter 458-20 - Excise tax rules › Section 458-20-104 - Small business tax relief based on income of business

Current through Register Vol. 24-14, July 15, 2024
(1)
Introduction.
This rule explains the business and occupation
			 (B&O) tax credit for small businesses provided by
			 RCW
			 82.04.4451. This credit is commonly referred
			 to as the small business B&O tax credit or small business credit (SBC). The
			 amount of small business B&O tax credit available on a tax return can
			 increase or decrease, depending on the reporting frequency of the account and
			 the net B&O tax liability for that return. This rule also explains the
			 public utility tax income exemption provided by
			 RCW
			 82.16.040. The public utility tax exemption
			 is a fixed amount, or threshold, based on the reporting frequency assigned to
			 the account. Readers should refer to WAC
			 458-20-22801 (Tax reporting
			 frequency-Forms) for an explanation of how the department of revenue
			 (department) assigns a particular reporting frequency to each account. Readers
			 may also want to refer to WAC
			 458-20-101 for an explanation of
			 Washington's tax registration and tax reporting requirements.
This rule provides examples that identify a number of facts and
				then state a conclusion regarding the applicability of the income exemption for
				the public utility tax or small business B&O tax credit. These examples
				should be used only as a general guide. The tax results of other situations
				must be determined after a review of all facts and circumstances.
(2)
The public utility tax
			 income exemption.
Persons subject to public utility tax (PUT) are exempt
			 from payment of this tax for any reporting period in which the gross taxable
			 amount reported under the combined total of all public utility tax
			 classifications does not equal or exceed the maximum exemption for the assigned
			 reporting period. Per
			 RCW
			 82.16.040, the public utility tax exemption
			 amounts are:
for taxpayers reporting monthly ...............
$2,000 per month
for taxpayers reporting quarterly ..............
$6,000 per quarter
for taxpayers reporting annually ...............
$24,000 per annum
(a)
What if
			 the taxable income equals or exceeds the maximum exemption?
If the
			 taxable income for a reporting period equals or exceeds the maximum exemption,
			 tax must be remitted on the full taxable amount.
(b)
How does the exemption apply if a
			 business does not operate for the entire tax reporting period?
The
			 public utility tax maximum exemptions apply to the entire tax reporting period,
			 even though the business may not have operated during the entire
			 period.
(c)
Do taxable
			 amounts for B&O tax or other taxes affect this exemption?
The public
			 utility tax exemption is not affected by taxable amounts reported in the
			 B&O tax section or any of the other tax sections of the tax
			 return.
(d)
Example - How is
			 the public utility tax exemption applied?
Taxpayer registers with the
			 department and is assigned a quarterly tax reporting frequency. Taxpayer begins
			 business activities on February 1st. During the two months of the first quarter
			 that the taxpayer is in business, taxpayer's public utility gross income is
			 $7,000. After deductions provided by chapter 82.16 RCW (Public utility tax) are
			 computed, the total taxable amount is $5,000. In this case, the taxpayer does
			 not owe any public utility tax because the taxable amount of $5,000 is less
			 than the $6,000 exemption threshold for quarterly taxpayers. The fact that the
			 taxpayer was in business during only two months out of the three months in the
			 quarter has no effect on the threshold amount. However, if there were no
			 deductions available to the taxpayer, the taxable amount would have been
			 $7,000. The public utility tax would then have been due on the full taxable
			 amount of $7,000.