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

Citation: Wash. Court of Appeals published opinion — D2 60254-7-II Published Opinion.pdf
Jurisdiction: Washington (state)
Source: Official source
Original Source: https://www.courts.wa.gov/opinions/pdf/D2%2060254-7-II%20Published%20Opinion.pdf ↗

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. . . [N]o charge which represents an advance payment on the purchase price
of an article or a cost of doing or obtaining business, even though such charge is
made as a separate item, will be construed as an advance or reimbursement. Money
so received constitutes a part of gross sales or gross income of the business, as the
case may be.

WAC 458-20-111.7

For Rule 111 to apply, three conditions must be met: “1) the payments are ‘customary

reimbursements for advances made to procure a service for the client’; 2) the payments ‘involve

services that the taxpayer did not or could not render’; and 3) the taxpayer ‘is not liable for paying

the associate firms except as the agent of the client.’” Rho, 113 Wn.2d at 567-68 (emphasis in

7
WAC 458-20-111 also provides examples of “advance” and “reimbursement”:

For example, where a taxpayer engaging in the business of selling
automobiles at retail collects from a customer, in addition to the purchase price, an
amount sufficient to pay the fees for automobile license, tax and registration of title,
the amount so collected is not properly a part of the gross sales of the taxpayer but
is merely an advance and should be excluded from gross proceeds of sales.
Likewise, where an attorney pays filing fees or court costs in any litigation, such
fees and costs are paid as agent for the client and should be excluded from the gross
income of the attorney.