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

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For the current opinion, go to https://www.lexisnexis.com/clients/wareports/.

No. 60254-7-II

of doing business.” Budget Rent-A-Car, 81 Wn.2d at 173. Therefore, the superior court did not

err when it determined the wages AMC pays to onsite employees from the operating accounts

constitute part of AMC’s gross income. RCW 82.04.080(1).

3. Rule 111 Does Not Apply

AMC argues that it is an agent of the Owners and it meets the conditions of Rule 111 such

that the onsite employee payroll should be excluded from AMC’s gross income. We disagree.

To qualify for Rule 111, AMC must meet three conditions: “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 original) (quoting Christensen, 97 Wn.2d at 769). The primary inquiry is whether

AMC can establish that it paid onsite employee wages solely as an agent of the Owners. William

Rogers Co., 148 Wn.2d at 177-78. However, if AMC is the employer, then it is liable in its own

right for paying the onsite employees and Rule 111 does not apply. Rho, 113 Wn.2d at 569.

Here, AMC fails to establish the primary inquiry—that it is solely an agent of the Owners

as it pertains to paying the onsite employees. William Rogers Co., 148 Wn.2d at 177-78. As

discussed above, AMC is the employer of record for the onsite employees. AMC participates in

and controls all aspects of the employment relationship with onsite employees, ranging from

writing job descriptions, issuing employment offer letters, hiring, supervising, and compensating