State & Local Tax Blog

Don’t Miss this New Twist to the Washington Tax Amnesty

You might be able to get part of the tax WAIVED along with the penalty and interest

We’ve been beating the drum on the amnesty in Washington for some time. We don’t like to beat the drum too long and loud, but in this case, we feel compelled to call your attention to the opportunity, lest you miss out.

The State is NOT Meeting Their Projections

In December of 2010, during Senate hearings of the Washington State Tax Amnesty (SB 6892), the WA Department of Revenue Interim Director, Tremaine Smith, testified that the proposed Amnesty program was projected to generate $28.3 million. The Amnesty which subsequently passed, began on February 1, 2011 and continues through April 18, 2011, may not meet it’s projections. According to a Tri-City Herald article published 3/24/2011, “5,000 businesses in Washington have taken advantage of a new tax amnesty program and paid more than $12.6 million into the state”. Using those numbers our calculations show that more 70% of the time had elapsed yet less than 45% of the revenue had been generated.

On Tuesday, March 29 the featured speaker at our Hot Topics in Washington State Tax Webinar, Gerald Swanson, told us that, “the DOR is anxious to show results… eager to cut deals… and settle old disputes.” Gerald went on to tell us that since WA does not have a history of offering amnesty programs they are eager to make this one work. As such, if you move quickly (there are roughly only two weeks left) not only could you have your entire penalty and interest waived but maybe a portion of the underlying tax as well.

We first mentioned the Washington Tax Amnesty Program in our previous article, “An Amnesty Worth it’s SALT”. In it we mentioned that although we usually prefer VDAs over amnesties (reasons detailed in You Missed the Tax Amnesty Express) the WA Amnesty was a pretty good amnesty. The amnesty covers the state business and occupation (B&O) tax, state public utility tax and both state and local sales and use taxes. It has a limited look back period of 4 years plus the current. There are also waivers of all penalty and interest. It was a good program to begin with, but with the potential for a tax reduction it is now a great program.

Don’t Ask, Won’t Receive

It is important to note that not everyone who asks for a tax waiver will receive one. We strongly suggest that if you wish to have the tax waived you work with a third party who can negotiate on your behalf. When choosing your third party make sure they have special experience in this type of work. How you frame your situation is extremely important. We can help. Gerald Swanson has helped many clients already and just last week had one tax base waiver of over 70%. There are no guarantees your tax will be reduced, but we can guarantee one thing: if you don’t ask, and ask the right people in the right way, you most certainly will not get any tax waived.

Who Qualifies?

While many companies are prime candidates for this amnesty program, companies selling into the state of WA from other states are the best candidates. Because of last summer’s nexus rules changes, that eliminated the need for physical presence for “service companies” in regards to the B&O, many companies are now subject to a new tax they were or are not aware of. Other companies, while checking their operations to make sure they were not affected by the new rules, suddenly realized they have always had nexus and just never realized it. This is the perfect time for all companies to examine their operations to ensure you don’t have liabilities you are not aware of. The worst time to learn about a problem is in an audit. Contact us if you need help determining if you have issues. There is still time to evaluate your situation and meet the April 18th filing deadline.

You may participate in the WA Amnesty directly by following the directions at the DOR webpage or you may contact us for help. However you decide to proceed, do so quickly as you only have about 2 weeks to get it done. We can help with as little as 72 hours.

One Response

  1. gowrylowm says:

    This article misrepresents the Washington State Department of Revenue’s position on amnesty, and makes flawed assumptions about the success of the program to date. The Department is not anxious to cut deals and isn’t waiving the taxes themselves. What it will do is recharacterize any past payments toward penalties and interest to apply to the taxes due. It was the fairest way to treat delinquent taxpayers who were making an effort to pay off their back taxes. We are reaching out to delinquent businesses so they know about the program and upcoming April 18 application deadline, but we are not behind in collections. The Department has collected $22.4 million in state and local taxes as of April 4, and expects significantly more taxes to be paid by the April 30 deadline by many of the more than 7,000 businesses that have applied for amnesty so far. The Department expects to easily exceed the estimate that the amnesty program would generate $28.3 million in state and local tax revenues.

    Mike Gowrylow
    Communications Director
    Washington State Department of Revenue

Leave a Reply

Your email address will not be published.

What You Should Do Next

Have a state or local tax issue or question? Need help? Want peace of mind? We can help! Sign up for a free "What's Next" call and let us get to work for you.