United States: Mandatory Filing Of Washington Reports Or Surveys To Ensure Tax Preferences

Taxpayers familiar with Washington's tax systems understand that properly calculating the appropriate amount of tax due often entails complying with distinctive and complicated substantive requirements. In addition to fulfilling these substantive requirements, however, taxpayers should be aware of the requirement to complete the important procedural step of filing a uniform Annual Report and/or Annual Survey, in order to receive various benefits characterized as tax preferences.

Annual Report and/or Survey Requirement

Manufacturers, research and development firms, data centers, and other companies can benefit from tax preferences offered by the state of Washington, including exemptions, exclusions, or deductions from the base of a state tax, as well as credits, deferrals and lower tax rates.¹ Washington law requires taxpayers that receive these types of tax preferences for business and occupation (B&O) tax, sales and use tax, and other taxes to e-file a correct and complete uniform Annual Report and/or uniform Annual Survey, depending upon statutory requirements specific to the preference with the Washington Department of Revenue.² The purpose of completing the annual report and survey is to inform the Department, and by extension the Washington state government, the extent to which these preferences have benefited employment and industry-specific growth in the state.

The filing requirements depend upon the specific tax preference being taken, as well as the specific industry of the taxpayer. For example, taxpayers in the aerospace industry claiming a Washington B&O tax credit generally must file an Annual Report.³ However, taxpayers who are claiming a data center sales and use tax exemption must file both an Annual Report and an Annual Survey.⁴

The survey or report generally is due by April 30 of the following year. Additionally, reports and surveys must be electronically filed through the Department's Web site: http://dor.wa.gov.

Commentary

It is crucial that the Annual Report or Annual Survey be filed by the April 30 deadline. Administrative decisions by the Department have held that the failure to timely file a correct and complete Annual Report or Annual Survey will result in the loss or denial of past and/or future deferral or credits.⁵ In addition, it is our experience that filing an Annual Report or Annual Survey that contains what would be considered a nonmaterial technical error may imperil the tax preference that would otherwise be granted by the Department. Accordingly, taxpayers should consider whether they are able to claim tax preferences in the past year that would be subject to the required filing of an Annual Report and/or Annual Survey. If so, care should be taken to file these documents as necessary in an accurate and timely manner in order to preserve the tax preferences to be claimed.

Footnotes

1 WASH. REV. CODE § 43.136.021.

2 WASH. REV. CODE §§ 82.32.534; 82.32.585.

3 WASH. REV. CODE §§ 82.04.4461(6); 82.04.4463(5); 82.32.534; WASH. ADMIN. CODE § 458-20- 267(2)(a). Note that the sales and use tax exemption for the construction of new facilities used to manufacture commercial airplanes or fuselages or wings of commercial airplanes requires that both an Annual Report and an Annual Survey be filed. Special Notice: New and Extended Aerospace Tax Incentives, Washington Department of Revenue, July 11, 2014.

4 WASH. REV. CODE §§ 82.08.986; 82.32.585; 82.63.020(2); WASH. ADMIN. CODE §§ 458-20- 267(2)(a); 458-20-268(2).

5 See Tax Determination No. 13-0331, Washington Department of Revenue, July 31, 2014; Tax Determination No. 14-0301, Washington Department of Revenue, Feb. 26, 2015.

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