Washington State installment interest

[jimenright]

Several months ago, I posted a thread asking for opinions about whether or not interest from installment sales of business assets is subject to Washington State B&O tax. I also wrote that I made an inquiry to Washington's DOR concerning this. I finally recieved an answer from them. A few of you asked to be informed of the answer.

This is their answer: "Yes. Interest income resulting from the sale of business assets is subject to the B&O Tax under the service and other activities classification. This does not include interest income from the sale of real property."

They referred me the following on line article: http://dor.wa.gov/Content/GetAFormOr...essAssets.aspx.

They also prefaced the answer with the following:
"This a nonprecidential,informal response based on limited tax provided. It is not binding on the Department of Renue or any taxpayer. To be binding, the identity of the client must be disclosed."

[Maribeth]

Okay, I read the article. It appears to me that they are saying that interest income earned while the business is on-going is subject to B&O tax. I have no problem with that. Interest assessed on past-due accounts receivable is taxable for B&O purposes and always has been.

I believe that the issue that you have, where the assets were sold, the business is closed, your client is simply receiving payments of principal and interest, after the close of business, is not subject to B&O tax.

Remember that when the assets were sold, any sales tax due upon that sale were paid at that time. Also, any B&O tax due upon that sale was paid at that time. You cannot get around that when you have a business sale in the State of Washington.

Now you have a non-business transaction, with a private citizen receiving interest & principal. I still would not report any interest for B&O purposes.

Maribeth

[jimenright]

I do not intend to report the interest to the state

or this issue to my client. I am unsure if the interest is subject to the tax and the state does not seem to be confident either judging from the length of time it took for them to answer my inquiry. I will consider the interest not subject to the tax.