Recouping Washington B & O Tax: It Must Be Part of the Sales Price

Business and Operation TaxAs 2013 begins, it is a good idea to be sure that your business practices are in compliance with applicable laws and regulations. There is nothing like preventative care. Discovering noncompliance too late and dealing with the process of fixing the problems associated with noncompliance results in unnecessary headaches and expense. As Benjamin Franklin put it, “An ounce of prevention is worth a pound of cure.” In this short blog, I hope to remind business owners of one of the many practices that must be performed according to Washington law: collecting Washington’s business and operation (“B & O”) tax.

In 2012, the Washington Supreme Court clarified the meaning of RCW 82.04.500 through its holding in Peck v. AT&T Mobility, 174 Wn.2d 333, 275 P.3d 304 (2012). In Peck, the Washington Supreme Court held that, “even if disclosed, a seller is prohibited from recouping its B & O taxes by collecting a surcharge in addition to its monthly service fee.”  As such, “a business cannot add on the B & O tax to the sales price.” Instead, B & O tax must be factored as part of the sales price just as any other overhead expense. One of the rationales behind this ruling is that, although ultimately the B & O tax is likely passed on to the consumer, “at least it will be reflected in a sales price that consumers can compare against competitors.” Therefore, in reviewing your business’s pricing policies and practices for 2013, be sure that B & O tax is not included as an additional, separate charge in addition to the final sales price.

If you have any questions about collecting B & O tax or any other questions relating to your business, please contact your attorney at MPBA.