By Brad Eriksen
Many an Oregon business incurs tax liability in Washington without even realizing it, and without having properly qualified or registered its business activities in Washington. Washington has a very different tax structure from that of Oregon. Instead of income tax on the profits of the business, as in Oregon, Washington has a gross revenue tax in the form of the Business and Occupations tax. Washington also has a number of excise taxes applicable to business, including the Retail Sales Tax and the Use Tax. Because of this differing tax structure it is often easy to overlook Washington taxes when your contact with the state of Washington seems minimal.
There is now an opportunity for Oregon businesses to address this potential tax liability without incurring the penalties, fines, and interest typically associated with the late payment of taxes. In the closing days of the 2010 special legislative session, the Washington legislature passed Senate Bill 6892, granting tax amnesty to up to 10,000 businesses, including out-of-state businesses. The program provides amnesty from penalties and interest for unpaid tax and unfiled tax returns coming due prior to February 1, 2010. The tax amnesty program runs from February 1, 2011 through April 30, 2011, so there is a limited window of opportunity to take advantage of the tax amnesty program — only 90 days.
The program applies to Washington's business and occupations tax, sales and use tax, and public utility tax. Unlike many other state tax amnesty programs, it applies to both penalties and interest on the unpaid taxes. The program does not include special penalties for failing to disclose another tax liability while participating in the amnesty program. Other states' amnesty programs do include significant penalties for failing to disclose all unpaid taxes while participating in the program, even if the failure was inadvertent. This is especially attractive to Oregon business that may not be familiar with all of Washington's tax obligations.
Under the amnesty program, taxpayers are required to identify the tax liability before April 18, 2011 and to pay the tax in full before May 1, 2011. Since businesses are typically preparing Oregon tax returns, at that time, it is a good opportunity to address any potential Washington tax liability as well. However, since this is tax season, and most tax professionals will be very busy, it makes sense to get started as soon as possible. Taxpayers with outstanding warrants will also have to pay any filing fees associated with the warrant.
The new tax amnesty program offers businesses an opportunity to clean the slate. This could be especially valuable for Oregon business that transact business in Washington State, but may not be aware of their Washington tax responsibilities. This is the perfect time to examine your operations, determine whether you have been transacting business in Washington — perhaps without even realizing it — and put this potential tax liability behind you.