Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule
discusses the responsibility of taxpayers to pay their tax by the appropriate
due date, and the acceptable methods of payment. It discusses the interest and
penalties that are imposed by law when a taxpayer fails to pay the correct
amount of tax by the due date. It also discusses the circumstances under which
the law allows the department of revenue (department) to waive interest or
penalties.
(a)
Where can I get my
questions answered, or learn more about what I owe and how to report it?
Washington's tax system is based largely on voluntary compliance. Taxpayers
have a legal responsibility to become informed about applicable tax laws, to
register with the department, to seek instruction from the department, to file
accurate returns, and to pay their tax liability in a timely manner (chapter
82.32A RCW, Taxpayer rights and responsibilities). The department has a
taxpayer services program to provide taxpayers with accurate tax-reporting
assistance and instructions. The department staffs local district offices,
maintains a question and information phone line (360-705-6705), provides
information and electronic forms on the internet (dor.wa.gov), and conducts
free public workshops on tax reporting. The department also publishes notices,
interpretive statements, and rules discussing important tax issues and
changes.
(b)
What is My DOR
and how can it help me? My DOR is an internet-based application
providing a secure and encrypted way for taxpayers to file and pay many of
Washington state's excise taxes online. The My DOR system automatically
performs math calculations and checks for other types of reporting errors.
Using My DOR to file electronically will help taxpayers avoid penalties
and interest related to unintentional underpayments and delinquencies.
My DOR can be accessed on the department's internet site dor.wa.gov. Taxpayers
may also call the department's telephone center at 360-705-6705 for more
information.
All taxpayers are required to electronically file and
electronically pay their taxes unless the department waives the requirement in
accordance with
RCW
82.32.080. For more detailed information on
the requirement and exceptions for electronically filing using My DOR and
submitting payment electronically, see WAC
458-20-22802 (Electronic filing
and payment).
(c)
Index of subjects addressed in this rule:
Topic-Description
|
See subsection
|
Where can I get my questions answered, or learn
more about what I owe and how to report it? - By phone or online, the
department provides a number of free and easy resources to help you find
answers.
|
(1)(a) of this rule, (see above)
|
What is My DOR and how can it help me? -
My DOR guides you through the return an you avoid many common mistakes.
|
(1)(b) of this rule, (see above)
|
Do I need to file a return? - How do I
access returns and file them?
|
(2) of this rule
|
What methods of payment can I use? - What
can I use to pay my taxes?
|
(3) of this rule
|
When is my tax payment due? - Different
reporting frequencies can have different due dates. What if the due date is a
weekend or a holiday? If my payment is in the mail on the due date, am I late
or on time?
|
(4) of this rule
|
Penalties - What types of penalty exist?
How big are they? When do they apply?
|
(5) of this rule
|
Statutory restrictions on imposing penalties
- More than one penalty can apply at the same time, but there are
restrictions. Which penalties can be combined?
|
(6) of this rule
|
Interest - In most cases interest is
required. What interest rates apply? How is interest applied?
|
(7) of this rule
|
Application of payment towards liability -
Interest, penalties, and taxes are paid in a particular order. If my payment
doesn't pay the entire liability, how can I determine what parts have been
paid?
|
(8) of this rule
|
Waiver or cancellation of penalties - I
think I was on time, or I had a good reason for not paying the tax when I
should have. What reasons qualify me for a waiver of penalty? How can I get a
penalty removed?
|
(9) of this rule
|
Waiver or cancellation of interest
-
Interest will only be waived in two limited situations.
What are they?
|
(10) of this rule
|
Interest and penalty waiver for active duty
military personnel - Is a majority owner of the business on active duty
with the military? BOTH interest and penalty can be waived if all the statutory
requirements are met. What are the requirements?
|
(11) of this rule
|
Stay of collection - Revenue will
sometimes temporarily delay collection action on unpaid taxes. When can this
happen? Can I request that revenue delay collection?
|
(12) of this rule
|
Extensions - Can I get an extension of my
due date? How long does an extension last? A special extension may be available
if the governor proclaims a state of emergency in your area.
|
(13) of this rule
|
(2)
Do I need to file a return?
A "return" is defined as any paper or electronic document a person is required
to file by the state of Washington in order to satisfy or establish a tax or
fee obligation which is administered or collected by the department, and that
has a statutorily defined due date.
RCW
82.32.050.
(a) Electronic returns and payments are to be
filed with the department by every person liable for any tax which the
department administers and/or collects, except for the taxes imposed under
chapter 82.24 RCW (Tax on cigarettes), which are collected through sales of
revenue stamps. Returns must be filed through the My DOR system (see subsection
(1)(b) of this rule), or by other means if approved by the department.
Taxpayers who file with My DOR do not receive paper returns.
However, taxpayers can set up alerts in My DOR and an electronic reminder for
each upcoming return as the time to file approaches.
(b) Taxpayers whose accounts are placed on an
"active nonreporting" status are required to timely notify the department and
file a tax return with My DOR if they no longer qualify for this reporting
status. See WAC
458-20-101 (Tax registration and
tax reporting) for an explanation of the active nonreporting status.
(c) Some consumers may not be required to
register with the department and obtain a tax registration endorsement. (Refer
to WAC 458-20-101 for detailed
information about tax registration and when it is required.) But even if they
do not have to be registered, consumers may be required to pay use tax directly
to the department if they have purchased items without paying Washington's
sales tax. An unregistered consumer must report and pay their use tax liability
directly to the department. Use tax can be reported and paid on a "Consumer Use
Tax Return" or the consumer can create an online account at the department's
website to conveniently report and pay use tax electronically. Consumer use tax
returns are available from the department at any of the local district offices.
A consumer may also call the department's telephone information center at
360-705-6705 to request a consumer use tax return by mail. Finally, the
consumer use tax return is available for download from the department's
internet site at dor.wa.gov, along with a number of other returns and forms
which are available there.
The interest and penalty provisions of this rule may apply if
use tax is not paid on time. Unregistered consumers should refer to WAC
458-20-178 (Use tax and use of
tangible personal property) for an explanation of their tax reporting
responsibilities.
(3)
What methods of payment can I
use? The law requires taxpayers to file and pay their taxes
electronically. There are two electronic payment methods: Electronic funds
transfer (EFT) and credit card. The department may waive the electronic payment
requirement for any taxpayer or class of taxpayers, for good cause. Waivers may
be temporary or permanent, and may be made on the department's own motion. (See
WAC 458-20-22802 for more information
on electronic filing and payment.)
(a) For
taxpayers not required to pay electronically, payment may be made by cash,
check, cashier's check, or money order.
(b) Payment by cash should only be made at an
office of the department to ensure that the payment is safely received and
properly credited.
(c) Payment may
be made by uncertified bank check, but if the check is not honored by the
financial institution on which it is drawn, the taxpayer remains liable for the
payment of the tax, as well as any applicable interest and penalties.
RCW
82.32.080. The department may refuse to
accept any check which, in its opinion, would not be honored by the financial
institution on which that check is drawn. If the department refuses a check for
this reason the taxpayer remains liable for the tax due, as well as any
applicable interest and penalties.
(4)
When is my tax payment due?
RCW
82.32.045 provides that payment of the taxes
due with the excise tax return must be made monthly and within 25 days after
the end of the month in which taxable activities occur, unless the department
assigns the taxpayer a longer reporting frequency. Payment of taxes due with
returns covering a quarterly reporting frequency are due on or before the last
day of the month following the period covered by the return. (For example,
payment of the tax liability for a first quarter tax return is due on April
30th.) For annual filers, tax payments, along with reports and returns are due
on or before April 15th of the year immediately following the end of the period
covered by the return. WAC
458-20-22801 (Tax reporting
frequency explains the department's procedure for assigning a quarterly or
annual reporting frequency.
(a) If the date
for payment of the tax due on a tax return falls upon a Saturday, Sunday, or
legal holiday, the filing will be considered timely if performed on the next
business day.
RCW
1.12.070 and
1.16.050.
(b) When a taxpayer is not required to
electronically file and pay taxes and chooses to file or pay taxes through the
U.S. Postal Service, the postmark date as shown by the post office cancellation
mark stamped on the envelope will be considered conclusive evidence by the
department in determining if a tax return or payment was timely filed or
received. RCW 1.12.070. It is the
responsibility of the taxpayer to mail the tax return or payment sufficiently
in advance of the due date to assure that the postmark date is
timely.
(c) Taxpayers required to
file and pay taxes electronically should refer to WAC
458-20-22802 (Electronic filing
and payment) for more information regarding My DOR, electronic payment due
dates, and when electronic payments are considered received.
(d) If a taxpayer suspects that it will not
be able to file and pay by the coming due date, it may be able to obtain an
extension of the due date to temporarily avoid additional penalties. Refer to
subsection (12) of this rule for details on requesting an extension.
(5)
Penalties.
Various penalties may apply as a result of the failure to correctly or
accurately compute the proper tax liability, or to timely pay the tax. Separate
penalties may apply and be cumulative for the same tax. Interest may also apply
if any tax has not been paid when it is due, as explained in subsection (7) of
this rule. (The department's My DOR system can help taxpayers avoid additional
penalties and interest. See subsection (1)(b) of this rule for more
information.)
The penalty types and rates addressed in this subsection
are:
Penalty
Type-Description
|
Penalty Rate
|
See subsection
|
Late payment of a return - Nine percent
added when payment is not received by the due date, and increases if the tax
due remains unpaid.
|
9/19/29%
|
(5)(a) of this rule
|
Unregistered taxpayer - Five percent added
against unpaid tax when revenue discovers a taxpayer who has taxable activity
but is not registered.
|
5%
|
(5)(b) of this rule
|
Assessment - Five percent added when a tax
assessment is issued if the tax was "substantially underpaid," and increases if
the tax due remains unpaid.
|
5/15/25% or 0/15/25%
|
(5)(c) of this rule
|
Issuance of a warrant - Ten percent added
when a warrant is issued to collect unpaid tax, and does not require actual
filing of a lien.
|
10%
|
(5)(d) of this rule
|
Disregard of specific written instructions
- Ten percent added when the department has provided specific, written
reporting instructions and tax is underpaid because the instructions are not
followed.
|
10%
|
(5)(e) of this rule
|
Evasion - Fifty percent added when tax is
underpaid and there is an intentional effort to hide that fact.
|
50%
|
(5)(f) of this rule
|
Misuse of resale certificates or a reseller
permit - Fifty percent added against unpaid sales tax when a buyer uses
a resale certificate or reseller permit, but should not have.
|
50%
|
(5)(g) of this rule
|
Failure to remit sales tax to seller - Ten
percent added against sales tax when the department proceeds directly against a
buyer who fails to pay sales tax to the seller as part of a sales taxable
retail purchase.
|
10%
|
(5)(h) of this rule
|
Failure to obtain the contractor's unified
business identifier (UBI) number - A two hundred fifty dollar maximum
penalty (does not require any tax liability) when specified businesses hire
certain contractors but do not obtain and keep the contractor's UBI
number.
|
$250 (max)
|
(5)(i) of this rule
|
Disregarded transaction - A thirty-five
percent penalty of the additional tax found to be due as a result of engaging
in a disregarded transaction.
|
35%
|
(5)(j) of this rule
|
(a)
Late
payment of a return.
RCW
82.32.090(1) imposes a nine
percent penalty if the tax due on a taxpayer's return is not paid by the due
date. A total penalty of 19 percent is imposed if the tax due is not paid on or
before the last day of the month following the due date, and a total penalty of
29 percent is imposed if the tax due is still not paid on or before the last
day of the second month following the due date. The minimum penalty for late
payment is five dollars. Various sets of circumstances can affect how the late
payment of a return penalty is applied. See (a)(i) through (iii) of this
subsection for some of the most common circumstances.
(i)
Will I avoid the penalty if I file
my return without the payment? The department may refuse to accept any
return that is not accompanied by payment of the tax shown to be due on the
return. If the return is not accepted, the taxpayer is considered to have
failed or refused to file the return.
RCW
82.32.080. Failure to file the return can
result in the issuance of an assessment for the actual, or an estimated, amount
of unpaid tax. Any assessment issued may include an assessment penalty. (See
RCW
82.32.100 and (c) of this subsection for
details of when and how the assessment penalty applies.) If the tax return is
accepted without payment and payment is not made by the due date, the late
payment of return penalty will apply.
(ii)
What if my account is given an
active nonreporting status, but I later have taxes I need to report and
pay? WAC
458-20-101 provides information
about the active nonreporting status available for tax reporting accounts. In
general, the active nonreporting status allows persons, under certain
circumstances, to engage in business activities subject to the Revenue Act
without filing excise tax returns. Persons placed on an active nonreporting
status by the department are required to timely notify the department if their
business activities no longer meet the conditions to be in active nonreporting
status. One of the conditions is that the person is not required to collect or
pay a tax the department is authorized to collect. The late payment of return
penalty will be imposed if a person on active nonreporting status incurs a tax
liability that is not paid by the due date for taxpayers that are on an annual
reporting basis.
(iii)
I did
not register my business with the department when I started it, and now I think
I was supposed to be paying taxes! What should I do? You should fill out
a business license application to get your business registered. It is important
for you to register before the department identifies you as an unregistered
taxpayer and contacts you about your business activities. (WAC
458-20-101 provides information
about registering your business.) Except as noted below, if a person engages in
taxable activities while unregistered, but then registers prior to being
contacted by the department, the registration is considered voluntary. When a
person voluntarily registers, the late payment of return penalty does not apply
to those specific tax-reporting periods representing the time during which the
person was unregistered.
(A) However, even if
the person has voluntarily registered as explained above, the late payment of
return penalty will apply if the person:
(I)
Collected retail sales tax from customers and failed to remit it to the
department; or
(II) Engaged in
evasion or misrepresentation with respect to reporting tax liabilities or other
tax requirements; or
(III) Engaged
in taxable business activities during a period of time in which the person's
previously open tax reporting account had been closed.
(B) Even though other circumstances may
warrant retention of the late payment of return penalty, if a person has
voluntarily registered, the unregistered taxpayer penalty (see (b) of this
subsection) will not be due.
(b)
Unregistered taxpayer.
RCW
82.32.090(4) imposes a five
percent penalty on the tax due for any period of time where a person engages in
a taxable activity and does not voluntarily register prior to being contacted
by the department. "Voluntarily register" means to properly complete and submit
a master application to any agency or entity participating in the unified
business identifier (UBI) program for the purpose of obtaining a UBI number,
all of which is done before any contact from the department. For example, if a
person properly completes and submits a business license application to the
department of labor and industries for the purpose of obtaining a UBI number,
and this is done prior to any contact from the department of revenue, the
department considers that person to have voluntarily registered. A person has
not voluntarily registered if a UBI number is obtained by any means other than
submitting a properly completed business license application. WAC
458-20-101 (Tax registration and
tax reporting) provides additional information regarding the UBI
program.
(c)
Assessment. If the department issues an assessment for
substantially underpaid tax, a five percent penalty will be added to the
assessment when it is issued. If any tax included in the assessment is not paid
by the due date, or by any extended due date, the penalty will increase to a
total of 15 percent against the amount of tax that remains unpaid. If any tax
included in the assessment is not paid within 30 days of the original or
extended due date, the penalty will further increase to a total of 25 percent
against the amount of tax that remains unpaid. The minimum for this penalty is
five dollars.
RCW
82.32.090(2).
(i) As used in this rule, "substantially
underpaid" means that:
(A) The taxpayer has
paid less than 80 percent of the amount of tax determined by the department to
be due for all of the types of taxes included in, and for the entire period of
time covered by, the department's examination; and
(B) The amount of underpayment is at least
$1,000. If both of these conditions are true when an assessment is issued, it
will include the initial five percent assessment penalty. If factual
adjustments are made after issuance of an assessment, and those adjustments
change whether a taxpayer paid less than 80 percent of the tax due, the
department will reevaluate imposition of the original five percent
penalty.
(ii) If the
initial five percent assessment penalty is included with an assessment when it
is issued, the penalty is calculated against the total amount of tax that was
not paid when originally due and payable (see
RCW
82.32.045). Audit payments made prior to
issuance of an assessment will be applied to the assessment after calculation
of the initial five percent assessment penalty. At the discretion of the
department, preexisting credits or amendments paid prior to an audit or
unrelated to the scope of the assessment may be applied before the five percent
assessment penalty is calculated, reducing the amount of the penalty.
Additional assessment penalty is assessed against the amount of tax that
remains unpaid at that particular time, after payments are applied to the
assessment.
(d)
Issuance of a warrant. If the department issues a tax warrant for
the collection of any fee, tax, increase, or penalty, an additional penalty
will immediately be added in the amount of 10 percent of the amount of the tax
due, but not less than $10.00.
RCW
82.32.090(3). Refer to WAC
458-20-217 for additional
information on the application of warrants and tax liens.
(e)
Disregard of specific written
instructions. If the department finds that all or any part of a
deficiency resulted from the disregard of specific written instructions as to
reporting of tax liabilities, an additional penalty of 10 percent of the
additional tax found due will be imposed because of the failure to follow the
instructions.
RCW
82.32.090(5).
(i)
What is "disregard of specific
written instructions"? A taxpayer is considered to have received
specific written instructions when the department has informed the taxpayer in
writing of its tax obligations and specifically advised the taxpayer that
failure to act in accordance with those instructions may result in this penalty
being imposed. The specific written instructions may be given as a part of a
tax assessment, audit, determination, or closing agreement. The penalty applies
when a taxpayer does not follow the specific written instructions, resulting in
underpayment of the tax due. The penalty may be applied only against the
taxpayer given the specific written instructions. However, the taxpayer will
not be considered to have disregarded the instructions if the taxpayer has
appealed the subject matter of the instructions and the department has not
issued its final instructions or decision.
(ii)
What if I try to follow the
written instructions, but I still don't get it quite right? The penalty
will not be applied if the taxpayer has made a good faith effort to comply with
specific written instructions.
(f)
Evasion. If the department
finds that all or any part of the deficiency resulted from an intent to evade
the tax due, a penalty of 50 percent of the additional tax found to be due will
be added. RCW 82.32.090(7).
The evasion penalty is imposed when a taxpayer knows a tax liability is due but
attempts to escape detection or payment of the tax liability through deceit,
fraud, or other intentional wrongdoing. An intent to evade does not exist where
a deficiency is the result of an honest mistake, miscommunication, or the lack
of knowledge regarding proper accounting methods. The department has the burden
of showing the existence of an intent to evade a tax liability through clear,
cogent and convincing evidence.
(i)
Evasion penalty only applies to the specific taxes that a taxpayer
intended to evade. To the extent that the evasion involved only specific
taxes, the evasion penalty will be added only to those taxes. The evasion
penalty will not be applied to those taxes which were inadvertently underpaid.
For example, if the department finds that the taxpayer intentionally
understated the purchase price of equipment in reporting use tax and also
inadvertently failed to collect or remit the sales tax at the correct rate on
retail sales of merchandise, the evasion penalty will be added only to the use
tax deficiency and not the sales tax.
(ii)
What actions may establish an
intent to evade? The following is a nonexclusive list of actions that
are generally considered to establish an intent to evade a tax liability. This
list should only be used as a general guide. A determination of whether an
intent to evade exists may be ascertained only after a review of all the facts
and circumstances.
(A) The use of an
out-of-state address by a Washington resident to register property to avoid a
Washington excise or use tax, when at the time of registration the taxpayer
does not reside at the out-of-state address on a more than temporary basis.
Examples of such an address include, but are not limited to, the residence of a
relative, mail forwarding or post office box location, motel, campground, or
vacation property;
(B) The willful
failure of a seller to remit retail sales taxes collected from customers to the
department; and
(C) The alteration
of a purchase invoice or misrepresentation of the price paid for property
(e.g., a used vehicle) to reduce the amount of tax owing.
(g)
Misuse of resale
certificates, reseller permits, and other documents. Any buyer who uses
a resale certificate, a reseller permit, or other documentation authorized
under RCW
82.04.470, to purchase items or retail
services without payment of sales tax, and who is not entitled to use the
certificate, permit, or other documentation for the purchase, will be assessed
a penalty of 50 percent of the tax due.
RCW
82.32.291. The penalty can apply even if
there was no intent to evade the payment of the tax. For more information
concerning this penalty or the proper use of resale certificates, reseller
permits, and other documentation, refer to WAC
458-20-102 Reseller
permits).
(h)
Failure to
remit sales tax to seller. The department may assert an additional 10
percent penalty against a buyer who has failed to pay the seller the retail
sales tax on taxable purchases, if the department proceeds directly against the
buyer for the payment of the tax. This penalty is in addition to any other
penalties or interest prescribed by law.
RCW
82.08.050.
(i)
Failure to obtain the contractor's
unified business identifier (UBI) number. If a person who is liable for
any fee or tax imposed by chapters 82.04 through 82.27 RCW contracts with
another person or entity for work subject to chapter 18.27 RCW (Registration of
contractors) or chapter 19.28 RCW (Electricians and electrical installations),
that person must obtain and preserve a record of the UBI number of the person
or entity performing the work. A person failing to do so is subject to the
public works contracting restrictions in
RCW
39.06.010 (Contracts with unregistered or
unlicensed contractors prohibited), and a penalty determined by the director,
but not to exceed $250.
RCW
82.32.070(2).
(j)
Engaging in disregarded
transactions.
RCW
82.32.090 imposes a 35 percent penalty for
engaging in a disregarded transaction as defined in
RCW
82.32.655(3). See
RCW
82.32.090(6),
82.32.655, and
82.32.660.
(6)
Statutory restrictions on imposing
penalties. Depending on the circumstances, the law may impose more than
one type of penalty on the same tax liability. However, those penalties are
subject to the following restrictions:
(a) The
penalties imposed for the late payment of a return, unregistered taxpayer,
assessment, and issuance of a warrant (see subsection (5)(a) through (d) of
this rule) may be applied against the same tax concurrently, each unaffected by
the others, up to their combined maximum rates. Application of one or any
combination of these penalties does not prohibit or restrict full application
of other penalties authorized by law, even when they are applied against the
same tax. RCW
82.32.090(8).
(b) The department may impose either the
evasion penalty (subsection (5)(f) of this rule) or the penalty for
disregarding specific written instructions (subsection (5)(e) of this rule),
but may not impose both penalties on the same tax.
RCW
82.32.090(9). The department
also will not impose the penalty for the misuse of a resale certificate
(subsection (5)(g) of this rule) in combination with either the evasion penalty
or the penalty for disregarding specific written instructions on the same
tax.
(c) The penalty provided in
subsection (5)(j) of this rule may be assessed together with any other
applicable penalties provided in this rule on the same tax found to be due,
except for the evasion penalty provided in subsection (5)(f) of this
rule.
(7)
Interest. The department is required by law to add interest to
assessments for tax deficiencies and overpayments.
RCW
82.32.050 and
82.32.060. Interest accrued
against an underpayment only applies to underpaid tax. (Refer to WAC
458-20-229 for a discussion of
interest as it relates to refunds and WAC
458-20-230 for a discussion of
the statute of limitations as applied to interest.)
(a) For interest imposed after December 31,
1998, interest will be added from the last day of the month following each
calendar year included in a notice, or the last day of the month following the
final month included in a notice if not the end of the calendar year, until the
due date of the notice. However, for 1998 taxes only, interest may not begin to
accrue any earlier than February 1, 1999, even if the last period included in
the notice is not at the end of calendar year 1998. If payment in full is not
made by the due date of the notice, additional interest will be due until the
date of payment. The rate of interest continues at the annual variable interest
rates described below in (c) of this subsection.
(b)
How is interest applied to an
assessment that includes underpaid tax from multiple years? The
following is an example of how the interest provisions apply. Assume that a tax
assessment is issued with a due date of June 30, 2010. The assessment includes
periods from January 1, 2008, through September 30, 2009.
(i) For calendar year 2008 tax, interest
begins February 1, 2009, (from the last day of the month following the end of
the calendar year). When the assessment is issued interest is computed through
June 30, 2010, (the due date).
(ii)
For the 2009 tax period ending with September 30, 2009, interest begins
November 1, 2009, (from the last day of the month following the last month
included in the assessment period). When the assessment is issued interest is
computed through June 30, 2010, (the due date).
(iii) Interest will continue to accrue on any
portion of the assessed taxes which remain unpaid after the due date, until the
date those taxes are paid.
(c)
How is each year's interest rate
determined? The annual variable interest rate will be an average of the
federal short-term rate as defined in
26 U.S.C. Sec.
1274(d) plus two percentage
points. The rate for each new year will be computed by taking an arithmetical
average to the nearest percentage point of the federal short-term rate,
compounded annually. The average is calculated using the federal short-term
rates from January, April, July of the calendar year immediately preceding the
new year, and October of the previous preceding year, as published by the
United States Secretary of the Treasury. The interest rate will be adjusted on
the first day of January of each year.
(d)
How is the interest applied if an
assessment includes some years that are underpaid and some that are
overpaid? If the assessment contains tax deficiencies in some years and
overpayments in other years with the net difference being a tax deficiency, the
interest rate for tax deficiencies will also be applied to the overpayments.
(Refer to WAC
458-20-229 for interest on
refunds.)
(8)
Application of payment towards liability. The department will
apply taxpayer payments in the following order:
* Interest;
* Penalties;
* Fees;
* Other nontax amounts;
* Tax, except spirits tax;
* Spirits tax;
without regard to any direction of the taxpayer.
RCW
82.32.080.
In applying a partial payment to a tax assessment, the payment
will first be applied against the oldest tax liability. For purposes of
RCW
82.32.145 (Limited liability business entity
- Terminated, dissolved, abandoned, insolvent - Collection of unpaid trust fund
taxes), it will be assumed that any payments applied to the tax liability will
be first applied against any retail sales tax liability, and then to other
trust fund tax liabilities. For example, an audit assessment is issued covering
a period of two years, which will be referred to as "YEAR 1" (the earlier year)
and "YEAR 2" (the most recent year). The tax assessment includes total interest
and penalties for YEAR 1 and YEAR 2 of $500, retail sales tax of $400 for YEAR
1, $600 retail sales tax for YEAR 2, $2,000 of other taxes for YEAR 1, and
$7,000 of other taxes for YEAR 2. The order of application of any payments will
be first against the $500 of total interest and penalties, second against the
$400 retail sales tax in YEAR 1, third against the $2,000 of other taxes in
YEAR 1, fourth against the $600 retail sales tax of YEAR 2, and finally against
the $7,000 of other taxes in YEAR 2.
(9)
Waiver or cancellation of
penalties.
RCW
82.32.105 authorizes the department to waive
or cancel penalties under limited circumstances.
(a)
Circumstances beyond the control of
the taxpayer. The department will waive or cancel the penalties imposed
under chapter 82.32 RCW upon finding that the underpayment of the tax, or the
failure to pay any tax by the due date, was the result of circumstances beyond
the control of the taxpayer. It is possible that a taxpayer will qualify for a
waiver of one type of penalty, without obtaining a waiver for all penalties
associated with a particular tax liability. Circumstances determined to be
beyond the control of the taxpayer when considering a waiver of one type of
penalty are not necessarily pertinent when considering a waiver of a different
penalty type. For example, circumstances that qualify for waiver of a late
payment of return penalty do not necessarily also justify waiver of the
substantial underpayment assessment penalty. Refer to WAC
458-20-102 (Reseller permits) for
examples of circumstances which are beyond the control of the taxpayer
specifically regarding the penalty for misuse of a reseller permit found in
RCW
82.32.291.
(i) A request for a waiver or cancellation of
penalties should contain all pertinent facts and be accompanied by such proof
as may be available. The taxpayer bears the burden of establishing that the
circumstances were beyond its control and directly caused the late payment. The
request should be made in the form of a letter; however, verbal requests may be
accepted and considered at the discretion of the department. Any petition for
correction of assessment submitted to the department's administrative review
and hearings division for waiver of penalties must be made within the period
for filing under
RCW
82.32.160 (within 30 days after the issuance
of the original notice of the amount owed or within the period covered by any
extension of the due date granted by the department), and must be in writing,
as explained in WAC
458-20-100 (Informal
administrative reviews). Refund requests must be made within the statutory
limitation period.
(ii) The
circumstances beyond the control of the taxpayer must actually cause the late
payment. Circumstances beyond the control of the taxpayer are generally those
which are immediate, unexpected, or in the nature of an emergency. Such
circumstances result in the taxpayer not having reasonable time or opportunity
to obtain an extension of the due date or otherwise timely file and pay.
Circumstances beyond the control of the taxpayer include, but are not
necessarily limited to, the following.
(A)
The return payment was mailed on time but inadvertently sent to another
agency.
(B) Erroneous written
information given to the taxpayer by a department officer or employee caused
the delinquency. A penalty generally will not be waived when it is claimed that
erroneous oral information was given by a department employee. The reason for
not canceling the penalty in cases of oral information is because of the
uncertainty of the facts presented, the uncertainty of the instructions or
information imparted by the department employee, and the uncertainty that the
taxpayer fully understood the information given. Reliance by the taxpayer on
incorrect advice received from the taxpayer's legal or accounting
representative is not a basis for cancellation of a penalty.
(C) The delinquency was directly caused by
death or serious illness of the taxpayer, or a member of the taxpayer's
immediate family. The same circumstances apply to the taxpayer's accountant or
other tax preparer, or their immediate family. This situation is not intended
to have an indefinite application. A death or serious illness which denies a
taxpayer reasonable time or opportunity to obtain an extension or to otherwise
arrange timely filing and payment is a circumstance eligible for penalty
waiver.
(D) The delinquency was
caused by the unavoidable absence of the taxpayer or key employee, prior to the
filing date. "Unavoidable absence of the taxpayer" does not include absences
because of business trips, vacations, personnel turnover, or
terminations.
(E) The delinquency
was caused by the destruction by fire or other casualty of the taxpayer's place
of business or business records.
(F) The delinquency was caused by an act of
fraud, embezzlement, theft, or conversion on the part of the taxpayer's
employee or other persons contracted with the taxpayer, which the taxpayer
could not immediately detect or prevent, provided that reasonable safeguards or
internal controls were in place. See (a)(iii)(E) of this subsection.
(G) The department does not respond to the
taxpayer's request for a tax return (or other forms necessary to compute the
tax) within a reasonable period of time, which directly causes delinquent
filing and payment on the part of the taxpayer. This assumes that, given the
same situation, if the department had provided the requested form(s) within a
reasonable period of time, the taxpayer would have been able to meet its
obligation for timely payment of the tax. In any case, the taxpayer has
responsibility to insure that its return is filed in a timely manner (e.g., by
keeping track of pending due dates) and must anticipatively request a return
for that purpose, if one is not received. (Note: Tax returns and other forms
are available at no cost from the department's website, dor.wa.gov. When good
cause exists, taxpayers are advised to contact the department and request an
extension of the due date for filing, before the due date of concern has
passed. See subsection (12) of this rule. Taxpayers who have registered to file
electronically with My DOR will avoid potential penalties relating to paper
returns not received. See subsection (1)(b) of this rule.)
(iii) The following are examples of
circumstances that are generally not considered to be beyond the control of the
taxpayer and will not qualify for a waiver or cancellation of penalty:
(A) Financial hardship;
(B) A misunderstanding or lack of knowledge
of a tax liability;
(C) The failure
of the taxpayer to receive a tax return form, EXCEPT where the taxpayer timely
requested the form and it was still not furnished in reasonable time to mail
the return and payment by the due date, as described in (a)(ii)(G) of this
subsection;
(D) Registration of an
account that is not considered a voluntary registration, as described in
subsection (5)(a)(iii) and (b) of this rule;
(E) Mistakes or misconduct on the part of
employees or other persons contracted with the taxpayer (not including conduct
covered in (a)(ii)(F) of this subsection); and
(F) Reliance upon unpublished, written
information from the department that was issued to and specifically addresses
the circumstances of some other taxpayer.
(b)
Waiver of the late payment of
return penalty. The late payment of return penalty (see subsection
(5)(a) of this rule) may be waived either as a result of circumstances beyond
the control of the taxpayer (RCW 82.32.105 (1) and
(a) of this subsection) or after a 24 month
review of the taxpayer's reporting history, as described below.
(i) If the late payment of return penalty is
assessed on a return but is not the result of circumstances beyond the control
of the taxpayer, the penalty will still be waived or canceled if the following
two circumstances are satisfied:
(A) The
taxpayer requests the penalty waiver for a tax return which was required to be
filed under
RCW
82.32.045 (taxes reported on the combined
excise tax return),
RCW
82.23B.020 (oil spill response tax),
RCW
82.29A.050 (leasehold excise tax),
RCW
84.33.086 (timber and forest lands),
RCW
82.14B.030 (tax on telephone access line
use); and
(B) The taxpayer has
timely filed and paid all tax returns due for that specific tax program for a
period of 24 months immediately preceding the period covered by the return for
which the waiver is being requested.
RCW
82.32.105(2).
If a taxpayer has obtained a tax registration endorsement with
the department prior to engaging in business within the state and has engaged
in business activities for a period less than 24 months, the taxpayer is
eligible for the waiver if the taxpayer had no delinquent tax returns for
periods prior to the period covered by the return for which the waiver is being
requested. As a result, the taxpayer's very first return due can qualify for a
waiver under the 24 month review provision. (See also WAC
458-20-101 for more information
regarding the tax registration and tax reporting requirements.) This is the
only situation under which the department will consider a waiver when the
taxpayer has not timely filed and paid tax returns covering an immediately
preceding 24 month period.
(ii) A return will be considered timely for
purpose of the waiver if there is no tax liability on it when it is filed.
Also, a return will be considered timely if any late payment penalties assessed
on it were waived or canceled due to circumstances beyond the control of the
taxpayer (see (a) of this subsection). The number of times penalty has been
waived due to circumstances beyond the control of the taxpayer does not
influence whether the waiver in this subsection will be granted. A taxpayer may
receive more than one of the waivers in this subsection within a 24 month
period if returns for more than one of the listed tax programs are filed, but
no more than one waiver can be applied to any one tax program in a 24 month
period.
For example, a taxpayer files combined excise tax returns as
required under
RCW
82.32.045, and timber tax returns as required
under RCW
84.33.086. This taxpayer may qualify for two
waivers of the late payment of return penalty during the same 24 month period,
one for each tax program. If this taxpayer had an unwaived late payment of
return penalty for the combined excise tax return during the previous 24 month
period, the taxpayer may still qualify for a penalty waiver for the timber tax
program.
(iii) The 24 month
period reviewed for this waiver is not affected by the due date of the return
for which the penalty waiver is requested, even if that due date has been
extended beyond the original due date.
For example, assume a taxpayer's September 2012 return has had
the original due date of October 25th extended to November 25th. The return and
payment are received after the November 25th extended due date. A penalty
waiver is requested. Since the delinquent return represented the month of
September 2012, the 24 months which will be reviewed begin on September 1,
2010, and end with August 31, 2012, (the 24 months prior to September 2012).
All of the returns representing that period of time will be included in the
review. The extension of the original due date has no effect on the 24 month
period under review.
(iv) A
24 month review is only valid when considering waiver of the late payment of
return penalty described in subsection (5)(a) of this rule. The 24 month review
process cannot be used as justification for a waiver of interest, assessment
penalty, or any penalty other than the late payment of return
penalty.
(10)
Waiver or cancellation of interest. The department will waive or
cancel interest imposed under chapter 82.32 RCW only in the following
situations:
(a) The failure to pay the tax
prior to issuance of the assessment was the direct result of written
instructions given the taxpayer by the department; or
(b) The extension of the due date for payment
of an assessment was not at the request of the taxpayer and was for the sole
convenience of the department.
RCW
82.32.105(3).
(11)
Interest and penalty waiver for
active duty military personnel.
RCW
82.32.055 provides a waiver of BOTH interest
and penalty imposed under chapter 82.32 RCW when:
(a) The majority owner of the business is:
(i) On active duty in the military;
(ii) Participating in an armed
conflict;
(iii) Assigned to a
location outside the territorial boundaries of the United States; and
(b) The gross income of the
business is $1,000,000 or less for the calendar year immediately prior to the
year in which the majority owner is initially deployed outside the United
States for the armed conflict.
Interest and penalty may not be waived or canceled for a period
longer than 24 months. The waiver applies to interest or penalty based on the
date they are imposed, which must be within the 24 month waiver period.
To receive a waiver or cancellation of interest and penalty
under this subsection, the taxpayer must submit a copy of the majority owner's
deployment orders for deployment outside the territorial boundaries of the
United States.
(12)
Stay of collection.
RCW
82.32.190 allows the department to initiate a
stay of collection, without the request of the taxpayer and without requiring
any bond, for certain tax liabilities when they may be affected by the outcome
of a question pending before the courts (see (a) of this subsection).
RCW
82.32.200 provides conditions under which the
department, at its discretion, may allow a taxpayer to file a bond in order to
obtain a stay of collection on a tax assessment (see (b) of this subsection).
The department will grant a taxpayer's stay of collection request, as described
in RCW
82.32.200, only when the department
determines that a stay is in the best interests of the state.
(a) Circumstances under which the department
may consider initiating a stay of collection without requiring a bond
(RCW
82.32.190) include, but are not necessarily
limited to, the existence of the following:
(i) A constitutional issue to be litigated by
the taxpayer, the resolution of which is uncertain;
(ii) A matter of first impression for which
the department has little precedent in administrative practice; or
(iii) An issue affecting other similarly
situated taxpayers for whom the department would be willing to stay collection
of the tax.
(b) The
department will give consideration to a request for a stay of collection of an
assessment (RCW 82.32.200) if:
(i) A written request for the stay is made
prior to the due date for payment of the assessment; and
(ii) Payment of any unprotested portion of
the assessment and other taxes due is made timely; and
(iii) The request is accompanied by an offer
of a cash bond, or a security bond that is guaranteed by a specified authorized
surety insurer. The amount of the bond will generally be equal to the total
amount of the assessment, including any penalties and interest. However, where
appropriate, the department may require a bond in an increased amount not to
exceed twice the amount for which the stay is requested.
(c) Claims of financial hardship or threat of
litigation are not grounds that justify the granting of a stay of collection.
However, the department will consider a claim of significant financial hardship
as grounds for staying collection procedures, but this will be done only if a
partial payment agreement is executed and kept in accordance with the
department's procedures and with such security as the department deems
necessary.
(d) If the department
grants a stay of collection, the stay will be for a period of no longer than
two calendar years from the date of acceptance of the taxpayer request, or 30
days following a decision not appealed from by a tribunal or court of competent
jurisdiction upholding the validity of the tax assessed, whichever date occurs
first. The department may extend the period of a stay originally granted, but
only for good cause shown.
(e)
Interest will continue to accrue against the unpaid tax portion of a liability
under stay of collection.
(13)
Extensions. The department,
for good cause, may extend the due date for filing any return.
(a) Any permanent extension more than 10 days
beyond the due date, and any temporary extension in excess of 30 days, must be
conditional upon deposit by the taxpayer with the department of an amount equal
to the estimated tax liability for the reporting period or periods for which
the extension is granted. This deposit is credited to the taxpayer's account
and may be applied to the taxpayer's liability upon cancellation of the
permanent extension or upon reporting of the tax liability where a temporary
extension of more than 30 days has been granted.
The amount of the deposit is subject to departmental approval.
The amount will be reviewed from time to time, and a change may be required at
any time that the department concludes that such amount does not approximate
the tax liability for the reporting period or periods for which the extension
was granted.
(b)
RCW
82.32.080 allows department of revenue to
grant extensions of the due date for any taxes due to department of revenue
when the governor has proclaimed a state of emergency under
RCW
43.06.010. In general, the bill gives
department of revenue the authority to provide extensions on its own
initiative, or at the specific request of any taxpayers affected by the
emergency. The specific details of how, where, and to whom any extensions are
granted will depend on the type and scope of each unique emergency and will be
determined when an emergency is declared.
Statutory
Authority:
RCW
82.32.300,
82.01.060(2),
82.32.080,
82.32.085,
82.32.655, and
82.04.470. WSR 13-22-049, §
458-20-228, filed 11/1/13, effective 12/2/13. Statutory Authority:
RCW
82.32.300 and
82.01.060(2). WSR
10-07-134, § 458-20-228, filed 3/23/10, effective 4/23/10; WSR 07-06-077,
§ 458-20-228, filed 3/6/07, effective 4/6/07; WSR 05-22-095, §
458-20-228, filed 11/1/05, effective 12/2/05. Statutory Authority:
RCW
82.32.300. WSR 01-05-022, § 458-20-228,
filed 2/9/01, effective 3/12/01; WSR 00-04-028, § 458-20-228, filed
1/24/00, effective 2/24/00; WSR 92-03-025, § 458-20-228, filed 1/8/92,
effective 2/8/92; WSR 85-04-016 (Order 85-1), § 458-20-228, filed 1/29/85;
WSR 83-16-052 (Order ET 83-4), § 458-20-228, filed 8/1/83; Order ET 74-1,
§ 458-20-228, filed 5/7/74; Order ET 71-1, § 458-20-228, filed
7/22/72; Order ET 70-3, § 458-20-228, filed 5/29/70, effective 7/1/70. WSR
13-21-033, § 458-20-228, filed 10/9/2013, effective
11/9/2013