Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule
explains the carbonated beverage syrup tax (syrup tax) as imposed by chapter
82.64 RCW. The syrup tax is an excise tax on the number of gallons of
carbonated beverage syrup sold in this state at wholesale or retail. The syrup
tax is in addition to all other taxes.
Except as otherwise provided in this rule, the provisions of
chapters
82.04,
82.08,
82.12 and
82.32 RCW regarding definitions,
due dates, reporting periods, tax return requirements, interest and penalties,
tax audits and limitations, disputes and reviews, and all general
administrative provisions apply to the syrup tax.
This rule provides examples that identify a number of facts and
then state a conclusion regarding the applicability of the syrup tax. These
examples should be used only as a general guide. The tax results of other
situations must be determined after a review of all facts and
circumstances.
(2)
What is carbonated beverage syrup? Carbonated beverage syrup
(syrup) is a concentrated liquid that is added to carbonated water to produce a
carbonated beverage. "Carbonated beverage" includes any nonalcoholic liquid
intended for human consumption that contains any amount of carbon dioxide.
Examples include soft drinks, mineral waters, seltzers, and fruit juices, if
carbonated, and frozen carbonated beverages known as FCBs. "Carbonated
beverage" does not include products such as bromides or carbonated liquids
commonly sold as pharmaceuticals.
(3)
When is syrup tax imposed and how
is it determined? Syrup tax is imposed on the wholesale or retail sales
of syrup within this state. The syrup tax is determined by the number of
gallons of syrup sold. Fractional amounts are taxed proportionally.
(a)
When should syrup tax be reported
and paid? The frequency of reporting and paying the syrup tax coincides
with the reporting periods of taxpayers for their business and occupation
(B&O) tax. For example, a wholesaler who reports B&O tax monthly would
also report any syrup tax liability on the monthly excise tax return.
(b)
What if I sell both previously
taxed and nontaxed syrups? Persons selling syrups in this state, some of
which have been previously taxed in this or other states and some of which have
not, may contact the department of revenue (department) for authorization to
use formulary tax reporting. Prior to reporting in this manner, the person must
receive a special ruling from the department that allows formulary reporting. A
ruling may be obtained by writing the department at
dor.wa.gov/content/ContactUs/Default.aspx; or
Taxpayer Information and Education
Washington State Department of Revenue
P.O. Box 47478
Olympia, WA 98504-7478
Persons selling previously taxed syrups should refer to
subsections (5)(a) and (6) of this rule for information about an exemption or
credit that may be applicable to such sales.
(4)
Who is responsible for paying the
syrup tax? This subsection explains who is responsible for payment of
the syrup tax for both wholesale and retail sales of syrup in this state.
(a)
Wholesale sales. A
wholesaler making a wholesale sale of syrup in this state must collect the tax
from the buyer and report and pay the tax to the department. If, however, the
wholesaler is prohibited from collecting the tax under the Constitution of this
state or the Constitution or laws of the United States, the wholesaler is
liable for the tax. A wholesaler who fails or refuses to collect the syrup tax
with intent to violate the provisions of chapter 82.64 RCW, or to gain some
advantage directly or indirectly is guilty of a misdemeanor. The buyer is
responsible for paying the syrup tax to the wholesaler. The syrup tax required
to be collected by the wholesaler is a debt from the buyer to the wholesaler,
until the tax is paid by the buyer to the wholesaler. Except as provided in
subsection (5)(b)(ii) of this rule, the buyer is not obligated to pay or report
the syrup tax to the department.
(b)
Retail sales. A retailer
making a retail sale in this state of syrup purchased from a wholesaler who has
not collected the tax must report and pay the tax to the department. Except as
provided in subsection (5)(b)(ii) of this rule, the buyer is not obligated to
pay or report the syrup tax to the department.
(5)
Exemptions: This subsection
provides information on exemptions from the syrup tax.
(a)
Previously taxed syrup. Any
successive sale of previously taxed syrup is exempt. See
RCW
82.64.030(1). "Previously
taxed syrup" is syrup on which tax has been paid under chapter 82.64 RCW.
(i) All persons selling or otherwise
transferring possession of taxed syrup, except retailers, must separately
itemize the amount of the syrup tax on the invoice, bill of lading, or other
instrument of sale. Beer and wine wholesalers selling syrup on which the syrup
tax has been paid and who are prohibited under RCW 66.28.010 from having a
direct or indirect financial interest in any retail business may, instead of a
separate itemization of the amount of the syrup tax, provide a statement on the
instrument of sale that the syrup tax has been paid. For purposes of the
payment and the itemization of the syrup tax, the tax computed on standard
units of a product (e.g., cases, liters, gallons) may be stated in an amount
rounded to the nearest cent. In competitive bid documents, unless the syrup tax
is separately itemized in the bid documents, the syrup tax will not be
considered as included in the bid price. In either case, the syrup tax must be
separately itemized on the instrument of sale except when the separate
itemization is prohibited by law.
(ii) Any person prohibited by federal or
state law, ruling, or requirement from itemizing the syrup tax on an invoice,
bill of lading, or other document of delivery must retain the documentation
necessary for verification of the payment of the syrup tax.
(iii) A subsequent sale of syrup sold or
delivered upon an invoice, bill of lading, or other document of sale that
contains a separate itemization of the syrup tax is exempt from the tax.
However, a subsequent sale of syrup sold or delivered to the subsequent seller
upon an invoice, bill of lading, or other document of sale that does not
contain a separate itemization of the syrup tax is conclusively presumed to be
previously untaxed syrup, and the seller must report and pay the syrup tax
unless the sale is otherwise exempt.
(iv) The exemption for syrup tax previously
paid is available for any person selling previously taxed syrup even though the
previous payment may have been satisfied by the use of credits or offsets
available to the prior seller.
(v)
Example. Company A sells to Company B a syrup on which Company A paid a similar
syrup tax in another state. Company A takes a credit against its Washington tax
liability in the amount of the other state's tax paid (see subsection (6) of
this rule). It provides Company B with an invoice containing a separate
itemization of the syrup tax. Company B's subsequent sale is tax exempt even
though Company A has not directly paid Washington's tax but has used a credit
against its Washington liability.
(b)
Syrup transferred
out-of-state. Any syrup that is transferred to a point outside the state
for use outside the state is exempt. See
RCW
82.64.030(2). The exemption
for the sale of exported syrup may be taken by any seller within the chain of
distribution.
(i)
Required
documentation. The prior approval of the department is not required to
claim an exemption from the syrup tax for exported syrup. The seller, at the
time of sale, must retain in its records an exemption certificate completed by
the buyer to document the exempt nature of the sale. This requirement may be
satisfied by using the department's "Certificate of Tax Exempt Export
Carbonated Beverage Syrup," or another certificate with substantially the same
information. A blank exemption certificate can be obtained through the
following means:
(A) From the department's
internet web site at dor.wa.gov; or
(B) By writing to: Taxpayer Services,
Washington State Department of Revenue, P.O. Box 47478, Olympia, Washington
98504-7478.
(ii) The
exemption certificate may be used so long as some portion of the syrup is
exported. Sellers are under no obligation to verify the amount of syrup to be
exported by their buyers providing such certificates. The buyer is liable for
tax on syrup that is not exported.
(iii) Example. Company A sells a previously
untaxed syrup to Company C. Company C provides the seller with a completed
exemption certificate as explained in (b)(i) of this subsection. Company C
sells the syrup to Company D, who provides Company C with an exemption
certificate. Company D decides to not export a portion of the purchased syrup.
Companies A and C can both accept exemption certificates. Company D is
responsible for paying syrup tax on the syrup not exported.
(iv) Persons who make sales of syrup to
persons outside this state must keep the proofs required by WAC
458-20-193 (Inbound and outbound
interstate sales of tangible personal property) to substantiate the
out-of-state sales.
(c)
Taxation prohibited under the United States Constitution. Persons
or activities that the state is prohibited from taxing under the United States
Constitution are exempt. See
RCW
82.64.050(1).
For instance, consider the sales of syrup to Indian tribes when
the syrup is delivered in Indian country. In the following examples, the
assumption is that the sale to the tribal business qualifies under the
subsection on preemption of state tax for "sales of tangible personal property
or provisions of service by nonmembers in Indian country" in WAC
458-20-192, Indians-Indian
country.
(i)
Example 1.
Big Cola (an instate manufacturer) sells syrup wholesale to Little Cola
Distribution (a nonbottler). Big Cola collects and pays the syrup tax and shows
it on the invoice of Little Cola Distribution. Little Cola Distribution then
sells and delivers the syrup to a tribal business in Indian country. In this
situation the tax is due because the legal incidence of the tax is on Little
Cola Distribution, a non-Indian outside of Indian country, as the first
purchaser in a wholesale sale. Thus, the syrup tax is not preempted by the
second wholesale sale to Indians in Indian country of syrup. In this
circumstance, the legal incidence of the tax is not on the sale to the tribal
business in Indian country. The syrup tax was previously owed and paid by
Little Cola Distribution in its purchase from Big Cola. This tax is only
collected once, notwithstanding that Little Cola Distribution separately
itemized its syrup tax obligation as provided for in subsection (5)(a)(i) of
this rule.
(ii)
Example
2. Big Cola sells syrup wholesale to Little Cola Bottling (a trademarked
bottler). Big Cola does not collect or pay the syrup tax from the sale to
Little Cola Bottling due to the trademarked bottler exemption under subsection
(5)(d) of this rule. Little Cola Bottling then sells and delivers the bottled
syrup to a tribal business in Indian country. The syrup tax is not
due.
(iii)
Example 3.
Big Cola sells and delivers syrup directly to a tribal business in Indian
country. The syrup tax is not due.
(d)
Wholesale sales of trademarked
syrup to bottlers. Any wholesale sale of a trademarked syrup by any
person to a person commonly known as a bottler who is appointed by the owner of
the trademark to manufacture, distribute, and sell the trademarked syrup within
a specific geographic territory is exempt. See
RCW
82.64.030(3).
(6)
Syrup tax
credits.
(a)
B&O tax credit
for syrup tax paid.RCW 82.04.-4486 provides a B&O tax credit that
was effective July 1, 2006. The credit is available to any buyer of syrup using
the syrup in making carbonated beverages that are then sold, provided that the
syrup tax, imposed by
RCW
82.64.020, has been paid. The tax credit is a
percentage of the syrup tax paid.
(i)
How much is the credit? For syrup purchased July 1, 2006, through
June 30, 2007, the B&O tax credit for the buyer was equivalent to
twenty-five percent of the syrup tax paid. From July 1, 2007, through June 30,
2008, the allowable credit was fifty percent. From July 1, 2008, through June
30, 2009, the credit was seventy-five percent. As of July 1, 2009, the buyer is
entitled to a B&O tax credit of one hundred percent of the syrup tax
paid.
(ii)
When can the
credit be taken? The B&O tax credit can be claimed against taxes due
for the tax reporting period in which the taxpayer purchased the syrup. The
credit cannot exceed the amount of B&O tax due, nor can credit be refunded.
Unused credit may be carried over and used for future reporting periods for a
maximum of one year. The year starts at the end of the reporting period in
which the syrup was purchased and credit was earned. See (b)(ii)(B)(iii) of
this subsection for record documentation and retention.
(b)
Credit for syrup tax paid to
another state. Credit is allowed against the taxes imposed by chapter
82.64 RCW for any syrup tax paid to another state with respect to the same
syrup. The amount of the credit cannot exceed the tax liability arising under
chapter 82.64 RCW. The amount of credit is limited to the amount of tax paid in
this state upon the wholesale sale of the same syrup in this state. In
addition, the credit may not be applied against any tax paid or owed in this
state other than the syrup tax imposed by chapter 82.64 RCW.
(i)
What is a state? For
purposes of the syrup tax credit, "state" is any state of the United States
other than Washington, or any political subdivision of another state; the
District of Columbia; and any foreign country or political subdivision of a
foreign country.
(ii)
What is
a syrup tax? For purposes of the syrup tax credit, "syrup tax" means a
tax that is:
(A) Imposed on the sale at
wholesale of syrup and is not generally imposed on other activities or
privileges; and
(B) Measured by the
volume of the syrup.
(iii)
How and when to claim the
credit. Any tax credit available to the taxpayer should be claimed and
offset against tax liability reported on the same excise tax return when
possible. The excise tax return provides a line for reporting syrup tax, and
the credit must be taken in the credit section under the credit classification
"other credits." A statement showing the computation of the credit must be
provided. It is not required that any other documents or other evidence of
entitlement to credits be submitted with the return. Such proofs must be
retained in permanent records for the purpose of verification of credits
taken.
Statutory Authority:
RCW
82.32.300,
82.01.060(2), and
chapter 82.64 RCW. 08-14-019, § 458-20-255, filed 6/20/08, effective
7/21/08; 06-23-067, § 458-20-255, filed 11/9/06, effective 12/10/06;
05-02-009, § 458-20-255, filed 12/27/04, effective 1/27/05. Statutory
Authority:
RCW
82.32.300. 98-20-085, § 458-20-255,
filed 10/6/98, effective 11/6/98; 91-20-058, § 458-20-255, filed 9/24/91,
effective 10/25/91; 89-17-001 (Order 89-13), § 458-20-255, filed 8/3/89,
effective 9/3/89.