Washington B&O Treatment of Federal Financial Assistance

June 11, 2020

With all the changes currently occurring due to the CARES Act, there have been questions regarding how the state of Washington will treat any federal financial assistance for businesses subject to Business and Occupation Tax (B&O).

On May 12, 2020, the Washington Department of Revenue (DOR) released an announcement regarding the tax treatment of federal financial assistance to cope with the impacts of the COVID-19 pandemic. On the DOR website, the Department posted a statement to include:

Businesses receiving assistance under these federal programs (including the federal Paycheck Protection Program (PPP) program) should not report assistance as gross receipts for B&O tax purposes and should not pay B&O tax on that assistance at the present time.

It is important to note, the Washington DOR also stated it “will delay any final decision on taxability or enforcement actions until after the Legislature has had an opportunity to act”. Because of this additional statement, taxpayers will need to wait and see if any further guidance will be provided once Legislation finalizes.

In the meantime, businesses who have received federal financial assistance should not report these funds in their WA gross receipts for B&O per the State’s guidance until the WA DOR updates this announcement.

Our expert team of state and local tax professionals at Geffen Mesher is ready and prepared to help navigate these changes for your business.

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