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jgordosea
jgordosea, Enrolled Agent
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Experience:  I've prepared all types of taxes since 1987.
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This is a filing tax question for on commissions earned as

Resolved Question:

This is a filing tax question for on commissions earned as a independent business/corp...

I'm an independent insurance agent in Seattle, Washington. I earn earns commissions paid directly by the insurance carrier. I file my commissions quarterly as a corporation online. When filing taxes quarter in the state of WA, do I report my commissions both under state sales and local sales tax on my commissions?

Phil
Submitted: 11 months ago.
Category: Tax
Expert:  jgordosea replied 11 months ago.
Greetings,

Presumably you are not an insurance company that is receiving the premiums as that is what is subject to sales tax for insurers in Washington state.
See http://dor.wa.gov/Content/DoingBusiness/BusinessTypes/Industry/insurance/default.aspx
"Income received by insurers that is subject to the premiums tax, is exempt from business and occupation (B&O) tax (RCW 82.04.320). However, the B&O tax exemption does not extend to sales tax or use tax. Insurers are consumers of tangible personal property and retail services, and must pay sales or use tax on the goods and retail services used in Washington."

Commissions are not an item that is subject to Washington state sales tax. See the chart at http://dor.wa.gov/Docs/Pubs/ExciseTax/FilTaxReturn/MajorTaxes.htm
and the article at http://dor.wa.gov/docs/reports/2010/tax_reference_2010/07sales.pdf
"The definition of retail sale is contained in RCW 82.04.050. Because services are not specifically defined as being taxable, most services rendered to persons and businesses are not subject to sales tax. This includes medical, legal, accounting, and similar services performed by professionals, as well as services of barber shops, beauty parlors, funeral homes, cable TV companies, etc."
Title insurance is the only item listed as subject to sales tax in RCW 82.04.050


Commissions are subject to the business and occupation (B&O) tax as explained at http://dor.wa.gov/content/fileandpaytaxes/beforeifile/def_txclassbando.aspx#0014
"Insurance agents, brokers, or solicitors. The amount of gross income is determined by the amount of gross commissions received, not by the gross premiums paid by the insured. “Gross income” includes gross receipts from commissions, fees, and other amounts which the agent, broker, or solicitor receives or becomes entitled to receive. It does not include amounts held in trust for the insurer or the client. No deduction is allowed for commissions, fees, or salaries paid to other agents, brokers, or solicitors, or for other expenses of doing business. Each person acting in the capacity of agent, broker, or solicitor is presumed to be engaging in business and subject to the B&O tax unless such person can demonstrate the he or she is a bona fide employee. WAC 458-20-164"

Services are not generally subject to sales tax, either state or local.
If you buy items for use in the insurance business for which sales tax is not paid then use tax will be paid and the item will be listed under both state and local sales tax. For more details see http://dor.wa.gov/content/findtaxesandrates/usetax/

The business will include in gross income subject to B&O tax the amount of gross receipts from commissions, fees, and other amounts received or entitled to receive.

Please ask if you need clarification.
Thank you.




jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3004
Experience: I've prepared all types of taxes since 1987.
jgordosea and 7 other Tax Specialists are ready to help you
Customer: replied 11 months ago.

I think I might have been filing my commissions the last two quarters incorrectly, can you view attached ....did i do this incorrectly?


 


I've been reporting state sales use tax and local use tax...if i reported incorrectly, how do I request a refund or a correction?


 



Phil

Expert:  jgordosea replied 11 months ago.
Hello again,

Indeed only the B&O needs to be paid on the commissions.

The procedures for applying for refund are explained at
http://dor.wa.gov/content/fileandpaytaxes/applyforataxrefund/
"If you are a registered business and you believe you have overpaid taxes, penalties, or interest, you may request a refund directly from the Department by:

Amending your excise tax return
The following information must be included with your refund request:

Name and UBI/tax registration number
Amount of the refund
Tax type and taxable period
Explanation
Signature
note A refund or credit cannot be made if the overpayment was originally received more than four years before the start of the current calendar year."

The link for the amending is http://dor.wa.gov/Content/FileAndPayTaxes/FileOrAmendMyReturn/AmndRetrn.aspx

"Electronically
If you file your returns electronically, you can also amend your returns online.
See https://fortress.wa.gov/dor/efile/content/doingbusiness/myaccount/fortresslogon/


By paper
Make a copy of the return you need to correct.

At the top, write "Amended Return" in large letters.

Draw a single line through any incorrect information and write the correct information to the side or above. (Please use black ink only.)

Recalculate your "Totals."

If you are amending your return and you owe money, include a check when you mail the amended return.

If you are seeking a refund, attach a letter explaining why you are submitting an amended return, with a telephone number where you can be reached during business hours.

Example: " We have submitted an amended return for the January 2003 period. We discovered that our retailing and retail sales tax gross figures were overstated by $3000 because we erroneously included some December 2002 figures with our current month's figures. Please send us a refund check for overpayment. If you have any questions, we can be reached at (xxx) xxx-xxxx."

Mail the amended return to:
Washington State Department of Revenue
Taxpayer Account Administration
PO Box 47476
Olympia, WANNN-NN-NNNN

Again, please ask if you need clarification.
Thank you.
jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3004
Experience: I've prepared all types of taxes since 1987.
jgordosea and 7 other Tax Specialists are ready to help you
Customer: replied 11 months ago.

Thanks for the great answers...BTW ....I accidentally paid you twice, so I'll be retracting one of the $46 payments FYI.


 


Thanks again, Phil

Expert:  jgordosea replied 11 months ago.
No problem. Thank you for the positive rating and bonus.

See http://ww2.justanswer.com/help/how-can-i-request-refund

If the charge occurred less than 30 days ago and you would like to request a refund, you may do so by clicking the link below. Refund requests are generally processed within 24 hours. However, it can take anywhere from 3-5 business days, depending on your bank, for your funds to be made available in your account.
To request a refund, please use the following: http://www.justanswer.com/refund/refund.aspx

You may also contact our Customer Support team at (XXX) XXX-XXXX from the USA or Canada

Thank you for using our service.
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