- On September 9, 2024, the Washington Department of Revenue ruled that a digital advertiser was not a marketplace facilitator and was required to pay business and occupation (B&O) tax on total gross income, including payments made to third-party publishers.
- The taxpayer operated a digital advertising platform that facilitated real-time bidding for ad placements, charging advertisers while paying a portion of the income to publishers, which they excluded from their gross income for B&O tax purposes.
- The B&O tax is levied on gross income from business activities, with Washington allowing deductions for reimbursements or advances that meet client obligations.
- Upon audit, the Department concluded that the entire gross income, including payments to publishers, was subject to B&O tax, leading the taxpayer to argue for classification as a marketplace facilitator to limit tax liability.
- The Department determined that the taxpayer’s services fell under advertising services, not qualifying as a marketplace facilitator, as they did not contract with sellers for retail sales, which is a requirement for such classification.
Source PwC
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