Washington Announces First Ever Amnesty Program in the State, Slated for 2011

by Stewart Weintraub and Jennifer Weidler

The Washington legislature recently authorized the state’s first ever tax amnesty program.  As with many states that have enacted amnesty programs, Washington is facing significant budget challenges.  The amnesty program is anticipated to help combat those fiscal difficulties by generating approximately $24.4 million in revenue for the state and $3.9 million for local governments, while giving businesses a break from penalties and interest associated with back taxes.

Washington’s temporary amnesty program waives the penalties and interest associated with certain taxes and is slated to begin February 1, 2011 and end April 18, 2011.  The program applies to the following taxes: state business-and-occupation tax, public utility tax, state and local sales and use taxes – including general retail sales and use taxes, rental car taxes, King County food and beverage tax, sales and use tax on motor vehicle sales/leases, lodging taxes and brokered natural gas use tax.  Additionally, taxpayers can apply for amnesty for any unpaid invoice from the Washington Department of Revenue (“Department”) that lists penalties and interest due for tax periods before February 1, 2011 for any of the aforementioned taxes included in the program, including Department audit assessment invoices.  Notably, application under the program waives a taxpayer’s right to seek a refund or challenge the amount of taxes paid under the program.

Pursuant to the terms of the program, both registered and unregistered businesses are eligible to participate.  Additionally, for taxpayers who have never filed returns with the state of Washington, the Department will only require the filing of returns for the current year and the previous four (4) years.  However, certain taxpayers may be excluded from the amnesty program, namely those who: (1) have ever been assessed a penalty by the Department for evasion or misuse of a reseller permit or resale certificate; (2) are in bankruptcy and payment of tax debt would violate federal bankruptcy laws; or (3) have ever been prosecuted for failing to pay or collect the proper amount of any tax administered by the Department.

To qualify for the program, a taxpayer must submit an application and file all outstanding or amended tax returns for which a waiver is sought by April 18, 2011.  The past due taxes must then be paid by April 30, 2011.  Additionally, if the taxes for which a waiver is sought are included in an invoice that also includes other taxes not subject to the program, those taxes, penalties and interest must also be paid in full by the April 30th deadline.

To insure ample time to fulfill the requirements of the program prior to the April deadlines, it is imperative to apply to the program as early as possible.  If a taxpayer fails to fulfill all of the requirements of the amnesty program within the allotted timeframe, payments made during the program will be adjusted to include penalties and interest, as though the taxpayer had never applied for the program.  Thus, taxpayers who believe they qualify for the amnesty program should apply as expeditiously as possible.  The Washington State Revenue Department will make amnesty applications and instructions for completing the applications available by mid-January.

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