Washington Appeal Court Affirms B&O Tax on Termination Payments for Taxpayer

The Washington Court of Appeals affirmed that termination payments received by a wholesale distributor were subject to business and occupation (B&O) tax. The dispute arose when the taxpayer, a wholesale distributor of alcoholic beverages, received over $21 million in termination payments from a competitor after suppliers terminated the taxpayer’s distribution rights without cause. The court concluded that these payments constituted gross income from business activities and were properly classified under the “service and other activities” B&O tax rate. In its reasoning, the court determined that transferring distribution rights, even involuntarily, was a discrete business activity distinct from wholesale sales, and ...