Paymaster Services for Affiliates

From the 2024 DOR Tax Exemption Study

Det. No.14-0073, 34 WTD 019 (February 10, 2015) 24 [A] true agency relationship between the client or customer and the taxpayer is required. “The existence of that agency relationship is not controlled by how the parties described themselves” and “standard agency definitions should be used in analyzing the existence of the agency relationship.” William Rogers Co., 148 Wn.2d at 177-78, 60 P.3d 79. Washington Imaging, 171 Wn.2d at 561-62. Thus, Taxpayer must first establish that it received the funds as the affiliate’s agent and second that it did not assume any liability to any third party in connection with the receipt of payment, including any liability to the workers, beyond that of an agent of the client. But, even if Taxpayer establishes that it is the agent of the affiliates, the inquiry does not end there. If Taxpayer assumes any liability for the payment owed to any of the third parties, other than as the agent of the affiliates, Taxpayer will not be entitled to exclude the payments from its gross income as pass-through payments. Instead, Taxpayer will be deemed to be engaged in the business for which it received the payment; in this case, selling the services performed by t