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Washington Department of Revenue Announces LendingTree Decision Does Not Prevent Sourcing of Services to Customer’s Customer Location

The Washington State Department of Revenue (the "Department") recently announced its interpretation of the Washington Court of Appeals' March 30, 2020, adverse ruling in LendingTree, LLC v. Dep't of Revenue, no. 80637-8-I (Wash. App. Ct. Mar. 30, 2020). See here for our prior analysis of the LendingTree opinion. In its interpretation, the Department takes the view that the LendingTree opinion "does not represent a new legal framework," but rather that the court simply followed the applicable business and occupation tax apportionment rules in sourcing service receipts to the customer's location and rejecting the Department's methodology sourcing to the customers' customers' location. The Department's response suggests that it intends to narrowly apply LendingTree's holding. The Department admits that the court agreed with LendingTree in designating the service at issue to be LendingTree's referral services (lenders pay a fee to receive referrals of potential...

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Washington Appellate Court Rejects Department’s B&O Tax Apportionment Method

In a recently issued taxpayer-favorable opinion, the Washington Appellate Court rejected the apportionment methodology used by the Department of Revenue, which sourced service receipts to the location of a taxpayer’s customers’ customers. The Court then affirmed the taxpayer’s methodology, which sourced the receipts to the location of its customers. LendingTree, LLC v. State of Wash. Dep’t of Revenue, no. 80637-8-I (Wash. App. Ct. Mar. 30, 2020) (“LendingTree Op.”). The dispute concerned the receipts LendingTree, LLC (“LendingTree”) earned from operating its online loan marketplace for purposes of Washington’s Business and Occupation Tax. LendingTree’s business sought to match prospective borrowers and lenders though its website. Prospective borrowers provided LendingTree with requested financial information for no charge, and LendingTree analyzed this data to make referrals to lenders. Lenders paid fees to LendingTree related to its referral services. On...

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