TAXATION ‑- EXCISE TAXES ‑- EMPLOYEES

TAXATION ‑- EXCISE TAXES ‑- EMPLOYEES

State business and occupation and sales taxes apply to charges made by persons who work by the day in the construction and remodeling of homes or buildings furnishing only labor if their status is that of an independent contractor.  Said taxes do not apply if their status is that of an employee.

                                                                  - - - - - - - - - - - - -

                                                                November 9, 1956

Honorable Herb Hanson
State Representative, 39th District
1005 Alice
Snohomish, Washington

                                                                                                              Cite as:  AGO 55-57 No. 337

Dear Sir:

            By letter of October 26, 1956, you requested our opinion as to whether a person who labors by the day in connection with the construction or remodeling of homes or buildings, furnishing only labor but no materials, is required to be registered with the tax commission and collect sales tax on such work.

            It is our conclusion that if the individual is working in the status of an employee that he is not required to register with the tax commission nor collect sales tax upon his salary, but that if he does any work as an independent contractor, he is obligated to register with the commission, pay business and occupation tax and collect sales tax upon the total charges made for the work.

                                                                     ANALYSIS

            RCW 82.32.030 provides that every person who:

            "* * * engages in any business or performs any act upon which a tax is imposed by the preceding chapters, he shall, * * * apply for and obtain from the commission, upon payment of a fee of one dollar, a registration certificate.  * * *"

             [[Orig. Op. Page 2]]

            "Business" is defined by the act to include:

            "* * * all activities engaged in with the object of gain, benefit, or advantage to the taxpayer or to another person or class, directly or indirectly." RCW 82.04.140 (1955 Supp.).

            "Business" thus includes all activities pursued with the object of gain.  The act makes no exceptions for those whose business is only periodic; there is no requirement that it be continuous.

            However, RCW 82.04.360 expressly exempts from the business tax any person who works in

            "* * * the capacity of an employee or servant as distinguished from that of an independent contractor."

            Thus, if the activities pursued by an individual for gain are performed as an employee, no business tax applies, but if the individual's status is that of an independent contractor, he is subject to tax.  These same conclusions apply with respect to the sales tax.  RCW 82.04.030 (1), RCW 82.04.040.

Very truly yours,

DON EASTVOLD
Attorney General

KEITH GRIM
Assistant Attorney General