Washington Imaging Services, LLC v. Dep't of Revenue
Annotate this CaseWashington Imaging Services is a medical imaging company that retains Overlake Imaging Associates as an independent contractor. Overlake’s radiologists interpret the images that Washington Imaging generates. Washington Imaging pays Overlake a percentage of net receipts pursuant to the terms of a contract between them. Though patients know that doctors interpret the images taken by Washington Imaging, they do not know that Overlake’s doctors review their images. The issue for review by the Supreme Court centered on whether Washington Imaging must pay business and occupation (B&O) tax on the entire amount it received from patients, or whether the amounts that Washington Imaging paid Overlake qualify as “pass through” payments on which Washington Imaging does not owe the tax. The trial court ruled in the Department of Revenue’s favor, holding that the amounts paid to Overlake do not qualify for pass-through treatment. The Supreme Court affirmed the trial court. The Supreme Court found that “Washington Imaging does not act in an agent’s capacity to pass payments from the patients through to Overlake. All of the payments received by Washington Imaging constitute gross income. . . and the B&O tax is owed on the entire amount that Washington Imaging receives.”
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