Universal Service Fund Support Distributions Are Subject to Washington’s Business and Occupation Tax

On June 29, 2018, the Washington Department of Revenue (DOR) released Determination Number 17-0234 concerning the taxation of universal service fund (USF) support distributions. The new determination builds on an excise tax advisory for certain telecommunications-specific business and occupation (B&O) tax classifications.


On November 17, 2017, the DOR released excise tax advisory (ETA) 3205-2017 regarding the proper B&O tax classifications for the various telecommunications support payments and fees that service providers receive.

Depending on the circumstances in which payments and fees are received, one of the following tax classifications will apply:

  • Service-and-other-activities B&O tax
  • Wholesaling B&O tax
  • Retailing B&O tax and retail sales tax

For more information about ETA 3205-2017, see our previous Alert.

Washington Determination Number 17-0234

The DOR has since concluded that a taxpayer owes service-and-other-activities B&O tax on USF support distributions—regardless of whether a taxpayer has paid B&O tax on USF surcharges passed on to its customers. The determination outlines the following reasons for this decision:

  • The USF support distribution isn’t related to a taxpayer’s USF contributions.
  • The USF support distribution amount is based on eligible telecommunications carriers’ costs, rather than the amount of USF contributions.
  • The voluntary imposition of the USF surcharge is a way for a taxpayer to recoup the business costs of its USF contribution.

Ultimately, this determination provides an application of ETA 3205-2017 concerning the applicable B&O tax classification of telecommunications support payments, such as USF support distributions taxed under the service.

We’re Here to Help

For more information about how this determination may affect your business, contact your Moss Adams professional or email

Contact Us with Questions

Enter security code:
 Security code