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Jessica05

Junior Member
What is the name of your state? Washington

Snipes! I need help! I just emerged from an excise tax audit and I think I'm about to slip into psychogenic shock. I have a very small software business (basically me and the cat). We create a multimedia software product (audio, video, graphics, code) then sell it to a publisher. The publisher duplicates our product, packages, markets and sells between 5 and 50,000 copies, sending us a (piddling) royalty to supplement our up-front payment.

The State of Washington (God bless 'em) said today that by producing that software I am providing a custom service to that publisher and "I owe an additional 5k in taxes (at the higher service rate) and please remit soon and thank you for your patronage". I cry "fie!" because a custom service is when I write a single specific code to help a single customer. For example, I use if-then routines to help Sam's dog Fido master higher physics. Manufacturing is when I write code that ten thousand college students discover in the back of their textbooks. Pre-written software, in my book. Ironically, the State of Washington called it manufacturing too when I called them ten years ago and asked them, but a whole lot of good that is going to do me now.

The auditor was really no help – he mumbled something about the 5k, then was out the door with a "you'll hear from us". What do I do? I feel like I should be looking for the gun and the stick-up note. Are they right? Jess
 


Snipes5

Senior Member
Unfortunately, this seems to be more a legal question than a tax question. Although I am a WA resident, I have little to no excise tax experience. My expertise is in IRS issues.

I would suggest you seek the help of a Tax Attorney licensed in WA to help you sort this out.

Snipes
 

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