The Washington Court of Appeals held that a laboratory created by the University of Utah was not a government entity exempt from Washington taxation.
Affirming the lower court’s decision, the Washington Court of Appeals rejected Arup Laboratories, Inc.’s arguments that it should be excluded from paying B&O taxes because it is an “arm of the State of Utah.” The court held that because Arup has non-university employees and is responsible for its own liability in legal actions, it was not an arm of the state and thus not exempt from the B&O tax.
Arup further contended that even if it were subject to the tax, its income should be attributed to Utah rather than Washington. The court disagreed, reasoning that the revenue from testing samples in Utah that are sent by Washington customers was properly sourced to Washington because the actual benefit was received in the state, where the medical providers receive the results of the tests were located.