Robin's Ruminations

In my opinion, the first four tests are subject to a fair amount of interpretation and debate.  Here in #5 we're given a test that appears straight forward and lends itself to fairly easy compliance.

5.  Required Registrations - Have your IC's complied with all requirements for the operation of a business in Washington?  To answer this question in the affirmative you'll need to do a little background work but it is nothing onerous.  Have your IC's satisfied the following?

Department of Licensing - DoL requires the completion of a Master Business License application.  If you're in business in Washington you need to fill one out and submit it.  In return you'll receive a UBI number (Universal Business Identifier).  UBI numbers are used by various agencies to identify you as a valid business in Washington.

Department of Revenue - Anyone doing business in Washington needs to register with DoR.  In doing so they will receive the honor of paying the B&O tax (Business & Occupation - This is really a state income tax on business but that is another story for another day).

Local government - Many local governments have registration requirements.  You need to know with which each of your IC's need to register.  Usually they'll need a city or county business license.

Employment Security Department and the Department of Labor & Industries - You only need to register with these if you have employees.  Since many IC's don't have employees they probably won't need to register.  However, they can register and then exempt themselves from the taxes.  This might be worth thinking about because it will go a long way towards establishing them as truly INDEPENDENT contractors.

Department of Social and Health Services Division of Child Support - As with ESD and L&I, a business only needs to register here if they have employees.  When ever a new employee is hired they are to be reported to DSHS.  The purpose is to locate workers who owe child support.  

Secretary of State Corporations Division - If the IC operates as some kind of corporate entity (corporation, S-Corp, LLC, etc) then they must maintain their registration with this office.  I can see some advantages in having IC's who are set up in this way.  Seems to me it would really help a lot in establishing them as IC's.

I'm familiar with a situation where a process server failed to keep up his various registrations.  He went on for almost 10 years without a current UBI number.  But when one of his clients, who was also a process serving company, was audited, he became caught up in that audit.  Why?  Because the state said he was an employee and not an IC - even though they were in substantially different parts of the state!  And frankly, from the state's point of view, that is exactly what he was.  This created problems for him and for the company which was under audit.  Fortunately he has registered and is now square with the state.

Side Note - I don't feel sorry for people who operate a business under the table in order to avoid paying taxes and fees and then cry about it when they get caught.  I may not agree with the way taxes are collected or the manner in which government spends the money but I pay my taxes.  Anyone not paying their taxes is cheating society and is causing me (along with all other honest taxpayers) to pay more than I would otherwise.  There are plenty of honest ways to effect change.  Cheating isn't one of them.