Overview
The Annual Reconciliation of Apportionable Income (ARAI) is a true-up filing the Washington Department of Revenue (WADOR) requires from businesses with income both inside and outside the state. During the year, the Washington Business & Occupation (B&O) tax base is reported on periodic returns based on the revenue attributed to Washington for each period.
The ARAI lets your business recalculate its tax for the full year using the applicable apportionment method, then settle any difference with the state by paying additional tax or claiming a credit. You can file the ARAI online in your MyDOR portal, or by paper form. The WADOR also offers a downloadable Excel version of the form.
Note
Anrok doesn't file the ARAI on your behalf. The ARAI depends on apportionment decisions and income data that live outside of what Anrok ingests, so it falls outside the scope of the B&O tax Anrok files on your Combined Excise Tax Return.
Businesses required to file the ARAI
The ARAI applies to any business that's taxable in Washington and another state and reports apportionable income. Apportionable income is generally income reported under the Service and Other Activities and Royalties B&O classifications, but it can include other apportionable activities as well.
The ARAI generally applies when you take the interstate and foreign sales (apportionment) deduction on your Combined Excise Tax Return. You'll need to file a separate reconciliation for each apportionable classification. Businesses that report only under non-apportionable B&O classifications, such as Retailing, Wholesaling, and Manufacturing, aren't required to file the ARAI.
Why Anrok doesn't file the ARAI
Although the ARAI relates to B&O tax, which Anrok supports, the data needed to substantiate your apportionment lives outside of the data Anrok ingests. The ARAI involves decisions about your business's income apportionment methodologies and how much of your revenue isn't subject to tax in another state (throw-out income). Anrok can't make these determinations on your behalf, and they aren't currently supported by our engine.
Anrok still files your Washington B&O tax because the state-level B&O tax is filed on the same return as retail sales tax, and you can't file B&O tax separately. As a result, Anrok will calculate and file your B&O tax based on the information available in our system.
Next steps for filing the ARAI
Your apportionable income may depend on information Anrok doesn't have visibility into and can't advise on. We recommend consulting your company's Tax team or a tax advisor to determine the apportionment methodology that most accurately reflects the sourcing of your gross receipts.
To ensure the correct amount of tax is paid to the state, you may need to file the ARAI yourself — the WADOR expects businesses that report apportionable income to file it. You can file online in MyDOR or download the ARAI paper form.