Article
Washington supreme court decision clarifies laws on premiums tax
Jan. 30, 2025 · Authored by Shane Griffiths
The Washington Supreme Court ruled on Envolve Pharmacy Solutions, Inc. v. Department of Revenue on Dec. 12, 2024. This decision impacts insurance providers by clarifying that if an insurance provider pays Washington’s premiums tax, amounts received by a related entity that are derived from insurance premiums are exempt from business and occupation (B&O) tax. Additionally, the related entity must provide administrative services that are functionally related to the insurance provider’s insurance business.
Learn more about the court case below.
The case
Envolve Pharmacy Solutions (Envolve) provided administrative services for Coordinated Care, a related entity through common ownership. These administrative services included:
- Maintaining a network of providers of health services
- Processing claims of providers
- Reimbursing healthcare providers for claims
- Maintaining a drug utilization review program
Coordinated Care paid Washington premiums tax on premiums it received from its health insurance customers, and then out of those receipts, paid amounts to Envolve in exchange for administrative services.
Flow of service
Revised Code of Washington (RCW) 82.04.320 provides an exemption from B&O tax for “any person in respect to insurance business upon which a tax based on gross premiums is paid to the state.”
Ruling
The Court found that the phrase “any person in respect to insurance business” in the statute means an entity must perform activities that relate to insurance business to qualify for the exemption, and that Envolve fits into that category despite Envolve not directly paying the premiums tax.
Related sections
Washington decision clarifies business and occupation tax credit opportunity
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