Analytical Methods, Inc. v. Department of Revenue

A federal statute requires some federal agencies to expend a small percentage of their research funds on small businesses that agree to do specified research. The Department of Revenue includes the amounts Washington businesses receive under the program as gross income in calculating Business and Occupation (B & 0) taxes. Eleven small businesses that participate in the program challenge the tax on these funds, contending that the amounts received are contributions, donations, or endowments, all of which are exempt by statute from the B & O tax. The businesses also argue that federal…