Imaging Services v. State Dept. of Revenue, 252 P.3d 885

Washington Imaging operates medical imaging facilities; Overlake provides radiologist interpretation as an independent contractor under contract.
Washington Imaging bills patients and insurers for both imaging and interpretation in a single global charge.
Overlake is paid a percentage of Washington Imaging’s collections, determined by contract; patients are unaware of Overlake’s involvement.
Patients contract with Washington Imaging and assign insurance payments to Washington Imaging; they have no obligation to pay Overlake.
The Department assessed B&O tax on the amounts Washington Imaging paid to Overlake; Rule 111 pass-through was at issue to exclude those payments from gross income.
The trial court granted summary judgment for the Department; Court of Appeals reversed; Supreme Court granted review.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Rule 111 applies to Washington Imaging’s payments to Overlake.	Washington Imaging argues payments are pass-through as agent for patients.	Department contends no true agency; payments are Washington Imaging’s gross income.	Rule 111 does not apply; payments are not solely agent pass-throughs.
Whether Washington Imaging’s payments to Overlake are gross income subject to B&O tax.	Payments to Overlake reduce gross income under pass-through theory.	Payments fall within gross income despite independent contractor setup.	Payments to Overlake are part of gross income; tax applies to total receipts.
Whether an agency relationship between patients and Washington Imaging exists under Christensen test.	An agency relationship exists because Washington Imaging pays Overlake on patients’ behalf.	No agency; patients owe Washington Imaging, not Overlake; agency not solely liable.	No true agency; rule 111 inapplicable. Washington Imaging liable for full amount.
Whether corporate practice of medicine doctrine affects B&O tax liability.	Corporate practice restrictions imply no profit share from professional services.	Independent contractor model allows liability despite corporate practice doctrine.	Doctrine does not exempt Washington Imaging from B&O tax on gross receipts.

Rho Co. v. Dep't of Revenue, 113 Wash.2d 561 (1989) (contract terms do not control gross income for B&O tax)
William Rogers Co., 148 Wash.2d 169 (2003) (agency vs. sole liability; pass-through concept clarified)
Walthew, 103 Wash.2d 183 (1984) (pass-through relies on client liability; ethics considerations noted)
Pilcher v. Dep't of Revenue, 112 Wash.App. 428 (2002) (employee/independent contractor payments; agency analysis used)
City of Tacoma v. William Rogers Co., 148 Wash.2d 169 (2003) (pass-through framework for agency analysis)