The Washington Court of Appeals upheld a broad application of the Washington Business and Occupation (B&O) tax to sales between an out-of-state seller and out-of-state purchasers when the products are delivered in Washington. Although the taxpayer maintained a research and product development facility in Washington, none of the activities performed by the taxpayer at that facility were related to the sales in question. The court analyzed two types of sales: (1) sales that the taxpayer’s out-of-state customer directed the taxpayer to ship to the customer’s customer in Washington (“drop shipment sales”); and (2) sales made by the taxpayer’s out-of-state office to an out-of-state customer that were delivered to the customer’s facility in Washington (“national sales”). First, the court held that both categories of sales were subject to tax under the B&O imposition statutes based on the fact that the only transfer of possession took place in Washington, even if the buyer taking possession was not the taxpayer’s customer. The court disregarded two regulations cited by the taxpayer and interpreted the regulations to impermissibly narrow the B&O imposition statutes. The taxpayer then argued that the state could not rely on its nexus with the taxpayer as an entity, because the state lacked transactional nexus with both categories of sales. Citing Tyler Pipe, the court disagreed, holding that case law permits state taxation of transactions not directly related to a taxpayer’s in-state activities as long as such in-state activities “were significant in establishing and maintaining a market for [the taxpayer’s] goods in the state.” The court found that the taxpayer’s in-state market research and product development were significant in developing the taxpayer’s Washington market for the goods sold, and that Washington could therefore constitutionally tax both the drop shipment and national sales. Avnet, Inc. v. State of Wash., Dep’t of Revenue, No. 45108-5-II (Wash. Ct. App. Apr. 28, 2015).