(1) A payment received with a tax report will be applied to the quarter for which the report is filed. A payment exceeding the legal fees, penalties, interests and taxes due for that quarter will be applied to any other debt as provided in subsection (2). If no debt exists, a credit statement will be issued for any overpayments.

(2) If a payment is received separately from a tax report, the payment will be applied in the following order of priority. It will first be applied to the current quarter if a balance is owed for that quarter, then to the previous quarter if a balance is owed for that quarter, then beginning with the oldest quarter in which a balance is owed:

(a) Costs of audit and collection;

(b) Penalties for willful misrepresentation of payroll;

(c) Lien fees;

(d) Warrant fees, surcharges, and fees for nonsufficient funds (NSF) on checks;

(e) Penalties for knowingly failing to register with the department;

(f) Penalties for late tax reports;

(g) Penalties for incomplete reporting;

(h) Penalties for reporting using incorrect format;

(i) Penalties for failure to maintain records (RCW 50.12.070(3)) or other penalties not otherwise specified here;

(j) Penalties for late tax payments;

(k) Interest charges; and

(l) Tax payments.