Washington — Sales & Use Tax

Washington imposes a 6.5 percent state sales tax on each retail sale of tangible personal property, digital goods, digital codes, digital automated services, and certain enumerated services unless specifically excluded from the statutory definition of retail sale. The tax applies to the selling price of retail sales occurring in Washington. Washington also imposes a complementary use tax at the same rate on the privilege of using tangible personal property, digital goods, digital codes, and taxable services within the state when sales tax has not been paid. The use tax rate equals the retail sales tax rate in effect under RCW 82.08.020, and it applies to the value or purchase price of the article or service used by the taxpayer.

Local jurisdictions may impose additional sales and use taxes on top of the state rate; total combined state and local rates vary by location.

Source: RCW 82.08.020; RCW 82.12.020

Starting January 1, 2020, remote sellers without physical presence in Washington must register to collect and remit sales tax if they have more than $100,000 in combined gross receipts sourced or attributed to Washington in the current or prior calendar year. The threshold applies to all Washington income, including retail sales, wholesale sales, service income, and other apportionable activities. Sales made through marketplace facilitators are included in the threshold calculation, even though the facilitator may collect tax on those sales.

Washington originally adopted economic nexus effective October 1, 2018, with both a $100,000 sales threshold and a 200-transaction threshold. The transaction count threshold was eliminated effective March 14, 2019, leaving only the gross receipts test.

When a remote seller exceeds the $100,000 threshold during the current calendar year, the seller must begin collecting sales tax on the first day of the month that starts at least 30 days after crossing the threshold. A seller who met the threshold in the prior calendar year must collect tax for the entirety of the current calendar year.

Source: RCW 82.04.067; Washington DOR, Out of state businesses reporting thresholds and nexus

Beginning October 1, 2018, marketplace facilitators subject to a tax collection obligation under RCW 82.08.052 must collect and remit retail sales tax on all taxable retail sales made or facilitated by the marketplace facilitator, whether in its own right or as an agent of a marketplace seller, regardless of whether the marketplace seller has a tax collection obligation. For facilitators, receipts counting toward the RCW 82.08.052 threshold include both the facilitator's own sales and the cumulative gross proceeds from sales by all marketplace sellers through the facilitator's marketplace.

Source: RCW 82.08.0531(2); RCW 82.08.052(1)(d)(i)

From October 1, 2018 through December 31, 2019, a marketplace facilitator had a collection obligation if it had more than $100,000 in cumulative gross receipts from Washington or 200 or more separate transactions for delivery into Washington in the current or prior calendar year. For threshold purposes, the facilitator's receipts and transactions include both its own direct sales and the cumulative gross proceeds and transactions from all marketplace sellers selling through its marketplace, regardless of whether those sellers themselves have nexus. The transaction-count threshold was eliminated effective March 14, 2019. Beginning January 1, 2020, marketplace facilitators meet the threshold if they have more than $100,000 in gross receipts attributed to Washington under RCW 82.04.067.

Source: RCW 82.08.052(1)(a) and (d); RCW 82.04.067

Washington sales and use tax returns are generally due monthly within 25 days after the end of the month in which taxable activities occur. The Department of Revenue may assign taxpayers to quarterly or annual filing frequencies. Quarterly returns and payments are due on or before the last day of the month following the reporting period. Annual returns and payments are due on or before April 15 of the year immediately following the period covered by the return.

Source: RCW 82.32.045; WAC 458-20-228

Washington sellers must obtain proper resale documentation from buyers to substantiate that a sale is a wholesale sale rather than a retail sale. The burden of proving a sale is wholesale falls on the seller under RCW 82.04.470(1). A seller may meet this burden by taking from the buyer, at the time of sale or within a reasonable time after the sale, a copy of a reseller permit issued by the Washington Department of Revenue under RCW 82.32.780 or 82.32.783. In lieu of a reseller permit, sellers may accept properly completed exemption certificates authorized by the department, including uniform exemption certificates approved by the Streamlined Sales and Use Tax Agreement governing board or the Multistate Tax Commission's uniform sales and use tax exemption certificate.

Required information on resale certificates

All resale certificates must satisfy the information requirements of RCW 82.04.470. Under WAC 458-20-102A(2)(b), every resale certificate must contain:

• The name and address of the buyer
• The uniform business identifier or tax registration number of the buyer (if the buyer is required to be registered with the department)
• The type of business engaged in
• The categories of items or services to be purchased for resale or that are exempt (unless the buyer's business classification allows a blanket resale certificate as provided by department rule)
• The date on which the certificate was provided
• A statement that the items or services are either purchased for resale in the regular course of business or exempt from tax pursuant to statute
• An acknowledgment that the buyer is solely responsible for payment of sales or use tax if the property is used rather than resold

Farmers not required to be registered with the department may provide resale certificates with the registration number information omitted, provided the balance of the certificate is completed in full.

Timing requirements

The seller should obtain the resale certificate at the time of sale or within a reasonable time after the sale. If the resale certificate is obtained more than 120 days after the sale or sales in question, WAC 458-20-102A requires that the resale certificate must be specific to the sale or sales. The certificate must specifically identify the sales in question on its face, or be accompanied by other documentation signed by the buyer specifically identifying the sales and stating that the provisions of the accompanying resale certificate apply. A nonspecific resale certificate obtained more than 120 days after the sale is generally not, in and of itself, acceptable proof of the wholesale nature of the sale. The resale certificate and any required documentation must be obtained within the statutory time limitations provided by RCW 82.32.050 (generally four years from the last day of the tax period).

Dual-purpose purchases

If a buyer is normally engaged in both consuming and reselling certain types of personal property and cannot determine at the time of purchase whether the particular property will be consumed or resold, the buyer may use a reseller permit for the entire purchase if the buyer principally resells the property according to the general nature of the buyer's business. The buyer must account for the value of any articles purchased with a reseller permit that is actually used by the buyer and remit the deferred sales tax on that property to the department. This rule applies only if the buyer principally resells; if the buyer principally consumes the articles in question, the buyer should not give a resale certificate for any part of the purchase.

Penalties for misuse

Any person who uses a resale certificate to purchase items or services without payment of sales tax and who is not entitled to use the certificate for that purchase is assessed a penalty of 50 percent of the tax due, in addition to all other taxes, penalties, and interest due, on the improperly purchased item or service under RCW 82.32.291. The department may waive the penalty if it finds that the use of the certificate was due to circumstances beyond the taxpayer's control or if the certificate was properly used for purchases for dual purposes.

Source: RCW 82.04.470; WAC 458-20-102A; RCW 82.08.130; RCW 82.32.291