On August 3, 2018, the Washington Department of Revenue announced that it will require certain remote sellers to begin collecting Washington retail sales tax by October 1, 2018. This requirement imposes new registration, collection, and remittance obligations on remote sellers who didn’t previously have retail sales tax reporting requirements.
Changes for Remote Sellers
Previously, physical presence through employees or property was required before Washington could impose a retail sales tax collection and remittance obligation on a seller. However, the June 21, 2018, South Dakota v. Wayfair decision overturned the previously accepted physical presence requirement, which allowed many states, including Washington, to establish economic nexus thresholds for remote sellers.
A remote seller will be required to register for, collect, and remit Washington retail sales tax if sales to Washington consumers meet either of the following sales thresholds during the current or previous year:
- $100,000 of gross retail sales; or
- 200 separate transactions
It’s important for sellers to understand how this new requirement fits in with other existing requirements.
Marketplace Fairness Law
Note that remote sellers with between $10,000 and $100,000 of sales and fewer than 200 transactions must still comply with Washington’s Marketplace Fairness Law. The Marketplace Fairness Law requires sellers in this category to either:
- Comply with the retail sales tax registration, collection, and remittance requirements, or
- Comply with Washington’s use tax reporting requirements
Learn more in our alert on Washington’s use tax reporting requirements.
Business and Occupation Tax
Additionally, note that sales subject to retail sales tax are also subject to the retailing classification of business and occupation (B&O) tax. Washington statutes impose different economic nexus thresholds for B&O tax than it does for retail sales tax. Effective January 1, 2018, sellers may establish nexus for retailing B&O tax purposes to the extent Washington sales exceed $285,000 or Washington property or payroll exceed $57,000 in the current or immediately preceding calendar year.
In other words, there may be situations in which a taxpayer could have nexus for retail sales tax but not retailing B&O tax.
Remote sellers must register to collect retail sales tax with the Washington Department of Revenue, which can be accomplished directly through the department’s website or through the streamlined sales tax central registration system.
We’re Here to Help
To discuss if this development may impact your business, or for help meeting registration and compliance requirements, contact a Moss Adams tax professional at email@example.com.