Alert

House Bill 2163, also known as Washington’s Marketplace Fairness Act, took effect on January 1, 2018.

The new law requires remote sellers, marketplace facilitators, and referrers that meet certain statutory criteria to do one of the following:

• Collect and remit sales or use tax
• Comply with certain notification and reporting requirements

The legislation specifies that failing to meet this requirement could result in penalties.

Affected Parties

Remote sellers, marketplace facilitators, and referrers with a physical presence in Washington are affected by the legislation as well as the following:

• Remote sellers that, during the current or previous calendar year, had at least $10,000 of gross receipts from retail sales sourced to Washington
• Marketplace facilitators who, during the current or previous calendar year, had at least $10,000 of gross receipts from retail sales sourced to Washington, whether in their own name or as an agent of a marketplace seller
• Referrers who, during the current or previous calendar year, received at least $267,000 of gross business income from a referrer's services that were apportioned to Washington or from retail sales that were sourced to Washington

Definitions

Marketplace Facilitator

A person who:

• Contracts with sellers to facilitate the sale of the sellers’ products through a physical or electronic marketplace
• Engages in specified activities bringing a buyer and seller together
• Partakes in activities related to the sellers’ products

Remote Seller

A seller that doesn’t have a physical presence in the state—Washington, in this instance—in which it makes retail sales to purchasers.

Referrer

A person who:

• Contracts or otherwise agrees with a seller to list or advertise items for sale in any medium
• Receives a commission, fee, or other consideration from a seller for listing or advertising
• Transfers a potential purchaser to a seller or an affiliated person to complete a sale
• Doesn’t collect receipts from purchasers for transactions

Notice Requirements

Remote sellers and marketplace facilitators that don’t collect retail sales or use tax are required to comply with certain notification and reporting requirements.

Post Conspicuous Notices

Remote sellers and marketplace facilitators must post conspicuous notices on their websites, catalogs, and other similar media informing Washington consumers of the following:

• Sales or use tax is due on certain purchases
• Consumers may have to file a use tax return with the Washington State Department of Revenue (DOR)
• The posted notice is required under Revised Code of Washington (RCW) 82.13.020(2)(a)(i)

Provide Notice at Time of Sale

Remote sellers and marketplace facilitators must prominently display a notice on all invoices, order forms, sales receipts, or similar documents provided to the purchaser at the time of retail sale that includes the following statements:

• Sales and use tax aren’t being collected or remitted upon the sale
• Consumers may be required to remit sales or use tax directly to the DOR

The notice should also contain instructions for obtaining additional information from the DOR about whether it’s necessary to remit sales or use tax and, if so, how to do it.

Provide Notice at Time of Referral

A referrer must provide a conspicuous notice on its platform at the time of referral that informs Washington purchasers of the following items:

• Sales or use tax is due on certain purchases
• The seller may or may not collect and remit retail sales tax on a purchase
• Washington requires the purchaser to file a use tax return if retail sales tax isn’t assessed by the seller at the time of a taxable sale
• The notice is required under RCW 82.13.020(3)(a)
• If the referred seller doesn’t collect retail sales tax, the seller may have to provide information to the purchaser and the DOR about the purchaser’s potential sales or use tax liability

Instructions for obtaining additional information from the DOR regarding whether and how to remit sales or use tax should also be included in the notice.

Reporting Requirements

Remote Sellers and Marketplace Facilitators

By February 28 of each year, remote sellers and marketplace facilitators must provide the following reports:

Purchaser Report

An annual report provided to each Washington purchaser from whom the seller didn’t collect sales or use tax that details the purchaser's transactions in the previous year. 

The report must include two statements:

• The seller didn’t collect sales or use tax on the purchaser’s transactions
• The purchaser may be required to remit such tax directly to the DOR

Further, the seller must also disclose that it’s required to submit a report to the DOR stating the total dollar amount of the purchaser’s transactions. 

DOR Report

An annual report submitted to the DOR that includes Washington purchasers' information and an affidavit from a seller's officer affirming that the seller has made reasonable efforts to comply with consumer notice and reporting requirements.

This annual report must include the following information:

• Each consumer's name, billing or mailing address, and total dollar amount of purchases made
• Shipping address for each product sold and delivered to a location in Washington during the previous year

Referrers

No later than February 28 of each year, a referrer must provide the following reports:

Seller Report

An annual report provided to marketplace sellers to whom the referrer transferred a potential purchaser located in Washington during the previous year.

The report must state that Washington imposes a sales or use tax on retail sales and a seller meeting the legislation’s threshold requirements must do one of the following:

• Collect and remit sales or use tax
• Comply with the states notice and reporting requirements for sellers

DOR Report

An annual report submitted to the DOR that includes the following:

• A list of sellers who received the referrer’s annual notice
• An affidavit from the referrer's officer stating that reasonable efforts were made to comply with the notice and reporting requirements

Penalties

The legislation outlines penalties that may be assessed for the following reasons:

Failure to Provide Notice

A $20,000 penalty for each seller or referrer who fails to provide notice to consumers. 

Failure to Provide Sales Reports

A penalty for a seller who fails to provide a report to each of hers or his purchasers that details all sales in the previous calendar year.

This penalty can range from $5,000—if the seller’s gross receipts sourced to Washington are less than $50,000—to $100,000 if the gross receipts sourced to Washington are at least $300,000. An additional $20,000 penalty for every $50,000 of gross receipts over $300,000 may also be imposed.

Failure to Provide Referral Reports

A penalty for a referrer who fails to provide to each of his or her sellers a report that includes all potential purchasers referred from Washington in the previous calendar year. 

If the gross income that’s sourced to Washington through the referrer’s services is at least $267,000 but less than $300,000, the penalty is $50,000. If the gross income is at least $300,000, the penalty is $100,000 plus an additional $20,000 for every $50,000 in gross receipts over $300,000.

Failure to File with Department of Revenue

A penalty of $25 per failure—with a minimum of $20,000—is imposed on any seller who fails to file required reports with the DOR.

Penalties are cumulative and may only be applied once per year. They’re also subject to interest. A conditional waiver may be granted for reasonable cause. 

We’re Here to Help

For more information on how the legislation may affect you, contact your Moss Adams professional or email statetax@mossadams.com.