Alert

Washington State will launch a new voluntary disclosure program aimed at helping international sellers with unpaid Washington tax liabilities get into compliance on February 1, 2026. This limited-time program offers a unique opportunity to settle outstanding debts with reduced penalties and without enforcement actions.

This is a unique and perhaps one-time opportunity to materially reduce tax liabilities, penalties, and interest—through reducing lookback periods—for international sellers that have nexus with the state and haven’t filed Washington tax returns to remit timely tax due.

Explore the program’s key features as well as its nexus and legal implications that can help you leverage this opportunity with the following insights.

Key Program Features

Although the new program has a degree of complexity, its key features include:

• Limited Window. The program will be open for only four months, encouraging international sellers to come forward promptly.
• Shorter Lookback. International sellers will need to address unpaid sales tax only for the past year, shorter than the typical three-to-five-year periods in other states. B&O tax remains applicable for the last four calendar years plus the current calendar year.
• Penalty Relief. The program offers potential penalty abatements, though interest on unpaid taxes still applies.

Understand Nexus and Legal Implications

International sellers with sufficient legal connection for tax purposes with Washington State–referred to as nexus–are required to file tax returns with the state.

Washington recognizes several triggers for nexus that may subject international sellers to tax return filing responsibilities:

• Physical Presence. Ownership of property or presence of employees in the state may create nexus. The in-state transient presence of employees or independent contractors who establish or maintain a market on behalf of the international seller may also create nexus.
• Economic Nexus. Generating substantial business income in the state can create nexus even without physical presence, as affirmed in South Dakota v. Wayfair. Wayfair overruled the physical presence requirement from Quill Corp. v. North Dakota with respect to economic connection being a nexus creating attribute, notwithstanding physical presence remains a nexus creating attribute, too.
• International Tax Treaties. US states, including Washington, aren’t parties to international tax treaties and thus these treaties don’t provide clear tax reporting instructions for international sellers.
• Washington Precedent. In Washington Tax Determination No. 15-0251, which is a published determination and therefore precedential, the Administrative Reviews and Hearings Division upheld audit’s assessment of royalties B&O tax on Washington-source royalty income of a German-based company lacking in-state physical presence but having substantial nexus under economic nexus provisions of Washington law.

Next Steps

If your international company sells into Washington and has concerns about unpaid sales tax or B&O tax, this program provides a valuable opportunity to resolve these issues.

Act promptly when the program opens on February 1, 2026, to benefit from this initiative.

We’re Here to Help

For more information about Washington’s upcoming voluntary disclosure program and how your business can benefit from it, contact your firm professional.

Additional Resources

• State & Local Tax Services
• Voluntary Disclosure Agreements Services