Washington Nexus Provisions to Include Remote Sellers

Legislation has been enacted that extends Washington sales and use tax to remote sellers, “marketplace facilitators,” and “referrers” that meet certain criteria and expands economic nexus provisions.

Nexus

Beginning January 1, 2018, remote sellers, marketplace facilitators, and referrers must elect to either:

  • remit sales or use tax; or
  • comply with certain notice and reporting requirements.

These requirements apply to remote sellers or marketplace facilitators with gross receipts sourced to Washington in the current or preceding calendar year of at least $10,000. A referrer is subject to these requirements if, in the current or preceding calendar year, it has gross business income from referral services sourced to Washington, whether or not they are subject to sales or use tax, of at least $267,000. The duty to remit or report is delayed until January 1, 2020 for most sales of digital goods and digital codes.

Remote Seller Requirements

A seller, other than a referrer, that elects to comply with notice requirements, must post a conspicuous notice on its website and on its customer invoices that includes a statement that sales or use taxes are due on certain purchases and that Washington requires the purchaser to file a use tax return. The seller must also provide an annual report no later than February 28 of each year to each Washington purchaser stating that the seller did not collect sales or use tax on sales and including details on the purchaser’s transactions. An annual report must also be filed with the department by February 28 of each year that includes purchasers’ information and an affidavit from a seller’s officer affirming that reasonable efforts were made to comply with notice requirements.

Referrer Requirements

A referrer that elects to comply with notice requirements, must post a conspicuous notice on its platform that sales or use tax is due on certain purchases and that a purchaser may need to file a use tax return. A referrer must send an annual report by February 28 of each year to each marketplace seller to whom the referrer transferred a potential purchaser located in Washington during the previous year. The report must state that the seller must either collect sales tax or comply with notice requirements. A referrer must also submit an annual report to the department by February 28 of each year that includes a list of sellers who received notice and an affidavit from a referrer’s officer stating that the referrer made reasonable efforts to comply with notice and reporting requirements.

Economic nexus

Beginning July 1 2017, economic nexus for business and occupation (B&O) tax purposes is extended to persons engaged in retail sales as long as the person has:

  • more than $267,000 in receipts from Washington, or
  • at least 25 percent of the person’s total property, payroll, or total receipts in Washington.

A person who has a substantial nexus with Washington in the current calendar year based solely on the person’s property, payroll, or receipts in this state during the current calendar year, is subject to the B&O tax imposed for the current calendar year only on business activity occurring on and after the date that the person established a substantial nexus with this state in the current calendar year.

Bottled water exemption

Beginning August 1, 2017, the sales and use tax exemption for bottled water has been discontinued. Bottled water that is prescribed pursuant to a prescription or that is provided to persons whose primary source of drinking water is unsafe remains exempt.

Fuel exemption

Beginning August 1, 2017, the use tax exemption for fuel used by the manufacturer thereof when used directly in the operation of the particular manufacturing plant that produced it, is limited to biomass fuels. The value of refinery fuel gas for use tax purposes is set to the United States natural gas wellhead price and local sales and use tax does not apply. Beginning January 1, 2018, the use tax rate for refinery fuel is 0.963%, increasing each year to 3.852% from January 1, 2021 and onwards.

H.B. 2163, Laws 2017, effective 91 days after adjournment and as noted above

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CCHTaxGroup

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