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B&O and Use Tax Changes for Out of State Retailers

Marketplace fairness changes

Effective January 1, 2018, this bill requires remote sellers, marketplace facilitators, and referrers meeting specified sales or income thresholds to elect to either:

  • Collect sales or use tax on sales to Washington consumers, or
  • Comply with specified use tax notice and reporting requirements. Failure to comply subjects the entity to specified penalties.

Use tax notification requirements

The Legislature passed Colorado-style use tax notification and reporting requirements effective January 1, 2018.  The Use tax legislation is relevant because purchasers are required to pay Use Tax on purchases with no sales tax, and most states are going to require the same thing which will affect sales by WA state retailers with no presence in other states.

  • Online marketplaces and remote sellers with no physical presence but at least $10,000 of Washington source receipts must notify Washington purchasers that use tax is due and annually provide information on taxable purchases to both the purchasers and Department of Revenue
  • The penalty for failing to provide notice on a website is $20,000.
  • The penalty for failure to report to the state can be as high as 40% of Washington sourced gross receipts over $300,000.
  • Additional B&O Tax Nexus for out of state retailers as explained below.

New nexus standard for retailing B&O tax

Effective July 1, 2017, this bill requires a business to pay retailing B&O tax if, in the current or immediately preceding calendar year, the business has more than $267,000 of yearly gross receipts sourced or attributed to Washington, or at least 25% of its total yearly gross receipts from this state. As result, a business engaged in a retailing activity has nexus with Washington State either by having a physical presence in this state or by exceeding these receipts threshold.

Also, the timeframe for applying the economic nexus standards for out-of-state businesses with apportionable income has changed beginning July 1, 2017. This means that out-of-state businesses (not organized or commercially domiciled in Washington) will be subject to B&O tax in the current year if they met any of the economic nexus thresholds during the current or prior calendar year. 

Note that revenue collected through June 30, 2017 is excluded from this requirement.

Posted by Admin Posted on Oct 24 2017