Washington revises remote sales tax collection after Wayfair
TAX ALERT |
On Aug. 3, 2018, the Washington State Department of Revenue announced that out-of-state retailers exceeding sales of $100,000 or 200 transactions into the state of Washington in the current year, or the previous year, will be required to start collecting sales tax beginning Oct. 1, 2018.
The department’s announcement follows the U.S. Supreme Court’s decision in the South Dakota v. Wayfair, which overturned the long-standing "physical presence” nexus standard and opened up the possibility for states to impose sales and use tax collection and remittance responsibilities on remote sellers based solely upon their economic presence in a state.
Retailers who do not meet the sales or transaction threshold for sales tax collection will still be required to comply with Washington’s Marketplace Fairness law that became effective on Jan. 1, 2018. That law imposes a requirement for remote businesses with retail sales exceeding $10,000 to elect to either register and collect sales tax or comply with use tax notice and reporting requirements. Under the new guidance, when a remote business exceeds $100,000 of retail sales or 200 transactions, remote sales tax collection is mandatory. For information on Washington’s Marketplace Fairness law, please see our alert, Washington enacts use tax reporting and B&O changes for remote sellers.
Although the department has amended the requirements for remote sales tax collection, the economic activity thresholds for reporting under the Retailing Business and Occupation tax (B&O) classification have not changed and were not immediately impacted by the Wayfair decision. Retailers making sales into Washington are required to report Retailing B&O when sales exceed $285,000 ($267,000 in 2017) or at least 25 percent of total sales attributed to Washington during a calendar year.
Remote businesses making sales into Washington should review whether their sales into the state exceeds either the 1) $10,000 threshold to trigger the election, or 2) the $100,000 or 200 transaction thresholds to mandate remote seller sales tax collection. Businesses that meet one of the latter thresholds will need to register and begin collecting the sales tax by Oct. 1, 2018.
Remote sellers, referrers and marketplace facilitators with annual sales between $10,000 and $100,000, in under 200 transactions, should consider whether the use tax reporting and notification requirements, or collection of sales tax, is more appropriate.
Since the Wayfair decision on June 21, 2018, over half of the states that impose a state-wide general sales tax have addressed similar remote seller economic sales tax nexus thresholds. Many of those provisions are effective on Oct. 1 or Dec. 1, 2018, or Jan. 1 2019. Multistate taxpayers with questions about compliance under the new sales and use tax nexus landscape should speak to their tax advisers on how to diligently track and comply with these provisions.