United States

Washington enacts use tax reporting and B&O changes for remote sellers


On July 7, 2017, Washington state Gov. Jay Inslee signed House Bill 2163, providing for a use tax notice and reporting requirement for remote sellers and extending economic nexus to the retailing business and occupation tax (B&O).

Use tax notice and reporting

Effective Jan. 1, 2018, House Bill 2163 mandates remote sellers with at least $10,000 in Washington sourced retail sales to either collect and remit retail sales tax or comply with use tax notice and reporting requirements. The election also applies to “marketplace facilitators” and “referrers.” Marketplace facilitators must consider their own sales as well as sales made as an agent of another marketplace seller in meeting the $10,000 threshold. A marketplace facilitator is one that contracts with a seller to facilitate the sale of the seller’s products through a physical or electronic marketplace operated by the facilitator. “Referrers” are subject to the election when gross income earned from referral services exceeds $267,000. A referrer means a person who contracts or otherwise agrees with a seller to list or advertise for sale one or more items in any medium, including a web site or catalog; receives a commission, fee, or other consideration from the seller for the listing or advertisement; transfers, via telephone, internet link, or other means, a purchaser to a seller or an affiliated person to complete the sale; and does not collect receipts from the purchasers for the transaction. Whether the threshold is achieved is determined based on sales in the current or immediately preceding calendar year.

If a remote seller, referrer, or marketplace facilitator elects not to register with the department and collect and remit sales tax, the Washington Department of Revenue will presume that the company has elected to comply with the notice and reporting requirements.

Remote sellers electing to comply with the use tax notice and reporting requirements are required to 1) post a conspicuous notice on its marketplace, platform, website, catalog or similar medium that informs Washington purchasers that a sales or use tax is due on certain purchases, that the state requires the purchaser to file a use tax return, and the notice is provided under the requirements of the new law; and 2) provide a notice to each consumer at the time of each retail sale that sales and use tax is not collected, that use tax may be required to be remitted, and instructions for obtaining additional information on how to remit the tax.

An election to collect the sales or use tax is binding on the remote seller until Jan. 1 of the calendar year that is at least 12 consecutive months after the remote seller began collecting the tax. Alternatively, remote sellers that have opted for use tax notice and reporting requirements may change their election to collect and remit sales or uses taxes at any time. Penalties for noncompliance start at $20,000 and have the potential of exceeding $100,000 depending on the company’s gross receipts sourced to the state.

Expanded B&O nexus standards for remote retailers

In 2015, Washington expanded substantial nexus to include remote wholesalers with no physical presence in the state. Nexus was established when the remote wholesaler met certain dollar thresholds related to Washington payroll, property, or gross receipts. Remote retailers, however, were not subject to the same expanded nexus requirements as wholesalers on retail sales delivered to Washington purchasers.

Effective July 1, 2017, House Bill 2163 subjects remote retailers to the same economic nexus standards as remote wholesalers. Remote retailers achieving any of the following thresholds are deemed to establish nexus in the state for purposes of the B&O: Washington payroll of $53,000, property of $53,000, or gross receipts of $267,000. Remote retailers establishing nexus under the new standards must register with the department and report B&O tax under the retailing tax classification, currently imposed at a tax rate of .471 percent.

Miscellaneous changes

House Bill 2163 also makes the following changes:

  • Eliminates the sales and use tax exemption for bottled water
  • Narrows the use tax exemption for self-produced fuel
  • Modifies the streamlined sales tax mitigation account and payments to local governments


According to the legislature, Washington state and its local governments will lose approximately $353 million dollars in sales and use taxes in fiscal year 2018 due to remote sales. In drafting the use tax reporting and notification law, the legislature cited the DMA litigation and Colorado use tax reporting and notification law recently upheld by the Tenth Circuit Court of Appeals. A significant difference between Colorado’s reporting requirements and Washington’s is that the Colorado mandate applies to remote retailers with over $100,000 of sales into the state – a much higher threshold than Washington’s $10,000 sales threshold. A number of other states have addressed use tax reporting and notification since Colorado’s provision was enacted, including Alabama, Louisiana, Oklahoma and Vermont.

Remote sellers, referrers and marketplace facilitators making sales into Washington should review whether the business achieves the threshold sales requirements set forth in House Bill 2163 and consider whether the use tax reporting and notification requirements, or whether collection of the tax, is more appropriate. Additionally, remote retailers should examine their Washington factor presence to determine whether the new law subjects the remote seller to the B&O.


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