United States

Washington state enacts major changes around nexus

New nexus standards and adoption of a uniform trailing nexus period.


The state of Washington recently enacted ESSB 6138, which changes the nexus standards for wholesalers and adopts "click-through" nexus standards that apply to remote sellers making retail sales to Washington consumers. In addition, the Washington State Department of Revenue (department) updated an administrative rule, WAC 458-20-193, to remove disassociation and revise trailing nexus.

Remote sellers

Under this legislation, remote sellers making sales at retail are presumed to have nexus with Washington state if such sellers enter into agreements with Washington residents who refer potential customers to the remote seller for a commission or other consideration and generate more than $10,000 in gross receipts for the remote seller during a calendar year.

These sellers are required to collect and remit retail sales tax from Washington customers. In addition, the remote sellers are now required to pay Washington's retailing business and occupation (B&O) tax (current .471 percent tax rate), which is imposed directly on the sellers. Remote sellers may find this new law to be similar to click-through nexus laws that other states have adopted.

The law related to click through nexus is effective Sept. 1, 2015.

Wholesale sales

In the past, wholesalers with no physical presence in Washington were not required to register with the department or pay Washington B&O tax on sales delivered to buyers in Washington. However, pursuant to ESSB 6138, out-of-state wholesalers are now subject to Washington's economic nexus laws and rules, which include dollar thresholds related to Washington payroll ($53,000), property ($53,000), or gross receipts ($267,000). This means that an out-of-state business with no physical presence in this state but with Washington wholesale gross receipts of $267,000 or more has established nexus with Washington state. That business is now required to register with the department and report B&O tax under the wholesaling tax classification (current tax rate of .484 percent).

The law related to such wholesalers takes effect on Sept. 1, 2015.

Interstate sales of tangible personal property

The department recently amended WAC 458-20-193 (a/k/a Rule 193), titled "Interstate Sales of Tangible Personal Property." Among other changes, the amended rule eliminates dissociation language contained in the previous version of the rule and also revises the trailing nexus period.

Previously, the department would allow a business to dissociate specific revenue from taxation if the business could prove that the revenue stream was not associated with in-state activities that established and/or maintained a market for its products in this state. Under the new version of Rule 193, businesses that meet Washington's nexus standards must report and pay tax on all revenue, even though specific revenue streams are not associated with, or generated from, activities performed in the state that create or maintain a market for their products in Washington.

In addition, the department revised Rule 193 to reflect its position concerning trailing nexus. Pursuant to 2010 legislation, companies were required to report B&O tax for the calendar year following the year in which the business ceased to have physical presence in Washington state. However, there was no statute that identified the trailing nexus period for retail sales tax purposes. Consequently, the department took the administrative position that companies were required to collect and report retail sales tax for up to five years after the year in which the business ceased to have physical presence in the state.

The department has now amended Rule 193 to reflect a uniform trailing nexus period for all excise taxes it administers, including retail sales tax. A company is now required to report excise taxes for one calendar year after the calendar year in which the company ceased to have nexus under Washington's nexus standards. This one-year trailing nexus period will apply to companies that meet either Washington's economic nexus standards and thresholds or those that meet Washington's physical nexus standards.

The newly amended version of WAC 458-20-193 became effective Aug. 7, 2015.


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