Businesses are eligible to claim a tax credit of up to $1,000 toward the cost of implementing the destination-based sales tax or two years of subsidized service from a Certified Service Provider (see RCW 82.32.760).
You will be eligible for either of these two options if:
- You are registered with the Department and making sales of delivered tangible personal property on June 30, 2008, and
- During the calendar year of 2008 you meet all of the following:
- You have a physical presence in Washington
- You have Washington gross income of less than $500,000
- You have at least 5% of your gross income from sales of delivered taxable goods
- You have at least 1% of your gross income from sales of delivered taxable goods outside the local jurisdiction where most local sales tax is reported
The credit may be applied toward the purchase or modification of equipment such as cash registers or hardware and software, labor, including the hiring of professionals such as accountants, consultants, or attorneys, or internal payroll expenses. These costs must be incurred between July 1, 2007 and June 30, 2009 to be eligible. Businesses can start claiming the credit on:
- the July 2008 tax return (due in August) for monthly filers
- the Q3, 2008 tax return (due in October) for quarterly filers
- the 2008 annual tax return (due in January 2009) for annual filers
The credit must be claimed initially by the first tax return due after June 30, 2009:
- the June 2009 tax return (due in July 2009) for monthly filers
- the Q2, 2009 tax return (due in July 2009) for quarterly filers
- the 2009 annual tax return (due in January 2010) for annual filers
If the credit cannot be used up by July 1, 2009, it may be claimed in subsequent periods until it is used up.
To be eligible for the Certified Service Provider option, you must begin using the services of a Certified Service Provider by June 30, 2009. For more information on Certified Service Providers, please visit the national Streamlined Sales Tax Governing Board web site.
How to calculate the Destination Sourcing Tax Credit
- Calculate total costs incurred one year before or after July 1, 2008, to comply with tax sourcing changes. Costs include goods and services purchased and labor costs.
- Credit is the lesser of total costs incurred or $1,000.
For example, if the total cost incurred was $850, the maximum credit allowed is $850. If the total cost incurred was $1,500, the amount of credit is limited to $1,000.
- Credit taken per return cannot exceed the total of business and occupation taxes (B&O) plus the state portion of retail sales tax, minus any other credits. However, any remaining credit may be carried over to the next reporting period until used.
For example, total costs incurred equal $850. The maximum credit allowed is $850. On the 7/08 return, total taxable retail sales equal $8,000.
State portion of retail sales tax = $520
B&O taxes = $37.68
Small business B&O credit (SBC) = $35
B&O tax due less SBC = $2.68
B&O taxes due + state portion of retail sales tax = $522.68
Sourcing Tax Credit allowed on the 7/08 return = $522.68
$327.32 may be carried over to the next reporting period
- If at least a portion of the credit is not claimed on a return period within one year after the effective date of July 1, 2008, the credit is no longer available.