Q. How do I properly code transactions?
A. Follow the streamlined agreement sourcing rules.
Q. If a seller delivers a product to the buyer’s warehouse or other temporary location, what location should determine the sales tax?
A. Because the buyer takes possession (receipt) of the product upon delivery to the warehouse or other temporary location, the sales tax is based on that location. RCW 82.32.730(1)(b).
Q. What location determines the tax if a buyer picks up a product from the seller’s warehouse?
A. The tax is based on the warehouse location because that is where the goods are received. RCW 82.32.730(1)(a).
Q. What location determines the tax if a buyer arranges to have a shipping company pick up the product from the seller’s warehouse or the warehouse of a third party?
A. Shipping company pick-up does not constitute receipt of a product under RCW 82.32.730(8)(c), so the following rules apply:
- If the seller knows the delivery destination, the seller should collect the sales tax for that destination. RCW 82.32.730(1)(b).
- If the seller does not have the delivery destination, the sale should be coded to the buyer’s address as maintained in the seller’s business records. The seller must not use this address in bad faith. RCW 82.32.730(1)(c).
- If the seller does not have the buyer’s address in his business records, the seller should code the tax to an address for the buyer obtained at the time of the sale. The seller must not use the address in bad faith. RCW 82.32730(1)(d).
- If none of the above applies or there is insufficient information to apply the rules, the seller should default to the origin-based tax rate and code. RCW 82.32.730(1)(e).
If the person picking up the product is a representative of the buyer (and not a shipping company), such as an employee, family member, independent contractor, etc., the tax is based on the seller’s location (as in an over-the-counter sale). RCW 82.32.730(1)(a).
Q. What location determines the tax if a buyer purchases several products with multiple destinations using the seller’s pre-printed order forms?
A. Because the seller knows the delivery locations for the products, the sales tax for each product should be based on its destination, i.e., the location where the buyer receives the products. If the buyer pays either by credit card or is billed for the purchase, it should not be difficult to determine and apply the correct tax. However, where the buyer pays by check, the seller must make sure the appropriate tax is paid. Frequently, preprinted forms are designed to direct the buyer to fill in the applicable sales tax or taxes. To assist sellers who have repeat customers, the Department is offering a customer database conversion service to code the various tax jurisdictions for the seller’s customer database.
Q. Under our normal accounting method, we collect taxes when the sale is written. What if the delivery address changes later?
A. If there is a change in delivery location, you can rely on the address information given, provided you recognized the sale for state tax purposes under your accounting method. However, if you amend the transaction for any reason, you will need to update the coding and retail sales tax.
Q. What if some of the product is taken from the store and some is delivered?
A. You must separate the sale. The product received at the store must be taxed based on the rate at the store’s location. The delivered product must be taxed based on the location of receipt.
Q. What if the customer decides to pick up the product after scheduling the delivery?
A. If the sale has been recognized for state tax purposes under your accounting method, you can rely on the address information given at that time you recognized the sale. If you amend the transaction for any reason, you will need to update the coding and retail sales tax.
Q. An order is called in and set up as a will call. The customer indicates that they will pick up the materials in their own vehicle, so we quote them the local tax rate and they make payment with credit card over the phone. The customer then changes their mind and makes arrangements with a private carrier to pick up the materials. What do we do?
A. If the sale has already been recognized for state tax purposes under your accounting method, you won’t need to change the coding of the order. However, if the transaction is amended for any reason, you will have to recalculate the tax and code the items picked up to the store location. Where a sale involves a repeat customer who regularly picks up items through a shipping company, you should determine the shipping arrangements, so that you can appropriately code the transaction.
Q. What about shipping out of state?
A. Washington law does not require that you charge sales tax on shipments of tangible personal property received by customers out-of-state.
Q. How will I be notified of tax rate or boundary changes?
A. Tax rates are updated quarterly. Businesses that file paper returns will receive a list of sales and use tax rates with their tax return. You may also sign up to receive email notification through our (GIS) sales tax rate listserv.
Taxpayers are notified quarterly through the Local Sales & Use Tax Rates & Changes publication of changes in both rates and boundaries for the various tax jurisdictions.
Q. We have repair business and we pick up equipment to be repaired and return the repaired items to the customer. Do I charge sales tax based on the rate at the location where the repair occurred, or where I deliver the equipment after the repair is complete.
A. When a purchaser receives a retail service at a location other than the seller's place of business, the sale must be sourced to that other location. RCW 82.32.730(1)(b).
RCW 82.32.730(7)(c) defines "receive" as making first use of services. Repair services are first used by the purchaser when a repaired item is delivered to and received by the purchaser.
You need to charge sales tax based upon the rate applicable at the location where the purchaser takes receipt of the repaired property.
Q. What is the Streamlined Sales and Use Tax Agreement (SSUTA)?
A. The SSUTA is a cooperative effort of 44 states, the District of Columbia, local governments and the business community to simplify and make more uniform sales and use tax collection and administration by retailers and states. It is intended to reduce the cost and administrative burdens on retailers that collect the sales tax, particularly retailers operating in multiple states. It would encourage "remote sellers" selling over the Internet and by mail order to collect tax on sales to Washington customers. It seeks to make local "brick-and-mortar" stores and remote sellers all operate by the same rules and in the same competitive environment.
Q. What are "remote sellers"?
A. Remote sellers are businesses that sell products to customers in a state, using the Internet, mail order, or telephone, without having a physical presence in that state. These sellers currently cannot be required to collect and remit sales tax as brick-and-mortar stores must do. The U.S. Supreme Court ruled in 1992 (Quill vs. North Dakota) that the burden of collection was too high given the number of taxing districts in the country and variations among states as to what was taxable and at what rate.
Q. Why is this agreement needed?
A. Local brick-and-mortar stores are operating at a competitive disadvantage to remote sellers who aren't collecting or paying taxes. Sometimes local stores find themselves serving as showrooms for Internet sellers. Prospective customers check out the merchandise locally but buy the product online to avoid paying sales tax.
Q. How does the change in sales tax work?
A. Prior to July 1, 2008, businesses that shipped products directly to customers code the local sales tax to the location from which the product was shipped. Under destination-based sales tax, the tax now goes to the destination city or unincorporated county. The rate is determined by the local rate in the destination city or unincorporated county. Destination-based sales tax doesn’t affect local taxes when the customer takes the product home. In that case the tax applies to the location where the customer picked up the product.
Q. How many states have passed legislation for the agreement?
A. Twenty-two states have passed conforming legislation so far, not including Washington. The agreement went into effect on October 1, 2005, and over 1,000 remote sellers have already registered to begin collecting and remitting sales taxes on sales to purchasers in these states.
Q. What did Washington do to become a member of the Agreement (SSUTA)?
A. With the passage of SSB5089, Washington has enacted the remaining legislation necessary to come into conformance with the requirements of the Agreement. This includes changing its local sales tax system from an origin-based system to a destination-based system, providing amnesty for remote sellers who voluntarily begin collecting sales tax, providing compensation for certified service providers that will coordinate and process the sales tax reported by remote sellers, and providing assistance for small businesses that need to adapt to destination-based sales tax.