Many businesses add surcharges to their customer billings to cover their expenses, such as tariffs, fuel costs, or credit card fees. If your business adds an additional charge to invoices to help cover expenses, you need to know if state taxes apply to the charge passed onto your customer.
If you are an importer, you are required to collect and pay custom taxes on tariffs. US Customs bases the custom tax amounts on a percentage of the total value of the product. Tariffs are also called customs, import duties, or import fees.
Washington’s business and occupation (B&O) and retail sales taxes apply to your gross proceeds of sales. You cannot take any deductions for your property costs, materials costs, labor costs, delivery costs, or any other expense (RCW 82.04.070).
In cases where you charge your customers a surcharge (including an amount to cover tariffs) to compensate for costs you incur, the surcharge becomes part of the selling price and is subject to tax. It makes no difference if the surcharge is listed as a separate line item on the invoice.
- If you pass the tariff on an imported product onto the consumer, the tariff surcharge is subject to retail sales tax and retailing B&O tax.
- If you place a "Living Wage" surcharge on a restaurant bill, the surcharge is subject to retail sales tax and retailing B&O tax.
- If you add a surcharge for attorney fees, the surcharge is subject to the B&O tax under service and other activities classification.
- If a moving company adds a surcharge for hauling property from one point to another point in Washington, you are required to pay public utility tax under the appropriate classification.
- If a surcharge is added to a bill from a moving company for hauling property from one point to another point in this state, the surcharge would be taxable under the appropriate classification of the public utility tax.