Washington Governor Jay Inslee has signed legislation to help the state collect sales and use taxes from online transactions. The bill, H.B. 2163, combines elements of recent legislation in Colorado and Minnesota.
Washington follows Colorado’s lead by requiring vendors selling within the state to either collect sales tax from Washington buyers or report them to the state for assessment of use taxes. It follows Minnesota’s lead by imposing the same requirement on “online facilitators,” such as Amazon, eBay and Etsy. Vendors selling only through such third-party marketplaces will not have to comply separately.
A similar rule is applied to “referrers.” This rule applies to any taxpayer 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
Vendors, third-party facilitators and referrers who opt to not collect sales taxes have to refer their customers to Washington revenue officials. They also must post prominent notices on their websites of the requirement for Washington customers to remit use taxes on their purchases.
Online vendors and marketplaces are subject to the rules if their annual sales in Washington exceeded $10,000 in the previous calendar year. The cutoff for referrers is gross income from Washington referral sources exceeding $267,000. The rules take effect January 1, 2018.
Reports say litigation is likely, but so far efforts to overturn notification requirements in court have failed. Taxpayers who might be affected should be considering how to comply with the new rules. Contact a member of our State and Local Tax team to learn more.