New law updates Washington state tax requirements for out-of-state businesses

OLYMPIA, WASH. – March 18, 2019 – Last week, Gov. Jay Inslee signed a bill that simplifies Washington tax responsibilities for out-of-state sellers without a physical presence in the state.

Substitute Senate Bill 5581 immediately removes the requirement for out-of-state businesses without a physical presence to collect and remit Washington sales tax if they make 200 or more transactions into Washington. Businesses will use $100,000 in sales to Washington as the primary threshold for collecting.

Beginning July 1, the bill eliminates the notice and reporting requirements established in the state’s 2018 Marketplace Fairness law.

On Jan. 1, 2020, the economic nexus threshold for B&O tax will match the retail sales tax threshold of $100,000. The threshold for retail sales tax and B&O tax will be calculated using all gross income, not just retail sales.

The bill also eliminates click-through nexus and most import commerce exemptions.

The Marketplace Fairness law went into effect Jan. 1, 2018. The law was the first in Washington to require out-of-state businesses that made $10,000 or more in retail sales to Washington consumers to either collect and remit Washington sales tax or comply with use tax notification and reporting requirements.

After the 2018 U.S. Supreme Court decision in Wayfair v. South Dakota, Washington adopted an economic nexus standard consistent with the ruling – more than $100,000 in sales or 200 transactions. These thresholds went into effect Oct. 1, 2018.

Washington businesses that make sales into other states should be aware that they may now be required to register and collect sales tax in those states for items shipped outside Washington. Check taxadmin.org or streamlinedsalestax.org for information about tax collection and registration requirements in other states.

If businesses have questions about these changes they can call Revenue at 360-704-5900.

Note: Detailed information about Washington’s Marketplace Fairness law and these changes are available at dor.wa.gov/marketplacefairness.

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