Washington Sales Tax Guide with Rates and Requirements

Sales tax requirements can be tough for business owners to understand due to state and local variations. If you’re operating out of the state of Washington, this Washington sales tax guide is here to help. It simplifies calculating sales tax and filing returns for you, so you can avoid catching penalties.

What Is the Sales Tax Rate in Washington?

Washington’s statewide sales tax rate is 6.5%. That is the base rate. Cities and counties sales tax can add up to 3.9%. That makes the combined rates as high as 10.4% in some areas.

In other words, the sales tax in Washington varies from city to city and county to county. You must thus understand the system so you can charge your customers the correct sales tax.

Washington Sales and Use Tax Overview

As a business owner, you must collect state taxes while selling taxable goods and services, and then send the tax to the state authorities. The Washington Department of Revenue (DOR) looks after the sales and use tax in Washington.

The sales tax is applied on selling goods and some services. Use tax is charged on goods purchased when sales tax has not been collected at the time of sale. For more details on Use Tax in Washington, consult the Department of Revenue’s site.

Taxable goods and services include:

• Most physical goods (like clothing, electronics, alcoholic beverages, etc.)
• Certain services (like construction services, car washing, digital products like SaaS, etc.)

Exemptions include groceries, prescription drugs, medical devices, farm equipment, sales to nonresidents and newspapers. Commenda recommends you to visit here to see which goods are exceptions and under what conditions.

When Do Businesses Need to Collect Sales Tax in Washington?

Businesses must collect sales tax in Washington if they trigger an economic “nexus”. The nexus is what decides whether you have to collect and file sales tax in Washington or not.

So, what triggers a nexus (that is, how do we decide whether the sales tax has to be paid)? A nexus may be triggered under two conditions:

1. Physical nexus: This type of nexus is triggered when the business has employees, or owns a store, office, or warehouse in Washington.
2. Economic nexus: A nexus of this type is triggered when the business meets the state’s threshold of $100,000 in annual gross sales to Washington customers. Find the economic nexus guide for business owners here.‍

1. This economic nexus applies because Washington is what they call a destination-based state. That means the sales tax rate is determined by the delivery address for all taxable sales.

So, a SaaS service based in California surpassing $100,000 in Washington sales would be required to collect a Washington sales tax, even without an office in the state. For more info, you can click here.‍

Failure to Collect Washington Sales Tax

As a business registered to collect and remit Washington sales tax, you act as an intermediary for the state. Not doing your duties as an intermediary can lead to hefty files and penalties.

Penalties for Late Filing and Payment

Late filing or payment of sales tax can attract the following penalties.

• Failure to File:
  • 5% of the tax liability if you don’t file it by the due date.
  • Increases to 15% if unpaid by the due date of the late filing notice.
  • Rises to 25% if unpaid within 30 days of the notice’s due date.
• Failure to Pay:
  • 9% of the unpaid tax if you don’t pay it by the due date.
  • Increases to 19% if not paid by the end of the following month.
  • Rises to 29% if unpaid by the second month following the due date.
• Minimum Penalty: $5, regardless of the amount owed.
• Electronic Payment Penalty: Most businesses are supposed to pay electronically. In case you miss, it results in an additional 10% penalty on the amount due.

Washington Sales Tax for Out-of-State and Amazon FBA Program Sellers

Out-of-state businesses selling to Washington residents should comply with economic nexus rules. Remote sellers, like those using the Fulfillment by Amazon (FBA) program, must know if their inventory is Washington-based.

FBA remote sellers can access the Inventory Event Detail Report from Amazon Seller Central to search for their Washington-based inventory. If you have an inventory in Washington, you have likely triggered the economic nexus and are required to collect sales tax. In case of queries, please consult a tax expert.

Registering for a Washington Seller’s Permit

To legally collect sales tax in Washington, you must obtain a seller’s permit through the Washington Department of Revenue (DOR) online. This should be done before you make your first sale in the state. Below are detailed steps to guide you through the online process:

1. Obtain an Employer Identification Number (EIN)

You must have an Employer Identification Number (EIN), which serves as your federal tax ID. An EIN is mandatory, but if you are a sole proprietor, you can use your social security number. You can apply for an EIN online through the IRS website.

2. Create an Account on the Washington DOR Website

Next, visit the Washington Department of Revenue (DOR) and create an account on the My DOR portal. Provide the necessary details to set up your account, which will be used to file sales tax activities.

3. Complete the Business License Application

The Business License Application can be completed via the Business Licensing Service (BLS) portal. You’ll need to provide details such as your business name, legal entity type, physical and mailing address, start date, and business activities. Additionally, include the North American Industry Classification System (NAICS) number for your industry. Set the start date as the date you started with Washington state if you have an out-of-state business.

4. Pay the Registration Fees

A $90 non-refundable fee is needed if you are setting up the first location for your business, or re-opening your business with no active locations. The fee is $19 for any other purpose.

5. Submit Supporting Documents

Submit your business documents according to your business structure. These include federal EIN, Articles of Incorporation, etc. in the required format.

6. Await Confirmation

The DOR typically processes applications within 10 business days. Once approved, you’ll receive your seller’s permit via email or postal mail. Store it safely. The letter ID and the UBI number should be present in the welcome mail.

7. Connect the Business and Excise Licenses

After getting the letter ID and the UBI number, log in again into your My DOR account and choose “Access an Existing Business Account.” Enter the correct letter ID and UBI numbers. Make sure you do this for the business license AND the excise license separately to connect both.

8. Address Additional Requirements

Businesses dealing in tobacco, alcohol, or fuel may need additional permits. Check for any local licensing requirements if you’re operating in cities within Washington that impose additional conditions before you collect Washington Sales Tax.

How to Collect Sales Tax in Washington

Collecting Washington sales tax starts with registering for a seller’s permit through the Department of Revenue. As a destination-based state, Washington calculates its sales tax based on the buyer’s ship-to address.

Use tools like the Washington Department of Revenue Tax Rate Lookup Tool to help determine the correct tax for any location. As a seller, you must itemize and display tax rates clearly on receipts to ensure transparency.

See how you can track taxes, file your returns, and stay compliant with Commenda.

Tax-Exempt Customers

Nonprofits, government entities, and resellers come under the category of tax-exempt customers. If you fall under this category, you are requested to collect valid exemption or resale certificates from your dealers.

Filing Sales Tax Returns in Washington

Filing sales tax requires you to choose your filing frequency and filing steps. Read on to find out what’s best for your business.

Filing Frequency

Filing Steps

1. Collect essential data for the reporting period, including:
   1. Total sales and income
   2. Purchases and expenses
2. Access your Secure Access Washington (SAW) account through your MyDOR and select the Excise Tax Return panel for online filing.
3. Provide detailed information, including:
   1. Total sales
   2. Amount of tax collected
   3. Location of each sale
4. Choose a payment method (see below table).
5. Ensure both your tax return and payment are submitted by the due date.

How to Pay Your Washington Sales Tax

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Using Sales Tax Automation Tools

Sales tax automation tools like Commenda can simplify your Washington sales tax calculation and filing with built-in reporting, remittance, and expert accounting support. Trusted by over 250+ business across borders, click here to see how Commenda handles your sales tax needs while you can focus on growing your business.

Washington Sales Tax Compliance Checklist

Staying compliant with Washington’s sales tax laws requires careful planning. Follow this checklist to ensure accurate collection, timely filing, and proper documentation.

1. Register for a seller’s permit.

Businesses must register for a seller’s permit through the Washington Department of Revenue via the Business Licensing Wizard.

2. Track physical and economic nexus triggers.

Exceeding $100,000 in annual sales or engaging in local operations like warehousing can create a nexus in Washington. A nexus trigger means you must start collecting sales tax.

3. Use accurate sales tax calculators.

Washington sales tax combines a statewide rate of 6.5% with varying local rates. Use a reliable sales tax calculator that ensures accurate collection across cities and counties.

4. File and remit sales tax returns on time.

Businesses must file returns monthly, quarterly, or annually, depending on the frequency they chose. Filing can be completed online through My DOR.

5. Maintain documentation for tax-exempt sales.

For transactions with tax-exempt customers, retain valid resale certificates or nonprofit documentation. Accurate records protect against audits and ensure compliance with Washington’s sales tax exemption policies.

How Should I Prepare for Washington Sales Tax Audits and Appeals?

Preparing for a Washington sales tax audit requires accurate record-keeping. Audits are conducted by the Washington Department of Revenue (DOR) to verify accurate reporting and payment of state excise taxes. Let us walk you through on how to prepare your audits.

Understanding the Audit Process

• Audit Period: Typically covers the last four years plus the current reporting period.
• Focus Areas: Auditors will review income reconciliation, validate deductions or exemptions, and confirm sales or use tax payments on business purchases (e.g., assets and consumables).

Steps to Prepare for an Audit

1. Organize Records: Keep detailed sales records, purchase invoices, tax returns, payment receipts, and proof of deductions/exemptions for the entire audit period.
2. Reconcile Income: Ensure reported income matches financial records and revenue is classified correctly.
3. Validate Exemptions: Have valid documentation for claimed deductions and exemptions, such as exemption certificates.
4. Confirm Tax Payments: Verify that use tax was paid on taxable purchases, including assets and consumables, to avoid discrepancies.

During the Audit

1. Cooperate with the Auditor: Provide records promptly and address questions to resolve issues early.
2. Understand Results:
   • Owed Taxes: Pay within 30 days of receiving the final report.
   • Overpaid Taxes: Request a refund or apply the credit to future returns.

In case of disagreements, meet with the field audit manager to discuss concerns. Alternatively, you can file a formal appeal within 30 days to challenge findings or provide new evidence.

Washington Sales Tax Rates by City

As a business owner, you must understand the varying local tax rates across Washington to stay compliant. Below is a list of the local tax rates across various Washington cities.

Don’t let your business slow down because of sales tax complexities. Have Commenda on your side. Schedule a free call with our sales tax experts now!

FAQs

What triggers the sales tax nexus in Washington?

How do I register for a Washington seller’s permit?

What is Washington’s economic nexus rule for remote sellers?

What happens if I don’t collect sales tax in Washington?

Is SaaS taxable in Washington?

Can I get an extension on filing my Washington sales tax return?