Washington passes remote seller bill to collect sales tax

Your Guide to State, Local, Federal, Estate + International Taxation

sales tax, online shopping, remote seller, retail, tax, WashingtonThe State of Washington just passed Bill 2163 which will require out-of-state retailers with gross receipts of at least $10,000 from Washington sales to either collect and remit retail sales tax or make an election to comply with notice and reporting requirements (aka “tattle telling” on purchasers).

This will all go into effect on January 1, 2018. The penalty for not complying is $20,000 plus any other penalties that may apply for failure to provide information returns.

This bill intends to address the significant harm and unfairness brought about by the physical presence nexus rule in an ever increasing digital world. The internet has made it far too easy for a consumer to purchase items from out of state retailers. According to this bill, states are failing to collect more than $23 billion dollars annually in sales tax from remote sales over the internet. Congress has taken too long to make changes to the nexus rules requiring states to take matters into their own hands in order to preserve their tax revenue.

Washington has two other bills in the legislature looking to expand the definition of nexus even further. They seek to establish both economic nexus — whereby a substantial connection is created when an entity does a certain amount of business in (or has a certain number of economic ties to) the state — and affiliate nexus, whereby a tax obligation is created through ties to in-state affiliates.

This may possibly spur Congress into action as other states are sure to follow in Washington’s footsteps.

Stacy Redmond