As of July 1, 2008, Washington State retailers will need to collect sales tax based on the destination of the shipment or delivery – “destination-based.” This only affects shipments and deliveries to locations within Washington State.

Basically, all WA businesses that ship products to WA state addresses are now required to charge the correct sales tax for the destination city. For example, if you are a Washington business and sell an item online that is to be shipped to Bothell, WA, then you will have to charge the same sales tax as any store operating in Bothell. So tax charged to Bothell orders will be different than Seattle orders.

According to the Washington Dept. of Revenue, the tax tables will be updated quarterly.

Totera is currently developing a software solution that will be integrated into an wide range of shopping carts. Our solution will automatically reference the state database to determine the current tax rate based on the shipping zip code and then add the correct sales tax to the shopping cart during checkout.

Examples of Destination-based Sales Tax

SOURCE: http://dor.wa.gov

• A resident of Olympia orders a pizza from a restaurant located in Tumwater. The store delivers the pizza to the customer in Olympia. Sales tax is based on the customer’s location in Olympia.

• A Darrington resident purchases a couch at a furniture store in Bothell and requests that the merchant deliver the couch to the customer’s home in Darrington.  Sales tax is based on the customer’s location in Darrington.

• A Vancouver resident purchases a computer online from a merchant in Seattle. The computer is a gift for a student attending college in Pullman. The buyer directs the seller to ship the computer to the student’s address in Pullman. The sale is based on the location of the student in Pullman. The merchant should collect sales tax based on the “ship to” address in Pullman.

• A Spokane Valley resident purchases a mattress at a store in Spokane. The merchant delivers the mattress from its warehouse located in Deer Park to the customer’s home in Spokane Valley. Sales tax is based on the customer’s location in Spokane Valley.

What about deliveries to locations outside of Washington?

There is no change for deliveries outside of Washington. Washington’s sales tax does not apply on sales of goods when the seller delivers the goods to the buyer at a location outside the state.

Sales tax on short-term leases:

Sales tax on leases that require recurring periodic payments is generally based on the customer’s location, except the initial payment. For leases (other than motor vehicles, trailers, semi-trailers, or aircraft) that require recurring periodic payments, sales tax is sourced as follows:

• If the buyer receives the property at the seller’s location, sales tax on the first periodic payment is based on the seller’s location. Sales tax on subsequent payments is based on the primary property location for each period covered by the payment. The primary property location is considered to be the address for the property that the buyer provides to the seller and that the seller maintains in its records in the ordinary course of business, when use of this address does not constitute bad faith.

• If the buyer does not receive the property at the seller’s location, sales tax on the first periodic payment is based on the location where receipt occurs, if known by the seller.  Sales tax on subsequent payments is based on the primary property location for each period covered by the payment.

Sales tax on rentals:

• Olympia Construction Co. rents a “pressure washer” from Chehalis Rental Co.  The rental period is one week. Olympia Construction picks up the equipment in Chehalis and delivers it to their job site in Yelm. Sales tax is based on the seller’s location in Chehalis.

• If Chehalis Rental Co. delivers the pressure washer directly to the job site in Yelm, sales tax would be based on the location of the job site in Yelm.

• Washington’s tax does not apply if Chehalis Rental Co. delivers the pressure washer to the customer at a location outside the state of Washington.

• D&R Construction, located in Olympia, rents a “backhoe” from Construction Rentals, located in Tacoma. The rental period is 45 days, for a lump sum rental payment of $3,000. D&R picks up the equipment in Tacoma and delivers it to a job site in DuPont. Sales tax on the rental payment is based on the seller’s location in Tacoma.

—

Destination Sales Tax FAQ

Who is affected?

Destination-based sales tax will apply only to businesses that ship or deliver the goods they sell to locations within Washington. Under the new rules, if a retailer delivers or ships merchandise to a buyer in Washington State, the sales tax is collected based on the rate at the location where the buyer receives or takes possession of the merchandise.

There is no change for deliveries outside the state or over-the-counter sales where customers take home goods from the store location.

Who is not affected?

If you do not ship or deliver, nothing will change about the way you handle sales tax.

For example, if a buyer receives merchandise at your retail business location, sales tax continues to be based on that location – the “origin” of the sale.

Additionally, this change does not affect:

• Deliveries to locations outside the state of Washington
• Wholesale sales
• Services
• Sales of motor vehicles, trailers, semi-trailers, aircraft, watercraft, modular homes, and manufactured and mobile homes. Sales tax will continue to    be based on the seller’s location even if the seller delivers the items to customers.
• Towing companies

Is help available?

We hope to start implementing our destination tax compliant feature into our custom shopping carts within the next few weeks. Contact us if you have any questions, or would like a cost estimate for updating your existing shopping cart software.

*originally posted 07/08/2008

Tags: ecommerce, tax calculations