Sales & Use Tax in Washington, D.C.

How to Stay Compliant and Avoid Common Sales Tax Problems

If you operate a business in Washington, D.C., or if you make sales to residents in this area, you may need to collect and remit sales tax. Failure to register, file returns, or pay taxes can lead to intense penalties, interest, and potentially even the loss of your business license. 

To get help now, use TaxCure to find a licensed tax pro who has experience with the Washington, D.C. Office of Tax and Revenue (OTR). 

Key takeaways

• Sales tax in Washington, D.C. is 6%
• Some items are subject to special rates ranging from 8 to 19%. 
• You must obtain a sales tax certificate before making taxable sales if you have a physical presence in D.C.
• Remote sellers must register for sales tax if they have over $100,000 or over 200 transactions in the district. 
• Failure to file or pay on time can lead to penalties and interest.

How much is sales tax in Washington, D.C.?

The general sales tax rate in Washington, D.C. is 6%. The rate is scheduled to increase to 7% on October 1, 2026. But some items are subject to higher rates as follows:

• 8% – soft drinks
• 10% – rental cars and restaurant meals, alcohol and non-alcohol drinks consumed on premise.
• 10.25% – alcohol drinks sold for off-premise consumption (aka retail liquor); baseball tickets and baseball-related personal property sold at National Parks; tickets at the Capital One area and personal property sold there; and rental or leasing of rental vehicles and utility trailers.
• 14.95% – hotels
• 19% – motor vehicle parking in commercial lots.

Are services subject to sales tax?

Yes, some services are subject to sales tax in Washington, D.C. They include real property maintenance (cleaning, pest control, swimming pool services, etc), landscaping (but not landscaping architectural services), data processing services, information services, car washes, security services, health club services, 

Pro tip: To ensure you calculate the sales tax rate correctly, use point-of-sale or e-commerce software that calculates the sales tax rate based on your location, but that can also be programmed to calculate different rates for different types of items. 

Who needs to collect sales tax in Washington, D.C.?

Consumers pay sales tax at the point of purchase, but it's up to the business owner to assess the tax, collect it, and send it to the Office of Tax and Revenue (OTR). You must collect sales tax if you have a physical presence in D.C. and you sell taxable goods or services, or if you sell remotely and have economic nexus.

What is economic nexus in D.C.?

You have economic nexus if you sell more than $100,000 in gross receipts to residents of D.C. or have more than 200 transactions in the District. You should register for a sales tax account as soon as you hit that threshold. However, if desired, you may collect and remit OTR sales tax even if you're under that threshold. 

This rule applies to both domestic and foreign remote sellers. However, if you, your employees, and/or your contractors deliver goods into D.C., you are not considered a remote seller, and you must register for a sales tax account right away. For example, if you're based outside of D.C., you run an online boutique, and the post office delivers your items to buyers, you're a remote seller. In contrast, if you run an online boutique, you're not based in D.C., but you or your employees/contractors deliver to the area, you are not considered a remote seller. 

What about marketplace facilitators?

Marketplace facilitators are responsible for collecting and remitting sales tax for the marketplace sellers who work underneath them. However, if your're a marketplace seller and your facilitator is not doing this correctly, you could be liable for the unpaid tax. 

How to register for a sales tax account with the OTR

To register, you must complete Form FR-500 New Business Registration – you can do that online. You need your business name, contact details, names of owners/partners/shareholders, type of business, and location. The FR-500 form lets you register for sales tax, employee withholding tax, and other D.C. business taxes.

First, however, you need to set up your business. You can register corporations, LLCs, and trade names with the D.C. Department of Licensing and Consumer Protection (DLCP). Also, check with the DLCP to see if you need a permit to operate in D.C..

If you plan to operate as a corporation or LLC, you should get an EIN from the IRS. Sole props without employees don't need an EIN – but may want to get one for banking and privacy reasons. You can get an EIN online from the IRS or through the mail using Form SS-4.

Due dates for sales tax returns

When you register for a sales tax account, the OTR will let you know your filing frequency. Although deadlines are based on sales volumes, you cannot change your own deadline. The OTR will let you know if your filing frequency has changed. Most businesses must file monthly, while those with lower volumes of sales file quarterly or annually. 
 

 

You can file online through the OTR's website, mail in a paper form, or submit the form and payment in person. If the due date falls on a weekend or holiday, it moves to the next business day.

To mail in sales tax returns:

Government of the District of Columbia
P.O. Box 679
Ben Franklin Station
Washington, D.C. 20044-0679

Write your Federal Employer Identification Number (EIN), tax type (sales and use), and tax period on the check, cashier's check, or money order. 

To pay in person, go to any D.C. branch of the First Union Bank. 

Common DC Sales Tax Problems

Sales tax can be incredibly complicated, especially if you sell multiple types of products, ship products into or out of the area, or deal with other confusing situations. Here are some of the most common sales tax problems businesses are likely to experience:

• Not registering for a sales tax account – significant risk if you're not based in D.C. but have economic nexus or if you sell services that you didn't realize are subject to tax.
• Late or missed filing – if you file late, the OTR will assess a penalty of 5% of the balance due, which can get up to 25%. There's also interest at a rate of 1.5% per month.
• Underpayment or non-payment of tax due – if you file but don't pay some or all of the balance, you'll incur a 5% penalty on the unpaid amount. 
• Not claiming exemptions – if you forget to claim exemptions, you'll end up paying more sales tax than you should.
• Underreporting of the tax due – if you don't report all of your sales and the tax due shown on the return is less than it should be, you'll incur a 20% underreporter penalty if the understatement is more than the greater of 10% of the tax due or $2000. For instance, if you report that you owe $10,000 in sales tax but really owe $15,000, the penalty will be 20% of $5000 or $1000. 
• OTR sales tax audits – undereporting generally gets discovered during audits. Any sales tax return may be selected for an audit at any point.
• Collecting but not remitting sales tax – if you mix sales tax into the general fund and use it for operating expenses, you'll incur penalties for not paying the sales tax. The District may also decide to hold you personally liable for the unpaid tax. 

If you have any of the above problems, consider reaching out to a tax professional. Using TaxCure, you can search for licensed pros who have experience with the OTR and sales tax problems in particular. You can further narrow down your results to see pros who have experience with audits, unpaid taxes, or which ever other issues you're facing. 

What if you don't pay sales tax? OTR enforcement

If you don't pay sales tax, the OTR will:

• Send notices and demands for payment.
• Add interest and penalties to your account. 
• Potentially initiate an audit to ensure you're reporting sales tax correctly. 
• File a tax lien against you. 
• Go after business assets such as bank accounts, inventory, equipment, etc. 
• Assess the sales tax liability against you personally – and then go after your personal assets.
• Revolve your sales tax certificate – effectively forcing you to shut down your business.

To protect yourself, you need a licensed tax professional who has experience with Washington, D.C. tax problems. 

How to Resolve DC Sales Tax Issues

Gotten behind on your sales tax obligations? Missed returns? Forget to register? Or dealing with other problems. Check out this quick cheat sheet to dealing with OTR sales tax problems.

 

For more information on OTR payment plans or offers in compromise, check out the links to those pages. Or reach out to a D.C. tax professional to learn more about your options. 

FAQs

What is the DC sales tax rate?

As of 2025, the rate for most goods and taxable services is 6%, but it's scheduled to increase to 7% in October 2026. Some items are subject to higher rates, ranging from 8 to 19%.

What happens if I don't file DC sales tax returns?

You'll incur penalties, and the OTR may audit your account. Unpaid sales tax can cause the OTR to file tax liens, levy business assets, and potentially hold you personally liable for the unpaid tax. If that happens, they can seize your personal assets.

Do I need to file if I have no sales?

Yes, once you're registered for a sales tax account, you must file every period, even if you have no sales. During those periods, simply note $0 under the sales.

Can DC revoke my business license over sales tax?

Yes, under the Clean Hands mandate, D.C. can revoke business licenses if you owe more than $100 to the District. The OTR also has the right to revoke your sales tax license for unpaid or unfiled sales tax returns.

How do I apply for a payment plan for sales tax debt?

Apply for a payment plan through your OTR online account if you owe less than $100,000 and can pay off the balance within four years. Otherwise, contact the OTR directly or work with a tax professional. 

Can I dispute a sales tax audit from DC OTR?

Yes, if you disagree with the audit results, you have the right to appeal. Make sure you do so by the deadline. There are options for both formal and informal appeals. To be on the safe side, you may want to work with a seasoned tax professional. 

What if you make sales without a sales tax certificate?

Then, you may be subject to a fine of $50 per day. Plus, the OTR may assess the uncollected tax against you as well as interest and penalties.

Get Help With OTR Sales Tax Problems Now

You do not have to navigate sales tax problems on your own – nor should you. To protect your business, your assets, and your finances, contact a tax professional today. Use TaxCure to find a pro who has the experience you need.