Washington Sales Tax Guide
Washington sales tax rules are complex. Here’s what you should know about them and when to seek help from a professional.
It is important to know whether you need to collect Washington sales tax, and if you do, how — and when — to file your taxes and make payments. You may need to collect Washington sales tax even if you have never stepped foot in the state. Additionally, Washington tax law requires you to take specific steps before you can even begin collecting sales tax.
Understanding state laws can help you better run a successful business. But failing to follow Washington’s tax regulations can lead to costly penalties or even forced business closure. Here’s everything you need to know about staying compliant with sales tax regulations in Washington.
Washington Sales and Use Tax
Sales tax is applied to all retail sales of tangible goods in Washington State, with very limited exceptions. For instance, postage stamps and most groceries aren't subject to sales tax. Retailers collect the tax from buyers, then file sales tax returns and send the funds to the state.
When the full Washington sales tax rate has not been paid on a taxable good or service, the buyer may need to pay a Washington use tax. You may encounter Washington use tax if purchases are made in another state with no sales tax or a lower sales tax rate than Washington’s.
For example, if you make a purchase in Oregon (where there is no sales tax), but you store or use the goods in Washington, you would need to pay a use tax equal to the Washington sales tax rate.
Washington Sales Tax Rate
The Washington state sales tax rate is 6.5%, but that doesn’t mean retailers only collect a 6.5% tax on their sales. Local sales tax rates may also apply.
In fact, some areas charge as much as 10.6% when taking into account state and local sales taxes. To sell taxable goods or services in Washington, you need to know the local sales tax rate in every tax jurisdiction you do business in.
How to find local Washington Sales Tax Rates
Since you might do business in several Washington tax jurisdictions, having an easy way to find local Washington sales tax rates is essential. Thankfully, the Washington Department of Revenue (DOR) has a handy local sales tax rate lookup tool that will compute the sales tax you need to collect. You can even check the sales tax rate for a specific address, which is handy if you sell goods or services online.
Register to Collect Sales Tax in Washington
You will need to apply for a Washington business license (Form 700 028) if you need to collect sales tax in Washington. You can find a business license application on the Washington DOR website.
- Washington typically processes online applications within ten business days.
- Paper applications may take up to three weeks to process.
- There is a $50 fee to apply for a business license in the state of Washington.
You cannot collect any sales tax until you receive your Washington business license. Washington will provide you with a Unified Business Identifier (UBI) number, which you will use for tax purposes (such as filing your sales and use tax returns).
There may be additional steps you need to take after your business license has been processed. Requirements vary depending on the type of business you conduct. Cities and counties in Washington may have separate licensing requirements.
What Triggers Nexus in Washington?
You do not necessarily need to have a physical business or live in Washington to trigger a sales tax nexus. The word nexus means "connection" and if you only have to collect sales tax in a state if you have nexus with that state.
Of course, if you do have a physical presence in Washington, a nexus is automatically triggered. If any of the below apply, you also have nexus in Washington State.
- You have more than $100,000 in combined gross receipts sourced or attributed to Washington State.
- You are organized or commercially domiciled in Washington.
This means that if you are a remote seller that meets any of the above criteria, you need to register to collect Washington sales tax. Tax-exempt goods and services must be included when determining your gross receipts.
To give you an example, imagine that you have an online store selling gifts, and people living in Washington State buy $50,000 worth of products from you. In this case, you don't have nexus, and you don't have to collect or pay Washington sales tax. Now, imagine that the next year, you sell $101,000 in taxable goods to Washington residents. Now, you are over the threshold and must collect, file, and remit sales tax.
Who is Required to Collect Sales Taxes?
Any individual who triggers a sales tax nexus in Washington needs to collect sales tax on taxable goods. You can't collect sales tax until you receive your business license from the state. The sales tax you collect must be paid to the state of Washington, so it’s wise to keep sales taxes separate from other business revenue.
How to Report Sales Tax in Washington State
You will report your retail sales on your Washington State excise tax return. This return is for business income as well as sales and use tax.
Sales tax returns can be tricky, so you may find it beneficial to consult with a tax professional that has experience working with Washington State excise tax returns. Failing to report your sales tax properly can result in expensive penalties. If the penalties go unpaid, you may even lose your Washington business license.
On the other hand, mistakes can also cause you to overpay. A tax pro can help you ensure that you're tracking your sales tax and filing the forms correctly.
How to Pay Sales Tax in WA
Most businesses in Washington need to file and pay taxes online. However, some can get an exemption and file through the mail. The Washington DOR accepts the following payment methods.
- EFT Debit: The Washington DOR withdraws specific funds from your bank account (no fee)
- EFT Credit: Your bank or financial institution sends specific funds to the Washington DOR (fees may apply)
- E-Check: Similar to EFT debit but requires taxpayers to enter financial information for every transaction
- Credit Card: The Washington DOR accepts American Express, Discover, Master Card, and Visa (convenience fee applies)
There are certain circumstances where you may pay your Washington sales tax in other ways. It is possible to pay your sales taxes via a paper check or cash, but you must request an e-file/e-pay requirement waiver to make a payment this way.
Payments may be made over the phone only if you receive a bill from the Washington DOR for an outstanding excise tax debt. The department has special requirements for cash payments that exceed $20,000.
Can You Pay Sales Tax With a Payment Plan?
If you have trouble paying your Washington State sales tax bill, you may qualify for a self-service payment plan. If you qualify for a payment plan, you will have between three and nine months to pay your tax bill in full, but interest will continue accumulating, so it is not the best choice for everyone.
The rules for payment plans in Washington State can be complicated, and the DOR has specific criteria that must be met to enroll in a self-service payment plan. Qualifying criteria includes the following.
- Must have received a Notice of Balance Due.
- Including penalties and interest, your total tax due must be more than $100 but less than $100,000.
- Must have the ability to schedule ACH debit payments.
- Must not have had an active payment plan within the last 12 months.
- Must not have penalties related to tax evasion or avoidance.
- Must not have any active DOR tax warrants or liens.
The above is not an exhaustive list. You may need to meet other criteria to qualify for a Washington State payment plan. Additionally, you must follow payment plan guidelines or risk defaulting on your payment plan. Failure to follow the below guidelines could cause Washington DOR collection efforts to resume.
- Make a payment within 30 days of setting up your payment plan.
- File future returns by their regular due dates.
- Make all future tax payments within five days.
Sales Tax Deadline in Washington
Washington sales tax filing frequency requirements vary. When you receive your Washington business license, you will also receive a packet that details your specific filing frequency requirement. How often you need to file depends on your estimated Washington State annual revenue.
- If you are a monthly filer, your tax return is due by the 25th of every month.
- If you are a quarterly filer, you must file by the last day of the month following the end of the quarter.
- Annual filers must file taxes by April 15 for the prior year’s tax return.
If your regular filing due date falls on a weekend or federal holiday, you have until the next business day to submit your tax return. All people conducting business in Washington who collect retail sales tax must file sales tax returns.
Washington State Tax Extension
If you cannot file your Washington tax return by the due date, you may be granted a tax extension. Tax extensions will not be approved if requested after your filing due date.
Most tax extensions are for 30 days or less, and Washington will only grant them in certain situations. You may get approved for an extension if any of the following scenarios apply.
- A natural disaster impacted your ability to file.
- You had a medical emergency.
- You experienced technical difficulties that prevented timely tax filing.
- Your business records were lost or stolen.
Penalties for Filing or Paying Late
Filing your sales tax return late comes with hefty penalties. Taxpayers will face a 9% penalty ($5 minimum) for late payments, but larger penalties may apply, including the following.
- 19% penalty after the last day of the month a return was due.
- 29% penalty after the last day of the second month that a return was due.
Some taxpayers may have late tax filing penalties waived. If you fail to file your Washington tax return due to reasons beyond your control, Washington may waive late penalties. Simply not having the money or not knowing when your tax return is due are not valid reasons for a penalty waiver, according to the department’s website.
You might also avoid a late filing penalty if you filed all Washington state tax returns and made all tax payments for 24 consecutive months prior to your latest tax return due date, regardless of your filing frequency requirement.
Interest Rate for Late Payments in WA
If you fail to pay your full tax balance, you could face late payment penalties. These are in addition to Washington's late filing penalties. The interest rates for late tax payments in Washington vary each year. For 2023, the late payment interest penalty is 3%.
Are Discounts Taxable in Washington State?
Offering discounts is a good way to attract more customers or clients, but offering discounts can make filing your Washington excise tax return a little more complicated. For true discounts (discounts offered by you and not the manufacturer), you won’t need to collect sales taxes on the discounted amounts. You will only charge and collect Washington sales tax on the amount your customer actually pays.
However, you must include the full price (price before the discount) in the gross amount column of your excise tax return. You will also need to report the discounted amount, but this amount goes in the deductions column of your tax return.
Individual reporting and collection requirements may vary depending on the type of discount you give. Consulting with a local CPA or tax attorney can ensure you don’t make mistakes that could cost you later.
Does Washington Audit Sales Taxes?
Washington State audits sales tax returns. In fact, the Washington DOR’s website states that it does so “routinely.” So, you’ll want to make sure you are prepared for an audit in case one happens to you. Retail sales tax reporting is one of the major categories the department looks at during an audit.
If your Washington States sales tax return is pulled for an audit, you will need to show documented proof of sales and use taxes, both paid and collected. The auditor may look at your returns for the four prior years in addition to your most current tax return. Having a Washington tax attorney represent you during a tax audit can save you a lot of stress — and possibly a lot of money, too.
What Happens if You Don’t Collect Sales Tax in WA
Not collecting and paying Washington sales when required can result in a tax evasion — or even tax fraud — conviction. These are serious offenses that may come with financial and/or criminal penalties.
Information from various lawyers’ websites in Washington state that you may face a misdemeanor or felony charge if you fail to accurately report Washington sales taxes. You may also have your Washington business license revoked if you don’t collect the required sales taxes. If your business license is revoked, you will no longer have the ability to conduct business in the state. So, if you have determined you have sales tax nexus in Washington, you should follow the state’s tax guidelines very carefully.
Voluntary Disclosure Agreement
You may have already started doing business in Washington State without knowing all the tax laws. In that case, you don’t need to panic. Washington offers voluntary disclosure agreements. These agreements can help unregistered businesses comply with Washington tax laws going forward, even when the business hasn’t filed excise tax returns for the past four years. If you are approved for a voluntary disclosure agreement, you can even have penalties waived.
Taking advantage of Washington’s voluntary disclosure agreement can save you a lot of money. That’s because you won’t be able to apply for the program if your non-compliant business activities are discovered by the state first. Here’s what could happen if Washington State discovers your failure to comply.
- You could face a 5% penalty for underpaid tax.
- You could face a 5% penalty for not having a Washington business license.
- You could face a 29% late payment of a return penalty.
- Washington could assess tax non-compliance penalties for the past seven years (compared to four years with a voluntary disclosure agreement).
Not every business is eligible for a VDA in Washington. Businesses already registered in Washington State are not eligible. If your business was registered in Washington at any time, you would not qualify. If Washington State has ever contacted you regarding tax compliance (i.e., the state already discovered your tax non-compliance), your application will not be approved.
You can apply for a Washington voluntary disclosure agreement online. If the department approves your application, it will send you a formal agreement that must be signed and returned within 30 days. The 30-day window starts on the date you filed your application, not the date you were approved. Failure to sign and return the document in this timeframe will result in a denial of your application.
Get Help with Washington Sales Tax
Whether you need to determine if you have nexus in Washington State, need help filing your Washington State tax return, or are facing a sales tax audit in Washington, working with a tax professional can make the process much easier. Due to the consequences of failing to comply with Washington sales tax laws, hiring a professional can be much less expensive than going it alone.
It’s easy to find qualified Washington State tax professionals on TaxCure. You can filter by state agency, type of tax problem, and your zip code to find profiles for Washington tax attorneys, certified public accountants (CPAs), and enrolled agents (EAs).