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2017 Washington Tax Legislation Update


The Washington legislature passed some significant tax legislation this year, particularly for out-of-state businesses making or facilitating remote sales. Legislators were also pressed to come up with additional funding to fulfill a mandate from the McCleary decision which found Washington is not adequately funding education at the state level.

The majority of the funds will come from a property tax increase, which raises the levy rates at the state level but places limits on local levy rates. This is expected to raise property taxes in areas with high property values relative to the state average, such as Seattle, Mercer Island and Bellevue.

Other items of note:  

  • Remote sellers, marketplace facilitators and referrers:
    • Businesses without a physical presence in Washington that realize retail sales greater than $10,000 annually to Washington customers ($267,000 total Washington sales for referrers) are subject to one of two options:
      1. Register to collect and remit Washington sales tax or
      2. Comply with the notice and reporting requirements (default election):
        • Remote sellers and marketplace facilitators must provide notice to customers at the time of sale that use tax may be due along with other required information. Referrers have similar requirements when they refer customers.
        • Referrers must provide annual reports to businesses they refer to who may have Washington customers. This includes information on Washington’s notice of reporting requirements and that they may apply.
        • Remote sellers and marketplace facilitators have annual reporting requirements to the DOR including contact information for Washington customers and details of their annual purchases. A separate report must be sent to Washington customers detailing this information and that it will be reported to the DOR.
    • Significant penalties of at least $20,000 annually apply to relevant businesses that do not comply with either the collection or reporting requirements.
    • This is effective January 1, 2018. Additional guidance is expected from the DOR, but affected businesses should consult House Bill 2163 for details and requirements.
  • The economic nexus criteria applies to all businesses with $267,000 or 25% or more of total sales sourced to Washington annually.

The new legislation also:

  • Eliminates the sales tax exemption for bottled water. This is effective August 1, 2017.
  • Extends the Invest in Washington pilot program which allows a deferral of sales tax on two new manufacturing facilities per year. Applications are due prior to construction and must be approved in advance.
  • Provides miscellaneous tax incentives or extensions of incentives related to:
    • agricultural fertilizer and seed distributors
    • solar silicon and semiconductor manufacturers
    • silicon smelters
    • historical auto museums
    • motion picture and film industry
    • martial arts instruction and classes

Additional information on all of the bills that passed will be coming from the DOR. Do you have questions about the effect of legislation on your tax liabilities? Please contact your tax professional at Berntson Porter & Company, PLLC at 425-454-7990. We’re here to help!