Sales and Use Taxes in D.C.

April 13, 2006

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The District of Columbia assesses a sales tax on the retail sales price of tangible personal property. So, if your business buys, sells or uses tangible personal property in the District of Columbia, a sales or use tax liability will probably be incurred.

Liability for sales tax. The District of Columbia is a state that assesses a sales tax on sellers for the privilege of doing business in the District of Columbia. What this means for those of you who are retailers is that you're going to be required to collect and pay a 5.75 percent sales tax on all sales you make in the District of Columbia. However, the District requires you to obtain reimbursement for this tax from your customers. So, if you fail to remit the correct amount of taxes on a given transaction, the District can go directly to your customer and collect the right amount of tax. While going after each purchaser to collect the right amount of sales tax may be impracticable, the District clearly intended to reserve that right for itself.

Liability for use tax. In order to avoid losing tax revenues on sales transactions taking place outside the District, the District of Columbia also imposes a use tax. The use tax is assessed against all persons who store, use, or otherwise consume tangible personal property in the District of Columbia that was purchased outside of the District. If the out-of-state seller you purchase property from is a registered retailer in the District of Columbia, you should pay the use tax to the retailer. If the retailer is not registered in the District of Columbia, you should pay the use tax directly to the District.

Sales or use taxes on services. In the District of Columbia, you may provide most services without incurring any sales tax liability for the service. However, this exclusion from tax does not extend to all service providers. If you provide any of the following types of services, you will incur a sales tax:

admissions
lodging for less than 90 days
repairs, alterations, mending or fitting personal property or applying or installing personal property as a repair or replacement
copying, photocopying, addressing, and mailing services
laundering, drycleaning, or pressing
parking, storing, or keeping motor vehicles
telecommunications
deliveries within the District when separately stated
employment services
real property maintenance services (including cleaning, maintenance and repairs)
landscaping services (including landscaping design and architectural services)
data processing services (including entering, processing and maintaining data and information by a third party)
information services (including the furnishing of general or specialized news or current information by printed, mimeographed, or electronic means)

Sales and use taxes on leased property. In general, all leases and rental agreements involving tangible personal property are treated as sales. As a result, leased and rented property is subject to sales tax. However, if your business rents or leases films, records, or any type of sound equipment to theaters and radio and television broadcasting stations, these transactions will be exempt from sales or use tax.

The following discussions address additional sales and use tax issues that many small business owners face.