Sales and Use Taxes in Washington

April 13, 2006

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In Washington a tax is imposed on all retail sales, including successive retail sales of the same property. Retail sale includes all sales of tangible personal property except sales for resale, materials becoming a component of property through installation, construction, etc., and material for manufacturing products. Retail sales include the following items:

materials and/or labor rendered in repairing, etc. realty for consumers
building cleaning
automobile towing
lodgings for less than one month
leasing or renting tangible personal property
telephone service
sale of personal, business, or professional services
amusement and recreation businesses
abstract, title insurance, and escrow businesses
credit bureau businesses
automobile parking and storage garage businesses
landscape services
professional sporting events
physical fitness, tanning salon, tattoo parlor, steam bath, escort, and dating services

Sales and use tax rate. The Washington sales and use tax rate is generally 6.5 percent. Retail car rentals are subject to an additional tax of 5.9 percent. Also, various sales tax rates are charged on the retail sale of spirits or strong beer. (In addition, make sure you contact your local governments in Washington because they are allowed to assess a local sales and use tax.)

Tax-exempt items. Washington has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Washington sales tax. You'll want to check and see if you are exempt from the sales tax.

Responsibility for paying sales tax. In Washington the sales tax is imposed on the buyer and is generally collected by the seller from the buyer. The sales tax is a debt from the buyer to the seller until paid. However, the state may collect the sales tax directly from the buyer when the buyer has failed to pay the seller.

Use tax. The use tax supplements the sales tax by taxing the use in the state of every service considered a retail sale and every article of tangible personal property on which sales tax has not been paid. The use tax is imposed on every person who consumes an article of tangible personal property in the state acquired in one of the following ways:

purchased at retail, including isolated sales
acquired by lease, gift, repossession, or bailment
extracted or manufactured by the person using the article, including byproducts
otherwise furnished to a person engaged in a taxable business
any qualified amusement or recreation service

Responsibility for collecting use tax. The use tax is imposed on every person who consumes a taxable article of tangible personal property or uses a taxable service in the state.

Obtaining tax permits in Washington. In Washington every person engaging in any taxable business is required to register with the Department of Revenue. No fee is required. A separate permit is required for each place of business. Registration with the Department of Revenue is not required after June 30, 1996, if you meet all the following requirements:

your value of products, gross proceeds of sales, or gross income of the business, from all business activities subject to the business and occupation tax, is less than $12,000 per year
gross income of the business from all activities subject to the public utility tax is less than $12,000 per year
you're not required to collect or pay to the Department any other tax or fee that the Department is authorized to collect
you're not otherwise required to obtain a license subject to the state's master application procedure

Leases. In Washington, rentals (including rentals of equipment with an operator), leases, and leases with option to purchase are taxable as retail sales. The sales or use tax is collected on the amount of the rental as each payment falls due.

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