The state Department of Revenue will help retailers prepare for a coming change in how local sales tax is coded. The change is designed to reduce the advantage mail-order and online businesses that don't charge sales tax can have over in-state retailers.
The changes don’t take place until July 1, 2008, but the Department wants to give retailers plenty of time to prepare for this shift from origin- to destination-based sourcing. The Department is mailing preliminary information to retailers, convening a business advisory group, and posted details on the Department of Revenue website. Workshops, tutorials and other assistance are being provided.
The sourcing change stems from legislation enacted during the 2007 legislative session that conformed Washington’s sales tax system to the national Streamlined Sales and Use Tax Agreement (SSUTA).
“This bill helps level the playing field between in-state and out-of-state retailers, helps Washington businesses compete with online businesses and allows us to recover sales taxes from out-of-state retailers,” noted Gov. Chris Gregoire.
Twenty-one other states are members of the SSUTA, and Washington has recently joined them. More than 1,000 Internet and mail-order sellers have agreed to voluntarily collect and remit sales tax on sales to customers in member states. Businesses who sell out-of-state can participate, but they are not required to do so.
Businesses currently code local sales tax to the city or unincorporated county from which a product is shipped. Fifteen months from now, they will begin coding local sales tax to the destination of the delivery.
This change only affects shipments from one local jurisdiction to another within Washington. The coding is used to determine which city or county receives the local share of the sales tax. It does not affect shipments to out-of-state customers, nor purchases when customers take possession at the selling location.
The legislation provides businesses grossing less than $500,000 a year with up to $1,000 in tax credits to offset any necessary changes to their accounting and point-of-sale systems; or the free use for two years of a certified service provider, a third party that can handle the coding, and file the sales tax return for businesses.
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