This tax guide was written to help direct sellers and multi-level organizations understand their tax liability in the state of Washington. For additional information or answers to any questions about Washington excise taxes, please contact us.
Contents
Are you selling products in the state of Washington through independent distributors?
You should know that each independent distributor selling in the state of Washington is responsible for collecting and paying retail sales tax to the Department of Revenue.
Distributors may also be required to pay Washington's Business and Occupation (B&O) tax, Litter Tax and Regional Transit Authority tax on their sales. B&O tax is also required for commissions on instate activities.
Because of this, the distributors are each required to register with the Washington State Department of Revenue and report and pay tax on their instate activities.
However, direct sellers and multi-level organizations may agree to report taxes on behalf of their distributors, relieving the distributors of their tax obligations. The Department offers two standard tax collection agreements to direct sellers and multi-level organizations:
Collection Agreement for All Taxes
Under this agreement, the direct selling organization assumes responsibility for collecting and paying the Sales, Use, Litter, Regional Transit Authority, and B&O taxes, on behalf of their distributors. See Collection Agreement for All Taxes (pdf).
Collection Agreement without B&O Taxes
Under this agreement, the direct selling organization assumes responsibility for collecting and paying the Sales, Use, Litter, and Regional Transit Authority taxes, on behalf of their distributors.
In this case the direct seller or multi-level organization agrees to disclose to the Department any distributor that has sales or commissions exceeding predetermined thresholds during a calendar year. See Collection Agreement without B&O Taxes (pdf).
Items Purchased for Resale
Direct Sellers/Multilevel Organizations and Distributors who purchase items in Washington for resale must obtain a resale certificate (through 12/31/09) or a reseller permit (effective 01/01/2010) to document the wholesale transaction.
Resale Certificate
A resale certificate is the buyer's written statement that goods are being purchased for resale in the normal course of business without intervening use.
Reseller Permit
Effective January 1, 2010, the resale certificate will be replaced with a reseller permit issued by the Department of Revenue. Reseller permits will be issued to businesses that make wholesale purchases. The permits allow businesses to purchase items or services in Washington for resale without paying retail sales tax.
For More Information
RCW 82.04.423 - Sales by certain out-of-state persons to or through direct seller's representatives
WAC 458-20-246 - Sales to or through a direct seller's representative
ETA 3006 - Direct sellers use of the internet, mail orders, direct calls, etc.