This tax guide was written to help school districts understand their tax liability in the state of Washington. For additional information or answers to any questions about Washington excise taxes, please
contact us.
Table of Contents
Overview
School districts are considered municipal corporations and are required to collect and remit:
Purchases/Sales for Resale
School districts are not eligible to make purchases using a resale certificate.
Taxable and Nontaxable Purchases
School districts must pay retail sales tax or use tax on the following goods and services:
- Catering services
- Construction services
- Copying services
- Equipment, including used and surplus
- Landscape maintenance and horticultural services
- Lease or rental of tangible personal property
- Lodging
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- Magazine subscriptions
- Musical instruments
- Office supplies
- Portable classrooms
- Prewritten software, including updates and patches
- School books
- Telephone services
- The use of a recreational facility when the owner controls the facility
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The following goods and services are nontaxable:
- Computer training
- College testing services
- Chemical toilet services
- Internet access
- Janitorial services
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- A license to use a recreational facility when the school district controls the facility
- Newspapers
- Piano tuning services
- Royalty payments for use of music, scripts, etc.
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Food Services
When food service is prepared offsite and sold to the school district, retail sales tax applies to the purchase of meals.
When a food service contractor prepares meals at the school facility, the taxability depends on the contract:
- Contracts for the sale of meals to the school district are taxable.
- Contracts for management of a food service program are not taxable.
Sales of meals/beverages to students, faculty, and staff by the school district are nontaxable.
Reimbursements
When a teacher purchases materials in Washington, pays retail sales
tax, and is reimbursed by the school district, no additional
sales tax or use tax is due. The school district must
maintain a copy of the teacher’s receipt to document that retail
sales tax was paid.
When a teacher purchases materials outside the state and is
reimbursed by the school district, the school district is subject to use
tax on the value of the materials. The school district can take a credit
for any sales tax that was paid to the other state on the purchase of the
materials.
Working with Vendors
Some Washington registered vendors may not initially collect retail
sales tax when selling to schools because they may think the school is
exempt. If this occurs, the school should notify the vendor that sales
tax applies and request that a new invoice be issued.
If the vendor does not issue a new invoice or collect retail sales
tax, the school should pay “deferred sales tax” directly to the state.
Deferred sales tax is reported and calculated on the use tax line of the
tax return. To determine the local sales tax rate, click here.
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Working with Contractors
When a school district hires a contractor,
the school district must obtain and keep a record of the contractor’s UBI/TAX Registration
Number. Failure to do so may result in a penalty of up to $250.
Donated Goods
School districts are not subject to use tax on donated items. Donors are also exempt from paying use tax on items donated to school
districts when there has been no intervening use of the items on the
part of the donor.
Donated recreational services, such as rounds of golf, are also exempt
from use tax.
Sales between Schools within a School District
Charges between schools within
a school district or other budgetary units, do not constitute bona fide
sales and are not taxable.
Nonenterprise Activities
Nonenterprise activities are activities not financed and operated in a manner similar to a private business. Activities include all sales of goods and services that are exclusively governmental in nature, and related to providing public education.
Nonenterprise activities also include activities funded by less than 50% of user fees or charges to consumers.
For example, the cost of maintaining recreational facilities that
a school may lease to organizations or groups is rarely, if ever, funded more than 50 percent with amounts charged to those groups or organizations.
To determine the percentage, user fees or charges to consumers must be measured against the total costs attributable to providing the activity, including overhead.
This review should be performed on the fiscal year basis used by the school district in maintaining its books and records.
Application of Tax
- Nonenterprise activities are exempt from B&O tax.
- Retail sales tax must be collected on nonenterprise
activities defined as retail sales.
Examples of Retail Nonenterprise Activities
(Exempt from B&O Tax, Subject to RST):
- charges to a group, organization, or the public for use of recreational facilities, when the school controls the facility.
- parking fees.
Examples of Nonretail, Nonenterprise Activities (Exempt from B&O tax, Exempt from RST):
- charges for academic transcripts
- charges for admission for school events
- charges to a group, organization, or the public for use of recreational facilities when the school does not control the facility
- sales of meals/beverages to students, faculty, and staff
- shop & lab fees
Enterprise Activities
Enterprise activities are activities financed and operated in a
manner similar to a private business and includes
activities in competition with private businesses. They are
subject to tax in the same manner as a private business.
Activities include sales of goods and services that
are not exclusively governmental and are not directly related to providing public education.
The activity must also be funded by over 50% of user fees
to be considered an enterprise activity. See nonenterprise
activities for how to determine the percentage.
Application of Tax
- Income received from enterprise activities is subject to the B&O
tax under the appropriate classification.
- Retail sales tax must be collected on retail sales.
Examples of Retail Enterprise Activities
(Subject to Retailing B&O Tax, Subject to RST):
- Sales of meals to the public or to guests of students.
- Sales of tangible personal property, such as surplus equipment. (Excluding student store sales)
Examples of Nonretail Enterprise Activities
(Subject to Service and Other Activities B&O Tax, Exempt from RST):
- Commission income from allowing coin-operated machines on the school premises (telephones, candy, soda pop, etc.)
- Income from special event (nonschool) admission fees.
- Rental income from renting conference facilities. (If funded over 50 percent with user fees)
Student Stores
The school is considered as the consumer of all goods that pass through a student
store. Therefore, the school is not eligible to use a resale certificate and must pay retail sales tax at the time of purchase:
- Retail sales tax must be paid on all taxable goods sold at student stores, such
as student supplies, soft drinks, etc.
- Retail sales tax does not
apply to the purchase of candy, bottled water, cookies, and other sales
tax exempt food products.
Student store activities are not taxable and retail sales tax is not collected from students.
Student Photographs, Class Rings, and Yearbooks
When the school is responsible for making payment
to the vendor, it must pay sales tax. This is true regardless
of how and when funds are collected from students.
As in the case
of student stores, the school is not considered to be purchasing
then reselling the items, so the school should not collect sales tax from students.
ASB Fundraising Activities
Unlike school districts, Associated Student Body (ASB) organizations
are eligible for a B&O tax and retail sales tax exemption.
Tax exempt activities include soliciting contributions of and selling goods or services. For example:
- Auctions
- Bake sales
- Car wash receipts
- Concession sales
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- Raffles
- Meals
- Sales of “booster” items
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Purchases for Fundraising Activities
ASB organizations may purchase the goods they will resell without paying retail sales tax by providing the
vendor with a resale certificate (pdf). A resale certificate
requires the purchaser’s UBI Tax Registration number. However,
most ASB organizations are not required to be registered with the
Department of Revenue. Therefore, in place of the UBI Tax
Registration number, the ASB organization can write “Nonprofit
fundraiser” on the resale certificate.
Sales in Conjunction with a For Profit Business:
Subject to Retail Sales Tax
ASB organizations may make sales on behalf of for profit businesses
to raise funds while providing the opportunity for persons to purchase
goods at a discount. The
ASB solicits the sales, collects the money, retains a commission or
portion of the amount collected, and sends in the order to the business
with the balance of the amount collected. While the ASB qualifies for
the fundraising exemption, the for profit business does not.
Under this circumstance the ASB must:
- make sure that the for profit business is registered to collect sales tax in Washington.
- collect retail sales tax on the gross amount of the sale.
- turn over the collected sales tax to the business for reporting to the Department of Revenue.
The commission amount retained or received by the ASB is exempt
from tax.