Income received by insurers that is subject to the premiums tax, is exempt from business and occupation (B&O) tax (RCW 82.04.320). However, the B&O tax exemption does not extend to sales tax or use tax. Insurers are consumers of tangible personal property and retail services, and must pay sales or use tax on the goods and retail services used in Washington. This guide has been prepared to help insurers understand their sales and use tax liability. (Insurance producers, surplus line brokers, and title insurance agents should refer to WAC 458-20-164.)
Key terms used in this publication are defined below.
Business License Application: Most businesses operating in Washington State are required to register. You register by completing a Business License Application. When you submit your application, you will receive a Unified Business Identifier (UBI) number and a Business License to post at your location.
Consumer: A consumer is any person who acquires, possesses or uses tangible personal property, or is the recipient of retail services. The tangible personal property or retail services may be for personal or business activities. RCW 82.04.190
RCW: Revised Code of Washington (Washington statutes or “laws”)
Retail Sales Tax: Retail sales tax is a tax on the purchase of goods and retail services. Generally, sellers are responsible for collecting the tax from the consumer and sending it to DOR. Sales tax is a combined state and local tax.
UBI/Tax Registration Number: The Unified Business Identifier (UBI) is a nine-digit number used to identify registered businesses. The number is assigned when a person completes a Business License Application. In most cases, your UBI number will also be your Department of Revenue (DOR) tax registration number (TRN).
Use Tax: Use tax applies when goods or services are acquired and sales tax is not paid. Either sales or use tax applies to the acquisition of goods or retail services. Like sales tax, use tax is a combined state and local tax. The use tax rate and sales tax rate are the same in any given location.
WAC: Washington Administrative Code (administrative rules)
Terms from the Insurer Holding Company Act (RCW 48.31B.005)
Affiliate: Two people are considered to be affiliated if one person, directly or indirectly, controls or is under common control with, the other.
Control: Control—along with controlling, controlled by, and under common control with—mean having the power, directly or indirectly, to affect the management and policies of a person. This can occur through the ownership of voting securities, by contract (other than a commercial contract for goods or non-management services) or otherwise, unless the power is the result of an official position with or corporate office held by the person.
Control is presumed to exist if a person, directly or indirectly, owns, controls, or can vote, ten percent or more of the voting securities of any other person. This presumption may be disputed by filing a disclaimer as provided in RCW 48.31B.025(11).
Insurance holding company system: An insurance holding company system consists of two or more affiliated persons, one or more of which is an insurer.
Insurer: Insurer includes every person who writes insurance contracts, excluding fraternal benefit societies (RCW 48.01.050). It does not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.
Person: A person is an individual, corporation, partnership, association, joint stock company, trust, unincorporated organization, or any combination of these working together.
Subsidiary: A person’s subsidiary is an affiliate directly or indirectly controlled by that person.
Sales and Use Tax
RCW 48.14.080 clearly states that insurers are subject to sales tax or use tax on tangible personal property, extended warranties, digital goods and codes, and retail services. It says:
- As to insurers, other than title insurers and taxpayers under RCW 48.14.0201, the taxes imposed by this title [the premiums taxes] are in lieu of all other taxes, except as otherwise provided in this section.
- Subsection (1) of this section [the exclusion] does not apply with respect to:
- Taxes on real and tangible personal property;
- Excise taxes on the sale, purchase, use, or possession of (i) real property; (ii) tangible personal property; (iii) extended warranties; (iv) [retail] services, including digital automated services as defined in RCW 82.04.192; and (v) digital goods and digital codes as those terms are defined in RCW 82.04.192.
All insurers and affiliates are responsible for paying either retail sales tax or use tax on goods and retail services used in their businesses. Use tax is due when goods or retail services are acquired without paying sales tax.
Example: If you purchased office supplies in Oregon for use in your Washington business, you owe use tax on those purchases. The use tax rate would be the same as the sales tax rate at the location the products are used.
Below is a list of some of the goods and retail services on which retail sales tax or use tax applies:
- Office furniture and artwork
- Office supplies
- Credit bureau services
- Extended warranties
- Computer hardware
- Computer software
- Reference materials
- Construction, repairs, and pest control services
- Telephone services
- Maintenance contracts
- Extended warranties
Paying Sales and Use Tax
Sales tax is paid directly to the retailer where items are purchased.
Use tax is reported and paid to the Department of Revenue with a regular excise tax return. Alternatively, insurers that are not registered with the Department may pay use tax by selecting one of the methods below:
- If you have an online My account with the Department, log in. From your home page, click on File a return in the left menu, then click on Use tax and follow the directions.
- If you don’t have an online account with the Department, you can set one up by going to dor.wa.gov and clicking on Register now. If you do not have a UBI, select “no” when asked if you want to add a business. Then, from your home page, click on File a return in the left menu, then click on Use tax and follow the directions.
- File a paper consumer use tax return. To print out a return, go to dor.wa.gov and type consumer use tax return into the search box. You may also request a return by calling the Department at 800.647.7706.
Services – Provided by the Department of Revenue
The Department of Revenue offers many services to make reporting your taxes as convenient as possible. The following list contains a sampling of the Department’s services.
Our web site offers a wide variety of information and resources for your business:
- Electronic Filing (E-file): File and pay taxes via the Internet.
- Business Information Update: Notify us online if your business has moved, closed, or changed activities.
- Local Offices: Find telephone numbers, office hours, and directions to a local office near you.
- Tax Rate Lookup Tool (GIS): Find the correct code and tax rate for specific locations.
- Publications and Forms: Find our tax guides, fact sheets, reports, and forms.
- Laws and Rules (Taxpedia): Search our online database for Department of Revenue rules, laws, advisories, administrative decisions, and court cases through Taxpedia.
- Contact Us: Ask a tax question. You can generally expect a response within 10 working days.
Telephone and One-on-one Assistance
If you have questions, call our Telephone Information Center at 1-800-647-7706 or visit your local Revenue office. They can also assist you in registering your businesses or completing your tax return.
For assistance in understanding and accessing your rights in working with the Department of Revenue, call the Taxpayer Advocate at (360) 705-6714.
To receive a written letter ruling on a complex tax question, you must identify your business and include all pertinent facts surrounding the issue. Send your request to:
Taxpayer Information & Education
Department of Revenue
PO Box 47478
Olympia, WA 98504-7478
You will generally receive a response within 10 business days. You may also fax your request to (360) 705-6655 or Contact Us.