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WAC 246 Sales to or through a direct seller's representative.
SOURCE DOCUMENT DETER. NO DATE OF ISSUE DESCRIPTION
       
WAC: 458-20-246 10/07/10 Sales to or through a direct seller's representative The Department is amending WAC 458-20-246 to recognize 2ESSB 6143, (chapter 23, Laws of 2010).  This legislation:

reaffirmed and clarified the legislature’s intent in establishing the direct sellers’ exemption; and
repealed the exemption effective May 1, 2010.
Language has also been added to subsections (2) and (3) to clarify that in the rule “direct seller” refers to the selling company, and “direct seller’s representative” refers to the person who purchases consumer products from the direct seller and resells the products, or sells for or solicits sales on behalf of the direct seller.

  458-20-246   11/30/1984 Sales to or through a direct seller's representative.Updated 12/31/99.
         
       
RCW: 82.04.423   1983 Exemptions -- Sales by certain out-of-state persons to or through direct seller's representatives.
         
       
ETA: 3006.2010 08/05/2010 Direct seller's Use of the Internet, Mail Orders, Direct Calls, etc. RCW 82.04.423 provides a business and occupation (B&O) tax exemption for wholesale and retail sales by certain out-of-state businesses that make sales in this state exclusively to or through a “direct seller’s representative.”  This exemption is often referred to as the “direct seller’s exemption” and the person claiming the exemption is referred to as the “direct seller.” 

ETA 3006 discusses the use of the internet, mail orders, direct calls, and other methods used by direct sellers to make sales directly to customers in this state.  The ETA explains when these methods satisfy or fail to satisfy RCW 82.04.423’s requirement that the direct seller make “sales in this state exclusively to or through a direct seller’s representative.”

ETA 3006 has been updated to recognize that the exemption provided by RCW 82.04.423 expired May 1, 2010.  See Chapter 23, Laws of 2010, 1st Special Session (2ESSB 6143, Part IV).
  3006.2009 2/2/09 Direct Seller’s Use of the Internet, Mail Orders, Direct Calls, etc.
  2041.04.246 7/1/08 Direct Seller's Use of the Internet, Mail Orders, Direct Calls, etc. Revised 2/2/09 See ETA 3006.2009
         
         
       
INDUSTRY GUIDES:     Direct Sellers/Multilevel Organizations Guide
         
       
SPECIAL NOTICES:      
Subject Title Reference:      
Direct Sellers   02/01/2000 Special Notice for Direct Sellers
Direct Sellers 04/23/10 Direct Seller's B&O Tax Exemption Repealed
       
DIRECTIVE: NONE      
         
       
RPM: NONE      
         
       
WTD: 3 WTD 353 87-232   B&O TAX -- EXEMPTION -- DIRECT SELLERS' REPRESENTATIVE -- EXCLUSIVITY OF SALES. A person selling both by direct mail and by direct seller's representatives is entitled to the exemption provided by RCW 82.04.423 if the direct mail sales are disassociated from any local activity.
  3 WTD 357 87-233   B&O TAX -- EXEMPTION -- DIRECT SELLER'S REPRESENTATIVE -- RELATIONSHIP TO SELLER. The direct seller's representative exemption is not lost if the direct seller's representative is owned by some of the owners of the seller. The seller and the direct seller's representative were separate corporations and therefore separate persons under Washington's excise tax system even though they shared some ownership in common.
  3 WTD 357 87-233   B&O TAX -- EXEMPTION -- DIRECT SELLER'S REPRESENTATIVE -- EXCLUSIVITY OF SALES. The direct seller's representative exemption is not lost if sales are made to Washington customers other than through direct seller's representatives if those sales are constitutionally exempt from tax.
  5 WTD 73 88-29   B&O TAX -- EXEMPTION -- SALES MADE TO OR THROUGH DIRECT SELLER'S REPRESENTATIVE -- CONSUMER PRODUCT -- AUTOMOTIVE PRODUCTS -- PERSONAL USE AND ENJOYMENT. The B&O tax does not apply to an out-of-state person in respect to sales made to or through a direct seller's representative of "consumer products." Where taxpayer sold automotive products (aluminum wheels, sport grips, running boards, seat belts), they are held to be within Rule 246's definition of "consumer products" because they are sold for personal use or enjoyment. A "consumer product" is not limited to those products used in the home or to be worn by the user.
  9 WTD 286-17 90-148   B&O TAX -- EXEMPTION -- DIRECT SELLER'S REPRESENTATIVE -- INTENT. The B&O tax exemption granted in Rule 246 was enacted by the legislature to avoid the situation in which the activities of independent direct seller's representatives was attributed to an out-of-state manufacturer or wholesaler to find nexus in this state.
  9 WTD 286-17 90-148   B&O TAX -- EXEMPTION -- DIRECT SELLER'S REPRESENTATIVE -- OTHER ACTIVITIES. The exemption granted in Rule 246 is not lost where a taxpayer conducts other activities in this state, so long as the activities in this state do not generate sales to consumers.
  10 WTD 381 91-011   SERVICE B&O TAX -- SALES COMMISSIONS -- SELLING AGENT -- DIRECT SELLER'S REPRESENTATIVE. Merely because Rule 246 explains that a "direct seller's representative" is subject to the Service B&O tax on commissions earned does not mean if a taxpayer is a selling agent who does not qualify as a direct seller's representative under the rule's definition that the taxpayer's sales commissions are exempt from the Service B&O tax. The taxpayer's earned sales commissions are Service B&O taxable under Rule 159.Accord:8 WTD 7 (1989), Det. 89-286.
  20 WTD 1 99-223   COMMISSION INCOME – MULTI-LEVEL MARKETERS.All commission income of a multi-level marketer must be included in its gross income for B&O tax purposes.
  22 WTD 202 01-9915   B&O TAX – DISCRIMINATION – EXEMPTION FOR DIRECT SELLERS.Washington’s tax structure does not discriminate against interstate commerce.If anything, a potential tax benefit is provided to the out-of-state firm using a direct sellers representative, since no equivalent is granted to a Washington-based seller of goods in the home or non-permanent retail locations.
  24 WTD 242 04-0252   DIRECT SELLER'S REPRESENTATIVE -- PERMANENT RETAIL ESTABLISHMENT.In order for a direct seller who sells to wholesalers to qualify for the direct seller's exemption, neither the buyer, which is the direct seller's representative, nor any other person may resell the direct seller's products in a permanent retail establishment.Regardless of to whom the representative sells, the retail sale of the product must take place either in the buyer's home or in a location that is not a permanent retail establishment for the direct seller to qualify for the exemption.
  25 WTD 48 05-0174   B&O TAX – DIRECT SELLER’S REPRESENTATIVE EXEMPTION.The requirements of the direct seller’s exemption are not met where the seller makes sales in Washington both through a representative and directly to customers, and the seller uses the representative to sell both consumer and non-consumer goods.
  25 WTD 120 05-0145   B&O TAX -- EXEMPTION -- DIRECT SELLERS -- REPRESENTATIVES -- METHOD OF PAYMENT.For direct sellers to qualify for exemption, RCW 82.04.423 requires their representatives to work on a “buy-sell” or “deposit-commission” basis.Transactions are on a "deposit-commission basis" if the sales representatives are entitled to retain part or all of the purchase deposits paid in connection with sales transactions.Direct sellers do not qualify for exemption when they accept orders and payments directly from buyers and then mail commissions to their representatives.
  25 WTD 120 05-0145   B&O TAX -- EXEMPTION -- DIRECT SELLERS -- PLACE OF SALE.When a direct seller sells through a direct representative who is selling at wholesale, the seller can qualify for the direct seller's exemption only if its products are never sold in a permanent retail establishment.The direct seller exemption is based on the notion of an itinerant sales force, and not the use of established retail places of business where consumers might go to purchase or order the direct seller’s goods.When ultimate purchasers may go to and deal with a permanent retail establishment to choose and purchase a product, the fact that ultimate delivery and installation take place in the home does not qualify the sale for the exemption.
  25 WTD 120 05-0145   B&O TAX -- EXEMPTION -- DIRECT SELLERS -- "CONSUMER PRODUCT."Custom made-to-order cabinets to be installed in a house are not “consumer products.”They are major construction components destined to become a permanent part of real estate before being used.
         
       
       
OTHER