home home Get a form or publication home Publications by subject home Tax Topics home The Taxability of Paper Bag Fees The Taxability of Paper Bag Fees

Various Washington cities have passed ordinances that require retail establishments to charge customers a minimum fee for certain carryout bags.

Is the paper bag fee subject to retail sales tax?

Yes. The Department has determined that the charge to customers for paper bags is a retail sale, subject to retail sales tax and the retailing B&O tax. Similarly, the charge for selling reusable shopping bags is subject to retail sales tax and the retailing B&O tax.

The cities of Seattle, Bellingham, and others have recently passed, or are considering, ordinances that prohibit the use of plastic carryout bags. The ordinances reviewed by the Department also require or authorize retail establishments to collect a fee from customers who request paper carryout bags. This fee is not remitted to the city but retained by the retail establishment. The fee is not collected by the retail establishment as an agent for the city and therefore is not exempt of tax.