Washington sellers may advertise the price of goods as including sales tax provided that certain conditions are met. Likewise, a seller and buyer may negotiate a lump sum price that both parties know and agree to that includes sales tax. However, the sales tax must be stated separately from the selling price on any sales invoice or other instrument of sale.
A seller may advertise the price as including sales tax or that the seller is paying the sales tax if all of the following conditions are met:
- The words “tax included” must be stated immediately following the advertised price in print size at least half as large as the advertised price print size, unless the advertised price is one in a listed series.
- When advertised prices are listed in a series, the words “tax included” must be placed clearly at the head of the list in the same print size as the list.
- If the price is advertised as including tax, the price listed on any price tag must be shown in the same way.
- All advertised prices and the word “tax included” must be stated in the same medium, whether oral, or visual, and if oral, in substantially the same inflection and volume.
If these conditions (as applicable) are met, then price lists, reader boards, menus, and other price information mediums do not need to reflect the item price and separately show the actual amount of sales tax collected.
However, the law specifically requires that retail sales tax must be stated separately from the selling price on any sales invoices or other instruments of sale, such as contracts, sales slips, or customer billing receipts.
The law provides a conclusive presumption that the price does not include tax if the tax is not stated separately from the selling price on the invoice or other instrument of sale. Failure to comply with this requirement may result in the assessment of additional taxes.
For example, if the seller advertises an item for sale at “$100, tax included,” or if the seller and buyer negotiate a price of $100 that both parties know and agree includes sales tax, the invoice should read:
| Sales tax
(This example assumes that the applicable combined state and local sales tax rate is 8.0%. In order to calculate the selling price, simply divide the total price which is to include the sales tax by 1 plus the applicable rate. In this example, $100.00/1.08 = $92.59.)
In other words, the “selling price” for purposes of calculating the sales tax is $92.59 ($92.59 x .08 = $7.41) so the seller collects and remits $7.41 to the state. The retailing business and occupation (B&O) tax is also based on $92.59 ($92.59 x .00471 = $0.44.) Total tax on the transaction would therefore be $7.85.
If the sales tax is not separately stated from the selling price on the invoice, tax would be due on the full $100. Sales tax would be $8 and retailing B&O tax would be $0.47, for a total of $8.47. Assuming the seller paid $7.85, an additional $0.62 would be due.
Administrative rule, WAC 458-20-124, provides a special rule applicable to Class H liquor license locations. Many class H restaurants elect to sell beverages or food at prices including sales tax in the cocktail lounge area. If this pricing method is used, notification that retail sales tax is included in the price of the beverages or foods must be posted in the lounge area in a manner and location so that customers can see the notice without entering employee work areas. It will be presumed that no retail sales tax has been collected or is included in the gross receipts when a notice is not posted and the customer does not receive a sales slip or sales invoice separately stating the retail sales tax.
The election to include retail sales tax in the selling price in one area of a location does not preclude the restaurant operator from selling beverages or food at a price excluding sales tax in another. For example, an operator of a class H restaurant may elect to include the retail sales tax in the price charged for beverages in the lounge area, while the price charged in the dining area is excludes sales tax
For additional information on tax included in the sales price, see WAC 458-20-107. For information on sales tax associated with sales of meals or drinks, see WAC 458-20-124.