Sales Tax
You should pay sales tax when you purchase consumable goods and services. However, if you purchase goods from a private party that is not in business or you purchase goods from out-of-state vendors (by subscription, mail order, Internet, etc.), you may not be charged sales tax. However, you will owe use tax on such goods used in Washington.
Purchases of goods (and some limited services) for resale (without intervening use) are not subject to sales tax if a properly completed resale certificate (pdf) is provided to the vendor.
Use Tax
Washington's use tax is a companion to the sales tax. The tax is due when goods are acquired for use (i.e., not for resale) in Washington without payment of the state's sales tax.
Use tax rates are the same as sales tax rates. Thus, rates vary depending on your location. For local use tax purposes, the location of first use of the property in Washington determines which rate applies. A business reporting use tax as a consumer will generally use its location to determine which rate applies.
When a business both consumes and sells products and is not able to determine at the time of purchase whether the product will be consumed or sold, the business should determine what is the primary nature of the product.
Purchases for Dual Use
Some businesses make bulk purchases of certain products where some of the product will be used or consumed by the business and the balance will be sold directly to the customer. Typically, the business does not know what portion of the product will be used as a consumer and what portion will be resold. Thus, the business is often unsure whether to pay retail sales tax on the purchase or provide a resale certificate (pdf) to the vendor, and how to reconcile the proper taxability.
If the business primarily consumes the product in question, the business should not give a resale certificate to the vendor and should pay retail sales tax.
If the business primarily resells the product, the business may issue a resale certificate for the entire purchase.
Deferred Sales Tax Liability
When the business gives a resale certificate for all purchases and thereafter consumes some of the product purchased, the business must set up the value of the article used in his or her books and records and remit to the Department of Revenue the applicable deferred sales tax. Deferred sales tax is the tax the business would have paid on the product had it not been purchased using a resale certificate. The deferred sales tax liability should be reported under the Use Tax classification on the business's tax return.
Tax Paid at Source Deduction
When the business has paid tax on a purchased product, and subsequently resells some of the product, the business must collect the retail sales tax from its customer. When reporting these sales on the excise tax return, the business can claim a deduction on the tax return for the taxable amount that the business paid.
Credit for Sales or Use Tax Paid in Another State
The amount of use tax legitimately due and paid to another state before the property was first used in Washington may be deducted from the amount of use tax due in Washington. You must have documentation of the tax paid in another state. |