Destination-based sales tax means that if a retailer delivers or ships merchandise to a buyer in Washington, the sales tax is collected based on the rate at the location where the buyer receives or takes possession of the merchandise. This only affects shipments and deliveries to locations within Washington State.
If you do not ship or deliver, nothing changes about the way you handle sales tax.
For example, if a buyer receives merchandise at your retail business location, sales tax continues to be based on your retail location where the customer receives the goods – the “origin” of the sale.
Examples of Destination-based Sales Tax
- A resident of Olympia orders a pizza from a restaurant located in Tumwater. The store delivers the pizza to the customer in Olympia. Sales tax is based on the customer’s location in Olympia.
- A Darrington resident purchases a couch at a furniture store in Bothell and requests that the merchant deliver the couch to the customer’s home in Darrington. Sales tax is based on the customer’s location in Darrington.
- A Vancouver resident purchases a computer online from a merchant in Seattle. The computer is a gift for a student attending college in Pullman. The buyer directs the seller to ship the computer to the student’s address in Pullman. The sale is based on the location of the student in Pullman. The merchant should collect sales tax based on the “ship to” address in Pullman.
- A Spokane Valley resident purchases a mattress at a store in Spokane. The merchant delivers the mattress from its warehouse located in Deer Park to the customer’s home in Spokane Valley. Sales tax is based on the customer’s location in Spokane Valley.
Sales tax on rentals examples
- Olympia Construction Co. rents a pressure washer from Chehalis Rental Co. The rental period is one week. Olympia Construction picks up the equipment in Chehalis and delivers it to their job site in Yelm. Sales tax is based on the seller’s location in Chehalis.
- If Chehalis Rental Co. delivers the pressure washer directly to the job site in Yelm, sales tax is based on the location of the job site in Yelm.
- Washington’s tax does not apply if Chehalis Rental Co. delivers the pressure washer to the customer at a location outside the state of Washington.
- D&R Construction, located in Olympia, rents a backhoe from Construction Rentals, located in Tacoma. The rental period is 45 days, for a lump sum rental payment of $3,000. D&R picks up the equipment in Tacoma and delivers it to a job site in DuPont. Sales tax on the rental payment is based on the seller’s location in Tacoma.
The following scenarios are excluded from destination-based sales tax:
- Retail services
- Sales of motor vehicles, trailers, semi-trailers, aircraft, and watercraft. Sales tax is based on the seller’s location even if the seller delivers the items to customers.
- Automobile towing