Fireworks sales

This tax topic discusses fireworks sales from for-profit businesses and nonprofit organizations, and discusses fireworks display businesses.

For-profit businesses selling fireworks

Can a business sell fireworks as an independent retailer?

Yes. A business is a fireworks retailer if they are selling fireworks to the public. The business is required to collect sales tax from their customer. The sales tax rate is based on the location of the fireworks store. Additionally, the gross income the business receives is subject to business and occupation (B&O) tax under the Retailing classification.

How can you determine if the business is a fireworks retailer?

To be considered a fireworks retailer, the business must meet all of the following criteria:

• The business and the fireworks distributor enter into a purchase and sale agreement, where title to the goods is transferred to the businesses at or before delivery.
• The business is responsible for paying for the goods based on the type and quantity of goods received (the distributor may agree to repurchase unsold goods).
• All sales are conducted by the business who has the authority and control to sell the products, rather than the distributor.
• The business has control over the profits received from the sales.

Reseller Permit

Businesses that purchase fireworks to sell to their customers can provide the fireworks distributor with a reseller permit. The reseller permit allows the business to purchase the fireworks without paying sales tax.

Can a business act as an agent on behalf of the fireworks distributor?

Yes. A business may act as a sales agent of the fireworks distributor. An agent on behalf of the fireworks distributor will receive and sell the distributor’s fireworks to the public on behalf of the distributor. An agent will not meet the requirements to qualify as a retailer above. In this case, the business will receive a commission from the distributor as payment for selling the products.

How are the commissions taxed?

The commission income the business receives as an agent is subject to B&O tax under the Service and Other Activities classification.

As an agent of the distributor, who collects sales tax from the customer?

The business acting as the agent is responsible for collecting sales tax from their customer on all the products sold. The business remits the sales tax to the Department of Revenue when filing their tax returns. They should not turn it over to the distributor.  

Nonprofit fireworks sales

What is a nonprofit organization?

An organization may be considered a nonprofit organization if any of the following conditions are met:

• Formed under the Washington Nonprofit Corporation Act.
• Qualifies as a nonprofit for federal tax purposes.
• Is a church, charity, or benevolent organization.

For more information, refer to our Nonprofit organizations guide.

Can a nonprofit organization sell fireworks as an independent retailer?

Yes. A nonprofit organization may act as an independent fireworks retailer. The nonprofit will purchase products from the fireworks distributor, and sell these products to the public.

Does the fireworks distributor owe B&O?

The distributor is liable for business and occupation (B&O) tax under the wholesaling classification on the gross amount of its sales to the nonprofit.

Does the nonprofit owe B&O or sales tax?

The nonprofit’s sales may qualify for the fundraising exemption under the B&O and retail sales tax. For more information on the fundraising exemption for nonprofit organizations, see our Nonprofit organizations industry guide.

How can you determine if a nonprofit organization is acting as a fireworks retailer?

The Department of Revenue will assume the nonprofit organization is acting as a retailer if it meets all the criteria listed in the “How can you determine if the business is a fireworks retailer section.

Providing a reseller permit to the fireworks distributor

Nonprofit organizations purchasing fireworks to sell to their customers, must provide the distributor with a reseller permit. Nonprofit organizations not required to register with the department should complete a Streamlined Sales Tax Agreement. Qualified nonprofit organizations that are reselling fireworks at a qualified fundraising event, will check box G on this form.

For more information on reseller permits, see WAC 458- 20-102.

Can a nonprofit organization act as a sales agent for the fireworks distributors?

Yes. A nonprofit organization may act as a sales agent of a distributor. The nonprofit will receive and sell the distributor’s products to the public. In this case, the nonprofit organization will receive a commission as payment for selling the products.

Does the distributor owe B&O and sales tax?

In this situation, because the distributor is the actual retailer, not the nonprofit, the sales do not qualify for the fundraising exemptions. The distributor must pay B&O tax on the full amount of gross sales by the nonprofit, without deducting the commission payment.

Does the nonprofit owe B&O, sales tax or both?

The nonprofit must collect sales tax on all their fireworks sales, and remit the sales tax to the Department of Revenue. The commission the nonprofit receives will generally qualify for the fundraising exemption. No B&O tax will be due, assuming this is a qualified fundraising activity.

How can you determine if a nonprofit organization is acting as an agent for the fireworks distributor?

To determine if the nonprofit is acting as an agent of the fireworks distributor, you should review the requirements listed in the retailer section. If these requirements are not met, the nonprofit is likely an agent of the distributor.

Fireworks display businesses

From time to time, cities and other organizations will contract with fireworks display contractors to supply the fireworks and light them off during special events or holidays. When this happens, the fireworks display is not subject to retail sales tax. Instead, the income the display contractor receives from the customer is subject to B&O tax under the Service and Other Activities classification. The display contractor is the consumer of the fireworks, and is responsible for paying sales or use tax on their purchases of fireworks.

Licensing

The Washington State Fire Marshal’s Office licenses persons that engage in the manufacture, importation, sale, or use of fireworks.