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Determine the location of my sale
Sales tax collection is based on the location where the customer receives the merchandise or service. To ensure local governments receive the correct amount of tax, retailers must code their sales accurately.
Destination-based sales tax rules
Most retail sales are coded based on a series of rules. If rule 1 does not apply, then you move to rule 2, and so forth.
Rule 1:
If your customer takes possession of a product, digital good, retail service, or extended warranty at your business location, calculate the sales tax based on the rate at your business location.
Rule 2:
If your customer will receive the product, digital good, retail service, or extended warranty at a location other than your business location, code the sales tax to the location where the customer receives the product, digital good, service, or warranty.
Rule 3:
If you do not know the address where the product, digital good, service, or warranty will be received, you should code the sales tax to your customer’s address that is maintained in your business records, unless this is done in bad faith.
Rule 4:
If you do not maintain a record of your customer’s address, you should code the sales tax to an address for the customer that you obtained at the time of the sale. This might be the address that appears on a check, credit card, or money order, unless this is done in bad faith.
Rule 5:
If you cannot apply Rules 1 – 4 or you do not have enough information to code the sales tax you should code the sales tax to the location as determined under the following rules:
- Tangible personal property: Use the location where the property was shipped from.
- Retail services and extended warranties: Use the location where the services or warranties were provided.
- Prewritten software (and digital goods): Use the location where the software was first made available for transmission.
Note: The time of sale is based on the seller’s customary tax accounting methods. If a seller knowingly uses an invalid address, the address is used in bad faith. If the seller purposely uses an invalid address or sales date to avoid or alter the amount of sales tax, this is considered fraud and the seller will be held liable.
Common transaction summaries
Sales of goods and merchandise
Goods and merchandise sales are coded to the location where the customer receives them. Over the counter sales, where the customer receives the item at the retail location are coded to the retail store or outlet. Items that are shipped or delivered to the customer are coded to location where the customer receives them.
Labor and services
Sales of labor and services are coded to where they are performed. If an installation charge is normally added to the cost of an item, the entire charge for that item is coded to the location where it is installed. If the customer picks up the item in person, the sale is coded to the retail location where the item was picked up.
Repair services
In the case of repaired merchandise, if the customer picks up the item at the repair facility, then the sale is coded to the location of the repair facility. If the repaired item is delivered or shipped to the customer, then the total charge, including shipping and handling, is coded to the location where the customer receives the repaired item.
Goods delivered into Washington
If goods are delivered into Washington from outside of the state, the sale is coded to the location where the customer receives the goods.
Lease or rental of tangible personal property
Lease or rental of tangible personal property depends on the following:
Leases or rentals that do not require recurring payments
- If a single payment is made and the person renting the equipment (lessee) picks up the equipment at the business’ (lessor) location, then the lessor’s location determines the code and local tax rate.
- If a single payment is made but the equipment is delivered to the lessee at another location, the code is determined by the location where the lessee receives the equipment.
Lease or rentals that require periodic payments
- If an item is leased for a length of time and periodic payments are made, the first payment is coded to the location where the lessee receives the equipment, generally the lessor’s business location. All subsequent payments are coded to the primary property location where the equipment is being stored or used.
Special sourcing provisions
The following are excluded from destination-based sales tax:
- Automobile towing: sales tax is based on the business location.
- 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 the customer.
- Qualifying florists: sales tax is based on the florist’s store location from which delivery is made.