Sales Tax for Small Businesses in Bellingham, WA
As a business owner in Washington state, you may need to report and pay sales tax to the Washington State Department of Revenue (DOR). If you’re unsure whether your business needs to collect sales tax, then keep on reading! In this blog post we’ll go over:
If you need to collect sales tax
How to collect sales tax
How to report and remit sales tax
It’s important that you have a good understanding of your requirements as a business owner, or else you could face penalties and fees.
Do I Need to Collect Sales Tax in Washington State?
There are a few questions you need to ask yourself to determine if you need to collect sales tax in Washington.
Do I have nexus in Washington?
Are my products or services taxable?
Is sales tax applicable to my customer?
If the answer is ‘yes’ to all these questions, then you need to collect sales tax in Washington state. Let’s take a deeper look at these questions.
Do I have nexus in Washington state?
Essentially, having nexus means that your business has a significant presence in Washington, and you are required to collect, file, and remit sales tax. If you have a physical presence, such as an office, storefront, warehouse, or you and/or your employees solicit sales or provide services in Washington, you have nexus.
The answer is a little bit more complicated when you have an online or out-of-state business. Washington has specific reporting thresholds and nexus for out-of-state businesses, which you can find on the DOR website. It’s important to consult with your tax advisor if you’re unsure about your nexus status.
Are my products taxable?
You will need to collect sales tax for most goods. There are a few exceptions including:
Some manufacturing machinery and equipment
The DOR has a full list of goods exempt from sales tax on its website.
Are my services taxable?
Most services aren’t taxable, however, there are a few common ones that need to collect sales tax in Washington state. This includes:
For a full list of services subject to sales tax, refer to the DOR website.
Is sales tax applicable to my customer?
For most people, sales tax is applicable. For those who are exempt, they must provide proof of sales tax exemption and you must collect a copy with each transaction. These customers include government agencies, nonresidents, and enrolled tribal members.
How Do I Collect Sales Tax in Washington State?
Register Your Business
To collect sales tax in Washington, you must register your business with the DOR. Once registered, the DOR will assign you a filing frequency. Generally, this is based upon the size of your business or sales volume.
Collect Sales Tax on Transactions
As a business owner, you collect sales tax from your customers at the point of purchase. Typically, point-of-purchase software and hosting websites that have the capability to process transactions, such as Shopify, can be programmed to charge sales tax.
Currently, in Q2 of 2021, the sales tax rate in Washington state is 6.5%. In Bellingham the local city tax rate is 2.2%, making the total tax rate in Bellingham 8.7%.
Washington State is a destination-based state, which means that the sales tax rate is determined by your customer’s location. For example, if your business is in Bellingham but you sell a product online to a customer in Seattle, the sales tax rate would increase to 10.1%, since that’s what it is in Seattle.
To determine the sales tax rate for a specific area, you can use the Department of Revenue’s Tax Rate Lookup tool.
How Do I Report and Remit Sales Tax in Washington State?
Once you’ve collected sales tax, it is then your responsibility to remit the taxes to the DOR and file a sales tax return. Filing and remitting sales tax both have the same due date.
Monthly and quarterly taxpayers must file and pay electronically. Annual taxpayers can choose to file electronically or by mail.
Even if you don’t collect any sales tax during a filing period, you must still file a sales tax return by the due date.
Ensure Accuracy in Sales Tax Reporting
Having a professional bookkeeper or accountant that is familiar with Washington state sales tax can save you time and help you avoid costly errors. Here at Summit Bookkeeping, we’ve got experienced bookkeepers that stay up to date on Washington state tax laws so that we can help business owners like you focus on the aspects of business that you're passionate about.
If you’re interested in getting help with your sales tax reporting, contact us or give us a call at (360) 756-6020!