The U.S. Supreme Court’s Wayfair decision changed the landscape for taxing remote sales. Today, the Washington Department of Revenue’s new reporting and collecting requirement go into effect, as detailed on the DOR’s Marketplace Fairness web page. The department also explains how Wayfair affected existing state law.
On June 21, 2018, the U.S. Supreme Court decided South Dakota v. Wayfair, Dkt. No. 17-494, 06/21/2018. In Wayfair, the U.S. Supreme Court upheld a South Dakota law that imposed a sales tax collection obligation on sellers with more than $100,000 in sales or 200 transactions annually in South Dakota. Prior to that decision, states could only impose a sales tax collection obligation on sellers with a physical presence in the state under federal law.
The Wayfair decision represents a change in federal law that permits states to impose greater sales and use tax collection obligations on sellers than was previously allowed. Pursuant to RCW 82.32.733, the Department has determined this change in federal law creates a conflict with the “collect or report” election provisions of RCW 82.08.053. Specifically, under federal law as applied in Wayfair, Washington can require remote sellers and marketplace facilitators that have $100,000 in sales or 200 transactions in the state to collect sales and use tax on those sales. To the extent the “collect or report” election provided in RCW 82.08.053 would limit this authority to require sales and use tax collection, the election provision conflicts with the change in federal law and will have no further force and effect.
The state Revenue Department has received a few phone calls from businesses requesting information about the sales tax requirement, but not a lot, department spokeswoman Anna Gill said.
Gill advises businesses to review their retail sales in other states and determine that state’s monetary limit – or threshold – and start date for tax collection. If selling on a third-party website or marketplace, businesses should determine if sales tax is collected on their behalf, she said in an email.
Under the new sales tax-collection requirement, businesses could face increased administrative compliance costs, which could mean lower profits, or they will have to pass the costs along to consumers, said John Buhl, spokesman for the Tax Foundation, an independent tax policy research organization based in Washington D.C.
Larger businesses may be able to absorb the costs, while smaller online businesses could be hit the hardest, he said.
“We found compliance costs get bigger, the smaller the business is,” Buhl said.
In our state, officials expect modest but positive revenue gains as a result of the decision.