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Washington’s sales and use tax rate is 6.5 percent. Local jurisdictions also have tax rates that businesses must add to the state sales tax rate. Additionally, Washington has some special taxes, such as lodging and vehicle rental. Some are at the state level and others at the local municipality level.
Types of taxes
Businesses must collect sales tax on sales of tangible personal property and some services.
Sales and use tax for sales of goods
The sales tax is a tax paid by the consumer. The use tax works in conjunction with the sales tax. A business only pays the use tax if it purchases tangible personal property for retail sales but ends up using or storing the items instead. For example, a business purchases 10 cases of Widget A, but it ends up being a poor seller. Instead of selling the last four cases, the business decides to use Widget A in the business. The business collected sales tax on the first six cases because it sold them. However, it did not pay taxes on the last four, so the business must pay use tax on those cases.
Spirits excise taxes
Washington has two liquor taxes – a sales tax and a spirits liter tax. Consumers pay a sales tax at a rate of 20.5 percent for liquor in its original package. On-premises retailers, such as bars and restaurants, pay 13.7 percent to distributors and distillers, who then collect the tax and pay it to the Washington Department of Revenue.
The spirits liter tax is based on volume. The general public pays $3.7708 per liter. Restaurants and bars pay $2.4408 per liter to distributors and distillers, who collect the tax and pay it to the Washington Department of Revenue.
The collection period runs from the 11th of the month through the 10th of the following month for both types of taxes for liquor purchased from distributors and distillers. Retailers remit taxes in February for taxes collected in January.
Motor vehicle rental surcharge tax
Washington’s automobile rental tax is 5.9 percent in addition to sales tax. Additionally, some counties might ad a 1-percent rental care rate for a total of 6.9 percent plus the state and local sales taxes. Additionally, vehicles rented in the Regional Transit Authority jurisdiction have another tax of 0.8 percent imposed.
For example, if the vehicle is rented in a county with a 1-percent tax, plus is in a Regional Transit Authority jurisdiction and is in a count with the extra rental car rate, the total tax would be 6.5 percent plus 1 percent, plus 0.8 percent, plus 1 percent for a total of 9.3 percent.
The vehicle rental taxes are for vehicles rented for less than 30 days to one person. Washington defines a rental car as one that is designed for carrying 10 or fewer passengers. Vehicles rented or loaned by an automotive repair shop for the consumer’s use while her vehicle is getting repaired are exempt. The federal government is also exempt if the government is paying for the rental. Government employees paying for the rental themselves must pay the tax.
Any charges added to the rental bill without giving the consumer a choice are also taxable. For example, the full tank of gas or insurance is added to every customer’s bill. They are taxable items.
However, if the business gives the consumer a choice of having rental insurance or offering to fill the tank up for a price when the consumer returns the vehicle, those items are not taxable.
Breweries and distributors pay a beer tax for the privilege of manufacturing their products in Washington. The tax is for each 31-gallon barrel or the equivalent if the beer is bottled or canned. Retailers must charge Washington’s sales tax on beer. The beer tax is as follows:
- Breweries that produce 60,000 or fewer barrels per year: $4.782 per barrel.
- Breweries that produce more than 60,000 barrels per year: $8.08 per barrel.
Washington business tax
Washington has a business and occupancy tax that varies by classification. In general:
- Retailers pay $0.00471.
- Wholesalers pay $0.00484.
- Manufacturers pay $0.00484.
- Services and other activities: $0.15.
Certain industries that might or might not fall under the above categories have different taxes. The tax is on gross receipts and is due on the 25th of the month after the collection month. For example, the tax on gross receipts for January is due on or before February 25 if you are a monthly filer.
Quarterly returns are due by the end of the month following the previous quarter. For example, gross receipts collected from January through March are due no later than April 30.
If the business is an annual filer, the tax is due on or before April 15 of the next year. For example, taxes collected in 2022 are due on or before April 31, 2023.
Motor fuel taxes
Washington’s motor fuel taxes have not changed since 2016. The taxes are as follows:
- Gasoline: $0.678. Of this, $0.494 goes to the state, and $0.184 goes to the federal government.
- Diesel: $0.738. Of this, $0.494 goes to the state, and $0.244 goes to the federal government.
Washington has a lodging tax, but it is divided into three types:
- The transient rental tax is a local tax that businesses report on the sales tax return. The tax is then deducted from the state part of the retail sales tax. It is not a consumer tax. If a lodging business reports this information, it does not pay additional taxes.
- Special hotel or motel tax: Certain locations charge this tax to their consumers. The tax is based on the local jurisdiction. Not all jurisdictions charge the tax.
- Convention and trade center tax: This is for Kings County only and is levied on businesses regardless of the number of units.
- Tourism promotion area charges: This special lodging tax is also municipality-based and is used to fund activities that promote tourism.
In addition to the room charge, several other charges are subject to taxes, including:
- Smoking fees.
- Pet fees.
- Damage and damage waiver fees.
- Cleaning fees.
- Attrition fees.
- Early and late departure fees.
Public utility tax
Washington has five rates for different public utilities:
- Water: $0.05029.
- Electricity: $0.038734.
- Telegraph companies, natural gas, collection of sewage: $0.03852.
- Urban transportation, watercraft vessels under 65 feet: $0.00642.
- Railroads, motor transportation, other public service businesses: $0.01926.
Registering for and filing Washington’s taxes
A business has several ways to remit tax payments:
- EFT debit.
- EFT credit.
- Credit card.
- Check (requires a waiver from the mandatory e-file).
- Cash (requires a waiver from the mandatory e-file).
Businesses with a tax liability of $20,000 or more and pay in cash should make an appointment with the Washington Department of Revenue. Make sure you schedule the appointment well in advance of the tax due date.
Sales tax due dates
The Washington Department of Revenue will advise you as to whether you pay taxes monthly, quarterly, or annually. If you are a:
- Monthly filer: Returns and payments are due on or before the 25th of each month following the collection month. For example, taxes collected in March are due on or before April 25.
- Quarterly taxpayer: Returns and payments are due on or before the last day of the month following the end of the quarter. For example, taxes collected for the first quarter – January through March – are due on or before April 30.
- Annual filers: Returns and payments are due on or before April 15 of the year following the collection year. For example, taxes collected in 2022 are due on or before April 15, 2023.
If the due date is a holiday or weekend, the due date is the next business day.
Washington sales tax holiday
Washington does not have a sales tax holiday. However, legislators are trying to pass a one-time sales tax holiday for September 2022.
Remote and marketplace sellers
Remote sellers and marketplace facilitators must register to pay Washington’s sales tax if it meets the financial nexus. If a business has $100,000 or more in gross receipts, it must collect the state and local jurisdiction sales tax.
Washington’s state sales tax is 6.5 percent. Many local jurisdictions also charge a sales tax and other special taxes.
Washington businesses must apply for a reseller permit. The permits expire. The state sends out renewal notices within 90 days of the expiration date.
Common exemptions include groceries, newspapers, and prescription drugs. Sales to the federal government are exempt. Additionally, any machinery and equipment used directly in manufacturing are exempt.
Some tax forms may ask for gross income instead of taxable retail sales. Gross income is the total of all sales the business made, whether taxable or not.
Indians are exempt from paying sales tax if the sale is in Indian Country or if the tangible personal property is delivered to Indian Country.