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The Washington Department of Revenue (DOR) has issued a notice reminding taxpayers that Washington state law does not permit the DOR to provide direct sales tax refunds to consumers in the context of class action settlements. In regards to the litigation In re Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation, which has been finalized by the order of the U.S. District Court in the Northern District of California, consumers should contact class counsel or the Federal Trade Commission. For more information on the settlement, click here. (Tax Topics, Washington Department of Revenue, September 22, 2016)


On August 25, 2016, House Judiciary Committee Chairman Robert Goodlatte released a discussion draft of the Online Sales Simplification Act of 2016. The legislation would implement a “hybrid origin” approach for remote sales. Under the legislation, states could impose sales tax on remote sales if the origin state participates in a clearinghouse.In this case, the tax is based on the origin state’s baseand taxability rules. The rate would be the origin state rate, unless the destination state participates. In that case, the rate used would be a single state-wide rate determined by each participating destination state. A remote seller would only remit sales tax to its origin state for all remote sales. Only the origin state would be able to audit a seller for remote sales. Non-participating states would not be able to receive distributions from the clearinghouse. Sellers would be required to provide reporting for remotes sales into participating states to the Clearinghouse so it can distribute the tax to the destination state. We will continue to monitor activity and update when the official bill is introduced.  (Discussion draft of Online Sales Simplification Act of 2016)


On July 14, 2016, Rep. Jim Sensenbrenner (R-WI) introduced the No Regulation Without Representation Act of 2016.  Taking the opposite approach of the Marketplace Fairness Act and Remote Transactions Parity Act, this proposed bill would limit the ability of states to require remote sellers to collect use tax. If enacted, the Act would codify the physical presence requirement established by the US Supreme Court in Quill Corp v. North Dakota.  The bill would define physical presence and create a de minimis threshold. If enacted, the bill would preempt click-through nexus, affiliate nexus, reporting requirements and marketplace nexus legislation. The bill would be effective as of January 1, 2017. The bill defines “seller” and provides that states and localities may not:


  • Obligate a person to collect a sales, use or similar tax; 
  • Obligate a person to report sales; 
  • Assess a tax on a person; or 
  • Treat the person as doing business in a state or locality for purposes of such tax unless the person has a physical presence in the jurisdiction during the calendar quarter that the obligation or assessment is imposed.


Persons would be considered to have a physical presence only if during the calendar year the person: 


  • Owns or leases real or tangible personal property in the state; 
  • Has one or more employees, agents or independent contractors in the state specifically soliciting product or service orders from customers in the state or providing design, installation or repair services there; or 
  • Maintains an office in-state with three or more employees for any purpose.


Physical presence would not include: 


  • Click-through referral agreements with in-state persons who receive commissions for referring customers to the seller; 
  • Presence for less than 15 days in a taxable year; 
  • Product delivery provided by a common carrier; or 
  • Internet advertising services not exclusively directed towards, or exclusively soliciting in-state customers.


The bill defines seller to exclude marketplace providers; referrers; third-party delivery services in which the seller does not have an ownership interest; and credit card issuers, transaction or billing processors or financial intermediaries.Marketplace Providers are defined as any person other than the seller who facilitates a sale which includes listing or advertising the items or services for sale and either directly or indirectly collects gross receipts from the customer and transmits the amounts to the marketplace seller. (No Regulation Without Representation Act of 2016 (H.R. 5893))


UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.


An out-of-state retailer that sold nutritional supplements in Washington was liable for sales tax and B&O tax because it had substantial nexus with Washington. The company made wholesale sales to retailers and distributors and retail sales through infomercials. Employees of the company traveled to Washington to participate in trade shows, sales staff training, and promotional planningto support its wholesale sales. The company engaged marketing firms to assist in marketing its products in Washington. The marketing firms solicited sales from the taxpayer’s wholesale customers, received orders, and acted as intermediaries with retailers on promotional programs. The taxpayer asserted that the Commerce Clause prohibited Washington from subjecting the retail sales to sales tax. However, due to the company’s substantial physical presence in Washington, the Commerce Clause did not preclude taxation. Regarding liability for B&O tax, the company had substantial nexus because its in-state activities supported its abilities to establish and maintain a market for its goods in Washington. There is no requirement that the activities that create the nexus with the state be connected to specific sales. The company’s wholesale sales and marketing apparatus allowed it to obtain information on Washington’s nutritional products market. Additionally, its wholesale activities created a market for its retail sales, since its sales at grocery and drug stores resulted in phone inquiries from individuals. (Irwin Naturals v. Department of Revenue, The Court of Appeals of Washington, Division One, No. 73966-2-I, July 25, 2016)


Effective from July 1, 2016 until January 1, 2027, Washington has enacted a sales and use tax exemption for charges for labor and services rendered for construction of new buildings made to an eligible maintenance repair operator engaged in maintenance of airplanes or a port district, political subdivision, or municipal corporation if the new building is to be leased to an eligible maintenance repair operator. Sales of tangible personal property to be incorporated as a component of such buildings and charges made for labor and services performed in respect to the installation of fixtures not otherwise exempt are also covered under the exemption. The exemption can be claimed as a remittance,meaning that the tax is paid and then a refund of the tax is claimed. Taxpayers can submit an application on a quarterly basis by identifying the amount of exempted tax claimed and the qualifying purchases. A taxpayer requesting a remittance may do so after the aircraft maintenance and repair station is operationally complete for four years, but not sooner than December 1, 2021. The state portion of the sales and use taxes may not be remitted(refunded) if the person didn’t report at least 100 average employment positions for September 1, 2020 through September 1, 2021 with an average annualized wage of $80,000. A taxpayer may request remittance(refund) of local sales and use taxes on and after July 1, 2016. In order to qualify for the exemption before starting construction, a port district, political subdivision or municipal corporation must have entered into an agreement with an eligible maintenance repair operator to build the facility. An annual report is required for the exemption. (H.B. 2839, Laws 2016, effective July 1, 2016)



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