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The Washington Department of Revenue has issued an advisory providing the substantial nexus thresholds for business and occupation (B&O) tax purposes. When the cumulative percentage change in the consumer price index for all urban consumers changes by 5% or more from the measurement date, the department must adjust the thresholds to reflect that change. For the 2015 calendar year, the threshold amounts are: receipts threshold, $267,000; property threshold, $53,000; payroll threshold, $53,000. The thresholds remain unchanged from 2014.  (Excise Tax Advisory No. 3195.2015, Washington Department of Revenue, February 3, 2015)


An out-of-state company established nexus in Washington in 2013 under the business and occupation tax statutory threshold because the taxpayer had payroll of more than $53,000 in the state during the year. In October 2012, the taxpayer hired an employee who lived and worked remotely in Washington. The taxpayer’s argument that a portion of the amount of payroll it paid in 2013 was attributable to 2012 was rejected. Per a rule provision, "payroll" is defined as the total compensation paid during the calendar year. The taxpayer also argued for a waiver of any tax liability because its payroll was only slightly above the $53,000 threshold. This argument was also rejected. The Appeals Division had no authority to waive tax liability for a taxpayer that meets any of the nexus thresholds in the relevant law. Even though the taxpayer ceased having an employee in Washington, nexus is established for 12 months and the B&O Tax was due for the 12 months following the cessation of nexus. (Tax Determination No. 14-0306, Washington Department of Revenue, February 26, 2015)


On March 10, 2015, a bipartisan group of senators introduced the Marketplace Fairness Act of 2015. Similar legislation – the Marketplace Fairness Act of 2013 – was previously introduced in February 2013 and passed by the Senate on May 6, 2013. That legislation failed to be enacted. If passed, the Marketplace Fairness Act of 2015 would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. For more information on the previous legislation, visit Federal Government Introduces New Remote Seller Bill. (Marketplace Fairness Act of 2015, March 10, 2015)


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.


Washington State has provided guidance on the requirements for a sale to qualify as an export sale exempt from retail sales tax when a customs broker is involved. To qualify as an exempt export sale, a sale must meet one of the following requirements:


  • the goods must be delivered to the buyer in another country;
  • the goods must be delivered to a carrier who transfers the goods to another country; or
  • the goods must be delivered to the buyer at shipside or aboard the buyer’s vessel or other vehicle.


If goods are delivered to an out-of-state or foreign buyer’s customs broker in Washington for subsequent delivery to the out-of-state buyer in Washington, the sale is not an exempt export sale. In this case, the delivery is deemed to be to the buyer’s agent in Washington.  The seller must collect retail sales tax and must pay retailing business and occupation (B&O) tax on the sale. (Tax Topics: Customs Broker, Washington Department of Revenue, November 26, 2014)


On December 16, 2014, President Barack Obama signed the Consolidated and Further Continuing Appropriations Act, 2015, for sales and use tax purposes. The Act includes a provision that extends the Internet Tax Freedom Act (ITFA) until October 1, 2015 with all provisions unchanged.


On January 9, 2015, the House of Representative introduced a bill (un-numbered) that would permanently extend the ITFA, banning states and local jurisdictions from imposing any new tax on internet access. The proposed bill removes the current effective dates of November 1, 2003 through October 1, 2015 and changes the effective date to be effective for new taxes imposed after the date of the enactment.  It is not clear if states that have been grandfathered under the existing provision could retain their current tax on internet access but it appears that may be the case.  No formal legislation has been introduced that would incorporate the Marketplace Fairness Act into this bill. The bill is sponsored by House Judiciary Committee Chairman Bob Goodlatte, among others.


For our previous news item on this topic, see Internet Tax Freedom Act is Extended Through December 11, 2014.


For an update on this news item, see Internet Tax Freedom Act Extended Until December 11, 2015.


(Consolidated and Further Continuing Appropriations Act, 2015; H.R. 235)



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