Washington DOR Issues Guidance Regarding Location of Sale for Sales Tax Collection

The Washington Department of Revenue simplified its “destination-based” sourcing rules that retailers must correctly recognize the sales tax to impose on charges related to any retail sales transaction. Sales tax collection is dependent on the location of where the customer receives the merchandise. Because of this, the Department has provided on its website a series of destination-based sales tax rules to follow in the order of  application:

1. If a customer takes possession of property, digital good, retail service, or extended warranty at the seller’s business location, calculate the sales tax based on the rate at the seller’s business location; or if not,
2. If the customer will receive the product, digital good, retail service, or extended warranty at a location other than the seller’s place of business, code the sales tax to the location where the customer receives the property, service, or warranty; or, if not,
3. If the seller does not know the address where the product, digital good, or service will be received, the seller should code the sales tax to the address for the customer maintained in the seller’s ordinary business records, provided use of the address does not constitute bad faith; or, if not,
4. If the seller does not have a delivery address or an address where the customer has received shipments, the seller must code the sales tax to an address for the purchaser obtained at the time of the sale (e.g., the address that appears on a check, credit card, or money order, so long as use of the address does not constitute bad faith).

If the Seller cannot apply Rules 1 through 4, or does not have enough information to recognize the sales tax code under the one of the four methods, they must base the sales tax on the location as follows:

• Tangible personal property: The location from which the property was shipped.
• Retail services and extended warranties: The location from which the services or warranties were provided.
• Prewritten software (and digital goods): The location at which the software was first made available for transmission.

It should be noted that the following transactions are subject to special sourcing provisions as outlined by Washington DOR and are excluded from destination-based sales tax sourcing:

• Automobile towing
• Sales of motor vehicles, trailers, semi-trailers, aircraft, and watercraft
• Qualifying florists

(Washington Department of Revenue, June 2021)