Washington Enacts Click-Through and Economic Nexus Provisions

Washington has enacted legislation that includes both click-through and economic nexus provisions for sellers. Effective September 1, 2015, a seller is presumed to have substantial nexus in Washingtonfor sales and use tax purposes if the seller enters into an agreement with one or more residents under which the resident, for a commission or other consideration, directly or indirectly, refers potential customers, by a website link or otherwise, to the seller. In order for the presumption to apply, cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller must exceed $10,000 during the preceding calendar year. The presumption can be rebutted by demonstrating that the residents with whom the seller had agreements did not engage in solicitation on behalf of the remote seller that would satisfy the nexus requirements of the U.S. Constitution during the calendar year. Remote sellers engaging in such agreements with state residents will be presumed to have substantial nexus with Washington for purposes of the Business and Occupation (B&O) taxand taxed under the retailing business and occupation tax classification.

An additional provision was enacted that imposes an economic nexus standard for the Business and Occupation tax only. Effective September 1, 2015, economic nexus provisions also apply for purposes of B&O tax on out-of-state businesses making wholesale sales in Washington. Economic nexus will apply to remote sellers that in the immediately preceding tax year had:

  • More than $50,000 of property in Washington (which includes the average value of property including intangible property, owned or rented and used in the state during the immediately preceding tax year) ;
  • More than $50,000 of payroll in Washington;
  • More than $250,000 of receipts from Washington; or
  • At least 25% of the person’s total property, total payroll, or total receipts in the state.

For an update on this news item, visit Washington Issues Guidance on Changes to Nexus Standards. For an additional update on this news item, click here.

(S.B. 6138, Laws 2015, effective as noted)

UPDATE: On March 14, 2019, Washington Gov. Jay Inslee signed legislation that eliminates the state’s click-through nexus provisions, effective March 14, 2019. (S.B. 5581, Laws 2019)

Posted on July 16, 2015