SALES TAX TUESDAY 2019: Washington State

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Sunday was Saint Patrick's Day; and I couldn't be in Emerald Green Ireland, 'the Murphy homeland' for the holiday, so I might as well be in Seattle, 'The Emerald City' in Washington, 'The Emerald State,' for this holiday. Unfortunately, the once grand dining experience and exquisite views of the Space Needle Restaurant are no more, but you can still enjoy the ‘sights of Seattle’ and all that surrounds it, from the two-story observation deck soaring 520 feet above Seattle. While it didn't always have 'the very best food' in Seattle, it was my 'all time' favorite place to dine (for the views and ambience) every time I went to Seattle for the many, many trips I made there in years past.

Now Seattle is called 'The Emerald City' because of the surrounding greenery that remains richly 'emerald' all year long, and the same applies to much of the western half of Washington State, even though Eastern Washington is much more arid. One reason the evergreens within the area, in and around Seattle in particular, stay so green is because of the weather. So, all of you who think that Seattle is nothing but rainy and cold would probably be thinking that's why, but the reality is that Seattle's notorious 'rainy weather' really is found during the fall and winter, and there really isn't that much rain in Seattle during late spring and summer at all. The same thing applies for cold weather as applies for the rain. But, in spite of the nicknames (and realities of the weather), 'The Emerald City' really is the 'Coffee Capital' of the U.S.A., but you already knew that because you recognize the Starbucks logo as yet another 'Seattle landmark.'

There is probably no other man-made landmark west of the Mississippi River that is as well recognized as the Space Needle, with perhaps the exception of Cinderella’s Castle at Disneyland in Anaheim, California.

There is another landmark in Seattle that many visitors there may not even know exists, in sharp contrast to the Space Needle. In fact, for many years it was frowned upon by locals to even discuss it. I’m speaking of ‘The Seattle Underground,’ a network of underground passageways and basements in downtown Pioneer Square that were originally ‘ground level’ Seattle when the City was built in the mid-19th century. In June 1889, the Great Seattle Fire resulted in much of the City being destroyed.  

Subsequent to the fire, City leaders imposed stringent requirements related to re-construction and the result was that much of the new city was built on top of the ruins of the old, in some places, as much as two stories above the prior street level. In 1907, the Underground areas which had been basements and, in some areas, served as underground sidewalks were condemned, but that made them perfect for illicit activities such as opium dens, prostitution houses, and gambling establishments.

By the 1940’s, the City had secured all areas of the Underground; but in 1965, a local Seattle entrepreneur petitioned the City for rights to refurbish and reopen portions of ‘the Underground’ as an entertainment district and to operate tours. You can today still enjoy ‘Bill Speidel’s Underground Seattle Tour’ if you know where to ask. It’s quite entertaining if you get one of the better guides.

And there is absolutely one more place you must visit when in Seattle, and that’s Pike Place Fish Market. Sometimes simply called ‘the Seattle Fish Market’ by many visitor’s because when you ask to go to the Seattle Fish Market, they take you to Pike’s. The Pike Place Fish Market was founded in 1930, and is an open air first market at Pick Street and Pick Place (thus the name ‘Pike Place’). This place is known for their fish mongers throwing fish that customers have purchased before they are wrapped. In fact, if you look closely in the picture below, you will see that the Salmon is in ‘mid-air’ because it has been thrown by the fish monger on the right to a fish monger who is awaiting it outside this picture on the left.

But expect the place to be a lot more crowded than either the Seattle Underground or the Space Needle, this is Seattle’s number one visitor attraction with more than 10,000 visitors per day. Stroll through the market and find your way to some fresh seafood to chow down on like a shrimp cocktail or some crab or some chowder.

In Seattle we have looked at ‘tourism,’ a trip up the Space Needle and an Underground Tour, we have also looked at some Seafood purchases (maybe raw and maybe prepared), and we haven’t talked a bit about Sales Tax yet. So, it’s time to remind you that this is Sales Tax Tuesday, a joint venture between Insightful Accountant and Avalara, the Sales Tax People, and that these Tuesday features are designed to cover the sales tax situations in all 50 states including those even without Sales Tax. We started our series in 2018 but as a result of a lot of breaking news about Nexus and the implications of eCommerce and ‘economic nexus’ legislation being imposed in various states resulting from last year’s Supreme Course Decision (also know as the ‘Wayfair case’), we got behind in our state-by-state tour.

As a result, Sales Tax Tuesday is still underway in 2019, and this is our ‘Washington State’ feature. With that being said, unlike many states that rely on Property or Income tax for their primary source of revenue, Washington’s principal tax source is actually ‘retail sales tax.’ Businesses making retail sales in Washington collect sales tax from their customer. As far as Washington is concerned, a retail sale is the sale of tangible personal property. It is also the sale of services such as installation, repair, cleaning, altering, improving, construction, and decorating. Other services include improving real or personal property, amusement and recreational activities, lawn maintenance, and physical fitness activities. Businesses also pay the retail sales tax on purchases of items for their own use (such as supplies or equipment) that will not be resold in the regular course of business. Similarly, when a business purchases a retail service for its own use, it must pay sales tax on the purchase. Washington has a number of specific definitions, exemptions and provisions that we will look at a little later in the ‘Sales Tax Facts’ section of this feature.

Now, one of those Sales Tax exemptions in Washington is ‘food’ (and ‘food ingredients’), but that’s a fairly broad definition. Again, we will point you to some specific provisions later in our ‘Sales Tax Facts,’ but for now just know that a couple of the biggest ‘exceptions’ to the ‘food exemption’ are ‘prepared foods’ and ‘soft drinks.’ So, if I am back at the Fish Market and I buy some fresh seafood to take home and cook for my supper, then I won’t be paying any Washington Sales Tax (state or local) on that fresh seafood because it hasn’t been prepared.

On the other hand, if I stop in at the Atmos Café on the upper observation level of the Space Needle for a sandwich or burger and a coke, (no, I'm not going to show you a burger and coke, as though it were a gourmet meal) I will be paying State and Local Sales Tax on that food because the sandwich or burger are considered ‘prepared foods’ and the Coke is a ‘soft drink.’

You may be wondering about that sales tax that we will be paying in Seattle, the total sales tax will be 10.10% (at the time this article was written). That's because the Washington state tax is currently 6.5% and with local taxes (ranging as high as 3.9%) added-in, the total tax can be as high as 10.4%.

Despite the relatively high sales tax, you maybe asking, "OK Murph, you said that the top of the Space Needle doesn't have a fine dining establishment any more, but where is a great place to eat in Seattle?" Since I am always 'up for beef,' The Butcher's Table has to be on the list of any Number One Spots because it features Mishima Reserve wagyu, born and bred in America.

Of course, this is the Northwest and Seattle is famous for seafood as well, so The Butcher's Table has more than enough specialties to meet the desires of every seafood lover, ranging from fresh chilled shell fish to grilled specialties, several smoked dishes, stews and much more. But whatever you do, don't forget desert.

Well, I think we better get down to the Nitty-gritty of Sales Tax, folks.

Sales Tax Facts

  • Sales and Use tax is managed by the Washington Department of Revenue (WDOR).
  • Washington is a destination based state (converted in 2008). Effective July 1, 2008, retailers had to begin collecting local sales tax based on the destination of the shipment or delivery. The WDOR provides more specific information and direction at their Destination-based sales tax webpage.
  • All businesses making retail sales of taxable tangible personal property and services in Washington must register and collect sales taxes.
  • Washington is a member of the Streamlined Sales Tax (SST). The Streamlined Sales and Use Tax Agreement (SSUTA) is a cooperative effort of multiple states, local governments and the business community. SSUTA pro­vides for a simpler and more uniform sales and use tax structure for businesses selling into multiple states.
  • Local-level tax rates in the state of Washington are quite complex compared against local-level tax rates in other states. Washington sales tax may be levied at the city/county/school/transportation and SPD (special purpose district) levels. As a result, there are 346 different Sales Tax Jurisdictions within Washington State. Accordingly, Washington is one of the most challenging states to monitor and maintain sales tax rate accuracy due to the complex local and special purpose taxes. Maintaining accuracy is demanding and time consuming.
  • Effective January 2, 2018, Washington adopted Marketplace Fairness provisions requiring certain marketplace facilitators, remote sellers and referrers, will be required to collect and remit retail sales tax or use tax on their sales into Washington or to provide certain notifications related to such sales. The WDOR provides specific information and direction related to these requirements at their Marketplace Fairness webpage.
  • In addition to Retail Sales, numerous services are also subject to sales tax within Washington. The WDOR provides specific directions and definitions of such at this taxable services website.
  • Use tax is paid by the consumer when the retail sales tax was not collected by the seller/service provider.
  • Multiple exemptions exist for retail sales and use taxes within Washington, the WDOR provides a specific directions and definitions of such at this list of retail sales and use tax exemptions.
  • The WDOR even provides a QuickBooks Quarterly Tax Rate Table that can be downloaded and imported into QuickBooks Desktop versions from this website.
  • Avalara's Washington State Sales Tax Basics Rate Page can be found here.

Manual sales and use tax management is subject to a lot of interpretation and errors, not to mention that it consumes a load of your valuable time in passing-through dollars to the State rather than generating revenue for your own business. Imagine how that is compounded in a state like Washington with the complexities of so many sales tax jurisdictions, so many exemptions, and so many specifics as to when and what is covered, and when it isn't. 

Avalara can provide you with the right solution for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. When  you automate your sales and use tax via Avalara, your business will be fully tax compliant without sacrificing productivity.