Washington Rule Changes Cause Many More Out-of-State Businesses to be Subject to B&O Tax in 2020
On March 14, 2019, Washington Gov. Jay Inslee signed Senate Bill 5581 into law.
The new law immediately eliminated the requirement for remote businesses without a physical presence to collect and remit sales tax if they made 200 or more transactions in Washington. Instead, now the only threshold for collecting sales tax is whether a seller exceeds $100,000 in sales destined for Washington.
Another aspect of the law goes into effect with the new year. Beginning January 1, 2020, the nexus threshold for all Business and Occupation (B&O) tax classifications will also be $100,000 of gross receipts per calendar year for businesses without a physical presence nexus. This threshold is applicable for all business classifications.
Prior to the bill, a nonresident individual or business entity was considered to have substantial nexus with Washington for B&O tax purposes if the remote seller had more than:
- $285,000 in gross receipts in Washington
- $57,000 of property in Washington
- $57,000 of payroll in Washington or,
- At least 25% of its total property, payroll, or receipts, in Washington
These previous thresholds have been repealed. As of January 1, 2020, the sole threshold for B&O tax reporting will be whether a business makes $100,000 of gross receipts.
Physical presence nexus will also establish nexus for all B&O tax classifications and sales tax collection.
If your business makes $100,000 of sales into Washington, you will now have both a sales tax and B&O tax obligation.
Please contact your Delap tax advisor to assist you in determining whether you are affected by this change and what next steps you should take to comply with this new nexus threshold. Delap advisors have an 87-year history of offering trusted and reliable state and local tax services to businesses in the state of Oregon.