How to pay consumer use tax in Washington, DC

The District of Columbia Office of Tax and Revenue (OTR) is changing its consumer use tax filing process effective November 20, 2019.

States (and Washington, D.C.) that have a sales tax also have an equivalent use tax, which consumers must pay when they didn’t pay sales tax on taxable goods and services purchased for consumption or use in their home state. This typically occurs when:

• Merchandise that’s taxable in the home state was purchased or rented in another state or country and delivered to the home state
• Merchandise that’s taxable in the home state was purchased in a jurisdiction that doesn’t tax it and brought home
• Merchandise that’s taxable in the home state was purchased from a catalog or internet seller who doesn’t have nexus (an obligation to collect sales tax in the home state)

Individuals are required to remit use tax in D.C. when, during a tax year, they purchased more than $400 worth of taxable merchandise, rentals, or services on which they didn’t pay sales tax. If their untaxed purchases total less than $400 annually, they get a lucky break.

Examples of products subject to use tax in D.C. include but aren’t limited to:

Taxpayers should report use tax on Form FR-329, Consumer Use Tax on Purchases and Rentals then remit payments through the OTR’s online tax portal for tax years 2017 and 2018. Payments for tax year 2019 must be filed and remitted by April 15, 2020.

Businesses as well as individuals can owe use tax; indeed, one of the most common causes of negative audit findings among businesses involves consumer use tax. However, businesses should not file a Form FR-329.

In D.C., businesses report use tax on their monthly (FR-800M), quarterly (FR-800Q), or annual (FR-800A) sales tax returns, which must be filed electronically via MyTax.DC.gov. The OTR has not accepted paper returns since November 1, 2017.

The most efficient way for businesses to manage sales and use tax compliance in Washington, D.C. is to automate sales tax collection and remittance.