Washington: Sales Tax Requirements for Crowdfunding
- Sales Tax News
- Dec 23, 2014 | Gail Cole
Crowdfunding is the act of raising small amounts of money from a large number of people. The practice has been around for a long time but has flourished in the Internet age and now raises billions annually for millions of campaigns. Crowdfunding can give a fledgling company a start. It can also create unexpected sales tax liabilities.
In Washington State, for example, sales tax must be collected by the project creator when, in exchange for donations, donors receive any of the following:
- Digital products
- Retail services (such as meals)
- Tangible taxable services
The applicable rate of sales tax is the rate in effect where the backer receives the taxable goods or services. For example: a project creator based in Seattle receives a donation from a backer in Spokane and sends the backer a watch in return. Sales tax on retail value of the watch is due, at the rate in effect at the backers’ Spokane address.
Project creators who collect sales tax on rewards must register with the Washington Department of Revenue. Additional information is available on the DOR website.
Starting a new business? Automated sales tax software as a service (SaaS) helps businesses stay sales tax compliant. Learn more.