Avalara Taxrates > Blog > Sales Tax News > Washington: Sales Tax Requirements for Crowdfunding - Avalara

Washington: Sales Tax Requirements for Crowdfunding

  • Dec 23, 2014 | Gail Cole

 Crowdfunding: unlimited opportunities plus possible sales tax liability.

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.

photo credit: Kevin Baird via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.