Washington Sales Tax Guide
Chapter 8: Understanding Washington sales tax rules for shipping & handling
If you do business or have nexus in the beautiful state of Washington, the rules for applying sales tax to shipping and delivery are pretty cut and dry.
That said, in lieu of an income tax, Washington does impose a Business and Occupation Tax (B&O) on most business owners (very few exceptions), which is calculated on your gross income, and the costs of doing business—including shipping and handling—aren’t exempt. Learn more.
Are Shipping and Handling Taxable in Washington?
Yes, shipping and handling are taxable in Washington. You should add the shipping, delivery, and/or handling charges to the sales price of your products, and then apply a sales tax to the overall cost. You must apply the statewide rate. Your county, city, or district may also tack on an additional tax. The rates vary, so check with the Washington Department of Revenue to learn the local rates.
The rule applies whether you use your own vehicles or a common carrier to deliver your products to customers.
Additionally, the same rule applies whether you are shipping items to your store to sell at retail or shipping them directly to your customer. If, however, your customer pays a third-party to deliver the product, don’t tax the delivery charges.
It’s important to understand that you are responsible for collecting a tax rate on the amount you charge customers for shipment and delivery—not the actual cost you paid to send the product. So if something takes you $10 to deliver, but your charge the customer $100, you must tax the $100 delivery charge.
Exceptions to the Rule
In the state of Washington, if an item is tax-exempt, so is the shipping and handling.
If you ship a package that contains both taxable and nontaxable items, you must apply a sales tax to the shipping cost of the taxable products only. Look at the total cost of the products you are shipping, and figure out the percentage of the taxable items to the overall cost. Take that percentage and multiple it by your total shipping cost, and that will give you a taxable basis.
For example, if you ship a package that contains $100 worth of product, and $70 dollars is taxable, you would charge sales tax on 70 percent of the cost of the shipping charges.
Washington Sales Tax Mistakes
In Washington, it’s all too easy to confuse your B&O tax requirements with your sales tax requirements. The two taxes operate under a completely different set of rules, so make sure that you fully understand both. In addition, another common issue is simply keeping track of all the fluctuating local rates within the state so that you can ensure that you are collecting the right sales tax. Avalara TrustFile, a sales tax filing solution, makes all of that manageable.