Washington’s new Remote Seller Relief Program: Will it start a new trend?
- Sales and Use Tax
- Sep 11, 2019 | Gail Cole
Washington was one of the first states to require remote vendors and marketplace facilitators to collect and remit sales tax. Now, the pioneering state has created a Remote Seller Relief Program for businesses that should be registered in Washington but aren’t. Will other states follow its lead?
The Evergreen State started enforcing economic nexus on October 1, 2018, mere months after the Supreme Court of the United States authorized states to do so as a result of its decision in South Dakota v. Wayfair, Inc. (June 21, 2018). Initially, Washington mimicked South Dakota’s small-seller exception: Remote vendors had to register once they had more than $100,000 in cumulative gross receipts from retail sales in Washington, or at least 200 separate transactions in the state.
To simplify remote seller sales tax compliance, the state later eliminated the transaction threshold. Thus, as of March 14, 2019, a remote retailer establishes economic nexus when it has more than $100,000 in cumulative gross receipts from retail sales in Washington in the current or previous calendar year, period. The threshold will change again on January 1, 2020.
But back to tax relief.
Under the Remote Seller Relief Program, remote businesses that have nexus with Washington but haven’t registered to collect and remit sales tax may be eligible for significant tax relief.
Businesses that haven’t been contacted by the Washington Department of Revenue are invited to “look into” the department’s Voluntary Disclosure Program. For businesses accepted into the program, the state will limit the look-back period and fully or partially waive penalties — though there’s an unlimited look-back period for taxes collected but not submitted. Interest will be imposed at the statutory rate.
Businesses that have been contacted by the department for some reason “may still qualify for a reduction of penalties” under the Remote Seller Relief Program. Affiliates and subsidiaries in need of tax relief must submit a separate application for tax relief.
The main benefit of the program is that up to 39 percent of potential penalties can be waived. These include:
- 5 percent penalty for underpaid tax
- 5 percent penalty for not being registered
- 29 percent penalty for late payment of a return
Do other states have similar programs?
Businesses that have been making sales in California but haven’t registered to collect California sales or use tax have a limited time to obtain tax relief.
The California Department of Tax and Fee Administration (CDTFA) is providing tax relief for qualifying retailers, defined as businesses that:
- Are or were engaged in business in California solely because a marketplace facilitator stored their inventory in the state;
- Didn’t register with the CDTFA prior to December 1, 2018 (when California began taxing remote sales);
- Didn’t file sales or use tax returns or make payments prior to being contacted by the CDTFA; and
- Voluntarily register with the CDTFA, and file completed tax returns for all necessary tax reporting periods by September 25, 2019, and pay the tax in full or apply for a payment plan.
Note that marketplace sellers seeking tax relief in California must register, file returns, and pay the tax they owe by September 25, 2019.
For a qualifying retailer, the CDTFA won’t assess tax on sales made prior to April 1, 2016, or penalties on sales made from April 1, 2016, to March 31, 2019. For more details, see the CDTFA notice, Relief May Be Available to Marketplace Sellers Using Fulfillment Centers in California.
Illinois is also providing temporary tax relief for certain businesses through its upcoming tax amnesty program, which will run October 1, 2019, through November 15, 2019. For successful participants, the Department of Revenue will waive applicable penalties and interest charges for the amnesty period of June 30, 2011, to July 1, 2018.
If we learn of other states offering programs similar to the ones in California, Illinois, or Washington, we’ll report on it in the Avalara blog. In the meantime, learn more about states that tax remote sales at our Sales tax laws by state resource page.