Complying with Consumer Use Tax Notifications

Recently, you may have received a notice from out-of-state sellers identifying various online purchases for which you were not charged sales tax.

Here is what you need to know concerning the notice:

A change in state tax law, effective January 1, 2018, requires out-of-state sellers and marketplace facilitators (e.g., Amazon.com) with sales of $10,000 or more to Washington consumers to send annual notices to customers. These notices must detail any taxable purchases made in the preceding calendar year where Washington sales tax was not collected. This information is also required to be sent to the Department of Revenue.

The notice will direct the recipient to the Department of Revenue’s website to file and pay the required use taxes due on the purchase of taxable items. The recipient has the option of filing the use tax return online or by mail. While you can pay use tax anytime (pay as you go), the deadline for all 2018 use tax reporting is April 1, 2019.

Use tax is due on goods and certain services when sales tax was not paid, such as when an out-of-state seller ships taxable items to a customer in Washington. Use tax is a compensatory tax, so either sales tax is due or use tax is due, but not both. The sales tax and use tax rates are the same. The use tax rate applicable to a particular purchase is dependent on the location where the items are first used in this state; in this case, it’s likely the address where the items are received.

The Department of Revenue is tasked with auditing and collecting tax from those who do not voluntarily file a consumer use tax return and pay the tax. These notices are a new process for the Department with little formal guidance as of yet, but the Department has implied that interest and penalties will apply to any outstanding unpaid tax.

This does not affect the sales and use tax compliance process for Washington businesses. Businesses should continue to report any use tax obligations on their excise tax returns.

Please contact a member of our State and Local Tax group for assistance with filing or to address any questions you may have.