Out-of-state companies could see some changes to their Washington state tax obligations due to new legislation taking effect Sept. 1.

Economic nexus applies to wholesaling

Businesses located outside Washington will need to begin paying the state’s business and occupation tax if they make more than $267,000 in wholesale sales to Washington customers, based on their 2014  sales. These companies were already required to pay the tax if they had physical nexus with the state, which could include a stock of goods, employees or non-employee representatives.

Click-through transactions

The 2015 Legislature also approved a second tax change: out-of-state sellers paying a commission or other type of payment to a Washington individual or business to promote their products online could be required to collect the retail sales tax. The law presumes these types of sellers have substantial nexus when sales to Washington customers referred through this arrangement exceeded $10,000 in 2014 (the prior calendar year).

This click-through nexus provision is modeled after New York state’s law, and Washington joins approximately 15 other states implementing this type of legislation. This change also takes effect Sept. 1.

The new legislation is expected to generate $185 million in new revenue to the state by June 30, 2017.

The Washington State Department of Revenue has developed a web page to help out-of-state businesses understand how and if these new tax laws apply to their business. Visit the Economic Nexus page for out-of-state businesses.