The place to find business sales tax information

— as well as solutions, services and jobs!

It's "Use" Tax Time in Washington: Don't Ignore the Reminder Notice!

author photo of Rachel A Le Mieux

The Washington State Department of Revenue recently mailed use tax reminder notices to businesses located within the state that are doing business primarily in the information and professional services sectors.

The notices ask businesses to review their purchases since January 1, 2011 to determine whether or not they may have missed paying sales tax on purchases of tangible personal property, certain services subject to sales tax, or digital goods or digital automated services just to name a few. If sales tax should have been paid at the time of purchase but wasn't, then the business now has the opportunity to remit use tax to the state.

The reminder notices provide the following information regarding how to comply with the reminder notice:

  1. Go to our online Use Tax Response page. (http://dor.wa.gov/UseTax)
  2. Enter the 9-digit tax registration number found at the top of this screen.
  3. Enter the Group Code: (code provided for in the letter and could be different based on industry sector).
  4. Answer the questions and submit.

If you owe use tax, be sure to report the use tax due on your next excise tax return to avoid penalties and interest.

If you do not owe use tax, you can clear your account on our Use Tax Response page by following the steps above.

You may comply with the notice in three ways. First would be to identify those purchases where sales tax was not paid but should have and calculate the exact amount of use tax due. If that process is too cumbersome or time consuming, you may secondly, use a chart to estimate the amount of use tax due and remit that amount. Or thirdly, if no use tax is due simply respond that no tax is due on your on-line account. But be careful here – the consequences of reporting the wrong amount or not reported could be expensive.

Estimating may not be the way to go because the Department uses its own statistics to pre-determine an amount.

For information service providers the chart to be used to estimate the annual use tax liability is pictured below:

Annual Gross Business Income

Annual Average Value of Items Subject to Use Tax

Use Tax Due based on Average state & Local Rate of 9%

Use Tax Due for the period of 1/1/2011 through 09/30/2015

Less than $1,000,000

$239,198.27

$21,528

$102,258

$1,000,000 - $4,999,999

$288,099.42

$25,929

$123,163

$5,000,000 - $50,000,000

$625,920.06

$56,333

$267,5801

Greater than $50,000,000

$17,839,065.98

$1,605,516

$7,626,201

For professional service providers the chart used to estimate the annual use tax liability is pictured below:

Annual Gross Business Income

Annual Average Value of Items Subject to Use Tax

Use Tax Due based on Average state & Local Rate of 9%

Use Tax Due for the period of 1/1/2011 through 09/30/2015

Less than $1,000,000

$12,826.59

$1,154

$5,483

$1,000,000 - $4,999,999

$35,733.89

$3,216.05

$15,276

$5,000,000 - $50,000,000

$440,661.13

$39,659

$188,383

Greater than $50,000,000

$554,153.66

$49,874

$236,901

Why does the Department send out these notices? Well as you can see, the estimated amount of unpaid use tax can be quite high and lucrative for the state. But it can also be quite burdensome for a business to pay after almost 5 years of accumulation.

To encourage business to comply, the Department has made this into an informal amnesty program. If the business complies with the notice by October 25th of 2015 or October 31, 2015 if you are a quarterly or annual filer, the Department will waive interest and penalties on any unpaid amount.

As stated above, the Department has sent these reminder notices to specific businesses within certain business sectors. And, per the notice, the Department considers this notice to be "specific written instructions" to the taxpayer. Therefore, failure to respond in one of the three ways mentioned above could result in onerous penalties and interest being assessed in a future audit.

For more information please contact Rachel A. Le Mieux, CPA CMI Partner, State and Local Tax Practice Leader, Peterson Sullivan LLP at Rachel A Le Mieux or 206-382-7711.

Other recent “Washington (WA)” posts by Rachel A Le Mieux, CPA:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

Submit a comment or question - only your first name will appear

Disclaimer:

Access to any portion of SalesTaxSupport.com is contingent upon your acceptance of our Terms of Use. This Web Site and content provided by STS Publishing, LLC and its third party content providers, including, but not limited to information, documents, forms, comments, advice and opinions, is for informational purposes only, and is not a substitute for professional advice, nor does the use of this Web Site constitute a professional-client relationship. The Web-Site also includes advertisements, directory listings, job postings and links to third party web sites, all of which are provided for your convenience only and in no way constitute a referral, endorsement, or warranty by SalesTaxSupport.com of any product or service provided by such third parties. All content is provided “as is” with no guarantee regarding accuracy, suitability, or timeliness. Your reliance on any content accessed on or through the Web Site, or on any product or service provider is strictly at your own risk.