Nonresident Sales Tax Exemption Revised in Washington State To Increase Tax Revenue
Qualified nonresidents, such as Oregonians, are now required to pay sales tax at the point of sale for purchases made in Washington state. Although the exemption remains, a qualified nonresident must pay the sales tax at the point of sale. To take advantage of the Nonresident Sales and Use Tax Exemption, qualified nonresidents must file a Request For Sales Tax Refund with the Department of Revenue the following year. The burden for the exemption has been shifted from the seller to the buyer. Additionally, the exemption now only applies to the state sales tax portion (6.5% in 2019), removing the exemption for the local sales tax (rate varies based on location). In order to increase tax revenue and decrease tax fraud, the Senate passed Bill 5997 which makes revisions to the Nonresident Sales and Use Tax Exemption in Washington state.
Background A Nonresident Sales and Use Tax Exemption allows for a Washington sales tax exemption to residents outside of Washington state if:
The product or property was purchased and picked up within Washington State.
The purchased product or property is for use outside of Washington state.
The buyer is not a resident of Washington state.
The buyer is a resident of:
U.S. States: Alaska, Colorado, Delaware, Montana, New Hampshire, or Oregon
U.S. Possessions: American Samoa
Canadian provinces/territories: Alberta, Northwest Territories, Nunavut, or Yukon
If requested, the out-of-state buyer agrees to provide verification to the Dept. of Revenue that the purchased item was not first substantially used within the state of Washington.
What's New Prior to the Senate Bill 5997, a qualified nonresident buyer was able to present proof of residency to the seller in a form of an identification or an exemption certificate. The buyer was exempt from both state and local sales tax at the point of sale. Effective July 1, 2019, the nonresident buyer must pay the state and local sales tax at the time of purchase and then request a state sales tax refund from Washington's Dept. of Revenue. The portion for the local sales tax is not available for refund. No change: The qualified nonresident state and local sales and use tax exemption remains at the point of sale for the following items. The new deduction for such items is now named as In-State Sales of Motor Vehicles, etc. to Nonresidents.
Request a Sales Tax Refund For purchases made beginning July 1, 2019 through December 31, 2019, a Qualified Nonresident may request a sales tax refund beginning January 1, 2020, with a deadline of December 31, 2020. For purchases made after December 31, 2019, requests for sales tax refund can be made within the calendar-year following the purchase date. For example, if a purchase was made on July 31, 2020, then a request for refund from the Dept. of Revenue can be made beginning January 1, 2021, with a deadline of December 31, 2021. Only one filed request for sales tax refund may be made by a person per calendar year. This is not a limit to the number of purchases submitted with the request for refund. The request for sales tax refund must be $25 or more. A request for sales tax refund must include proof of qualified non-residency (such as a state-issued photo ID) and purchase receipts. Purchases not eligible for a refund:
Marijuana, usable marijuana, or marijuana-infused products.
Repair parts which are not separately stated from repair labor.
Reasoning The bill points to a 2007 Washington State University study, which indicates that, over the last five years, the Department of Revenue lost $80 million dollars to persons avoiding taxes by failing to register their vehicles in Washington state or illegally registering in a different state. An estimated twenty thousand vehicles of Washington state residents, were registered in Oregon. In addition to shifting the burden of proof from the seller to the buyer, the bill encourages law enforcement and prosecutors to proceed violators, of wrongly registered vehicles, "to the fullest extent of the law." The owners of an illegally registered vehicle may face severe penalties and jail time. The message is loud and clear. What To Do Now If you are a qualified nonresident, start collecting the receipts for purchases made in Washington state. Set a task reminder to file for a refund next year. Vera V. Likhonin, EA Stewardship Tax & Accounting, LLC Reference: Senate Bill 5997, Effective July 1, 2019 Dept. of Revenue, August 2, 2019, Special Notice