How to Pay Sales Tax in Washington State

Washington State levies a sales tax on the retail sale of most tangible personal property and certain services. Businesses operating within the state collect this tax from customers and remit the funds to the Washington State Department of Revenue. The state relies on these collections to fund public services, as it does not have a personal or corporate income tax. Understanding the process for handling these funds is a fundamental aspect of compliance for any business selling to Washington customers.

Registering Your Business and Determining Filing Frequency

Before a business can collect sales tax, it must register with the state. The process involves applying for a Washington State business license through the state’s online portal, providing details like ownership structure and federal Employer Identification Number (EIN). After registering, the state issues a Unified Business Identifier (UBI) number, which serves as the primary account number for all state-level reporting.

The Department of Revenue then assigns a filing frequency based on the business’s estimated annual tax liability. Businesses with a higher tax liability are required to file monthly, while those with moderate or low liability are assigned a quarterly or annual schedule, respectively. This assigned frequency dictates the deadlines for reporting and paying collected sales tax. For example, monthly returns are due by the 25th day of the month following the collection period.

Information Needed to Calculate Your Sales Tax

Accurately calculating sales tax in Washington requires using its destination-based system. This means the tax rate is determined by the location where the customer receives the goods or services, known as the “ship-to” address. The total rate is a combination of the statewide 6.5% rate and various local rates, which can vary significantly across different jurisdictions.

To assist businesses, the Department of Revenue provides an online tax rate lookup tool. By entering a street address and zip code, a business can find the precise combined sales tax rate and the corresponding location code. This location code is a required piece of information for the tax return, as it ensures the local portion of the tax is allocated correctly.

While most sales of tangible goods are taxable, certain items and services are exempt, such as most groceries and prescription drugs. Conversely, digital goods and services like construction are generally taxable. Businesses should consult the extensive guides published by the Department of Revenue for detailed clarification on taxability rules to ensure they are collecting tax correctly.

Preparing Your Washington State Excise Tax Return

After gathering all necessary sales data, the next step is to transfer this information onto the Washington State Combined Excise Tax Return. This form is used to report sales tax, the Business and Occupation (B&O) tax, and other state excise taxes. The return requires a detailed breakdown of financial activity for the reporting period, starting with the business’s total gross income before any deductions.

The form requires reporting total taxable sales categorized by the specific location codes identified earlier. For each location code, the filer enters the total amount of taxable sales and then calculates the state and local sales tax owed for that jurisdiction. The return consolidates these amounts to determine the total sales tax liability for the period.

Beyond sales tax, the return includes sections for reporting B&O tax, which is calculated on gross receipts and varies by business classification. Filers may also be eligible for certain deductions or credits, such as the Small Business B&O Tax Credit. Completing the form accurately requires ensuring the gross income, deductions, and taxable sales figures from business records are correctly entered.

Filing and Paying Your Sales Tax Return

With the Excise Tax Return prepared, the final step is to file it and remit payment to the Department of Revenue through its online portal, My DOR. After logging in, the user selects the option to file an excise tax return for the appropriate reporting period. The online system presents a digital version of the tax return.

The user enters the figures from their prepared return into the corresponding fields of the online form. This includes gross income, sales detailed by location code, and the calculated tax amounts. The system automatically computes the total tax due, which should match the total from the prepared return.

After entering all tax data, the system proceeds to payment. Businesses can pay via a direct debit from a bank account (E-check or EFT) or by credit card, though the latter usually involves a third-party processing fee. After submitting the payment information, the user confirms the filing and receives a confirmation number as proof of submission.