Wash. Admin. Code § 458-20-145
Sellers and their agents are responsible for determining the appropriate tax rate for all their taxable retail sales in Washington. Sellers and their agents are also responsible for collecting from their purchasers the correct amount of tax due upon each sale and remitting that tax to the department.
This part also generally applies to retail sales of digital products and digital codes. Readers should refer to WAC 458-20-15503, which extensively addresses the sourcing of digital products and codes. This rule does not address sourcing under facts that are unique to sales of digital products and codes.
General sourcing rules apply in a descending order of priority, meaning that if the seller has information necessary to satisfy the requirement in (a) of this subsection, then those sourcing provisions must be applied. If the requirement in (a) of this subsection does not apply, the seller must consider whether the requirement in (b) of this subsection applies, and apply those sourcing provisions to the sale. If the requirement in (b) of this subjection does not apply, then the seller must use the same method in determining whether the requirements first in (c), second (d), or third (e) of this subsection apply respectively, and then apply the applicable sourcing provision. Retail sales must be sourced in this manner as follows:
In the case of retail services, this sourcing rule will generally apply where a purchaser receives retail services at the seller's place of business, e.g., an auto repair shop where purchasers pick up the repaired goods at the repair shop location.
Example 1. Tangible personal property received at seller's Washington business location.
Facts: Bill, a Tacoma resident, travels to Renton and purchases a ring from a jeweler located in Renton. Bill receives the ring at the Renton location.
Conclusion: The seller must source the sale to its Renton business location.
Example 2. Tangible personal property received at seller's Washington business location, purchaser is a resident of another state.
Facts: Jane, an Idaho resident, purchases and takes receipt of a mattress at a retailer's physical store in Spokane, Washington.
Conclusion: Even though Jane takes the mattress back to Idaho for her use, the seller must source the sale to its Spokane business location.
Example 3. Tangible personal property received at seller's out-of-state business location, purchaser is a Washington resident.
Facts: Luggage Retailer has retail stores located in Washington and Oregon. John, a Washington resident, goes to Luggage Retailer's store in Portland, Oregon to purchase luggage. John takes possession of the luggage at the store.
Conclusion: The seller must source the sale to its Portland business location where John took possession of the luggage. John is subject to use tax on the luggage upon his use of the luggage in Washington. Refer to Part 5 of this rule for more information regarding sourcing requirements for use tax imposed on the purchaser as a consumer.
Example 4. Tangible personal property received at seller's Washington business location using purchaser's own trucks, purchaser is an out-of-state business.
Facts: An out-of-state purchaser takes possession of tangible personal property in Vancouver, Washington and immediately delivers the tangible personal property to the purchaser's out-of-state location.
Conclusion: The sale is sourced to Washington because the purchaser received the tangible personal property in Washington.
Example 5. Tangible personal property received at seller's Washington business location by an affiliated shipping company (separate legal entity), receipt by purchaser is outside of Washington.
Facts: The purchaser in Example 4 uses a wholly owned "shipping company" (a legal entity separate from the purchaser) to receive purchased goods in Vancouver, Washington and immediately deliver them to the purchaser's out-of-state location.
Conclusion: Because "receive" and "receipt" do not include possession by the "shipping company," including a "shipping company" that is affiliated with the purchaser, the sale is sourced to the location where the purchaser receives the goods outside of Washington. The seller should maintain records that support the sourcing of the sale outside of Washington. See subsection (203)(b) of this rule for more details on recordkeeping requirements.
Example 6. Retail service received at seller's Washington business location.
Facts: Barbara, a Longview resident, takes her car to a mechanic shop located in Centralia. The mechanic services the car at the Centralia location. Several days later Barbara picks up the car from the Centralia location.
Conclusion: The seller must source the sale to its Centralia business location.
Example 7. Extended warranty received at seller's Washington business location.
Facts: Saffron, a Des Moines resident, buys a computer from a Burien computer retailer. When purchasing the computer, Saffron also purchases and receives a five-year extended warranty for the computer at the Burien location.
Conclusion: The seller must source the sale of the extended warranty and computer to its Burien business location.
Example 8. Tangible personal property delivered to purchaser's address.
Facts: Wade, a Seattle resident, buys furniture from a store located in Everett. Wade has the furniture delivered to his Seattle residence, where he will receive it.
Conclusion: The seller must source the sale to Seattle, the location where the purchaser received the furniture.
Example 9. Remotely accessed prewritten software.
Facts: Joanne, a Port Angeles business owner, purchases a prewritten software program online from a store located in Sequim. Joanne receives access to the software remotely, at her home address in Port Angeles. The seller has information identifying Port Angeles as the location where the software is accessed by the customer.
Conclusion: The seller must source the sale to Joanne's Port Angeles home location.
Example 10. Tangible personal property delivered to purchaser via third-party shipping company.
Facts: An out-of-state seller uses a third-party shipping company to ship goods to a customer located in Ellensburg. The seller first delivers the goods to the shipping company outside Washington using its own transportation equipment. The shipping company delivers the goods to Ellensburg.
Conclusion: The seller must source the sale to Ellensburg, the location of receipt by the purchaser. Even though the shipping company took possession of the goods outside of Washington, possession by the shipping company is not receipt by the purchaser for Washington tax purposes.
Example 11. Tangible personal property received by purchaser's affiliated shipping company outside Washington then delivered to purchaser.
Facts: A purchaser's affiliated shipping company arranges to pick up goods from an out-of-state seller's business location and deliver the goods to the purchaser's Yakima facility. The affiliated shipping company has the authority to accept and inspect the goods prior to transport on behalf of the buyer.
Conclusion: The seller must source the sale to Yakima, the location of receipt by the purchaser. Possession by a shipping company on behalf of a purchaser, including a shipping company affiliated with the purchaser, is not receipt for purposes of this rule. A shipping company's authority to accept and inspect goods on behalf of a buyer does not constitute receipt by the buyer.
Example 12. Purchaser exercises dominion and control over tangible personal property outside Washington, prior to receiving the tangible personal property in Washington.
Facts: An out-of-state manufacturer with nexus in Washington sells coffee mugs to a Washington-based purchaser in the business of selling small quantities of the goods under its own label in its own packaging. The purchaser directs the seller to deliver the goods to a third-party packaging plant located out-of-state for repackaging of the goods in the purchaser's own packaging. The purchaser then has a third-party shipping company pick up the goods at the packaging plant.
Conclusion: The purchaser takes constructive possession of the goods outside of Washington because it has exercised dominion and control over the goods by having them repackaged at an out-of-state packaging facility before shipment to Washington. The seller must source the sale to the location of the out-of-state packaging plant.
Example 13. Retail service received at location of the purchaser.
Facts: Brett, a Tacoma resident, hires ABC Painting Co., located in Olympia, to paint his home. ABC's employees perform the painting services at Brett's home in Tacoma.
Conclusion: The seller must source the sale to Tacoma, the location where the customer received the retail service.
Example 14. Retail repair service received at the location where repaired goods are received.
Facts: Gabe, a Shoreline resident, sends a clock to a repair business located in Auburn. The business repairs the clock and then delivers the clock to Gabe's home in Shoreline.
Conclusion: The seller must source the sale to Shoreline, the location where the customer received the repaired clock.
Example 15. Retail repair service received at the location where repaired goods are received (repair service in state, receipt of repaired goods out-of-state).
Facts: Assume the facts in Example 14, except that Gabe is a resident of Nevada, and that the repaired clock will be delivered by the seller to Gabe's home in Las Vegas.
Conclusion: The seller must source the sale to Las Vegas, NV, the location where the customer received the repaired clock.
Example 16. Extended warranty delivered to location of the purchaser.
Facts: Tara, a Chelan resident, buys a computer over the internet. The retailer offers a five-year extended warranty. Tara decides to purchase the extended warranty and sends the seller the appropriate paperwork. The seller then sends the extended warranty documents to Tara's home in Chelan.
Conclusion: The seller must source the sale to Chelan, the location where the customer received the extended warranty documents.
Example 17. Tangible personal property delivered to location of purchaser's donee.
Facts: Sandra, a Vancouver, Washington resident, buys a computer online from a merchant in Seattle. The computer is a gift for Tim, a student attending college in Pullman. The purchaser directs the seller to ship the computer to Tim's home address in Pullman. Tim receives the computer at the Pullman location.
Conclusion: The seller must source the sale to Pullman, the location of receipt by the purchaser's donee.
Example 18. Tangible personal property picked up by unaffiliated shipping company from seller's business location, no delivery information available.
Facts: A hotel located in Shelton purchases bathroom towels from a seller located in Bremerton. Rather than having the towels delivered by the seller, the purchaser uses an unaffiliated shipping company to pick up the towels at the seller's business location and deliver them to the purchaser in Shelton. The seller is not able to obtain delivery information for the purchase; however, the seller maintains the address of the purchaser for billing purposes.
Conclusion: The seller must source the sale to Shelton using the purchaser's address information retained in the seller's ordinary business records.
Example 19. Prewritten software delivered electronically, location of purchaser's receipt is unknown, billing address information available to seller.
Facts: Eric buys prewritten software over the internet from a retail outlet located on Vashon Island. The seller transmits the prewritten software to an email address designated by Eric. The email address does not disclose Eric's location. Eric pays for the software by credit card. When entering the relevant credit card information, Eric discloses a residential address in Port Angeles to which the credit card is billed.
Conclusion: The seller must source the sale to Port Angeles, the purchaser's credit card billing address obtained by the seller at the consummation of the sale.
Example 20. Prewritten software delivered electronically, location of purchaser's receipt is unknown, purchaser address information is not available.
Facts: Rebecca purchases prewritten computer software electronically and requests that the software be delivered to a specified email address. The seller operates from a retail store located in Tacoma. The seller does not know the location where the software will be received and further does not have information about Rebecca's location in its ordinary business records. Additionally, Rebecca does not supply the seller with address information during the consummation of the sale.
Conclusion: The seller must source the sale to Tacoma, the location where the computer software was first available for transmission by the seller. This result will not change if the software is routed from a Tacoma server through a second server (either operated by the seller or some third party) located outside of Tacoma. Routing as used in this context refers to the transfer of prewritten software from one location to another location for retransmission to a final destination, and does not include transfers to another location where additional services or products may be added.
Example 21. Motor vehicle delivered to the location of the purchaser.
Facts: Ben, a Federal Way purchaser, buys a car from a dealer in Fife. The customer has the option of picking up the car on the lot in Fife or having it delivered to his residential address in Federal Way. Ben asks to have the car delivered to the Federal Way location.
Conclusion: The seller must source the sale to Fife, the dealer's location from which the car was delivered.
Example 22. Floral arrangement delivered to a purchaser's donee in Washington, seller located in Washington.
Facts: Wade, an out-of-state resident, purchases a floral arrangement directly from a florist in Renton. The purchase arrangement does not involve multiple florists. Wade arranges for the florist to deliver the arrangement to a hospital located in Seattle, where his brother Frank is a patient.
Conclusion: The seller must source the sale to Renton, the location at or from which delivery is made. Because the seller is physically located in Washington and the purchase was made directly between the buyer and the florist, the sale is sourced to the location from which delivery was made.
Example 23. Floral arrangement delivered to a purchaser in Washington, originating florist located in Washington, delivering florist located out-of-state.
Facts: Michelle, a Tacoma resident, purchases a floral arrangement from an online florist, Beautiful Flowers, LLC. Beautiful Flowers, LLC is located in Seattle, but has contractual agreements with florists throughout the country, whereby the contracted florist will prepare and deliver floral arrangements to Beautiful Flowers LLC's customers as a subcontractor. Michelle arranges for the flowers to be delivered to her brother in Camas. The floral arrangement is prepared and delivered by a florist located in Portland, Oregon.
Conclusion: The seller would source the sale to Seattle and collect retail sales tax as the location at which the florist originally took the order was in Washington. RCW 82.32.730(7)(d) specifies that the sale is sourced to the location of the florist originally taking the order.
Example 24. Motor vehicle lease with recurring periodic payments. Facts: Rich, a Fall City customer, leases a car from a dealer in Duvall. Rich leases the car for a period of one year. The car does not qualify as transportation equipment. Rich provides the dealer with his residential address in Fall City where he keeps the car. Rich makes monthly periodic payments throughout the term of the lease. Rich indicates the primary property location for the car is his residence in Fall City. The Fall City location is recorded in the store's business records. The first monthly lease payment is due at the end of the month following the date in which Rich acquired the vehicle.
Conclusion: The seller (lessor) must source the periodic lease payments to Fall City, the residential primary property location of the purchaser (lessee). If Rich changes the vehicle's primary location during the term of the lease and notifies the lessor, the lessor must source any subsequent lease payments to the primary location of the vehicle.
Example 25. Vehicle trailer lease that does not involve recurring periodic payments.
Facts: Amanda, a Tacoma business owner, rents a trailer for a period of one week and no periodic payments are required under the lease. The trailer does not qualify as transportation equipment. Amanda receives the trailer at a business location in Tacoma.
Conclusion: The seller (lessor) must source the sale to Tacoma, the seller's business location where the trailer was received by the purchaser (lessee).
Example 26. Lease of tangible personal property with periodic lease payments, tangible personal property picked up at seller's location, tangible personal property intermittently used out-of-state.
Facts: Alison, a Seattle business owner, leases equipment from a store in Issaquah. Alison picks up the equipment in Issaquah and makes an initial periodic payment on the lease. The equipment is used primarily in Washington, but the equipment is intermittently used in Oregon throughout the term of the lease. Alison indicates the primary property location for the equipment is a business address in Seattle. The Seattle location is recorded in the store's business records. The equipment is leased for a period of one year.
Conclusion: The seller (lessor) must source the initial periodic payment to Issaquah, the location where the equipment was received. The seller must source the subsequent periodic payments to Seattle, the primary property location of the equipment. Alison's intermittent use of the equipment in other jurisdictions does not change the primary property location of the equipment.
Example 27. Lease of tangible personal property with periodic lease payments, tangible personal property delivered to purchaser, primary location of property changes during the term of the lease.
Facts: Amelia, a Pasco business owner, leases equipment from a store located in Pasco for a period of one year. The leased equipment is delivered by the lessor to Amelia and received at the primary property location of the equipment in Walla Walla. Amelia indicates this will be the primary property location for a period of six months. For the second six months of the lease, Amelia indicates the primary property location is a business address in Leavenworth. The store records the primary property locations in its business records.
Conclusion: The seller (lessor) must source the initial periodic payment to Walla Walla, the location where Amelia received the equipment. The seller must source subsequent periodic lease payments covering the first six months of the lease to Walla Walla, the primary property location. The seller must source periodic lease payments covering the last six months of the lease to Leavenworth, the primary property location.
Example 28. Use of a motor vehicle by a Washington resident, vehicle registration and location of the vehicle's primary use.
Facts: Sandra, a Spokane resident, purchases a motor vehicle from a private seller located in Seattle. Retail sales tax was not collected by the private seller. Title to the vehicle is transferred in the King County Auditor's office. Sandra will primarily use the vehicle in Spokane and will drive the vehicle to her residence in Spokane upon completion of the sale. Sandra will list the Spokane address on her vehicle registration and new vehicle insurance policy.
Conclusion: The King County Auditor's office will collect use tax from Sandra based on the combined state and local use tax rate for Spokane, as Sandra's use of the vehicle in Seattle is insufficient to establish first taxable use in that location for purposes of the local portion of the use tax.
Example 29. Use of a motor vehicle by a Washington resident, purchase of vehicle out-of-state.
Facts: Jerry, a Seattle resident, purchases a motor vehicle from a car dealership located in Oregon. The dealership is not registered with the department and does not collect retail sales tax from Jerry at the time of sale. Jerry drives the vehicle via Interstate 5, from Portland, Oregon to Seattle. Jerry subsequently registers the vehicle with the King County Auditor's office upon returning with the vehicle to Seattle.
Conclusion: The King County Auditor's office will collect use tax from Jerry based on the combined state and local use tax rate for Seattle. Although Jerry drove the vehicle in Clark County, the use was insufficient to establish first taxable use in that location for purposes of the local portion of the use tax.
Example 30. Use of a personal watercraft in Washington, purchase of watercraft out-of-state.
Facts: Cameron, a Port Townsend resident, purchases a 42-foot sailboat from a boat dealer in Portland, Oregon. Cameron takes possession of the sailboat at the dealer's location in Portland and does not pay Washington's retail sales tax. Cameron navigates the watercraft down the Columbia River and around the Olympic Peninsula, ultimately arriving in Port Townsend. Cameron entered into a long-term moorage agreement and lists the Port Townsend marina as an additional insured party on his current watercraft insurance policy.
Conclusion: The sailboat is subject to use tax based on the combined state and local use tax rate for Port Townsend. Although Cameron sailed the watercraft in Washington on the Columbia River, the use was insufficient to establish first taxable use in that location for purposes of the local portion of the use tax.
Example 31. Use of a personal aircraft in Washington by a Washington resident, possession taken outside of Washington.
Facts: John, a Bremerton resident, purchases an aircraft from a dealer located in Sacramento, California. John takes possession of the aircraft in California and flies it back to Washington. Prior to arriving at the Bremerton airport, where John has secured a permanent hangar or storage space for the aircraft, John lands the aircraft in Pullman, Washington. While in Pullman he refuels the aircraft before continuing on to the final destination in Bremerton.
Conclusion: The aircraft is subject to use tax based on the combined state and local use tax rate for Bremerton. Although John fueled the aircraft in Pullman, the use was insufficient to establish first taxable use in that location for purposes of the local portion of the use tax.
Example 32. Use of tangible personal property by a Washington business, purchase of tangible personal property out-of-state.
Facts: Grace, an Issaquah business owner, purchases a trailer-mounted generator from a dealer located in Oregon without paying retail sales tax. Grace tows the generator with her own motor vehicle to the company warehouse located in Issaquah. The company stores the generator at their warehouse throughout the year and operates it at various worksites throughout the state.
Conclusion: The King County Auditor's office will collect use tax based on the combined state and local use tax rate for Issaquah, the location where the taxpayer stores the generator. Although Grace towed the generator through other jurisdictions prior to arriving at the business' Issaquah warehouse, the use was insufficient to establish first taxable use in another location for purposes of the local portion of the use tax. Even though Grace operates the generator in multiple locations, the company warehouse is the location where first taxable use as a consumer occurs.
Example 33. Use of tangible personal property by a Washington resident, purchase of tangible personal property out-of-state.
Facts: Alex, a Wenatchee resident, purchases an electric bicycle from a dealer in Montana, without paying retail sales tax. Alex takes possession of the electric bicycle in Montana and transports it back to Wenatchee in their own motor vehicle where it will be stored in their garage. Alex rides the electric bicycle in Wenatchee and various other locations throughout the state.
Conclusion: The electric bicycle is subject to use tax based on the combined state and local use tax rate for Wenatchee, the location where Alex stores the electric bicycle. Transporting the electric bicycle to Wenatchee was insufficient to establish first taxable use in another location for purposes of the local portion of the use tax.
Example 34. Use of tangible personal property by an out-of-state service provider.
Facts: ABC Testing, an out-of-state medical testing company, provides services to Washington customers. ABC sends a customer of its services, a Sequim resident, a container that the customer uses to provide a saliva sample. The container is shipped to Sequim and back out of Washington using unaffiliated shipping companies. ABC owns the container at all times and its customers are subject to ABC terms and conditions regarding their use of the containers. ABC discards the container upon receipt and testing of the customer's sample at their out-of-state business location.
Conclusion: Use tax is due and sourced to Sequim, the location where the testing company made the tangible personal property available for their customer's use.
Example 35. Tangible personal property repaired by out-of-state business who is not required to register or collect Washington taxes.
Facts: Pamela, a resident of Sequim, sends an antique oil painting to an out-of-state business who will refurbish and repair the painting. The out-of-state repairer does not have nexus with Washington and is not required to register with the state or collect Washington's sales tax. Upon completion of the restoration, the repairer sends the painting to Pamela's residence, via a third-party shipping company.
Conclusion: Pamela must report and pay use tax. Pamela must source the repair services to Sequim, the location where first taxable use of the repaired painting occurred as a consumer.
Example 36. Extended warranty purchased from an out-of-state business who is not required to register or collect Washington taxes.
Facts: Michael, a resident of Longview, purchases a laptop computer from an online retailer, who is not registered with the state or required to collect Washington's taxes. The retailer sends Michael the laptop computer to his residential address in Longview via a third-party shipping company. At the time of the laptop's purchase, Michael also purchases an extended warranty. The retailer sends Michael an email which contains the extended warranty in electronic form.
Conclusion: Michael must report and pay use tax. Michael must source his use of the laptop computer and the extended warranty to Longview, the location where Michael first assumed dominion and control over the property and extended warranty, establishing first taxable use in this state as a consumer.
Wash. Admin. Code § 458-20-145
Statutory Authority: RCW 82.32.300 and 82.01.060(2). 08-12-035, § 458-20-145, filed 5/30/08, effective 6/30/08. Statutory Authority: RCW 82.32.300. 83-07-032 (Order ET 83-15), § 458-20-145, filed 3/15/83; Order ET 75-1, § 458-20-145, filed 5/2/75; Order ET 70-3, § 458-20-145 (Rule 145), filed 5/29/70, effective 7/1/70.