Sales tax takes new direction

DANNY GAWLOWSKI | DANNY GAWLOWSKI THE BELLINGHAM HERALD

• EXAMPLES OF SALES TAX CHANGES
  
  To join the national Streamlined Sales and Use Tax Agreement, Washington state had to change the way it collects sales tax in-state from retailers.
  Currently, sales tax is collected based on location from which the product is shipped. Starting Tuesday, sales tax must be collected based on the tax rate where the product ends up.
  Here are some examples given by the Department of Revenue, with the names of the cities changed to reflect local situations:

  • A Ferndale resident orders a pizza from a Bellingham establishment. If the Bellingham pizza place delivers to Ferndale, the sales tax would be based on the Ferndale rate.
  • A Blaine resident purchases a computer online from a merchant in Seattle. It’s a gift for a college student attending Western Washington University. The Blaine resident wants it shipped directly to the student, who has a Bellingham address. The sales tax would be based on the Bellingham rate.
  • A Lynden resident buys a couch at a store in Bellingham and requests the merchant deliver the couch to the customer’s home in Lynden. Sales tax is based on the customer’s location in Lynden.

  According to the Department of Revenue the sales tax rate in incorporated communities in Whatcom County is 8.4 percent.
  The public can determine the tax rates at their locations by going to www.dor.wa.gov and clicking the “Find a Sales Tax Rate (GIS)” link.
  

This can mean a savings for some consumers: If a Bellingham resident buys a TV in Bellevue (which has a 9 percent sales tax) and has it shipped to Bellingham (which has an 8.4 percent sales tax), he or she will pay a little less in taxes on Tuesday.

However, keeping track of all the tax rates in the state will be a challenge for the 40,000 Washington businesses that sell products and ship them to other parts of the state.

Andrew Skipton, chief financial officer at Bellingham-based Logos Bible Software, said they’ve had to work with another company and put in a significant amount of time making the adjustments.

“It’s been a lot of work for us, so I would guess small-business owners are pulling their hair out over this,” Skipton said. “If we didn’t have a company like Avalara helping us, I don’t know how we would have got this done in time.”

Washington state changed the way in-state retailers collect sales tax in order to join the national Streamlined Sales and Use Tax Agreement. This agreement is an attempt to standardize how states tax online goods.

The goal, according to the state Department of Revenue, is to preserve the economic vitality of brick-and-mortar businesses by reducing the competitive advantage held by out-of-state sellers who don’t charge sales tax.

More than 1,000 out-of-state sellers have agreed to begin charging sales tax to customers in any state that joins the SSUTA.

Getting the word out about the in-state collection change has been a challenge, however. Mike Gowrylow of the Department of Revenue said they’ve had more than 140 workshops and public appearances to educate business owners about the changes.

“We’re about 90 percent there (in educating businesses), but we still have a ways to go,” Gowrylow said. “We recognize this is a big change for businesses, and there are some, particularly small businesses, who don’t know about this.”

The department also is providing Web resources and tutorials.

Some small retailers are eligible for assistance from a certified service provider that handles the coding and files the sales tax forms for businesses.

One such provider is Avalara, based on Bainbridge Island. Rory Rawlings, founder of the company, said there hadn’t been as much interest as expected in his company’s services at the beginning of the year, but it has been rising as the Tuesday deadline approaches.

“We expect interest to peak on July 1 and remain high for several months as businesses realize that they need to make changes to how they calculate sales tax,” Rawlings said. “I feel our biggest role right now is educating businesses. We’re a Washington business, and we don’t want to see others be caught by surprised by this.”

This change is challenging even for companies that are used to this style of tax collection.

Ferndale-based Superfeet ships its shoe sole products across the country, but also had to work with Avalara to make adjustments, said Lynette Ziegler, vice president of operations.

She said Superfeet had to expand the number of tax codes they could input into their programs. For the time being, they’ll have to manually input the tax on orders taken over the phone.

“It’s increasing the burden on business in terms of reporting; once everything becomes automated, it’ll be fine in the longterm,” Ziegler said. “It’s one of those things that you just have to take in stride.”

Gowrylow said they expect it will take a while for every business to adjust, so there will be a bit of a grace period.

“We’re not going to penalize companies as long as they are making the effort to make it right,” Gowrylow said. “We’ll give them the time needed.”