WAC 458-20-27702
Taxpayer relief -- Sourcing
compliance -- One thousand dollar credit and certified service
provider compensation for small businesses. (1) Introduction.
RCW 82.32.760 provides sourcing compliance relief to certain
eligible taxpayers impacted by RCW 82.14.490 and 82.32.730.
RCW 82.14.490 and 82.32.730 govern where the local retail
sales taxes attributable to the sale of tangible personal
property, retail services, extended warranties, and the lease
of tangible personal property are sourced. "Sourced" and
"sourcing" refer to the location (as in a local taxing
district, jurisdiction, or authority) where a sale or lease is
deemed to occur and is subject to tax. Effective July 1,
2008, RCW 82.14.490 and 82.32.730 will change the way in which
many sellers collect Washington's local retail sales taxes,
resulting in some added transitional costs to these sellers.
This section gives information about the relief provided in
RCW 82.32.760 related to these new sourcing provisions.
In subsection (3)(c) of this section, the department of
revenue (department) provides an example that identifies facts
and then states a conclusion. This example should be used
only as a general guide. The tax results of other situations
must be determined separately after a review of all of the
facts and circumstances.
(2) Commonly used terms.
(a) What is a certified service provider (CSP)? A CSP is
an agent of the seller certified under the Streamlined Sales
and Use Tax Agreement (SSUTA) to perform all of that seller's
retail sales and use tax functions, other than the seller's
obligation to remit retail sales and use taxes on its own
purchases. For a list of current CSPs visit the SSUTA web
site located at: http://www.streamlinedsalestax.org. This
web site is not maintained by the state of Washington or the
department. The web site is current as of the date of
adoption of this section, but may change in future periods by
action of the owner of the web site without notice.
(b) Who is an eligible taxpayer? You will be an eligible
taxpayer if you meet all of the following conditions:
(i) You are registered with the department and are
engaged in making sales of tangible personal property
delivered to physical locations away from your place of
business on June 30, 2008; and
(ii) You meet all of the following requirements for the
2008 calendar year:
(A) You have a physical presence in Washington;
(B) You have annual gross income of the business in an
amount less than five hundred thousand dollars;
(C) You have at least five percent of your annual gross
income from sales subject to sales tax in Washington derived
from sales of tangible personal property delivered to physical
locations away from your place of business; and
(D) You have at least one percent of your annual gross
income from sales subject to sales tax in Washington derived
from deliveries of tangible personal property to destinations
in local Washington jurisdictions other than the one to which
you reported the most local sales tax.
"Gross income of the business" for the purpose of
applying (b) of this subsection means gross income of the
business as defined under chapter 82.04 RCW that is subject to
tax in Washington. The requirements under (b)(ii) of this
subsection apply only to the 2008 calendar year. This means
for instance that an eligible taxpayer may earn over five
hundred thousand dollars in gross income of the business for
the calendar years 2009 and 2010 respectively and not lose
eligibility under this section.
(c) What are eligible costs? Eligible costs represent
those goods and services purchased and labor costs incurred
for the purpose of complying with local sales and use tax
sourcing rules under RCW 82.14.490 and 82.32.730. Examples of
eligible costs include but are not limited to the purchase of
new software or modification of existing software used to
implement the new local sourcing rules; the hiring of
professionals such as accountants, consultants, or attorneys
to implement the new local sourcing rules; the costs for the
purchase or modification of equipment used to implement the
new local sourcing rules (including but not limited to cash
registers and similar items); and payroll expenses associated
with the implementation of the new local sourcing rules.
These costs must be actually incurred between July 1, 2007,
and June 30, 2009, to be eligible.
(3) What relief does Washington provide? If you are an
eligible taxpayer, you are entitled either to take up to a one
thousand dollar credit for your eligible costs, or you may use
the services of a CSP subsidized by Washington for a period of
up to two years. You may choose either the credit or the CSP
services option, but not both. You will not need to apply in
order to take advantage of these options, but you must keep
records sufficient to allow the department to determine
eligibility.
(a) How does the one thousand dollar credit option work?
You may take a tax credit of up to one thousand dollars for
your eligible costs (see subsection (2)(c) of this section).
You must take this credit against Washington state retail
sales taxes imposed by RCW 82.08.020(1) that you collect or
your business and occupation taxes imposed under chapter 82.04 RCW. The credit may not be taken against the local sales
taxes you collect. The amount of your credit is equal to the
sum of your eligible costs. You may take the credit only for
costs actually incurred from July 1, 2007, through June 30,
2009.
You must first make a claim for the credit during those
tax reporting periods that fall between July 1, 2008, and June
30, 2009. Thus, you must make a claim for the credit within
the applicable deadline associated with the filing of your
returns for that one-year period. However, this does not
affect your ability to take unused credit after June 30, 2009,
for costs actually incurred before that date until your credit
is used. You may not obtain a refund instead of the credit.
(b) How does the CSP services option work? You may use
the services of a CSP for up to a two-year period starting
July 1, 2008, and ending June 30, 2010. Washington will
compensate your CSP for its services in collecting and
remitting sales and use taxes for Washington on your behalf.
Washington will not compensate the CSP unless it is performing
for you the full services contractually required of a CSP
under the CSP description provided in subsection (2)(a) of
this section. If the CSP is providing a lesser level of
service, Washington will not compensate the CSP for any of
that service. However, you may be able to claim the credit of
up to one thousand dollars for what the CSP charges you in
such instances.
Washington will not compensate a CSP for services
provided to you prior to July 1, 2008, or after June 30, 2010.
If you use a CSP under this section, you will generally not be
liable to Washington for sales or use taxes due on
transactions processed and paid to the state of Washington by
your CSP unless you misrepresent the type of items you sell or
you commit fraud. CSP compensation will not be funded from
any portion of the local retail taxes that are collected and
reported. These local retail sales taxes must be remitted to
the department in full. This option is not available to model
1 volunteer sellers using the services of a CSP as described
in WAC 458-20-277.
(c) CSPs: Filing returns, remitting taxes, and
compensation.
(i) How do CSPs file tax returns and remit retail sales
taxes under this section? CSPs must file retail sales and use
excise tax returns for eligible taxpayers electronically.
CSPs must pay retail sales and use taxes due with respect to
these returns using ACH Debit, ACH Credit, or the Fedwire
Funds Transfer System.
(ii) How do CSPs determine their compensation under this
section? A CSP computes its compensation by multiplying the
amount of Washington state and local retail sales and use
taxes collected and reported by the CSP on behalf of an
eligible taxpayer (taxes due) for each applicable calendar
year by the established CSP compensation rate.
The compensation rates established for CSPs are provided
in Table A below. The applicable calendar years during which
a CSP may compute compensation are as follows: Calendar year
2008 (computed from July 1, 2008, through December 31, 2008),
calendar year 2009 (computed from January 1, 2009, through
December 31, 2009), and calendar 2010 (computed from January
1, 2010, through June 30, 2010).
(iii) What are the CSP compensation rates? The CSP
compensation rates are contained in Table A below.
Table A
Taxes Due
Compensation
Rate:
$0.00 - $5,000.00
4%
$5,000.01 - $20,000.00
3.7%
$20,000.01 - $50,000.00
3.3%
$50,000.01 - $100,000.00
3%
$100,000.01 - $200,000.00
2.7%
$200,000.01 - $500,000.00
2.3%
Over $500,000.01
2%
• The compensation rate in Table A is graduated. For
example, the highest rate (4%) applies to the first five
thousand dollars of taxes due, and the next highest rate
(3.7%) applies to the next fifteen thousand dollars of taxes
due.
• The compensation rate in Table A resets each calendar
year. For example, the highest rate (4%) applies to the first
five thousand dollars of taxes due for each applicable
calendar year that the CSP provides CSP services to an
eligible taxpayer, with the next highest rate (3.7%) applying
to the next fifteen thousand dollars of taxes due for the
applicable calendar year.
(iv) Example - Determining CSP compensation. Widgets is
an eligible taxpayer that does not claim the $1,000 credit
described in (a) of this subsection. Widgets retains a CSP,
Easysoft, to perform all of its retail sales and use tax
functions other than the obligation to remit retail sales and
use taxes on its own purchases. Easysoft files Widgets'
Washington state excise tax returns and remits the related
taxes due electronically.
(A) First year - Calendar year 2008. From July 1, 2008,
through December 31, 2008, Easysoft collects and reports
$5,000 in taxes due for Widgets. Easysoft may retain $200 of
the taxes due as compensation, which is computed as follows:
• 4% of the first $5,000 of taxes due = $200
(B) Second year - Calendar year 2009. From January 1,
2009, through December 31, 2009, Easysoft collects and reports
$200,000 in taxes due for Widgets. Easysoft may retain $5,945
of the taxes due as compensation ($200 + $555 + $990 + $1,500
+$2,700), which is computed as follows:
• 4% of the first $5,000 of taxes due = $200
• 3.7% of the next $15,000 of taxes due = $555
• 3.3% of the next $30,000 of taxes due = $990
• 3% of the next $50,000 in taxes due = $1,500
• 2.7% of the next $100,000 in taxes due = $2,700
(C) Third year - Calendar year 2010. From January 1,
2010, through June 30, 2010, Easysoft collects and reports
$120,000 in taxes due for Widgets for this period. Easysoft
may retain $3,785 of the taxes due as compensation ($200
+ $555 + $990 + $1,500 + $540), which is computed as follows:
• 4% of the first $5,000 of taxes due = $200
• 3.7% of the next $15,000 of taxes due = $555
• 3.3% of the next $30,000 of taxes due = $990
• 3% of the next $50,000 in taxes due = $1,500
• 2.7% of the next $20,000 in taxes due = $540
(d) Taxpayer liability.
(i) What happens if I incorrectly claim the one thousand
dollar credit option under (a) of this subsection? If you
take a credit under (a) of this subsection and are not an
eligible taxpayer, you are immediately liable to the
department for the amount of the credit erroneously claimed.
If any amounts due under this subsection are not paid by the
due date of any notice informing you of such liability, the
department shall apply interest, but not penalties, to amounts
remaining due.
(ii) What happens if I incorrectly claim the CSP services
option under (b) of this subsection? If you use a CSP and the
CSP retains compensation under (b) of this subsection and you
are not an eligible taxpayer, you are immediately liable to
the department for the compensation retained by the CSP. If
any amounts due under this subsection are not paid by the due
date of any notice informing you of such liability, the
department shall apply interest, but not penalties, to amounts
remaining due.