Washington law kicks in today
Though Washington shoppers are on their honor to pay sales taxes each year on out-of-state purchases -- it's called a "use tax" -- most people either ignore the requirement or have never heard of it. Thus, states such as Washington are banding together to encourage online businesses to collect tax.
On Tuesday, Washington joins 18 other states that require some e-commerce businesses to collect sales tax. About 1,100 online retailers have volunteered to collect, and in return, Washington promises not to sue them for back taxes they might have owed. Three more states are on the way to adopting the law.
The Tuesday change, which is the result of a state law passed in 2007, has two major effects, Washington Revenue Department spokesman Mike Gowrylow said.
The first is that Washington is joining a national online sales-tax effort. The second is that Washington's own tax system is changing from origin-based to destination-based. That is, tax will be collected based on the location of the buyer, not the location of the seller.
"This is a necessary evil. In order to join the national effort, we had to harmonize our sales tax with other states," Gowrylow said. "We believe this is the cleanest, fairest way to do this."
The revenue department has done outreach, conducted more than 140 workshops and public appearances, and is working with businesses that are having trouble adapting. Still, some may still be caught by surprise.
"This is a very important step," said Mark Johnson, vice president of government affairs for the Washington Retail Association. "It's a major changing of our tax structure."
The retail association supports the change because it brings state tax law "in line with the new economy," Johnson said. "When our sales-tax based structure was put into place, there wasn't an Internet, there wasn't a lot in catalog sales. We need to keep up with the times."
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