Sales Tax Change

Effective October 1st, the state of Washington is adding quite a few services to its list of items that are subject to Retail Sales tax, or if services are provided by companies outside the state, Use Tax.

In addition to the Sales tax, many of these services are also subject to the B&O (Business & Occupation) tax. Between the sales tax and B&O rates this is a substantial increase in the cost of business without adding any new services or experiencing any price increases. It’s time to take another look at your overhead costs. Since these are services you as a business are purchasing, this will eat into your profit margin directly.

One of the main focuses, what bumped it up on our radar, is the breadth of IT-related services that will now be subject to these additional taxes. This includes services that were previously excluded such as the DAS. These include network assessments, planning, design, migration services, network security services, system upgrades, and other network maintenance services involving technology infrastructure.

Also included is Remote Access Software (RAS) which is prewritten software provided remotely. We’ve requested a binding answer on whether our FIT System falls in this category or not.

Also added to the Retail Sales Tax list are data processing services including check processing; image processing’ form, survey, and claims processing; payroll processing. In addition to the sales tax, these are subject to B&O tax.

For those of you in WA who use our services, we are not registered in this state, so you will need to identify and file the use tax when you file your sales tax returns. The breadth of these changes are significant and could be a burden on some of our construction clients. Get informed, do your research, and engage with your representatives and the state departments. As always, the auditors will know the codes better than you, and with these changes, some decisions will not be so black and white at first. – CMW