How Did Washington Expand Nexus? State Tax Legislation

Over the last few years, Washington has taken an interesting approach to its nexus and state tax law. Back in 2015, it adopted a click-through statute and economic nexus thresholds for businesses making sales in the state. Washington currently has a few other interesting bills up for debate, but in the meantime the Department of Revenue (DOR) enacted another piece of legislation that affects economic nexus.

About Washington State Tax Law HB 2163

Washington’s DOR explains how this new state law affects nexus and business and occupation (B&O) tax alongside a few examples on its website. Here’s a brief summary.

As of July 1, Washington’s economic nexus standard is extended to businesses engaging in retailing activity that meet either of the following thresholds, making them subject to state B&O tax:

  • The Receipts Threshold: More than $267,000 of annual gross receipts sourced or attributed to Washington in the current or prior calendar year.
  • The 25 Percent Threshold: At least 25 percent of total annual gross receipts sourced or attributed to Washington in the current or prior calendar year.

The DOR also makes it clear that either one of the above thresholds establishes nexus, which means the company must follow state tax law, even if it doesn’t actually have a physical presence in the state.

Our Reaction to Washington State Tax Law HB 2163

As more states continue to expand the definition of nexus, it will be interesting to see what the courts uphold. In this case, we think it’ll be interesting to see whether Washington eventually expands its economic nexus threshold to sales tax as well, as some other states have done. Stay tuned…

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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