Washington State Sales Tax and B&O Tax Issues
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Washington State Sales and Use Taxes
All parties that sell goods in the State of Washington, and have a physical presence in the state, are required to collect sales tax. Often times, taxpayers do not realize they have enough of a physical presence to be required to collect sales tax, or they are unaware that their activities fall under a classification subject to sales tax. For instance, some construction related services fall under a classification subject to sales tax despite the fact that they are objectively performing services according to any rational person.
Unlike many other business taxes, with sales taxes, a business owner is personally liable for uncollected sales taxes. The State of Washington has no limit to how far they can go back to collect these taxes.
Use taxes are required when out-of-state purchases are made and sales taxes are avoided. For large items such as automobiles, these are charged when the item is registered in the state. But smaller items can be hard to detect, and as a result, many individuals never report items on which they never paid sales tax. So for businesses, the State of Washington actively audits them on a regular basis to make sure sales taxes we paid on purchases. They especially look at large, and out of state purchases. If you are being audited for the payment of Use Tax, or you have failed to pay sales tax on significant assets, call Insight Law and receive a free consultation.
Washington State B&O Taxes
All parties that do business in the State of Washington are required to pay B&O taxes, including Tax Exempt Non-Profit Organizations. The rate paid varies according to the type of activity performed by the business, and the taxable base is ALL revenue earned by the company. This creates a situation where even an unprofitable business is still liable for B&O Tax on all revenue earned. Manufacturing and sales activities are generally taxed at a low in relation to revenue, and services are taxed at a much higher rate.
If you have been audited by the Washington State Department of Revenue, contact Insight Law today, and do not risk being railroaded from the beginning. State governments cannot print money and must find ways to close budget deficits through cost cutting and tax collection. The State of Washington is often more stubborn than the IRS for this reason. Generally, once an audit is complete, the taxpayer has often lost one more opportunity to establish their case, and definitely the cheapest opportunity.
If you have a business and have not been paying B&O Taxes, do not wait for the Department of Revenue to discover this. Programs exist that will limit the back payment of taxes to four years as opposed to seven years if they discover the non-payment of taxes. They will also abate penalties, which can often times be a major percentage of the total. It is always better to retain a tax attorney, come forward, and disclose this information to the State of Washington to minimize overall tax liability.