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How Washington is impacted by SCOTUS online sales tax ruling

Thursday's U.S. Supreme Court ruling that says states can collect sales tax from most online retailers means you could be paying more to shop online -- no matter where the business is located.

And businesses that sell online, will be paying more too – particularly in what it could cost to put the taxes in place.

But shoppers in Washington state won’t be seeing as big of a difference as some other states. You’re most likely already paying an online sales tax.

As of Jan. 1, 2018, Washington was the first state in the country to put an online shopping tax in place for third-party sellers, and among the first states in the country for any kind of online sales tax.

It means when you buy from individual sellers hosted on Amazon and Etsy – even if they’re across the country – you’re already getting charged the Washington state sales tax of 6.5 percent, plus additional local sales taxes.

The Supreme Court ruling means you won’t see that tax going anywhere.

Seattle-based tax software company, Avalara, actually has part of the old Supreme Court rule engraved and painted on a wall.

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“It is the thing that has ruled how states can force people to collect sales tax,” said Scott Peterson, Avalara’s vice president of U.S. tax policy and government relations.

“Today has changed everything,” Peterson said.

Currently, only Washington and Pennsylvania have the online sales tax requirement for third-party sellers (Pennsylvania's law went into effect April 1, 2018) so this won't change the Washingtonian's online shopping experience in most cases.

Right now our state requires companies that make $10,000 or more in sales here to either pay the state sales tax, or do notice and reporting which would allow the state to contact and collect a use tax from the customer.

“We’re a sales tax driven state. Of course we don't have an income tax, we have a large sales tax, so we've learned a lot about how to do that,” said State Sen. Reuven Carlyle, D-36th District. Carlyle said he believes current Washington law already taxes most online retailers who sell here, but this ruling will expand Washington's ability to bring in more sales tax dollars.

“There are many retailers making sales into Washington that make $10,000 or more a year in Washington that need to be complying with the law but are not yet,” said Patti Wilson, who is the marketplace fairness project manager with Washington’s State Department of Revenue.

Carlyle said eBay is not currently having its third-party sellers charge the state’s sales tax. KIRO7 confirmed through a viewer’s past 2018 purchase receipts that no sales tax was charged here.

Now with the SCOTUS ruling, Washington might net more online retailers who’ve fallen through the cracks, and other states will start jumping on board and doing what we’re already doing.

It means businesses in Washington that sell online to customers in other states will need to take note.

The process could get complicated, because each state has a different sales tax rate.

And it varies by some cities too -- there are more than $12,000 sales tax jurisdictions in the U.S.

“They need to think of where they make -- instead of how they make sales and where they are physically, they need to start thinking about where they make sales. They need to have a spreadsheet or a map of the U.S. that shows that on a real time basis,” Peterson said.

And Avalara reminds you it's not just online shopping that could be impacted. The ruling also allows states to tax sales services.

“Accounting services, attorney services, engineers, architects,” Peterson said.

“What about Avalara,” asked KIRO7’s Deedee Sun.

“Avalara, absolutely. And software is a great example because there are a lot of people making software,” Peterson said.

Peterson said Avalara’s teams are monitoring states’ legislation and will tweak their tax software in response. (The company couldn’t comment, but the company’s stock shares jumped 30 percent immediately after the SCOTUS ruling Thursday.)

Whether or not Washingtonians will have to pay a tax on services they get from out of state 
is still up in the air.

The Washington State Department of Revenue says that’s something it is analyzing to figure out – it could end up being something lawmakers will have to figure out when drafting up legislation for 2019, or fall under DOR responsibility.

Washington is expecting to bring in $84 million in 2018 from the online sales tax and after the SCOTUS ruling, that number could go up next year.

Online retailers fighting back – Etsy has started an online petition to send a message to Congress. 
Also, eBay is asking Congress to make an exception for small businesses.

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