I actually can’t answer this question generally, or, at this point, even for myself. Normally, I would say “talk to your tax preparer.” But the truth of the matter is that the state of Washington is still promulgating regulations to try to deal with some changes that have been made to the law, and the draft form of the regulation does not clarify whether self-publishers (and others who have business dealings with Amazon) are swept in by the new law. So point your tax preparer to this post (which contains the answer I received from the Department of Revenue in its entirety). The ruling I obtained is not binding on you, but it is binding on me.
So here’s the deal.
For background purposes: Washington state has no individual income tax, but it does tax business activity in the state. That means that Washington residents and those who have a sufficient economic nexus with Washington need to pay a certain percentage of their income to Washington every year.
My initial thought was that if I wasn’t living in Washington, I wouldn’t have to pay their business & occupations tax. Then I started reading the tax code. As of 2011, Washington state requires you to license your business in Washington, and pay business occupation taxes, if you have an “economic nexus” with Washington. The standard is outlined on their website:
If your business earns income attributable to Washington that would be taxable under an apportionable B&O classification and meets one of the following thresholds within a calendar year, you have economic nexus with Washington:More than $50,000 of payroll in WashingtonMore than $50,000 of property in WashingtonMore than $250,000 of gross income in WashingtonAt least 25 percent of your total property, payroll, or income in WashingtonIf you have economic nexus, you must register your business with the Washington State Department of Revenue and report and pay Washington B&O tax.
Answer:Actually, we believe that you are making consignment sales of your books through Amazon Digital Services. Therefore, you would owe retailing B&O tax and retail sales tax on your sales to Washington consumers. However, if Amazon does not collect and remit sales tax on your behalf and if Amazon does not provide a state by state breakdown, we can allow an alternative to using the customer’s address (as is usually the case).Rather than requiring you to remit the taxes due on your book sales to all of your customers, we will allow you to remit such taxes on 2% of your sales since you don’t get the needed information from Amazon.Sharing this rulingYou may share this ruling with anyone you like. However, it is only binding on your business. We recommend other businesses request a ruling based on their specific facts.In the mean time, the Department is working on a proposed rule for royalty income (WAC 458-20-19403). You may view the proposed rules on our website.This ruling is binding. If you disagree with this ruling, you have specific appeal rights under WAC 458-20-100.