This blog post may now be out of date. For our most up-to-date info on Washington D.C. sales tax, check out our “Washington D.C. Sales Tax Guide for Businesses.“
Confused how sales tax works around the country? It’s not a surprise, considering every single state (and in district like DC!) has its own rules and regulations regarding these taxes. We know how frustrating it is, so we’re going around the country highlighting various rules and regulations when it comes to sales tax to help you out. Today, we have Washington DC!
You’re a merchant living anywhere but Washington DC
Do you have a business that doesn’t exist within Washington DC lines and otherwise have no nexus in DC? If so, then you don’t have to worry about sales tax. Congrats!
You live and/or operate your business in Washington DC
If your business actually exists within Washington DC, then you must collect and remit sales tax. Washington DC is destination-based so your concern is where your customer lives, not where your business is. Normally this would be very complicated, but tiny Washington DC has made things simple by having a 5.75% universal rate for the whole district. Nice!
You live-out-of-state but use a 3rd party fulfillment service like FBA
Do you have nexus in Washington DC? Not sure? There are no Amazon fulfillment centers in the nation’s capital, but here’s what you need to know if you store inventory or use a 3rd party fulfillment service based in the district. Here is a remarkably in-depth guide to nexus in DC:
District vendors are required to collect sales tax, but the obligation of out-of-state vendors to collect the tax is conditioned on whether the vendor has sufficient “nexus” or contacts with the District.
“Vendor” includes every person or retailer engaging in business in the District and making sales at retail.
“Engaging in business in the District” includes any activity in connection with the selling, delivering, or furnishing in the District, or any activity in the District in connection with the selling, delivering, or furnishing in the District, of tangible personal property or services sold at retail. The term shall include but not be limited to the following acts or methods.
– The maintaining, occupying or using, permanently or temporarily, directly or indirectly, or through a subsidiary or agent, by whatever name called, of any office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business.
– The having of any representative, agent salesman, canvasser, or solicitor operating in the District for the purpose of making sales at retail, or the taking of orders for such sales.
As stated above, Washington DC is destination-based, meaning you need to only worry where your customer lives. However, they’ve managed to simplify it by only having a 5.75% universal rate. No local rates to worry about!
Filing sales tax in Washington DC
To get started, you should register your business in Washington DC. After you do, you can start collecting sales tax.
A Sales and Use Tax Monthly Return must be filed for each month by the 20th day of the month following the period being reported. However, if your liability is consistently less than $100 per period, file an annual return instead, which is due annually on October 20th. If your sales and use tax liability is consistently between $201 and $1,200 per period, you must file a quarterly return. You can find all these forms on the Sales and Use Tax Forms page.
To pay online, sign up for an account at the Office of Tax and Revenue.
Sales tax on shipping
According to a rep at the Washington DC Department of Revenue, shipping costs ARE taxable even if they are separately stated on an invoice.
Summary: Washington DC makes something simple for once
Contrary to most laws and mess that come out of our nation’s capital, sales tax is pretty darn easy to understand. The only rate you have to worry about is 5.75%, as that’s the universal rate – there are no local rates to worry about. So if you have nexus or your business is physically located in Washington DC, collect 5.75% from customers there.
Make sure to register before collecting sales tax. Then you should start paying every month on or before the 20th. If your liability ends up consistently less than $100 per period, file annually. If it’s consistently between $201 and $1,200 per period, file quarterly. You can sign up for an account at the Office of Tax and Revenue to pay or file through paper forms.