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Washington Enacts Economic Nexus Provisions and Click-Through Nexus Provisions

On July 1, 2015 Washington Governor Jay Inslee signed into legislation that established click-through nexus and economic nexus provisions.  These provisions are effective September 1, 2015.

Washington’s click-through nexus provisions establishes a presumption that a remote seller has substantial nexus with Washington and is required to collect retail sales tax if the remote seller establishes an agreement with a Washington resident of which, for a commission or other consideration, directly or indirectly refers potential customers to the remote seller through an internet link or other method, and the sales, through the referral, exceed gross receipts of $10,000 during the preceding calendar year. This presumption also applies to Washington Business & Occupations tax when determining substantial nexus between remote sellers and instate residents.

This presumption may be rebutted if the remote seller can prove that the agreement with the resident does not include solicitation in Washington on behalf of the remote seller.  Proof can be shown in the following way:

  1. Establishing that each instate person with whom the remote seller has an agreement is prohibited from engaging in the solicitation of activities in Washington that refers potential customers to the remote seller, and
  2. Such instate person or persons have complied with that prohibition

In addition to the above method, any method that is approved by the Department may be used.
  
Included in this legislation is a provision that extends current economic nexus to wholesalers.  Through the new legislation, Washington has removed the previous physical presence test as a requirement for wholesalers to have substantial nexus within Washington.  As of September 1, 2015, the economic nexus standards now apply to wholesalers who had any of the following in the immediate preceding tax year:

  • More than $50,000 in property in this state;
  • More than $50,000 of payroll in this state;
  • More than $250,000 of receipts from Washington; or
  • At least 25% of the person’s total property, total payroll, or total receipts are in Washington.

For more information on the newly enacted legislation, click here.

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