Sales Tax Articles
Sales Tax State Activity Update - April 2006
Washington Explains Use Tax on Promotional Materials
Washington issued a new rule explaining use tax reporting with respects to promotional material.
The rule states, persons who distribute or cause to be distributed any article of tangible personal property (except newspapers), the primary purpose of which is to promote the sale of products or services, are subject to use tax on the value of the property under RCW 82.12.010, 82.12.020, and chapter 367, Laws of 2002.
The rule explains, the use tax reporting responsibilities of consumers when such property is delivered directly to persons other than the consumer from outside Washington. For the purposes of this rule, the term "promotional material" is used in describing such property where applicable.
This rule provides numerous examples that identify a number of facts and then state a conclusion. The examples should only be used as a general guide. Similar determinations for other situations can be made only after a review of all facts and circumstances.
Some of the more revealing points of the rule are as follows:
Who is liable for the use tax on promotional material?
The use tax is imposed on the consumer. The law provides that with respect to promotional material distributed to persons within this state, the consumer is the person who distributes or causes the distribution of the promotional material. A consumer as defined in this rule as being responsible for remitting use tax only if the consumer has nexus in Washington.
What is promotional material?
Promotional material is any tangible personal property, except newspapers, displayed or distributed in the state of Washington for the primary purpose of promoting the sale of products or services. Examples of promotional material include, but are not limited to, advertising literature, circulars, catalogs, brochures, inserts (but not newspaper inserts), flyers, applications, order forms, envelopes, folders, posters, coupons, displays, signs, free gifts, or samples (such as carpet or textile samples).
What is the applicable local use tax rate?
For purposes of determining the applicable rate of local use tax for promotional material, the following guidelines must be followed unless the consumer obtains prior written approval from the department to use an alternative method. Refer to (c) of this subsection for an explanation of the circumstances under which the department will consider approving alternate methods and how to obtain such approval.
- Operations directed from within Washington. The applicable local taxing jurisdiction and tax rate is the in-state location from where the consumer directs or manages its Washington operations.
- Operations directed from outside Washington. A consumer that manages or directs its Washington activities from outside the state must equally apportion the value of the promotional material among the local tax jurisdictions where the consumer conducts its business activities. Promotional material that is targeted to specific business locations of the consumer must be apportioned solely between those business locations. Targeted material is material specifically distributed to promote sales of products or services solely at a specific location(s) and at a different price(s) or terms than those offered at all other Washington locations.
- Are there alternative methods for determining the place of first use? For purposes of reporting use tax on promotional material, the department may agree to allow a consumer to use another method of determining the applicable local use tax rate provided that the method proposed by the consumer results in an equal or more equitable distribution of the tax. A consumer may request written approval for the use of an alternative method by contacting the department.
The entire ruling can be viewed on the Washington State Legislature website.
(Washington DOR Rule, WAC 458-20-17803, Effective 3/27/2006)
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