Washingtons change from resale certificates to

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Washingtons change from resale certificates to
Reseller Permits
John Wack 360-705-6658 Linda Miller-Baldwin
360-705-6649
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• The transition to reseller permits
• Why the change?
• How to get a permit
• How to use a permit
• Resources

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• Senate Bill 6173
• Eliminates the use of resale certificates
• Effective January 1, 2010, businesses may no
  longer accept, honor or use resale certificates
• Must use a permit issued by DOR
• Permits are free
• Issued only to businesses that make wholesale
  purchases

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Why the change? Misuse of self-issued resale
certificates costs the state over 100 million
dollars in lost revenue each year

• Anyone can download the form, fill it out and
  make purchases without paying sales tax
• Some dont know the law and use it to buy
  everything for their business

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• How is the reseller permit different?
• Changes process from an honor system with
  audits to a managed system with oversight
• Reseller permits issued by the Department to
  qualifying businesses
• Permits can be verified online (available
  January 2010)
• The Department will continue to examine wholesale
  activities during audits

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• Eligible for a reseller permit
• Retailers, Wholesalers, Manufacturers
• Actively reporting income
• No documented misuse of resale certificates

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• Eligible For a reseller permit
• Contractors
• Reporting retail or wholesale
• 25 or more of material and contract labor costs
  related to retail or wholesale construction
  activities
• No documented misuse of resale certificates

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Reseller Permit - Contractors

• Construction industry applies annually
• 12 month expiration period for construction
• Complete Resellers Permit Application
• Report amount for all material and labor
  purchases during previous 12 months
• If new business actual figures not available -
  estimate

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• Required information
• Application requires
• Tax registration number
• Description of business activity
• Description of items to be purchased
• Contractors
• Provide total cost of material and contract labor
  purchased during prior 12 months
• Percentage related to retail/wholesale
  construction

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Resellers Permit

• Applications denied if
• Applicant not entitled to make wholesale
  purchases
• Application incomplete
• Right to appeal if denied permit
• WAC 458-20-100

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25 Threshold

• Material costs and contract labor costs are
  calculated for
• Wholesale/Retail construction (custom
  construction)
• Other construction
• Public road construction
• Speculative building
• US government contracting
• Percentage of wholesale/retail construction
  material and contract labor costs greater than
  25 may qualify

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• Issuing permits
• Notify all active reporting businesses in
  September
• Many eligible businesses will receive their
  permit automatically
• Others will need to apply,
• including contractors

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• Apply for a permit
• Get an application
• Online at dor.wa.gov
• Call 1-800-647-7706
• October apply online through My Account
• please allow up to 60 days

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• Make copies of your permit
• DONT GIVE AWAY your original
• Provide a copy (paper or electronic) to your
  vendors - where you purchase goods that you resell

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How long is my reseller permit valid?
1 year for qualifying contractors Contractors
must reapply every year. Annual renewals
apply no earlier than 90 days prior to expiration
date.
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• Use the permit to buy
• Merchandise inventory that you sell
• Ingredients, components, or chemicals used to
  process new products for sale
• Materials and contract labor for retail/wholesale
  construction projects
• Feed, seed, fertilizer, and pesticides (farmers
  only)

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• Dont use permit to buy
• Items for personal or household use
• Items for business use (office supplies/equipment,
  furniture)
• Promotional items or gifts
• Materials and contract labor for public road
  construction or federal government contracting
• Tools, equipment, or equipment rentals
• Materials and contract labor for speculative
  construction projects

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Example

• A painter may use a reseller permit to purchase
• Materials that become a permanent part of the
  completed project (paint, primer, spackle)
• May not use to purchase
• Tools, equipment or supplies (brushes, rollers,
  equipment ladders, pressure washer, sanders, etc)
  

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• What if I dont qualify for a permit but on
  occasion buy goods to resell?
• Pay sales tax on your purchases and
• Recover the tax you paid on qualifying purchases

• Take a Taxable Amount for Tax Paid at Source
  deduction on your excise tax return, or
• Request a refund from the Department

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Example - Tax Paid at Source Deduction
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Example - Tax Paid at Source Deduction
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Example - Tax Paid at Source Deduction
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Example - Tax Paid at Source Deduction
Total sales tax remitted 2,422.50
Eatonville 32,300 5,700
Auburn - 5,700
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Example - Tax Paid at Source Deduction
Collected 3,900 sales tax (50,000 x .078)
Total sales tax remitted 2,422.50
Eatonville 32,300 5,700
Auburn - 5,700
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Example - Tax Paid at Source Deduction
Collected 3,900 sales tax (50,000 x .078)
Tax paid at source 1,477.50 Eatonville 12,000
x .078 936.00 Auburn 5,700 x .095 541.50
Total sales tax remitted 2,422.50
Eatonville 32,300 5,700
Auburn - 5,700
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Example - Tax Paid at Source Deduction
Collected 3,900 sales tax (50,000 x .078)
Tax paid at source 1,477.50 Eatonville 12,000
x .078 936.00 Auburn 5,700 x .095 541.50
Check 3,900 1,477.50 2,422.50
Total sales tax remitted 2,422.50
Eatonville 32,300 5,700
Auburn - 5,700
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Remind Your Customers
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Resources

• dor.wa.gov/resellerpermit
• Reseller permit brochure
• Online video tutorial
• Online lookup
• (available January 2010)

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Questions?

• See our website at dor.wa.gov/resellerpermit