Advanced Sales TaxUniversity of Washington, 2011

Basic sales/use tax refresherQuiz

Is the UW exempt from all WA sales/use tax?

What is the first question to ask when determining whether something is subject to sales or use tax?

Tangible piece of property OR pure service?

Which of the above is taxable, generally?

Tangible piece of property

Basic sales/use tax refresherQuiz (con’t)

When is a service considered taxable?

When it is associated with a piece of tangible property

Is a warranty or maintenance agreement taxable?

Yes, both are taxable.

Basic sales/use tax refresherName ONE sales/use tax exemption people at

the UW can take when making purchases.

Reseller’s permit Machinery and EquipmentHigh tech deferralNot brought into Washington

Miscellaneous ConceptsWhat is destination based sales tax?

Tax rate charged is that of the location of delivery

What are object codes used for?

Does the object code determine the taxability of the item?

NO! You determine the taxability and make the system work for you.

Computers - HardwareHardware is taxable

Includes sales, leases, rentals, licenses to use and any other transfer of possession

Sales tax also applies to all charges for the repair, maintenance, alteration, or modification of hardware, software, or equipment

Computers - SoftwarePrewritten software is taxable

Includes keys, or codes to access the softwareIncludes right to access software where possession is

maintained by the seller or third party regardless of how the payment is structured

Customized software is generally not taxable

Prewritten software maintenance agreementsAgreement may include professional service components

All taxable if part of the same agreement Professional services taxed as professional services if broken

out

Taxation of digital goodsLaw was put in place July 26, 2009

Digital product is a “digital good” or “digital automated service” transferred electronically

Digital products are generally subject to sales or use taxUser’s right of use can be permanent or less

than permanentMay be a subscription

Examples of digital goodsDigital audio works

RingtonesAudio books

Digital audio visual worksMoviesMusic videos

Digital booksBut, not newspapers, chat rooms or weblogs

What isn’t a digital good

Telecommunications services (may still be taxable)

Computer softwareInternet and internet accessProfessional and personal services,

represented in electronic formInvolves the application of human effortHuman effort originated after the customer

requested the service

Digital automated services (DAS)Online searchable database

Information service using software to transfer news, other information

Online data gathering serviceService that searches the internet to identify, gather,

and categorize digital documentsOnline gaming service

Games played against others onlineOnline rental facilitation

Eg. Apartment rental A service transferred electronically using one or

more software applications

What isn’t a DASServices that require primarily human effort

by the sellerMore than 50% of effort involved is human

effortCost, time, revenue to make determination

Website created by company after request (not subject to tax)

But, Website template is taxable as DAS

Live presentations via the internet where discussion takes place in real time, not taxable

Recorded presentations, taxable

Digital codes

Codes that give the purchaser the right to obtain digital products

Does not include a code that represents a stored monetary value, a redeemable card, gift card, or gift certificate

Can be delivered by different meansEmail, soft drink bottle cap, etc.

ExclusionsOnline education programsLive presentations

Seminars Participants can ask real time questionsDoesn’t include a pre-recorded webinarDoesn’t include online training courses if not

liveStorage, web hosting and back-up

Security, firewalls, web filtering are not included

ExemptionsResaleComponent of a new productMade available free to general publicNewspapers, if content is the same as

printed versionReceived for free by end userInternal use only

What should I remember?Even if it is delivered digitally, it might be

taxable

If you have it made specifically for you, it’s probably not taxable

If you and the rest of the world can buy it, it probably is taxable

Internet access and web hosting are not taxable

Medical mattersExempt items

Prescription drugs used in diagnosis, cure, mitigation, treatment, or prevention of disease in humans

Includes prescription lensesIncludes “other substances”

Needles, tubing, bag when used to deliver prescription drugs

Diagnostic substances and reagents, including prepared slides, tubes that contain diagnostic substances and reagents

Stands for intravenous bags, plain glass slides, not included

More medical itemsProsthetic devices are exempt

Artificial substitutes that replace missing parts of the human body

Includes dental prosthetic devices Orthotic devices are exempt

Designed to activate or supplement a weakened or atrophied limb or function

Braces, collars, casts, splintsDurable medical equipment is not exempt

Wheelchairs, crutches, walkers, canes

Value Added Tax (VAT)A tax on the purchase of a good or service

Usually seen in the European Union, but also in Asia

Generally between 15% - 25%

Can try to get a refund at the airport

Best option is to buy it through the internet when you get back

More MiscellaneousI paid 7.3% sales tax in Arizona. I don’t have to pay

use tax in Washington, do I? Well, yes actually you do.

That’s not fair! What can I do?Retail sales of tangible personal property to

nonresidents temporarily within Arizona, for use outside of Arizona, are exempt from transaction privilege tax if the seller ships or delivers the tangible personal property out of Arizona.

Generally applicable in most states. Confirm you are not resident and will use the item out of state.

Confirm treatment with seller!

Misc., cont’d/Amazon didn’t charge sales tax on my last

purchase. I don’t have to pay use tax, do I? Yes, you do have to pay use tax. Third party

sellers sometimes do not charge sales tax, so use tax is due.

Does the University of Washington pay Business and Occupation (B&O) tax? No, the UW is statutorily exempt from B & O

tax.What is a UBI?

A Unified Business Identifier. The UW has one for all its operations.

Is that it?Yep, it’s that easy. To sum up:

If you don’t pay sales tax, you probably owe use tax, unless there is a specific exemption.

If you pay sales tax someplace else, you probably shouldn’t have and you likely still have to pay use tax in WA.

Even if you can’t touch it, it might be taxable. (digital goods)

Object codes don’t drive taxability, the law does.

What do I do if I can’t figure it out? Email or call Julia!

Resources

taxofc@uw.edujeshana@uw.eduhttp://f2.washington.edu/fm/tax/homehttp://dor.wa.gov/Content/Home/Default.aspxhttp://apps.leg.wa.gov/rcw/default.aspx?cite=

82.08http://apps.leg.wa.gov/wac/default.aspx?cite=

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