Washington state residents do not pay income tax, but instead pay state and local sales tax on most retail purchases and services. Business owners also pay retail sales tax on items not intended for resale. As of May 2015, the state sales tax rate is 6.5 percent. However, local sales tax rates mean that some residents pay up to 9.5 percent.
Taxable Sales and Tax Exemptions
Most retail sales made to in-state residents are taxable. Sales that involve tangible personal property, digital products and construction, recreation, personal and a variety of miscellaneous services are all subject to the sales tax requirement.
Sales Tax Exemptions
Washington State exempts some items from the sales tax requirement. These are:
- Consumer items - food, prescription medication and newspapers
- Machinery and equipment required for manufacturing, including installation, labor and servicing
- Sales made on Indian reservation to an enrolled member of a Native American Indian tribe
- Interstate and foreign sales, and sales made to the federal government
Shipping, Delivery, Mail Order and Internet Sales
Sales tax is charged on the full selling price of a taxable item or service. This applies only to in-state shipments and includes the cost of the item or service, plus shipping, handling and delivery costs.
Washington State passed legislation to conform to the Streamlined Sale and Use Tax Agreement in 2008. Although it stops short of requiring remote sellers to charge sales tax on Internet and mail orders, it strongly encourages a destination-based sales tax system in which remote sellers from other states collect tax on sales to Washington customers and Washington sellers collect sales tax on sales going to other states.