[Case Study] Washington State’s Economic Nexus and Apportionment

Have you seen Washington state's new nexus statutes?

Have you seen Washington state’s new nexus statutes?

The state of Washington has a couple of interesting statutes they adopted in September as a way to increase the number of businesses with nexus in the state.

  • Nexus for click-through retail transactions
  • Economic nexus threshold for wholesalers

Both provisions establish additional requirements for out-of-state businesses to pay the state’s Business and Occupation (B&O) tax and file in the state depending on the type and amount of business they’re conducting with its residents.

Keep reading for a summary of the two provisions. As you can see, neither of them affects sales tax. We’ve seen more and more states adopt these types of laws for income or franchise tax. However, note that the B&O tax is not an income tax; it’s a gross receipts tax.

Nexus for Click-Through Retail Transactions

As of September 1, Washington adopted a click-through statute that defines a new way that out-of-state retailers are presumed to have physical nexus within the state. The provision states that they are presumed to have physical nexus with the state of Washington if they:

  • Enter into agreements with Washington residents and pay a commission or other consideration for referrals (such as a link on a website)


  • Gross more than $10,000 in sales into Washington state during the prior calendar year through this type of agreement

“Washington resident” is defined as either a business or individuals physically located within the state.

Economic Nexus Threshold for Wholesalers

Also as of September 1, out-of-state businesses making wholesale sales into Washington will be subject to the Wholesaling B&O tax for those sales delivered into the state if they meet any of the following economic nexus thresholds for the prior calendar year:

  • A business entity is organized or commercially domiciled in Washington
  • More than $267,000 of gross income in Washington
  • More than $53,000 of payroll in Washington
  • More than $53,000 of property in Washington
  • At least 25 percent of total property, payroll, or income in Washington

This provision for an economic nexus does not also establish nexus for Retail Sales Tax, Use Tax or Retailing B&O tax; these three taxes still require physical presence nexus.

It will be interesting to see how states continue to redefine nexus as trade expands into neighboring states through the Internet and other technological advances. In the meantime, please contact us if you have questions about these provisions or any other multi-state tax guidelines. We’re happy to help!

Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including the new California Partial Manufacturer’s Exemption for Sales Tax. To learn more, contact us today at www.MilesConsultingGroup.com.

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