Clarifying Use Tax for Digital Products / Services

[shanenc]

Hi. I have been researching and looking many places for more clarification on which digital products or services are subject to WA State Use Tax. I'm so overwhelmed by the information and still can't figure out what is taxable and not. Can someone please help clarify the following Use Tax, taxable or not taxable in WA STATE? Examples: Online subscription services that we use for our company like Quickbooks desktop monthly subscription, QB Time monthly subscription, Google Workspace monthly subscription, MS monthly subscription, Online digital advertising, Website development, hosting & services, Professional services such as bookkeeping, accounting, and other services provided where humans are doing the work. 

[JosephS1]

I have reviewed the WA resources and from what I can determine, a fair amount that you have listed in your question would be subject to use tax if sales tax was not charged.  The only exceptions I can determine that are not subject to use tax would be Website development, but not the hosting and services and the professional services you mention.  All other items you list would, based on the what I can determine, be subject to use tax if there was no sales tax charged initially.  Also, if sales tax was charged, but in an amount that is less that what the State of Washington would charge, you would owe use tax for the difference.

The links below may be of assistance.  From your question however, it appears you may have already reviewed them.

WA Tax Reference Manual

Sales Tax List

Use Tax

@shanenc 

[shanenc]

Hi. Thanks for the information you provided. I'm still a bit unclear. Yes, I have researched and read many, many documents about this but the language is not so clear to me. So what you're saying is that website development is not taxable in WA State but everything else listed would be? So hosting and site management would be taxable? I thought a lot of professional services were not subject to tax. I know some professional services performed by humans that we have like bookkeeping and accounting services have not been taxed. I also get so confused on what digital services are taxable (ie; digital products, subscription services, digital services). 

[DianeW777]

The Washington (WA) state sales and use tax on digital assets is printed below for your convenience.  Here is a link for contact information for WA Department of Revenue for more sales and use tax questions.

• Digital Products Including Digital Goods (more information can be found at this link).

What digital products are subject to tax?

Sales or use tax apply to all digital products, regardless of how they are accessed (downloaded, streamed, subscription service, networking, etc.). (See exclusions from the definitions and exemptions from retail sales and use tax below)
Digital products subject to sales or use tax include:

• Downloaded digital goods (music and movies, etc.)
• Streamed and accessed digital goods
• Digital automated services (DAS)

The laws also cover remote access software (“RAS”) which is also subject to sales and use tax.

It does not matter if the purchaser obtains a permanent or nonpermanent right of use.

Questions and answers

• Definition of terms
• How these laws apply
• Exclusions and exemptions
• Questions
• References

[shanenc]

Thanks for the additional info. Just to be clear that I'm understanding correctly, a Quickbooks subscription or Google Workspace or Adobe would be examples of taxable digital services. And say, online or print advertising and our regular website hosting service would NOT be subject to tax? What about a company that provides a service only such as bookkeeping or administrative services?

One other item that came up would be for freight & delivery service. For example, if we have a company that hauls resale materials for us, they don't sell us the material, only picking it up and delivering. Would that delivery service alone be subject to tax? I appreciate all the help with understanding this. Reading the DOR website info can be a little confusing and I would just like to find somewhere it can be plain and simply explained.

[DianeW777]

These are questions that really need to be addressed to your sales tax unit in Washington (WA) because we specialize in income tax, as opposed to sales and use tax.  I have placed the contact information here again for your convenience:  Here is a link for contact information for WA Department of Revenue for more sales and use tax questions.

[DianeW777]

These are questions that really need to be addressed to your sales tax unit in Washington (WA) because we specialize in income tax, as opposed to sales and use tax.  I have placed the contact information here again for your convenience:  Here is a link for contact information for WA Department of Revenue for more sales and use tax questions.