How to Register for a Sales Tax Permit in Washington

Being your own boss and running a successful business is the dream of every aspiring entrepreneur. You can then enjoy the many benefits that come with being your own boss, such a financial freedom, the license to work when you want, how long you want, with whom you want. And probably the best of all is the fact that you have more time to spend on yourself, with your friends and family.

But these benefits don’t come on their own as soon as you open the doors to your new business. Rather, there are many hours and even years of hard work that have to be put into achieving these goals. But even in this hard work, you will find something to enjoy. You will be able to watch something you created and built grow into a big respectable company, a testament to your success.

But you are probably asking whether you are cut out to be a leader and to run your own company. This is a reasonable question that every aspiring entrepreneur or business owner should ask themselves. If the answer is negative, it is not the end of the world, it just means you have to work harder to get to that goal. Work on yourself and your skills.

Take into account every hour you spent as an employee at every company you worked for as an education that will come into play now that you have made a decision to go on your own. Everything counts, and you already know certain aspects that go into running a business, you’ve been a part of a functional organization and had the chance to observe the set-up and the responsibilities of every employee and how everyone’s efforts pushed the company forward. Yes, it might be a lot of hard work, but take a moment to reflect on all the hours you spent working for someone else, and imagine if you put that much time and effort into building something of your own. Having a go at it already makes more sense.

If you are an aspiring entrepreneur, and are looking to build a company in the Washington state, and would like some pointers on how to prepare, what your tax obligations might be, what a sales tax permit is, and if you can make tax exempt purchases, then this article is for you. However, we have to stress that this is not an official guide and are urged to consult a business advisor or an attorney in order not to miss any details that might be important.

With that out of the way, let’s see what needs to be done before you start contacting the Washington state authorities, applying for permits and attempting to register your company.

Preparing to Register a Business in Washington State

Preparation is of utmost importance as it is the foundation on which the rest of your company will be built in the future. So it is essential you spend time preparing. This includes looking at the market dynamics, deciding what your line of business will be, what the product or the market you are interested in and whether there is any place for a new company in that market.

Answering these questions will be the basis of a document you have to prepare when starting your business, the business plan. This is the first step, and the first time you should consider consulting an attorney. A business plan requires extensive research of the market conditions and, depending on its findings, it will enable you to position your business in that environment and determine whether you have a sustainable model. Due to the scale of the research, one person can hardly cover all the necessary bases, hence the need for an attorney or a business advisor. They will have access to far more resources and personnel and will be able to provide more accurate results in a shorter period of time.

There are several things to consider. If you already have a market or product preference, look into the results of your research and compare the expenses, costs and the potential revenue and profit your business would generate in various market scenarios: a best case, a worst case, and the current case scenarios. This will show you whether your business is sustainable and whether the potential profits would be worth the hassle.

Another factor you need to consider is market competition. If you are entering a competitive and saturated market where the demand is outweighing the supply and where prices are cut to the lowest point, chances of making it in such an environment are slim. This is why it is advisable to look for market segments that don’t have much competition, niche markets, whether you stay in the same line of business or start in a completely different one.

There are a number of benefits to this step. First, you have the chance to establish your presence in the market, build an audience and gain valuable experience in running your own company in a less stressful environment while still making a decent profit. This is especially true if you manage to find a reliable and well-priced source that would enable you to dictate the prices in that market.

However, the price is not the only thing you should use to establish your name and presence; you should provide quality service. This, in turn, will result in customers coming and returning any time they need a new product. Even if you decide it is time to expand and enter a new market, customers will stay loyal and follow. With that experience, an established customer base and reputation it will be a lot easier to enter any market, and simply apply the same rules you have been applying, just on a larger scale.

Now, a business plan can be used as a roadmap and a sort of checklist, but it is a lot more than that. All the figures and projections you put in it will play a major role in case you decide to look for additional funding to start your business. No bank, investor or any other financial institution will consider investing in your company or loaning the money if you don’t present them with a solid business plan.

With all the preparation done, it is now time to have a look at the legal requirements of registering a business in the Washington state.

Registering a New Business in Washington State

With a solid business plan in place and having decided to start your business from scratch and not explore the option of purchasing an already existing business, Washington state directs you to the several choices for a business structure. All these choices come with their advantages and potential flaws but they will determine your business and tax obligations and are dependant on your goals and needs. This is the second instance where you should consult an attorney to fully understand the implications of choosing one business structure or the other and to determine which one is right for your business.

If you plan on being the sole owner of the business, then registering a sole proprietorship could be the option for you as it is the simplest and the cheapest structure to set up. However, you are personally liable for all the debts of the business.

You can also look into other options, depending on the size of your operation. Another popular choice is the Limited Liability Companies (LLCs), which share the liability protection of the larger corporations, but with the governing structure of a partnership. To form an LLC, or any other of the business structures like the Corporations, or Limited Partnerships, you are required to file documentation with the Washington Secretary of State. You can file the documents such as Articles of Incorporation or Certificate of Formation with the Secretary of State online. General Partnerships and Sole Proprietorships are not required to file documents with the Secretary of State.

With a business structure chosen, it is time to determine your business name. Washington State, through its BusinessHub, a one-stop resource for starting and operating a business in the state, advises that the name should be appealing to potential customers and also be easily implemented through graphic design and marketing. You should also look into the possibility of the name already being taken by someone else. To make sure you are using a unique name, do some searches through the U.S. Patent and Trademark Office, the Washington Business Licensing Service and the Secretary of State.

Once you have managed to find a unique name and filed your documents of registration with the Secretary of State, you will be provided with a Washington State Unified Business Identifier or UBI number. You will next have to look at your business license and permits requirements. Most businesses require state and local permits. You may file your Business License Application with the State of Washington Business Licensing Service.

https://dor.wa.gov/contact-us/local-offices

We have skipped a step in this process: filing for the Federal Employer Identification number with the Internal Revenue Service since the next part of this article will focus on the tax obligations and requirements of your business. We will focus specifically on the Sales Tax permit in the state of Washington, and find out what it is and who needs one.

Washington State Sales Tax Permit

If you are, for example, interested in a form of retail, and plan on purchasing liquidated stock to resell online, the state of Washington will issue a sales tax permit. However, the state has simplified its process as it uses its Business License Application to establish the accounts for your business with multiple Washington state agencies, including the Departments of Revenue (the sales tax permit), Employment Security and Labor & Industries, and even some local and specialty licenses can be obtained by using the Business License Application, the BusinessHub website reads.

Now whether your business will need a sales tax permit is another question. This depends on whether you have a sales tax nexus in the state of Washington. If you solicit sales in the state, assemble goods or maintain a stock of merchandise in the state, among other things, you will have a sales tax nexus. Check whether the products you plan on selling are taxable. In general, tangible products are taxable, with certain exemptions, while services are for the most part not taxable. If you tick the taxable box, you may continue the application process through the Business License Application.

However, in case you would like to file your documents the old fashioned way, you may use a printable Business License Application, fill it out and mail it to the Department of Revenue’s address listed in the contacts section below. As you can read in the application form, you will have to provide information about your business, as well as stating the purpose of the application. There are also certain processing fees you will have to pay.

Once you apply, your permit will be issued within one or two days if you apply online, or up to 21 days if you apply by mail. In addition, the sales tax permit has to be renewed. Once you receive the permit, check the top right-hand corner for the expiration date of your permit and have in mind that you should apply for renewal some 45 days before it expires.

Sales Tax Exemptions in Washington State

As noted above, there are certain exemptions to the taxable products or services and there are ways a retailer can make a purchase without having to pay tax. Exemptions include farming products, interstate sales, public activities and health-related purchase, among others, the Department of Revenue notes.

But, if you plan on purchasing merchandise with the sole intention of reselling, you might have another way of avoiding the tax. The state of Washington distributes its Reseller Permit to retailers and wholesalers who buy merchandise for resale. These reseller permits are valid for four years. However, if you are a contractor or your business has been open for less than 12 months, your reseller permit will be valid for two years only.

As you may have noticed, the Reseller Permit linked to in this article is only a sample since each permit is issued individually and contains permit numbers unique to every single business. Do make sure you use the permit properly to avoid any potential penalties and that, when you are planning on making a tax free purchase, you fill out all the required information.

Now, as you can use the permit to buy merchandise, you might as a seller be on the receiving end of such a permit. In case you do receive a reseller permit during a transaction, you have to keep it on file for at least five years, as you will be requested to provide it in case of an audit. To be valid a seller permit has to be filled out properly and signed by the buyer.

This is an overview of the steps required to set up and register your business and apply for a sales tax permit in the state of Washington. We stress that this is not an official guide and urge you to consult an attorney or a business advisor who will help you with the process and who will show you any specific local requirements you may need to meet.

Contact Details

Business Licensing Service

PO Box 9034
Olympia, WA 98507-9034
Phone:1-800-451-7985

Secretary of State

Dolliver Building
801 Capitol Way South
Olympia 98501
Email: [email protected]
Mail: PO Box 40234
Olympia WA 98504-0234
Phone: (360) 725-0377

Washington State Department of Revenue

Executive Office
PO Box 47450
Olympia, WA 98504-7450

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