New reseller permits, mandatory Jan. 1, have been been received by many local businesses

Published 4:14 pm Wednesday, October 7, 2009

Initial changes to the reseller system go into full effect Jan. 1. The Department of Revenue has now begun issuing reseller permits to businesses to try and stem the loss of an estimated annual $100 million in unpaid sales taxes.

My article this month will follow-up on the reseller permit process that takes effect on Jan. 1, 2010. Within the last few weeks some of my clients received their reseller permits from the Washington State Department of Revenue, other clients did not.

For those businesses that did not, do not fear as there is an opportunity to get one through an application process. There are two options to get a hold of the application. The first is the Department of Revenue’s website (www.dor.wa.gov/resellerpermit) or by phone 1-800-647-7706.

Don’t wait to apply for permits

My advice would be to start this process as soon as possible as the department has stated that it could take as long as 60 days to get notification about whether your application is approved or denied.

The key point to remember is that starting Jan. 1, 2010 your business will be charged sales tax on all items whether resale or not unless you can give the vendor a copy of the reseller permit for their files. There are two ways your business can recoup the tax paid to your vendors on resale items even if you do not have a permit.

Refund or deduction?

The first is to request a refund through the Department of Revenue; the second is to take a deduction on your State Excise Tax return. The deduction is listed under the description of “tax paid at source”. What this allows you to do is deduct the amount of tax paid against the tax due on that particular tax return. The problem is that this increases the record-keeping and accounting needs by having to account and break-out the tax on each receipt. More importantly is that it messes with your company’s lifeblood, cash.

Your business is basically paying out cash that it has to then make an extra effort to recoup in the future.

My advice is to protect the cash and not pay it if you legally can, in other words why do you want to pay out tax dollars not required then do additional accounting to jump through the hassle of claiming a deduction on a future tax return. Most business owners I know are plenty busy already to have to worry about one more tax issue.

Keep paperwork on file for five years

Another thing to be aware of is that the State of Washington wants to remind all businesses you collect resale certificates and the new reseller permits that you are required to keep these on file for five years from the last date used. This will protect your business in case of audit because without the appropriate paperwork the state will charge the tax to your business.

In a separate matter PLEASE BE AWARE that the extensions filed last April are set to expire on October 15, 2009. Even if you owe you should file timely and work with your advisor to set up an installment plan, at least it will avoid late filing penalties.

As always I welcome any questions, clarifications, or topics that you would like me to address in future columns.