WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Washington D.C. is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Washington D.C. include physical property, like furniture, home appliances, and motor vehicles.
Prescription and non-prescription medicine, groceries, and gasoline are all tax-exempt.
Some services in Washington D.C. are subject to sales tax. For a detailed list of taxable services check out the website of the Washington D.C. Department of Revenue website.
Washington D.C. Department of Revenue has also published a comprehensive guide to sales tax which includes services that are exempt from sales tax. You can find this list in Section H.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Washington D.C. requires businesses to collect sales tax on the sale of digital goods or services.
HOW TO REGISTER FOR WASHINGTON D.C. SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Your Federal Employer Identification Number and/or Social Security Number and the info for anyone authorized on your account
- Your legal form of business (e.g. partnership, corporation, sole proprietor)
- Your business address
- The names, titles, home address, and Social Security number of the proprietor, partners, or principal officers (mandatory)
- The former Entity Information if previously registered with Washington D.C.
- The addresses for all locations where you will collect sales tax in Washington D.C.
Register for a Seller's Permit online through the Washington D.C. Department of Revenue
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
Download the Resale Certificate through the Government of the Washington D.C. Office of Tax and Revenue
Instruction: Present the certificate to the seller at the time of purchase.
COLLECTING SALES TAX
Fortunately, D.C. has only a flat sales tax rate of 6%. Simply charge the 6% tax rate on all sales.
Recommended: Use our Sales Tax Calculator to look up the sales tax rate for any Zip Code in the US.
Washington D.C. businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Washington D.C. seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
Recommended: Hiring a business accountant can help your business file tax returns as well as issue payroll and manage bookkeeping. Schedule a consultation with a business accountant today to save thousands of dollars on your taxes.
How to File
Washington D.C. requires businesses to file sales tax returns and submit sales tax payments online.
File the Washington D.C. Sales Tax Return
You will do this with the MyTaxDC page of the Washington D.C. Tax and Revenue website.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business collects less than $200 in sales tax per month then your business should file returns on an annual basis.
- Quarterly filing: If your business collects between $200 and $800 in sales tax per month then your business should file returns on a quarterly basis.
- Monthly filing: If your business collects more than $800 in sales tax per month then your business should file returns on a monthly basis.
All Washington D.C. sales tax return deadlines fall on the 20th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day. Below is a list of this year’s filing deadlines:
Annual filing: January 31, 2020
- Q1 (Jan. - Mar.): Due April 20
- Q2 (April - June): Due July 20
- Q3 (July - Sept.): Due October 20
- Q4 (Oct. - Dec.): Due January 22
Monthly filing: The 20th of the following month, or the next business day, e.g. April 20 for the month of March, or May 22 for the month of April.
Penalties for Late Filing
Washington D.C. charges a late filing penalty of 5% per quarter or fraction of a quarter up to a maximum of 25% of the tax that is reported on the tax return. The penalty may not exceed an additional amount equal to 25% of the tax due.
Washington D.C. also charges an underpayment penalty that is equal to 20% of the tax that is unpaid.
Interest will gather on the total required payment at a rate of 10% per year; compounded daily until the tax is fully payed off.