As a bookkeeper for Richland-based Brutzman's Office Solutions, Judi Luchi wants to avoid a potential accounting headache when a new state retail sales tax rule aimed at helping Washington companies takes effect July 1.
Until now, Luchi collected sales tax according to the Richland rate and sent it to the state Department of Revenue. Under the new rule, she'll have to track sales tax rates of all destinations within Washington where her company delivers office and engineering supplies and furniture to customers.
There are 357 sales tax jurisdictions in Washington, seven in Benton County and six in Franklin County. Luchi has attended two workshops to find out more about the change.
Big stores may have software to deal with it, but for her and hundreds of other employees of small businesses, it means extra work, she said.
But the new law will help small businesses by keeping sales tax revenue stable and making them more competitive with online retailers, said Jan Teague, president and chief executive officer of the Washington Retail Association.
The tax rule change, which was approved by the Legislature last year, will help Washington become a full member of the Streamlined Sales and Use Tax Agreement, a cooperative effort of 44 states and local governments aimed at uniform sales and use tax collection.
The membership will help the state get sales tax from about 1,100 Internet sellers who have voluntarily agreed to begin collecting taxes, said Mike Gowrylow, spokesman for the state Department of Revenue.
"We recognize that this is a major change for businesses," Gowrylow said.
Small firms can get help to understand the change, both online and in person. His department has been conducting workshops throughout Washington to educate retail business owners.
Amber Eustus sells air and water purifiers and vitamin supplements from her Pasco home and plans to set up a spreadsheet to track her sales. In the past, her one-person business has sent orders to Aberdeen.
"I was impressed the way the info was put together," Eustus said of the tax workshop she attended.
Teague said the change affects two out of 10 Washington retailers, she said.
An online tax rate tool with a map search on the Department of Revenue website is especially helpful, Teague said. There's also a paper guide available, and department officials are working with businesses to iron out any potential problems, she said.
Luchi praised state revenue officials for offering one-on-one consultations and has found the workshops useful.
But she has some concerns. It's possible an address database may not be current, because it's based on the information provided by the postal service. That may make it difficult for business owners to find the precise tax rates, Luchi said.
Address rolls are updated quarterly, Gowrylow said, adding even if the database doesn't show a current address, retailers can use several other ways to determine the tax code. And if nothing works, they can use their own location code, he said.
Luchi also said she isn't sure if the new initiative will boost her business, as not many people buy modular furniture online.
Apparel, computers and cars are among the top three sales categories of online businesses, which are expected to grow 17 percent this year to $204 billion, says the National Retail Federation's latest survey.
But "remote" sellers, which include Internet and mail-order businesses, will cost the state $10 billion in lost sales in fiscal year 2008. That means a loss of $668 million in state sales tax, or about 8.6 percent of its total sales tax collections, and a loss of $206 million in local sales tax, Gowrylow said.
The Tri-Cities' share of that pie is about
3 percent.
He said trade groups such as the Association of Washington Business also believe the new tax measure will benefit retailers.
And to help retail businesses make a smooth transition to the new system, the Department of Revenue is offering eligible small businesses up to $1,000 in tax credits to offset the cost of making changes to their accounting/sales systems or getting them free help through vendors.
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