Guide to the District of Columbia Sales Tax

RATE OF SALES TAX:

6%

LOCAL & COUNTY MAXIMUM RATES:

None

Hire a Sales Tax Professional:

One such dependable service is:

TaxJar ($17/month) assists businesses with ecommerce sites in calculating sales tax at the checkout.

What are the taxable goods and services?

The first step in sales tax compliance is determining if the items or services your firm provides are taxable in Washington, D.C.

Traditional Products and Services

Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Washington, D.C.

Medicine, both prescription and non-prescription, food, and fuel are all tax-free.

In Washington, D.C., certain services are subject to sales tax. Check out the Washington D.C. Department of Revenue website for a comprehensive list of taxable services.

The Washington D.C. Department of Revenue has also issued a complete sales tax guide, which includes a list of services that are exempt from sales tax. This list may be found in Section H.

Digital Products and Services

A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.

Businesses in Washington, D.C. are required to collect sales tax on the sale of digital products or services.

How to Register for Sales Tax in Washington, D.C.

If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.

This enables your company to collect sales tax on behalf of the municipal and state governments.

You will need the following information to register:

Your Federal Employer Identification Number (FEIN) and/or Social Security Number, as well as the information for everyone who is permitted to use your account
Your legal business structure (e.g. partnership, corporation, sole proprietor)
Your company’s address
The owner, partners, or main executives’ names, titles, home location, and Social Security number (mandatory)
If previously registered with Washington D.C., the prior Entity Information
The addresses for all places in Washington, D.C. where you will collect sales tax.

A Resale Certificate might help you save money.

When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.

Sales Tax Collection

Fortunately, D.C. only has a 6% flat sales tax. Simply apply a 6% sales tax to all transactions.

Out-of-State Purchases

Businesses in Washington, D.C. must only pay sales tax on out-of-state purchases if they have nexus in other states.

Nexus indicates that the company has a physical presence in another state.

Common nexus types include:

A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.

Submit Your Sales Tax Return

You’re ready to submit your sales tax return now that you’ve obtained your Washington D.C. seller’s permit and understand how to charge the correct amount of sales tax to all of your clients. You avoid penalties and fines, be sure to meet all filing dates.

How to File a Claim

Businesses in Washington, D.C. are required to file sales tax forms and make sales tax payments online.

How Frequently Should You File?

The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.

Annual filing: If your company receives less than $200 in sales tax each month, you must submit returns on an annual basis.
Quarterly filing: If your company receives between $200 and $800 in sales tax every month, you need submit quarterly reports.
Monthly filing: If your company receives more than $800 in sales tax each month, you must submit returns on a monthly basis.

Deadlines for Filing

All sales tax return deadlines in Washington, D.C. are on the 20th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day. The following are the filing deadlines for this year:

Penalties for Filing Late

Washington, D.C. imposes a late filing penalty of 5% every quarter or fraction of a quarter, with a maximum penalty of 25% of the tax stated on the tax return. The penalty cannot exceed an amount equivalent to 25% of the tax payable.

Washington, D.C. additionally imposes an underpayment penalty equivalent to 20% of the unpaid tax.

Interest will be accrued at a rate of 10% per year on the total needed payment, compounded daily until the tax is entirely paid off.