Taxes and Digital Goods and Services in Washington State

I recently set up a landing page for a local not-for-profit organization. About a week later, I began wondering if I should have charged taxes on the invoice for my work.

To Tax or Not To Tax, That is the Question

Happily my conclusion is no.

TLDR of my research: As long as I am providing professional services (whether in person or via the internet), such as writing and web design, I don't need to charge taxes to my customers. However, if I were to sell digital goods, such as e-books or photos, I would need to charge taxes for those things.

Below is a quick and dirty compendium of the resources I used to make that determination. Below are select excerpts from a few sites. In some cases, I have added italics for details pertinent to my situation.

The first item had me concerned until I looked up other stuff, listed below it. I'm not a developer -- AKA programmer. I'm a content manager. I can set up a website via a plug-and-play service, like Word Press, but I don't do the kind of technical back end stuff that developers do. The final item lists technical writing and web services, including design and maintenance, under exclusions, so I think I'm in the clear here.

Department of Revenue Washington State: Digital products including digital goods

What are web site development services?

"Web site development service" means the design and development of a web site provided by a web site developer to a customer. Charges for web site development services are subject to service and other activities B&O tax as a professional service (sales tax does not apply).

Washington State Legislature WAC 458-20-15503 Digital Products

Part 3. Are There Applicable Exclusions from the General Definitions of Digital Product and Digital Code?

(d) Professional or personal services represented in electronic form are not a digital good. This exclusion applies where the service primarily involves the application of human effort by the service provider, and the human effort originated after the customer requested the service. For example, an electronic engineering report created at the customer's request that reflects an engineer's professional analysis, calculations, and judgment, which is sent to the customer electronically, is considered evidence of a professional service and not a digital good.

(n) Storage, hosting, and back-up. The mere storage of digital products, digital codes, computer software, or master copies of software is excluded from the definition of digital automated services. This exclusion includes providing space on a server for web hosting or backing-up data or other information.

Department of Revenue Washington State: Information technology products and services

Generally not subject to retail sales or use tax

Other services
  • Business process re-engineering
  • Technical writing
  • Assisting with network operations and support
  • Technology support: troubleshooting, basic analysis, hardware and software technical support (not repairs) and production services support
  • Help desk services
  • Custom software and services rendered to custom software
  • Website services: design, maintenance, hosting
  • In-person training related to hardware or software
  • Network system support services
  • Custom software maintenance agreement
  • Data entry services
  • Data processing services, such as processing checks, images, or forms

Additional resources I traipsed through in the process of finding my answer:
  1. Small Business Administration Seattle District Resource Guide (PDF)
  2. Open a business in Washington: Report Tax
  3. Department of Revenue Washington State: Services Subject to Sales Tax
  4. Washington State Legislature RCW 82.04.192 Digital Products Definition
  5. Department of Revenue Washington State: Tax Rate Lookup
  6. Washington BusinessHub

Originally published elsewhere May 19, 2018.