The change does not affect wholesale sales, deliveries and shipping out of state, service providers, as well as sales of motor vehicles, trailers, semi-trailers, aircraft, watercraft, modular and manufactured homes.

Mike Gowrylow, spokesman for the state Department of Revenue, said the legislation allows Washington to join the Streamlined Sales and Use Tax Agreement consortium, which has agreements with many out-of-state sellers to collect sales tax on sales to those states that are members of the group.

Washington was granted associate member status beginning July 1, and full member status beginning July 1, 2008, the effective date of legislation enacted during the 2007 legislative session. Associate member status means remote sellers who have signed on to the SSUTA can elect to collect sales tax from Washington customers beginning this July 1, but do not have to do so until the following July 1.

Gowrylow said the SSUTA has an agreement with more than 1,000 retailers currently to collect the tax. The retailers, who join voluntarily, receive amnesty in exchange for any tax that would have been previously due. The state could see an estimated revenue of $35 to $40 million a year.

Washington state has been involved with the consortium from its early stages, and was one of the states to develop the idea for Internet sales tax. The Legislature passed the first bill for streamlined tax in 2003, but it took four years to work out mitigation plans and agreements. The consortium has 44 states involved, and Gowrylow said about half of those have passed the streamlined tax legislation. “As more states join, more Internet sellers will join up,” he said. Washington would be the 21st state to join.

Gowrylow said the state did a number of studies to determine which businesses and jurisdictions will be affected, starting with fiscal year 2009 (the law is effective July 1, 2008).

In Kitsap, the city of Poulsbo is expected to have the biggest loss the first year, estimated by the state study at about $95,000 per year (however, the city will gain an estimated $5,000 from Internet/mail order new taxes). Port Orchard would lose about $25,000 (but gain $12,000 from Internet tax) while the city of Gig Harbor in Pierce County would lose about $200,000 (and gain $7,000 back from the Internet retailers). Some jurisdictions stand to gain altogether: The study shows that Bainbridge Island would actually see an increase in sales taxes of nearly $300,000 per year from the streamlined tax plus another $30,000 from Internet sales; Bremerton will gain about $53,000 from streamlined tax and another $24,000 from Internet sales, and Kitsap County would gain more than $1 million from both.

The state will compensate adversely affected jurisdictions, with $32 million set aside for the first fiscal year. Gowrylow said as more Internet retailers join the agreement, the losses will decrease.

The legislation has been supported by retailers, businesses and jurisdictions, which see it as a benefit to the local economy in the long term and a way to stop the erosion of local sales tax as people shop online more. “A big complaint for many local retailers has been the fact that they serve as a showroom for Internet business,” he said, because many customers would stop at a local store to check out a product, then go home and order it online to save on taxes.

Don Brunell, president of Association of Washington Business, wrote in an editorial earlier this year, “The Streamlined Sales Tax legislation is a good thing. It eases the burden on businesses operating in more than one state, protects small Main Street retailers, and creates incentives for catalog and Internet sellers to voluntarily collect sales taxes. In addition, the change could ultimately benefit homeowners…”

With the effective date still a year away, business owners have not started to gear up for the changes yet, but are anticipating to have a difficult time.

“To get it all set up in the beginning will be quite difficult,” said Colleen Glance, owner of Port Orchard-based EmbroidMe, a customized apparel retailer. “Each time we get a new customer (in state), we’ll have to look it up and manually enter it.”

Every time the sales taxes change statewide or per jurisdiction, the businesses will have to make those adjustments—as well as keep up on all the changes.

Ingrid Wachtler, owner of Woodbrook Nursery near Gig Harbor that specializes in native plants, says she is fortunate not to have a lot of retail deliveries, but is anticipating a big headache. As a vendor for the city of Bellevue, she is already using destination-based taxes on their orders per their request. “If you had 20 different municipalities, it is going to get confusing,” she said. “I would have to have 50 or 100 codes, and change for each and every customer… I’m a one-person shop so I’ll have to do it all myself.”

Gowrylow said DOR plans to start an aggressive business outreach campaign, with the goal to help business owners understand the changes as well as to help them transition. “Any business that delivers cross-jurisdiction will be affected,” he said. “That does put a greater burden on businesses because they do have to change their coding system… We’ll be gearing up to educate the business community and to figure out the best way to help them make the switch.”

Certain affected businesses that have gross revenues of under $500,000 and meet two other criteria will be compensated up to $1,000 for POS (point of sale systems) updates. The state has allocated $12 million for business compensation, which will be given as a one-time credit against state income tax liabilities.

“We’re launching a massive education and assistance campaign, with workshops and local advisory committees,” Gowrylow said.

More information is available at the DOR Website at dor.wa.gov.