The Oregon Department of Revenue recently published a new reseller form (150-800-002 (Rev. 02-15)). See www.oregon.gov/dor/BUS/docs/or-business-registry-resale-cert_800-002.pdf.
One of its apparent purposes is to help its Oregon businesses avoid paying the Washington sales tax on goods and certain services purchased from Washington vendors if those items will be resold and not used by the buyer.
The Oregon Department of Revenue website explains:
Oregon developed the Oregon Business Registry Resale Certificate for Oregon buyers who buy goods outside Oregon then resell them in the ordinary course of business. Please do not file this form with us. Give the completed form to an out-of-state seller if you buy property to resell in Oregon. The out-of-state seller may accept this certificate as a substitute “resale certificate” to exempt the transaction from that state’s sales/use/transaction tax, but they are not required to accept it.
There is a laudable and legal purpose behind this new form. However, Washington retailers should be reluctant to rely on this form.
The Old Law
A little background is necessary. Washington’s statutes presume that all sales of goods and certain services — that are defined as “retail sales” — are always subject to sales tax collection unless there is an applicable exclusion or exemption. There are many exemptions that eliminate sales tax collection obligations, including the very critical “resellers’ exemption.” Until 2010, the seller could document the exemption by having the buyer/reseller sign the Washington Department of Revenue’s “Reseller’s Exemption Certificate.”
The New Law
The resale certificate approach ended in 2009 when the legislature abandoned the certificate method and replaced it with a reseller’s permit number method. The legislature changed the certificate method because some buyers had been abusing the certificate, issuing them when the goods purchased were not for resale but for their own use. That 2009 legislation became effective on January 1, 2010.
Under that change, a buyer must provide the seller with a reseller’s permit number that the Washington Department of Revenue issues to the buyer (after application by the buyer and approval by the Washington Department of Revenue). In effect, the Washington Department of Revenue preapproves who can purchase for resale, and this theoretically reduces the risk of self-serving declarations of exempt purchases by any taxpayer with a tax number. Alternatively, a buyer that is not required to be registered by the Washington Department of Revenue may provide (1) a Streamlined Sales and Use Tax Agreement’s Governing Board’s resale form, (2) the Multistate Tax Compact’s resale form, or (3) other exemption form approved by the Washington Department of Revenue. To date, there are no other approved forms. (With respect to (1) and (2), it is not clear how the seller will know whether the buyer is required to be registered in Washington without insisting on an unreasonable intrusion … looking at the buyer’s confidential books and records to understand buyer’s business practices and to determine if such practices require the buyer to be registered in Washington. Good luck getting that information unless you work for a department of revenue.)
The Danger
It is tempting to accept this form. First, it is a government-prepared form from which you might infer credibility and authenticity. Second, it certifies relevant information consistent with the resale exemption. Third, and maybe most importantly, your Oregon customer might insist on your acceptance of the form. Nevertheless, Washington sellers should not rely on the Oregon form at this point in time, because the Washington Department of Revenue has not yet, and may never approve that form.
Because the form has not been approved, this would mean that a Washington Department of Revenue auditor could contend that the Washington seller did not make an exempt sale. And under Washington law, the Washington seller is liable for the sales tax that it failed to collect from a taxable buyer. While it is complex, the seller may be able to recoup the money from the buyer (who really wants to sue a customer?) or prove by other means that the buyer was a lawful reseller, but the cost and time to recover the funds would not likely make the seller 100% whole. This would not be a good result.
The Best Practice
The best practice is (1) to take the Washington reseller’s permit number if the buyer has such a number or (2) to take the uniform resale forms issued by the MTC or Streamlined Governing Board for those Oregon taxpayers who are not required to be registered in Washington.
