Retail Sales and Use Tax.  Retail sales taxes are imposed on retail sales of most articles of tangible personal property, digital products, and some services.  A retail sale is a sale to the final consumer or end user of the property, digital product, or service.  If retail sales taxes were not collected when the user acquired the property, digital product, or service, then use tax applies to the value of the property, digital product, or service when used in this state.  The state, all counties, and all cities levy retail sales and use taxes.  The state sales and use tax rate is 6.5 percent.  Local sales and use tax rates vary from 0.5 percent to 3.9 percent, depending on the location.

Nexus.  Nexus is required before a taxing jurisdiction can impose taxes on an entity.  In the case of retail sales taxes, nexus is necessary in determining whether an out-of-state business selling products into a state is liable for collecting retail sales taxes for that state.  As the result of a United States Supreme Court decision, Washington adopted requirements imposing retail sales tax collection requirements, as well as business and occupation tax obligations, on out-of-state sellers.

Streamlined Sales and Use Tax Agreement.  In 2007, legislation was enacted fully adopting the Streamlined Sales and Use Tax Agreement (SSUTA).
 
The SSUTA includes provisions for determining where a sale is deemed to occur for local sales and use tax purposes.  As part of the legislation, the Streamlined Sales and Use Tax Mitigation Account was created to mitigate the effect of the change in sourcing rules to negatively impacted local jurisdictions.  Each July 1st, the state treasurer must transfer an amount determined by the Department of Revenue (DOR) to fully mitigate negatively impacted local jurisdictions.  DOR determines each local jurisdiction's annual losses.  Distributions are made quarterly representing one-fourth of a jurisdiction's annual loss, less voluntary compliance revenue from the previous quarter.
 
In 2017, the Legislature repealed local mitigation payments, effective October 1, 2019.  Until that time, payments must be adjusted to reflect the impact of marketplace fairness on local tax revenues and will be made only to cities, counties, and public facilities districts.  Selected jurisdictions may have qualified for mitigation payments under the 2019-2021 omnibus operating budget.

House Bill 1948.  During the 2020 session, the Legislature passed EHB 1948.  Under EHB 1948, qualified local taxing districts negatively impacted by the SSUTA receive annual mitigation payments each July 1st.  To qualify, a local taxing district must be a city and have received a mitigation payment of at least $150,000 in calendar year 2018 from the Streamlined Sales and Use Tax Mitigation Account (mitigation account).  In addition, the taxing district must continue to have local sales tax revenue loss due to the sourcing provisions in the SSUTA.
 
Beginning July 1, 2020, DOR must calculate each qualified taxing district's annual loss.  The annual loss is calculated by comparing at least 12 months of tax return data from before and after July 1, 2008.  Each quarter, distributions are made from the Warehousing and Manufacturing Jobs Center Account (account) created in this act.  Distributions from the account will be an amount equal to one-fourth of the taxing district's annual loss.  DOR will reduce this amount by the voluntary compliance revenue and marketplace fairness revenue. 
 
On April 3, 2020, the Governor fully vetoed EHB 1948.  In the veto statement, the Governor cited dramatically changed circumstances resulting from the COVID-19 pandemic since the Legislature's approval of the 2020 supplemental operating budget.

Qualified local taxing districts negatively impacted by the SSUTA may receive annual mitigation payments each July 1st.  To qualify, a local taxing district must be a city and have received a quarterly streamlined sales tax mitigation payment of at least $60,000 on June 30, 2020.
 
Beginning July 1, 2021, DOR must provide each qualified local taxing district a quarterly mitigation payment equal to the payment provided to that taxing district on June 30, 2020.  Beginning July 1, 2022, the amount of the quarterly mitigation payments must be reduced by 20 percent from the previous year's payment that same quarter for each qualified local taxing district.  
 
The quarterly distribution must be made from the account.  Expenditures from the account may be used only for mitigating the negative fiscal impacts to local taxing jurisdictions as the result of sourcing changes from the SSUTA.
 
Payments end July 1, 2026.