Current through Register Vol. 24-06, March 15, 2024
Introduction. This section discusses the
application of the business and occupation (B&O), retail sales, and use
taxes to laundries, dry cleaners, laundry pickup and delivery services,
self-service laundries and dry cleaners, and linen and uniform supply services.
It also discusses the tax treatment of laundry services provided to nonprofit
health care facilities and income received from coin-operated laundry
facilities.
PART I - LAUNDRY OR DRY CLEANING SERVICES; LINEN OR
UNIFORM SUPPLY SERVICES.
(101)
Definitions.
(a)
Laundry or
dry cleaning service. A "laundry or dry cleaning service" is the
activity of laundering, cleaning, dying, and pressing of articles such as
clothing, linens, bedding, towels, curtains, drapes, and rugs. It also includes
incidental mending or repairing. The term applies to services operating their
own cleaning establishments as well as those contracting with other laundry or
dry cleaning services. It also includes pickup and delivery laundry services
performed by persons operating in their independent capacity and not as agent
for another laundry or dry cleaning service.
(b)
Linen and uniform supply
services. "Linen and uniform supply services" is the activity of
providing customers with a supply of clean linen, towels, uniforms, gowns,
protective apparel, clean room apparel, mats, rugs, and/or similar items
whether ownership of the item is in the person operating the linen and uniform
supply service or in the customer.
RCW
82.08.0202. It also includes the supply of
diapers and bedding. "Linen and uniform supply services" includes supply
services operating their own cleaning establishments as well as those
contracting with other laundry or dry cleaning businesses.
A person providing linen and uniform supply services performs a
number of different activities, often at multiple locations. Many of these
activities are the same types of activities performed by a person providing
laundry or dry cleaning services, such as: Laundering, dry cleaning, pressing,
incidental mending, and/or pickup and delivery. Additional activities not
generally performed by a person providing laundry or dry cleaning services may
include: Providing linen and uniform items customized by application of the
customer's business name, company logo, employee names, etc.; measuring and/or
issuing uniforms to the customer's employees; repairing or replacing worn or
damaged linen and uniform items; and/or performing various administrative
functions for the customer, such as inventory control.
(102)
Sales.
(a)
Services provided to
consumers. The sale of these services is subject to the retailing
B&O tax and retail sales tax when the services are provided to consumers.
No deduction is available for commissions allowed or amounts paid.
RCW
82.04.070 and
82.08.010. The retailing B&O
and retail sales taxes also apply to sales of soap, bleach, fabric softener,
laundry bags, hangers, and other tangible personal property to
consumers.
(b)
Services
provided to nonprofit health care facilities. Persons providing laundry
services to nonprofit health care facilities should refer to Part III of this
section for reporting instructions.
(c)
Services provided for
resale. The wholesaling B&O tax applies when these services are
performed for persons reselling the services. The seller must obtain a resale
certificate for sales made before January 1, 2010, or a reseller permit for
sales made on or after January 1, 2010, from the buyer to document the
wholesale nature of any sale as provided in WAC
458-20-102A (Resale certificates)
and WAC 458-20-102 (Reseller permits).
Even though resale certificates are no longer used after December 31, 2009,
they must be kept on file by the seller for five years from the date of last
use or December 31, 2014.
(d)
Laundry agents collecting and distributing laundry. Persons who
collect and/or distribute laundered or dry cleaned items as an agent for a
provider of laundry or dry cleaning services, or linen and uniform supply
services are liable for the service and other activities B&O tax on their
gross commissions. See WAC
458-20-159 for the recordkeeping
requirements for showing agency status. The person providing the laundry or dry
cleaning services, or linen and uniform supply services must collect and remit
to the department retail sales tax on the total charge made to the customer
(see (a) of this subsection).
(103)
Collecting retail sales
tax. For the purposes of determining a seller's responsibility to
collect and remit retail sales tax, the retail sales tax is based on where the
buyer receives the cleaned items.
RCW
82.32.730. It does not matter whether the
actual services occur at this location.
(a)
Delivery at service's location. If the laundered or dry-cleaned
items are picked up by the customer at the service's location, the retail sales
tax that applies at that location is to be collected. For example, a dry
cleaning service located in Vancouver, Washington, must collect sales tax from
an Oregon resident who brings clothing items to the business for dry cleaning,
if the Oregon resident picks up the clothing items at the Washington location.
The Vancouver, Washington, local sales tax applies to this sale.
(b)
Seller hiring third-party to
perform services. A customer may purchase laundry or dry cleaning
services, or linen and uniform supply services from a seller who hires another
person to perform the actual service. When the customer drops off and picks up
the clothing or other articles at the seller's business location, the place of
sale is the seller's location.
(c)
Seller using agent for pickup and delivery. If a person providing
laundry or dry cleaning services uses an agent such as a hotel or a driver for
pickup and delivery of the articles to be cleaned, the retail sales tax
collected is the tax applicable to the location where the articles are
delivered.
(d)
Geographic
information system (GIS) for identifying appropriate retail sales tax
rate. For assistance with determining appropriate local sales and use
tax rates, the department's GIS provides a mapping and address lookup system.
The system, along with other taxpayer resources, is available on the
department's internet site at:
http://dor.wa.gov.
(104)
Purchases. Laundry, dry
cleaning, and linen and uniform supply service businesses make retail and
wholesale purchases of products and services.
(a)
Wholesale purchases. The
purchase of tangible personal property for resale or as a component or
ingredient of the cleaned article is a wholesale purchase. Such purchases are
not subject to retail sales tax when the buyer provides a resale certificate
for purchases made before January 1, 2010, or a reseller permit for purchases
made on or after January 1, 2010, to the seller as discussed in WAC
458-20-102A (Resale certificates)
and WAC 458-20-102 (Reseller permits).
Even though resale certificates are no longer used after December 31, 2009,
they must be kept on file by the seller for five years from the date of last
use or December 31, 2014.
The following are examples of items that may be generally
purchased at wholesale. Persons providing laundry services for nonprofit health
care facilities, however, should refer to Part III of this section.
(i) Soap, bleach, fabric softener, laundry
bags, hangers, and other tangible personal property that is not used in
performing laundry or dry cleaning services but is resold as tangible personal
property.
(ii) Dyes, fabric
softeners, starches, sizing, and similar articles or substances that become
ingredients of the articles being cleaned.
(iii) Linen, uniforms, towels, cabinets, hand
soap, and similar property rented or supplied to customers as a part of the
laundry and linen supply service.
(b)
Purchases for own use. A
laundry or dry cleaning service, or linen and uniform supply service that
purchases, or otherwise obtains, services or tangible personal property for use
as a consumer must pay retail sales tax. If the seller does not collect the
tax, the purchaser must remit the retail sales tax (commonly referred to as
"deferred sales tax") or use tax directly to the department. For further
information about the use tax, refer to
RCW
82.12.020 and WAC
458-20-178 (Use tax).
The following are examples of purchases by a laundry or dry
cleaning service, or linen and uniform supply service that are subject to
retail sales tax or use tax:
(i)
Soaps, cleaning solvents, and other articles or substances that do not become
ingredients of the articles cleaned;
(ii) Equipment such as washing machines,
dryers, presses, irons, fixtures, and furniture;
(iii) Supplies such as hand tools, sewing
notions, scissors, spotting brushes, and stationery; and
(iv) Items given to customers without
charge.
PART II - SELF-SERVICE AND COIN-OPERATED LAUNDRY
FACILITIES.
(201)
Self-service and coin-operated laundry facilities. The definition
of "retail sale" excludes charges made for the use of self-service or
coin-operated laundry facilities.
RCW
82.04.050. Thus, gross income received from
charges for the use of such facilities is subject to the service and other
activities B&O tax. Retail sales tax does not apply to these
charges.
(202)
Sales of
tangible personal property. Sales of soap, bleach, fabric softener and
other supplies to consumers are subject to the retailing B&O tax and retail
sales tax. For most sales, the law requires a seller to separately state the
retail sales tax from the selling price. However, the law allows a seller
making sales of tangible personal property to a consumer from a vending machine
to deduct the tax from the total amount received to arrive at the net amount
that becomes the measure of the tax.
RCW
82.08.050 and
82.08.080.
For the purposes of determining a seller's responsibility to
collect and remit retail sales tax, the tax to be collected is determined by
the location of the facility.
(203)
Purchases.
(a)
Wholesale purchases. The
purchase of tangible personal property for resale as tangible personal property
is a purchase at wholesale. Such purchases are not subject to retail sales tax
when the buyer provides a resale certificate for purchases made before January
1, 2010, or a reseller permit for purchases made on or after January 1, 2010,
to the seller as discussed in WAC
458-20-102A (Resale certificates)
and WAC 458-20-102 (Reseller permits).
Thus, purchases of soap, bleach, fabric softener, and other supplies for resale
to customers separate from charges for the use of the laundry facilities are
wholesale purchases. Even though resale certificates are no longer used after
December 31, 2009, they must be kept on file by the seller for five years from
the date of last use or December 31, 2014.
(b)
Retail purchases. A
self-service or coin-operated laundry facility that acquires tangible personal
property for use as a consumer must pay retail sales tax (commonly referred to
as "deferred sales tax") or use tax directly to the department when the seller
fails to collect the appropriate retail sales tax. For further information
about use tax, refer to
RCW
82.12.020 and WAC
458-20-178 (Use tax).
The following are examples of purchases by a self-service or
coin-operated laundry facility that are subject to retail sales tax or use
tax:
(i) Washing machines, dryers,
fixtures, and furniture; and
(ii)
Items given to customers without charge.
PART III - LAUNDRY SERVICES PERFORMED FOR NONPROFIT
HEALTH CARE FACILITIES.
(301)
Definition - nonprofit health care facilities. For the purpose of
this section, "nonprofit health care facilities" means facilities operated by
nonprofit organizations providing diagnostic, therapeutic, convalescent, or
preventive inpatient or outpatient health care services. The term includes, but
is not limited to, nonprofit hospitals, nursing homes, and hospices.
(302)
Sales of laundry services to
nonprofit health care facilities. The definition of a retail sale
specifically excludes sales of laundry services to nonprofit health care
facilities. As a result, charges for laundry services provided to these
facilities are not subject to retail sales tax or the retailing B&O tax.
However, the gross proceeds of sale received for providing laundry services to
nonprofit health care facilities is subject to the service and other activities
B&O tax.
(303)
Purchases
subject to retail sales or use tax. Persons providing laundry services
to nonprofit health care facilities are considered consumers of all items used
in providing such services.
RCW
82.04.190. As a result, purchases of items
such as dyes, fabric softeners, linens, and uniforms are subject to the retail
sales tax. The same is true for purchases of washing machines, dryers,
fixtures, furniture, and other items of tangible personal property. The buyer
must remit retail sales tax (commonly referred to as "deferred sales tax") or
use tax directly to the department when the seller fails to collect the
appropriate retail sales tax. For further information about the use tax, refer
to RCW
82.12.020 and WAC
458-20-178 (Use tax).
Statutory Authority:
RCW
82.32.300 and
82.01.060(2).
10-12-052, § 458-20-165, filed 5/26/10, effective 6/26/10; 05-20-018,
§ 458-20-165, filed 9/26/05, effective 10/27/05; 02-23-034, §
458-20-165, filed 11/13/02, effective 12/14/02. Statutory Authority:
RCW
82.32.300. 99-13-052, § 458-20-165,
filed 6/9/99, effective 7/10/99. Statutory Authority:
RCW
82.32.300 and
82.04.050. 94-09-016, §
458-20-165, filed 4/13/94, effective 5/14/94. Statutory Authority:
RCW
82.32.300. 83-07-033 (Order ET 83-16), §
458-20-165, filed 3/15/83; Order ET 73-1, § 458-20-165, filed 11/2/73;
Order ET 70-3, § 458-20-165 (Rule 165), filed 5/29/70, effective
7/1/70.