Sales and Use Tax :: Accounts Payable :: UW Financial Management
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Sales and Use Tax

Process Overview

The University of Washington must pay sales tax on most merchandise purchased for operations of the University. Sales tax is charged directly by the vendor. If the vendor does not charge and collect sales tax, an equivalent amount is charged as a use tax when the invoice is paid through the Purchasing Accounting System (PAS).

Definitions:

Sales Tax

Sales tax is collected on sales of tangible personal property (TPP) and services not considered by Washington State to be personal or professional services. Tangible personal property and services consumed in Washington State are subject to sales tax. Vendors located in Washington State and out-of-state vendors with a significant presence in Washington State are required to charge and collect sales tax.

Effective April 1, 2009, the current rate in Seattle is 9.5%; Tacoma's rate is 9.3%. (see the Washington State Department of Revenue Site for more information)

Use Tax

Vendors located out-of-state with no direct presence in Washington State are not required to charge or collect sales tax. However, if items or services in question are obtained in Washington State and would otherwise be subject to tax, the University pays an equivalent tax on those purchases as required by WAC 458-20-178. The amount posted to the departmental budget charged for the purchase will be the total of the use tax and the amount of the purchase. Use tax is paid only when sales tax has not otherwise been charged. Like the sales tax, use tax is also collected on sales of tangible personal property. It is the responsibility of the University to determine which invoices are subject to use tax, calculate the appropriate tax, and remit the funds to the Washington State Department of Revenue.

Exceptions

Although the University of Washington is a state agency, it is subject to sales or use tax like any other business in Washington State. As a result, only a few sales/use tax exceptions are available to the University.If you have questions regarding a possible exception check out the Department of Revenue's website at http://dor.wa.gov/ but please don't contact them directly.

Tax Exempt University Purchases

Examples of Sales Tax Application

Sales tax applies to tangible personal property for those vendors subject to collect Washington State sales tax. If you purchase a chair, either from a local vendor, or a vendor out-of-state, who does collect Washington State tax, you will be expected to pay the current tax rate. The vendor out-of-state will bill you the rate applicable at the point of delivery. A local vendor will bill the rate associated with the location of the delivery of the good purchased.

Use tax application generally will effect out-of-state vendor transactions. When a chair is purchased from a vendor with no obligation to collect Washington State tax, the invoice will be for the selling price and shipping charge. The Purchasing Accounting System (PAS) will automatically charge use tax if sales tax is not charged. If the item being purchased is deemed tax exempt, and the purchase is made with an out-of-state vendor, use tax should not be charged. The department placing the order must coordinate with the Buyer in the UW Purchasing Department to make sure the purchase order is coded tax exempt in PAS. If this is not done, the system will default to use tax automatically, resulting in overcharging the department budget.

Correcting Use Tax Over/Under Charges

Reversing Use Tax Charged to Invoices Paid by Accounts Payable

If a budget was improperly charged use tax for a purchase that is exempt, the following procedure should be followed to reverse the use tax charge.

Please note budget reconciliation should be done monthly. See the Budget Activity Reconciliation Process Guidelines for more information. Notify Accounts Payable immediately if you have Use Tax to be reversed using the procedure below:

Procedure : Send an email to the Procurement Customer Service group (pcshelp@u.washington.edu) that includes the following information from your Budget Activity Report (BAR):

Accounts Payable will process a journal voucher to credit to the budget.


Charging Use Tax Charged to Invoices Already Paid by Accounts Payable

If an invoice was already paid without a required charge for use thax that is properly due, the following procedure should be followed to charge the required use tax:

For questions regarding sales tax paid/not paid on an invoice, please contact Procurement Customer Service at pcshelp@u.washington.edu or call (206) 543-4500.