Tax & Accounting Blog

Changes Coming to DC Sales Tax in October

Indirect Tax, Sales and Use Tax, Sales Tax Nexus August 31, 2011

This year, a number of tax law changes have been enacted in DC, in the income /franchise tax, withholding and the sales tax areas.  The following are some of the key sales tax changes.

Sales Tax Rate: The permanent basic sale tax rate is now 6%. The increase to 6% had previously been due to expire on 9/30/2012.

Armored vehicles, Private Investigation and Security services:  Amounts paid for armored car services, private investigation services and security services will be taxable effective October 1, 2011.  The collection of sales tax on these services will be applicable for services contracted for and performed on or after 10/1/2011.

Internet sales tax:  Subtitle Q of Title VIII provides a new definition for DC nexus vender and reminds them that they must pay sales tax on their internet sales as well as for their brick and mortar sales. Subtitle R provides for subsequent enactment of sales tax simplifications which would provide additional authority for taxation of remote sales.  These subtitles will be effective upon enactment of the FY 2012 Budget Support Act (BSA) but the impact of these changes will not occur until the subsequent simplification legislation is enacted.

Hotel Tax for On-line vendors:  Subtitle A of Title VII provides clarification for the collection and submission of sales and use tax on the additional fee charged on sale of the room by the online vendor from whom the transient purchased the room. The on-line vendor will charge the transient for the sales tax on the additional fee and remit the fee to the hotel/lodging operator.