Sales Tax Overview
Washington DC applies sales tax to the sale of food, drink, and alcohol for consumption on-premises at a rate of 10%. Alcoholic beverages for off-premises consumption are taxed at 10.25%. The general sales tax rate is 6.00%, with certain items like rental cars and calling cards also taxed at 10%. Other goods, such as foodstuffs, pharmaceuticals, and residential utilities, have different tax treatment.
When operating a business in DC, it’s important to charge the tax rate corresponding to the buyer’s address. Shipping charges are also subject to the same sales tax rate if the items being shipped are taxable.
Additional Local Taxes
Taxpayers in the District also pay local taxes which include:
- District income tax, ranging from 4% to 8.95%
- 6% sales tax
- Real estate property taxes
Sales Tax Nexus and Compliance
Sales tax nexus dictates when a business needs to collect and remit sales taxes to the DC authorities. Criteria include:
- The business location within DC
- Business activities conducted in DC by staff
- Owning or leasing property in DC
If a business meets these conditions, they must:
- Register for a sales tax permit
- Set up sales tax collection (e.g., on Shopify)
- Prepare and file sales tax reports and returns
Tourists and residents should note that there’s a Hotel/Transient Accommodations tax, currently set at 14.95%.
Conclusion
DC is not sales tax-free—sales are generally subject to a 6% rate, with higher rates for certain items and services. Additionally, states may impose tax obligations for contractors and exemptions for private universities, reflecting the complexity of tax laws across various jurisdictions. Five states, including Alaska, do not impose a statewide sales tax. In contrast, some states can reach a combined local and state tax rate of 13.5%.
DC sales tax returns must be submitted by the 20th day of the month following the reporting period. Even for periods with no taxable sales, a "zero tax filing" is required. Sales tax permit applications in DC are processed within 7-10 business days without a fee. Online, mail, or in-person filing and payment options are available.
For individuals, an annual DC income tax filing is necessary if they are residents and required to file federal income tax returns.