Washington – Taxability of Paper Bag Fees

SALT Report 1652 – The Washington Department of Revenue determined that fees for the sale of paper carryout bags are subject to tax. Recently, certain cities have passed ordinances that require retailers to charge customers a fee for carryout bags. The Department determined that charges to customers for paper carryout bags are retail sales and subject to retail sales tax and retailing B&O tax. Likewise, the charge for selling reusable shopping bags is subject to retail sales tax and the retailing B&O tax.
The cities of Seattle and Bellingham have recently passed ordinances that ban the use of plastic carryout bags. These ordinances allow retail establishments to collect a fee from any customer who requests a paper carryout bag. Since this fee is not remitted to the city but kept by the retailer it is not exempt from tax.
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