How We Fixed a Washington State Excise Tax Crisis for an Amazon FBA Seller (And Why Avalara Missed It)
A foreign-owned US LLC was selling on Amazon FBA, using Avalara for sales tax, and thought compliance was covered. It wasn't. Washington's Business & Occupation tax had been missed entirely — and the state was about to come knocking.
Washington State has two separate tax obligations — retail sales tax and B&O (Business & Occupation) excise tax. Avalara's Streamlined Sales Tax (SST) program handles sales tax automatically. But B&O tax is filed separately, directly with the Washington Department of Revenue, and Avalara does not file it for you.
Introduction
Our client was a foreign national — a non-US resident — who had formed a Wyoming LLC to sell on Amazon FBA. Like thousands of international sellers, they had signed up for Avalara to handle US sales tax compliance. The setup appeared solid: 25+ states covered, remittances automated, no manual filings needed.
Then the Washington Department of Revenue (DOR) sent an "Immediate Action Required" notice. Three months of returns were outstanding. Penalties were accruing. Collections proceedings were threatened.
The client was blindsided. Avalara was supposed to handle this. What went wrong?
What Is Washington Excise Tax (B&O + Sales Tax)?
Washington State is one of a handful of US states without a personal income tax — instead, it funds state government largely through the Business & Occupation (B&O) tax, a gross receipts tax applied to virtually every business that has nexus in the state.
Washington also levies retail sales tax on taxable sales to Washington customers — the standard consumption tax most sellers are familiar with.
Both are filed together on the Washington Combined Excise Tax Return, submitted monthly through the My DOR portal. Here's how the two components work:
| Tax type | Rate | What triggers it | Who files? |
|---|---|---|---|
| B&O – Retailing | 0.471% | Gross receipts from WA sales | You, via My DOR |
| Retail Sales Tax | ~10.1% (varies by city) | Taxable sales to WA customers | Avalara SST (if enrolled) |
The critical point: both taxes are reported on the same return. Avalara handles the sales tax remittance through the SST program, but the B&O portion must be reported separately by the business itself. Avalara does not do this automatically.
How the Problem Arose
When our client enrolled in Avalara SST, they were given a dashboard showing multi-state sales tax remittances. Washington appeared on the list. Green checkmarks. Everything looked fine.
What the dashboard didn't make obvious was that Avalara's SST enrollment only covered retail sales tax. The B&O portion of the Washington Combined Excise Return was left entirely unfiled. For months.
The timeline: The client started selling in Washington through Amazon FBA in early 2026. Amazon has FBA fulfillment centers in Washington, which creates physical nexus — and a clear B&O tax obligation from the first sale.
January, February, and March 2026 returns were never filed. By April, the Washington DOR had flagged the account and issued an enforcement notice. At this point, penalties were already accruing at 5% of unpaid tax per month, plus interest.
The client contacted us after receiving the DOR notice — convinced they had done everything right because Avalara showed Washington as "covered."
What We Did
We assessed the situation, quantified the liability, filed all outstanding returns, and set up a clean ongoing compliance process. Here's the step-by-step:
- 1Diagnosed the root cause: Confirmed that Avalara SST remits retail sales tax only — not Washington B&O. The client's My DOR account showed three unfiled periods with enforcement pending.
- 2Pulled and cleaned transaction data: Exported Avalara CSV transaction reports for January, February, and March 2026. Filtered to Washington state only. Excluded cancelled transactions — only Locked and Committed transactions count toward gross receipts.
- 3Calculated B&O liability: Applied the Retailing B&O rate of 0.471% to gross Washington sales for each period. Verified figures against the client's Amazon sales reports for cross-reference.
- 4Filed all three outstanding returns via My DOR: Logged in with SAW credentials, filed Combined Excise Tax Returns for January, February, and March 2026 under the B&O Retailing classification.
- 5Applied the SER deduction to avoid double-payment: Used the "Retail Sales Tax Reported on SER" deduction within the return to ensure the client was not charged for sales tax already remitted by Avalara. This is critical — without it, you pay the same tax twice.
- 6Leveraged the Small Business Credit: Washington automatically applies a Small Business B&O Tax Credit to businesses with qualifying gross income. After applying the credit, total B&O liability across all three periods came to $0.00.
- 7Set up ongoing monthly compliance: Obtained accountant access to the client's Avalara portal. Established a monthly workflow to pull transaction data and file the Washington Combined Excise Return within the first 10 days of each month.
| Outcome | Result |
|---|---|
| Periods resolved | 3 months (Jan–Mar 2026) |
| Total B&O tax due | $0.00 (Small Business Credit) |
| Double-payment of sales tax | Avoided (SER deduction) |
| Collections / enforcement | Closed |
| Ongoing monthly compliance | Set up |
Why Avalara Missed It
Avalara is an excellent tool — for the specific thing it does. The SST (Streamlined Sales Tax) program automates retail sales tax collection and remittance across participating states. That's genuinely valuable and complex work.
But Avalara is not a full-service tax compliance platform. It does not:
Avalara's dashboard showed Washington as an active state — because sales tax was being collected and remitted there. The B&O gap was invisible inside the tool. Most sellers, reasonably, assume "state covered" means full compliance. It doesn't.
Lessons for FBA Sellers
If you sell on Amazon FBA and have inventory in Washington state fulfillment centers, you have physical nexus — and both obligations apply to you from your very first Washington sale.
Using Avalara and selling in Washington?
If you use Avalara SST and have FBA inventory in Washington, you very likely have unfiled B&O returns. WhatsApp us — we'll review your situation and let you know what's outstanding before the DOR notices.