Update Aug. 17, 2017: Washington has enacted legislation requiring remote sellers and marketplace providers with at least $10,000 in annual Washington sales to either collect sales or use tax, or comply with certain sales and use tax notice and reporting requirements. Learn more.

Untaxed ecommerce sales are expected to cost the state of Washington approximately $353 million in sales and use taxes in Fiscal Year 2018. The legislature says the current policy of restricting states from taxing sales by remote sellers is unfair and harms the state. Two identical measures (Senate Bill 5855 and Senate Bill 5856), both introduced earlier this week, seek to address this perceived inequity by expanding nexus in Washington.

Nexus is a connection between a seller and a state that requires the seller to collect and remit tax on sales made in that state. For sales tax, precedent requires the connection to be a substantial physical presence. Yet with ecommerce growing and sales tax revenues decreasing across the nation, many states are looking to broaden their definitions of nexus and tax more sales by out-of-state sellers.

To that end, Washington established click-through nexus as of Sept. 1, 2015. Under this policy, remote entities that enter into agreements with Washington residents and provide a commission or other consideration for referrals (such as website links) have nexus when such referrals gross more than $10,000 in sales in the state during the prior calendar year.

The two measures introduced this week would expand the definition of nexus even further. They seek to establish both economic nexus — whereby a substantial connection is created when an entity does a certain amount of business in (or has a certain number of economic ties to) the state — and affiliate nexus, whereby a tax obligation is created through ties to in-state affiliates.

In addition, the measures would impose use tax notification reporting requirements on noncollecting out-of-state vendors.