According to a ruling from the State of Washington this week “Internet domain name registration services are generally subject to retail sales or use tax.
Every computer on the Internet has a unique address, called an Internet Protocol (IP) address. Website owners then buy an easy-to-remember domain name. For example, instead of typing in an IP address (such as 192.0.34.163), a user would type in a domain name (icann.org) to access a website.
Under the law, “sale at retail” and “retail sale” include sales of digital automated services to consumers (RCW 82.04.050(8)(a)).
“Digital automated services” means any service transferred electronically, such as over the Internet, using one or more software applications (RCW 82.04.192(3)(a), (8)).
Since domain name registration services meet these definitions, they are generally subject to retail sales or use tax.”
The state of Washington has a statewide sales tax of 6.5% but allows additional add on’s to the sales tax which can thereby vary by county or city. According to the taxfoundation.org, the average total sale tax in the State of Washington is 8.89% the 5th highest in the United States.
SourceOf course with new gTLD registrations priced as high as $60,000 per domain, we are now talking about a substantial amount of money.