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Rep. Drew Stokesbary

OLYMPIA, Wash. — A bill to exempt crowdfunding efforts from the state sales tax and business-and-occupation tax is working its way through the Washington House. The House Finance Committee held a hearing Friday on the bill by Rep. Drew Stokesbary, R-Auburn.

Right now, Washington does not have any specific laws addressing crowdfunding. The Washington Department of Revenue has interpreted existing business laws to require that fundraisers must report their total income after the fund-raising period is over. And fundraisers must collect sales tax on a service, item or software that is provided as a reward for a donation.

Jennifer Muhm of buddingSTEM — a girls clothing line that began in 2015 through crowdfunding — explained that if someone receives a shirt in return for a $500 donation, for example, sales and B&O taxes would have to be collected on the entire $500. Muhm, who with her business partner Malorie Catchpole was Geekwire’s Geek of the Year in 2015, was the sole person testifying on the bill Friday. She supported it.

BuddingSTEM founders Jennifer Muhm and Malorie Catchpole.
BuddingSTEM founders Jennifer Muhm and Malorie Catchpole launched their science-inspired kids’ clothing line on Kickstarter. (GeekWire File Photo)

Stokesbary’s bill would exempt a crowdfunding effort from having to pay a B&O tax.  It also would exempt a crowdfunding effort from paying a sales tax if it gives a gift to the donor — if the value of the gift is less than 80 percent of the donation, and the gift is not something sold in the fundraiser’s normal course of business.

The legislator acknowledged that there is a danger of merchants selling goods or services under the guise of crowdfunding in order to avoid paying sale taxes. However, he said, that is why the 80 percent and gift restrictions were put into the bill.

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