Multistate: A Tale of Two Bag Taxes

Recently, Virginia and Washington released guidance on new taxes and fees imposed on certain plastic bags.  Beginning as early as January 1, 2021, a Virginia county or city may adopt an ordinance imposing the Virginia Disposable Plastic Bag Tax in the amount of five cents on each disposable plastic bag provided to purchasers by any grocery store, convenience store, or drugstore in the locality. The tax is due regardless of whether the retailer sells the bag to the customer or it is provided free of charge. Per the guidance, the bag tax will be administrated by the Department of Revenue in the same manner as sales and use taxes. Retailers that collect the tax will be entitled to a dealer discount of two cents (before 2023) or one cent (beginning January 1, 2023).

The tax will be due on both in-person, to-go, or delivery sales. However, grocery stores, convenience stores, and drugstores that are not located in a county or city that imposes the tax are not subject to the tax. In other words, if a store located in a county that does not impose a bag tax makes a delivery to a person located in a locality that does impose a bag tax, no tax is due. Certain types of bags provided to customers, such as those containing fresh meat, will not be subject to the tax.

In Washington, effective October 1, 2021, a statewide ban applies to single-use plastic carryout bags, non-compliant paper carryout bags, and reusable plastic carryout bags that do not meet recycled content requirements. In addition, retailers are required to collect an eight-cent charge on every compliant paper and reusable film plastic carryout bag. Beginning January 1, 2026, the charge on reusable film plastic carryout bags will be increased to twelve cents per bag. The charge will be retained by the retailer and will be considered a retail sale subject to the Retailing Business and Occupation (B&O) Tax and the Retail Sales Tax, even if the underlying goods are exempt from sales tax. However, the retailer will be allowed a “Compliant Carryout Bag Charge” deduction for B&O tax purposes. The charge may not be collected from anyone using voucher or electronic benefits card issued under WIC, TANF support programs, SNAP, or Washington state food assistance program. The state charge supersedes any city, county, town, or municipal corporation carryout bag ordinance, unless the local ordinance was enacted prior to April 1, 2020 and the charge is ten cents. In that case, the local ordinance will temporarily supersede the state’s charge until December 31, 2025. Please stay tuned to TWIST for more bag tax/fee updates.