Persons that lease tangible personal property and that are charged for property taxes by the leasing company must also pay retail sales tax on the property tax charge.
RCW 82.04.070 defines “gross proceeds of sales”, the statutory measure of the business and occupation tax, in the following manner:
“Gross proceeds of sales” means the value proceeding or accruing from the sale of tangible personal property and /or for services rendered, without any deduction on account of the cost of property sold, the cost of materials used, labor costs, interest, discount paid, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses.
The term “selling price”, which is the measure of the retail sales tax, is defined in RCW 82.08.010(1) in the following manner:
"Selling price" includes "sales price." "Sales price" means the total amount of consideration, except separately stated trade-in property of like kind, including cash, credit, property, and services, for which tangible personal property, extended warranties, or services defined as a "retail sale" under RCW 82.04.050 are sold, leased, or rented, valued in money, whether received in money or otherwise. No deduction from the total amount of consideration is allowed for the following: (i) The seller's cost of the property sold; (ii) the cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller; (iii) charges by the seller for any services necessary to complete the sale, other than delivery and installation charges; (iv) delivery charges; and (v) installation charges.
The terms “gross proceeds of sales” for (retailing) B&O tax purposes and “selling price” for sales tax purposes both result in the same application of tax with regard to the charges for property taxes under a lease agreement.
Payments of personal property taxes by the lessee, when the tax is a legal liability of the lessor, are considered to be a recovery of a cost of doing business by the lessor. As such, the taxes are a nondeductible portion of both the gross proceeds of sales and the selling price.
This tax treatment is similar for charges to the lessee for insurance covering the leased item, when the lessor is the insured party.
For further information, see WAC 458-20-211.