Dual Residents

Many persons claim residency in both Washington and another state by virtue of spending near equal amounts of time in each state.

In state delivery

When such a person buys and takes possession of a vehicle in the state of Washington, the retail sales tax and B&O tax are due.

Out of state delivery

If the dual resident purchases the vehicle in Washington and has the seller (dealer) deliver the vehicle to him/her outside the state of Washington, no retail sales tax is charged at the time of sale and no B&O tax is due. The sale and delivery outside the state must be documented as described in WAC 458-20-193.

The Washington dealer may not order or place Washington license plates on the vehicle. If Washington plates are on the vehicle, the dealer must remove them. The dealer must also document such removal. This documentation may simply be a filed photocopy of the plates after they have been removed.

The buyer cannot take possession or use the vehicle in Washington before shipment outside the state.

If, at any time, the customer brings the vehicle into Washington, use tax and licensing fees will be due.

If the dealer is involved in obtaining Washington Licensing, or Washington license plates are attached, (when delivering outside the state) the dealer must collect use tax.

The shipping or delivery charges are part of the selling price and therefore taxed in the same manner as the vehicle.

See also Nonresident.

References

Revised Code of Washington (RCW) 82.08.0269
Washington Administrative Code (WAC) 458-20-193

Washington residents taking delivery outside of Washington

Washington residents who purchase a vehicle from a Washington dealer and have that vehicle delivered to them at a point outside of Washington are also exempt from the retail sales tax. This is true when the dealer ships the vehicle to the customer outside the state. The dealer must be listed as the consignor on the bill of lading.

No B&O or retail sales tax is due on this transaction.

Washington license plates must not be ordered or placed on the vehicle by the dealer. If Washington plates are on the vehicle, they must be removed. The dealer must document such removal.

If the dealer is involved in obtaining Washington Licensing, or Washington license plates are attached, (when delivering outside the state) the dealer must collect use tax.

The buyer cannot take possession or use the vehicle in Washington before shipment outside the state.

If, at any time, the customer brings the vehicle into Washington, use tax and licensing fees will be due.

References

Revised Code of Washington (RCW) 82.08.0269
Washington Administrative Code (WAC) 458-20-193

Insurance Life/Health

Many dealers will offer the buyer the opportunity to purchase insurance to cover payments of the vehicle in the event of illness or loss of employment or to pay off the vehicle in the case of death. When the dealer is acting as an agent for the insurance company providing the insurance, the dealer must pay the Service and Other B&O tax on the commission earned for sales of the insurance.

If the dealer is licensed under Section 48.17 RCW as an insurance agent, broker, or solicitor, the amount received for these sales is subject to the Insurance Agents B&O tax classification.

For the taxability of commissions on warranties and service contracts, see Maintenance Agreements and Warranties

References

Washington Administrative Code (WAC) 458-20-164
Washington Administrative Code (WAC) 458-20-257

Duty on Imported Cars

On occasion, a dealer will order a vehicle for a customer directly from the factory outside the United States. Delivery is to be made directly to the customer. The import duty added to the price of the vehicle is part of the selling price and is subject to the retail sales tax and the Retailing B&O tax.

Reference

Washington Administrative Code (WAC) 458-20-107

Exports to Canada

Dealers in Washington in close proximity to the Canadian border may be requested to deliver the vehicle to the customer in Canada. The delivery must be made on the Canadian side of the U.S./Canadian border. The vehicle may not be turned over to the customer or his/her agent on the American side, even when there is a certainty of actual crossing.

For the transaction to be exempt from the B&O and retail sales taxes, the shipping documents must show that the vehicle was, in fact, delivered to the buyer in Canada.

Reference

Washington Administrative Code (WAC) 458-20-193

Interest/Carrying Charges/Penalties/Finance Income

Interest and finance income received by dealerships for carrying contracts on sales of vehicles is subject to the Service and Other Activities B&O tax.

When interest is added to delinquent repair or parts invoices, the interest, penalty, or late fee is subject to the Service B&O tax.

Reference

Washington Administrative Code (WAC) 458-20-109

Sales of Scrap and Obsolete Parts

Sales of scrap metal, obsolete parts and junked vehicles to wrecking yards, hulk haulers, metal dealers or anyone else who will use the metal or parts for resale are sales at wholesale and subject to the Wholesaling B&O tax. A resale certificate must be obtained from the buyer.

Bad Debts

Amounts of credit losses actually sustained by dealerships whose records are kept on an accrual basis may be deducted from the gross amount of business, if the tax has already been paid. The deductions should be taken during the period when the bad debts were actually written off the dealer's books of account. These bad debts must also be written off for federal income tax purposes.

The amount of the deduction must be adjusted to exclude amounts attributable to:

1. Amounts due on property that remains in the possession of the seller until the full purchase price is paid;
   
   
2. Expenses incurred in attempting to collect debt; and
   
   
3. The value of repossessed property taken in payment of debt.

A bad debt deduction may be taken under the B&O tax and the retail sales tax.

For write-offs of the retail sales tax during a period when the retail sales tax rate was different than the current retail sales tax rate, a Schedule B, Credit for Sales Taxes Paid on Bad Debts, must be used. If the tax rate is the same, the deduction may be taken on the excise tax return.

Refund claims are allowed when a bank, as assignee, "steps into the dealers' shoes and assumes the dealers' status with respect to all the rights and liabilities related to those contracts." Thus, banks and other persons purchasing installment contracts are entitled to a bad debt credit when the retail seller paid the full amount of sales tax owed, and the assignee incurred a bad debt because the buyer defaulted. An assignee may claim a bad debt credit whether the contract was purchased on a recourse or nonrecourse basis, provided that the assignee actually incurs the loss and is entitled to the federal income tax bad debt deduction.

Also see Repossessions.

References

Washington Administrative Code (WAC) 458-20-196

Courtesy Deliveries

Motor vehicle dealers located outside Washington often sell new motor vehicles to Washington customers and use in-state dealers to facilitate the sales. The in-state dealers prepare the vehicles for delivery and deliver them to the buyers in this state as a courtesy to the out-of-state sellers.

Definitions

A "courtesy dealer" is any licensed new motor vehicle dealer authorized to prepare or deliver a new motor vehicle to a customer in this state. For excise tax purposes, the in-state courtesy dealer is deemed to be the agent for the "selling dealer." A "selling dealer" is defined as a motor vehicle dealer not licensed to prepare or deliver a new motor vehicle to a customer in this state, such as an out-of-state car dealer.

Reporting requirements

Unless the selling dealer is registered, reporting, and remitting taxes to the Washington Department of Revenue (DOR), the courtesy dealer must report and pay the taxes on the transaction, in addition to its own taxes. When completing the excise tax return, the courtesy dealer must:

• Report the sales transaction under the appropriate B&O tax classification (generally the retailing classification);
  
  
• Collect and remit the retail sales tax, unless an exemption applies; and
  
  
• Report commissions received for facilitating the sale under the service and other activities classification of the B&O tax.
  

Other requirements

The B&O tax paid on behalf of the selling dealer constitutes a debt from the selling dealer to the courtesy dealer. The courtesy dealer is authorized to withhold the amount from the proceeds of the sale. Such amounts are deemed to be held in trust by the courtesy dealer until paid to DOR.

When the selling dealer claims to be registered with DOR, the courtesy dealer must document this fact. The courtesy dealer can obtain an affidavit from the selling dealer that provides the name and signature of the selling dealer and the selling dealer's UBI/tax registration number. The affidavit must also contain a statement that the selling dealer will report and remit the B&O tax and the sales tax associated with the courtesy transaction.

A courtesy dealer must also obtain appropriate documentation when a sale of a vehicle is exempt from retail sales tax. For example, when a courtesy transaction involves a sale to a member of the military, the courtesy dealer must obtain affidavits and military orders as if the sale were made in the courtesy dealer's own name. See Exempt Vehicle Sales.

Documentation Fees

Legislation enacted in 2003 authorizes car dealers to charge up to $35 per vehicle sale to recover administrative costs, such as collecting licensing fees and verifying, clearing, and transferring title. The charge is not mandatory, but if charged, it must be:

• Disclosed to the purchaser,
  
  
• Separately designated from the selling price, and
  
  
• Disclosed in any advertisements.

Auction Sales

Wholesale sales of used motor vehicles are exempt from B&O tax when sold at auction by licensed vehicle dealers to other licensed dealers.

Wholesale sales of motor vehicles are exempt from B&O tax when sold at auction by motor vehicle manufacturers, as defined in RCW 19.118.021, to licensed vehicle dealers.

The dealer must be licensed under chapter 46.70 RCW or licensed by another state. When completing the excise tax return, the sellers should report the gross amount from theses sales under the wholesaling classification of the B&O tax and take a deduction under the "other" category.

References

RCW 82.04.317
RCW 82.04.422

Tire Fee Reimposed

Effective July 1, 2005, through June 30, 2010, retailers must collect a $1 per tire fee on the retail sale of new replacement vehicle tires.

The tire fee is paid by the buyer to the seller. The tire fee is not subject to sales tax. Tire sellers may retain ten percent of the fee and must remit the remainder to the Department of Revenue. The seller must report the retained amount as gross income subject to tax under the Service and Other Activities classification of the B&O tax.

The tire fee does not apply to sales of tires to the federal government that are exempt of sales tax under WAC 458-20-190 , to sales to Indians that are exempt of sales tax under WAC 458-20-192 , to the sales of re-treaded vehicle tires, nor to tires provided free of charge under the terms of a recall or a warranty service. If a customer returns the purchased new tire and the entire selling price is refunded to the customer, the $1 tire fee is likewise refundable.

References

WAC 458-20-272

Tire Fee Special Notice

Tire Fee Questions & Answers

Vehicles using alternative fuel

Effective January 1, 2009, 2SSB 5916 (Chapter 296, Laws of 2005) provides sales tax and use tax exemptions on the sale of use of new autos that are exclusively powered by natural gas, propane, hydrogen, or electricity. The bill also provides sales tax and use tax exemptions on the sale or use of new autos that use hybrid technology (electricity and gasoline) and get 40 miles or more per gallon. The exemption expires January 1, 2011.

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