Dealer trades

Dealer trades

What are dealer trades?

Automobile dealers often sell or trade inventory to other dealers for various reasons. Sometimes a vehicle is traded for another vehicle and sometimes it is merely sold to another dealership. Often these "trades" are booked as inventory transfers rather than as sales. Dealer trades differ from accommodation sales.

Taxability of dealer trades

Dealer trades are generally taxable as wholesale sales. However, an exemption is allowed under certain conditions. The wholesale sale of a new motor vehicle is exempt from the B&O tax when the sale occurs between new car dealers selling the same make of vehicle. New car dealers will, in most cases, find the requirements of this exemption to be less restrictive than those of the accommodations sales. There is no restriction on the amount that the selling dealer can charge the buying dealer, nor is there any requirement that the sale be made to fill an existing order from a customer. While these circumstances may be present in a particular transaction, there is no need to rely upon the accommodation sales exemption when the requirements for the dealer trade exemption are met.

Business and occupation tax

When completing the excise tax return, a dealer should report the gross amount from these sales under the wholesaling classification of the B&O tax. Those sales qualifying for the exemption are then shown as a deduction under the "other" category. Explain the deduction as an "exempt dealer trade."


A new car dealer making wholesale sales of new motor vehicles to other dealers must keep documentation (sales invoices, etc.) for five years to verify all of the following:

  • The buyer’s name, address, and Account ID.
  • The date of sale.
  • The buyer’s signature and title.
  • The vehicle sold (traded) was a new motor vehicle (make, model, and serial number of the vehicle).
  • The sale (trade) was made to another new car dealer authorized to sell new vehicles of the same make.

When determining whether the exemption applies to a trade, each new motor vehicle traded is considered a separate sale.

Accommodation sales vs. dealer trades

The terms "accommodation sales" and "dealer trades" are not interchangeable because there are different requirements for each. Dealers may use the "dealer trades" exemption, (if the requirements are met) even when the sale is to fill an existing order or to reimburse for a previous accommodation sale.

See Accommodation sales.


  1. XYZ Dealer has a purchase order from a customer for a new vehicle of a specific year, model, color, and options. XYZ does not have a vehicle in stock that meets the customer's requirements. However, ABC Dealer, who sells the same make of vehicle, does. ABC sells the vehicle to XYZ at cost, which includes transportation costs and costs incurred by ABC in preparing the vehicle for sale. The sale by ABC is a non-taxable dealer trade.
  2. ABC sells several used cars to XYZ. These sales are not exempt "dealer trades" since the motor vehicles are used. ABC owes the wholesaling B&O tax on the sales.
  3. ABC purchased a new vehicle for $16,000. ABC sells the vehicle to XYZ for $16,800. ABC sells the same make of vehicle as XYZ. This is a non-taxable dealer trade.


Revised Code of Washington (RCW) 82.04.422
Revised Code of Washington (RCW) 82.04.425
Washington Administrative Code (WAC) 458-20-208