Affiliated company transactions

Affiliated company transactions

What are affiliated company transactions?

Some dealers choose to form separate legal entities to engage in various activities of the dealership. For example, the dealership may have a separate corporation for transacting leases. There may also be separate corporations with common ownership where more than one line or make of new vehicles are sold. In some cases, assets such as equipment may be owned by an individual and leased to the corporation with the individual owning all of the stock of the corporation.

Fully taxable

Transactions between affiliated legal entities are fully taxable. The transactions are taxed in the same manner as if they were not affiliated. Whether the transaction is wholesale or retail will depend on the nature of the particular sale.


  • ABC Dealer is a corporation selling new vehicles. XYZ Leasing is a corporation which leases vehicles to consumers. The corporate stock of XYZ is wholly owned by ABC. Customers who are interested in leasing a vehicle will select the vehicle from ABC. ABC will then sell the vehicle at cost plus $500 to XYZ and XYZ will lease the vehicle to the customer. The sale from ABC to XYZ is taxable under the Wholesaling B&O tax classification, measured by the total selling price charged to XYZ. XYZ is taxable under the Retailing classification and required to collect and remit retail sales tax on the monthly lease charges. The fact that ABC and XYZ are affiliated has no bearing on the transaction.
  • Mr. Smith owns all of the corporate stock of ABC Dealer, Inc. Mr. Smith also owns the building and all of the major equipment that is used by the dealership and charges the dealership a monthly lease or rental charge. The rental of the building is a nontaxable rental of real property. The rental of the equipment is a retail sale. Mr. Smith is required to collect and remit retail sales tax on the equipment rental charges, and is subject to the Retailing B&O tax. He may purchase the equipment without payment of retail sales tax, if the equipment is purchased for purposes of renting or leasing the equipment to the corporation with no intervening use.


Washington Administrative Code (WAC) 458-20-102
Washington Administrative Code (WAC) 458-20-211