Layaway sales

If a customer buys merchandise on layaway, you do not need to recognize the transaction as a sale until the customer receives the item. Upon delivery, you must report retailing B&O tax, and collect and report retail sales tax.

Example: You sell a $1,500 watch to a customer on a layaway basis in June, accepting a deposit of $300 plus a $50 layaway fee. The customer returns in July, pays the balance due, and receives the watch. You would report the sale as taking place in July, with a selling price of $1,550.

If the customer does not complete the terms of the layaway and forfeits the deposit, you must report this income under the service and other activities B&O tax classification. In this case, you would not collect and report retail sales tax because there was no sale.

For more information, see our Tax Topics article regarding Gift cards, gift certificates and layaway purchases.