What are accommodation sales?
Automobile dealers often sell vehicles at cost to other dealers so that the "receiving" dealer can fill an existing order. These sales are generally referred to as "accommodation sales".
Taxability of accommodation sales
Sales of vehicles between dealers are generally taxable as wholesale sales. However, accommodation sales made by one dealer to another are not taxable to the "selling" dealer if the amount charged does not exceed the cost of the vehicle and the receiving dealer has an existing order from a customer for the vehicle.
Reimburse previous accommodation sale
When an accommodation sale occurs, the receiving dealer may reimburse the selling dealer in kind within fourteen days of the original accommodation sale. This reimbursement is also considered an accommodation sale when the vehicle or other item is sold at or below cost.
How is cost determined?
The cost of a vehicle includes the amount paid by the selling dealer, as well as any reasonable expenses for preparing the vehicle for sale. Actual delivery costs incurred by the selling dealer and billed to the receiving dealer may also be included in cost.
In determining the cost of a vehicle, the dealer may add reasonable expenses for preparing the vehicle for sale. Reasonable expenses are not necessarily limited to material costs only. It would include, for example, labor costs associated with dealer-installed accessories.
Business and occupation tax
When completing the excise tax return, amounts received for accommodation sales must be included in the Wholesaling-Other B&O tax classification, but may be deducted. The deductions should be shown under the category Casual Sales/Accommodation Sales on the deduction detail sheet.
Accommodation sales must be documented. The original accommodation sale can be documented by obtaining a completed Motor Vehicle Accommodation Sale Invoice form from the receiving dealer. Note that the first box ("Filling a bona fide order") should be checked. In addition, the selling dealer must show that the amount charged to the receiving dealer did not exceed the cost of the vehicle.
A reimbursement of the original accommodation sale must also be documented. The reimbursing dealer can obtain a completed Motor Vehicle Accommodation Sale Invoice form from the dealer being reimbursed. Note that the second box ("Reimbursing in kind") should be checked. In addition, the reimbursing dealer must show:
- That the amount charged to the dealer being reimbursed did not exceed the cost of the vehicle;
- That the reimbursement was made within 14 days of the original accommodation sale; and
- That the reimbursing dealer had an existing order from a customer when the original accommodation sale was made.
The seller must keep the documentation for five years.
See Dealer Trades for further information and examples.
- XYZ Dealer has a purchase order from a customer for a used 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 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 accommodation sale.
- Assume the same facts as in example 1, except that ABC charges $200 in excess of costs. Since the selling price exceeds documented costs, the conditions for an accommodation sale have not been met. This transaction is subject to the wholesaling B&O tax.
Motor Vehicle Accommodation Sales Invoice