What is a consignment sale?
A consignment sale is when the actual owner of a vehicle (the consignor) enters into a written agreement with a dealer (consignee) to sell a vehicle and to act as an agent for the vehicle owner.
Conditions of consignment sale
- When a dealer acts as an agent for a vehicle owner, several conditions must be present.
- The transaction was made in the name of and for the owner of the vehicle.
- The vehicle owner's name, the model and description of the vehicle and the buyer's name.
- The actual amount received for the sale, the amount of commission received and any other incidental income received by the dealer for the transaction.
When an UNREGISTERED person consigns a vehicle to a dealer for sale, the dealer will collect the retail sales tax. The dealer will remit the retail sales tax on its excise tax return. Under the Retailing B&O tax classification, the dealer will take a deduction for the amount of the consignment sale on the deduction detail sheet. The dealer will pay the Service and Other Activities B&O tax on the amount received as commission and any other fees for the sale.
When a REGISTERED dealer consigns vehicles to another dealer for sale, the consignee (selling dealer) must report their commission and any other fees under the Service and Other Activities B&O tax classification. However, the retail sales tax should be turned over to the consignor to be reported on its excise tax return. The consignor owes the Retailing B&O tax and must remit the retail sales tax on the full selling price.
Dealer selling in own name
When the dealer sells a vehicle received from an unregistered person in its own name, the sales are retail sales and the dealer must pay the Retailing B&O tax and collect the retail sales tax.
Sales in the dealer's name of vehicles from other dealers are also considered retail sales, subject to the Retailing B&O tax and the retail sales tax. The consigning dealer, in this case, is making a wholesale sale to the selling dealer and must report under the Wholesaling B&O tax classification.
John Jones consigns his vehicle to Dealer A located in Olympia, Washington. Mr. Jones says he does not want the car sold for less than $3,000. A contract is drawn up showing that John Jones has consigned this particular vehicle, make and model, color, special markings and equipment, to Dealer A for sale for no less than $3,000. Dealer A will try to sell the car for one month. If Dealer A sells the car, he will receive a 10% commission plus a fee of $50.
Dealer A sells the car for $4,000. Dealer A is required to collect the retail sales tax on $4,000 at the Olympia rate of 8.0% or $320. Dealer A takes his 10% commission, $400, plus his fee of $50 and gives the remaining $3,550 to John Jones who owes no taxes.
Dealer A completes its excise tax return in the following manner: $450 under Service and Other Activities, $4,000 under Retailing with a deduction of $4,000 described as consignment sale, $4,000 under state sales tax and $4,000 under the local sales tax coded to location code 3403. Dealer A must remit $328.23 to the Department of Revenue for this transaction: $8.23 Service B&O; $260 state sales tax; and $60 local sales tax.
For a discussion of trade-ins relating to consignment sales, see Trade-Ins.