Internal charges

What are internal (interdepartmental) charges?

New vehicle dealers typically maintain a system of accounting which measures the profitability of the various departments of the dealership. Different departments of the company may be charged by other departments for various activities.

Vehicle repairs made by own repair shop

It may be necessary to make repairs to new or used vehicles in the process of preparing the vehicles for sale. When these repairs are made by the dealership's own repair shop or the parts come from its own parts department, an internal charge will be made. This charge will be recorded as a sale from the parts or repair department to the new or used car department.

Not subject to B&O or retail sales tax

These internal charges between departments of the same legal entity are not taxable sales and are not subject to B&O tax. The parts are not subject to sales or use tax if the parts are placed on a vehicle which is being repaired or held for sale.

Shop vehicles - use tax due

The use tax does apply to parts which are installed on shop vehicles which are for the use of the dealership.


  1. ABC Dealer has a used vehicle in its used car inventory. The vehicle is serviced by the dealer's repair shop with new oil and a new oil filter installed. The used car department is charged for this service by the repair department. These internal charges are not subject to B&O tax. No retail sales or use tax is due.
  2. ABC Dealer has its own tow truck. It also has "loaner" vehicles which are loaned at no charge to customers while the customer's vehicle is being repaired. The dealer's repair department installs new spark plugs in these vehicles and charges other departments. No B&O tax applies to these charges. However, the dealer is required to pay use tax on any parts removed from inventory which are placed in these vehicles. Since these vehicles are not being held exclusively for resale, any replacement parts are taxable.


Washington Administrative Code (WAC) 458-20-201
Washington Administrative Code (WAC) 458-20-203
Excise Tax Advisory (ETA) 3134 (pdf)