Dealer use and demonstration

Dealer use and demonstration

A vessel dealer must register with the Department of Revenue to operate as a business. See Business Registration for more information.

The dealer must also be licensed and certified by the Department of Licensing, which will issue a dealer license number and decals to use in operating inventory vessels. The license and decals are not to be permanently affixed to a vessel.

References: RCW 82.32.030, RCW 88.02.790, WAC 458-20-101, WAC 308-90-70

Inventory purchases

Vessel dealers may purchase items for resale without paying sales tax. To make tax exempt purchases for resale, the buyer must regularly engage in selling the type of property purchased and be registered with the Department of Revenue. For more information, see reseller permits.

Caution: Improper use of reseller permits for purchases shall result in a penalty of 50% of the tax due on the item(s) plus the tax due and interest. Other penalties may apply.

Reference: WAC 458-20-102

Tax on dealer use of inventory

Any purchase of tangible personal property for use by the dealer as a consumer is subject to deferred sales or use tax.

"If a vessel held in inventory is used by a vessel dealer or vessel manufacturer for personal use, use tax shall be due based only on the reasonable rental value of the vessel (based on the number of days used), but only if the vessel dealer or manufacturer can show that the vessel is truly held for sale and that the dealer or manufacturer is and has been making good faith efforts to sell the vessel. The Department [of Revenue] may by rule require dealers and manufacturers to provide logs or other documentation showing that vessels are truly held for sale."

References: RCW 82.12.800 - 802

When use is permitted

Use tax doesn’t apply to these uses of a vessel by a registered vessel dealer registered under Chapter 88.02 RCW:

  • Testing, setup, repairing, remodeling, evaluating, or otherwise make a vessel seaworthy, if the vessel is held for sale
  • Training activity of a dealer's employees, agents, or subcontractors involved in the sale of the dealer's vessels, if the vessel is held for sale
  • Activities to promote the sale of the dealer's vessels, including photography and video sessions to be used in promotional materials
  • Traveling directly to and from promotional vessel events to display a dealer's vessel for sale, if the identification of the registered vessel dealer offering the vessel for sale is also displayed on the vessel
  • Any vessel loaned or donated to a civic, religious, nonprofit, or educational organization for up to 72 hours, or longer if approved by the Department of Revenue; or to vessels loaned or donated to governmental entities
  • Direct transporting, displaying, or demonstrating any vessel at a wholesale or retail vessel show
  • Delivery of a vessel to a buyer, vessel manufacturer, registered vessel dealer as defined by RCW 88.02.310, or to any other person involved in the manufacturing or sale of that vessel for the purpose of the manufacturing or sale of that vessel
  • Displaying, showing, and operating a vessel for sale to a prospective buyer to include the short-term testing, operating, and examining by a prospective buyer

Trailers or other devices used to transport, display, show, or operate a vessel held for sale are also exempt from use tax.

The above list assumes that use is limited to the stated purpose. Some uses, which may be disallowed in an audit or investigation, include:

  • operating an "employee training" session during a sporting event
  • stopping overnight at an island resort before returning an inventory vessel to its storage location
  • conducting sea trials or operating tests which include activities or ports of call above and beyond testing needs
  • "fueling" a vessel on a holiday then participating in festivities before returning.

With these types of activities, the specifics of each situation will determine the application of tax on a case-by-case basis.

Vessel dealer decals shall only be used to demonstrate vessels held for sale when operated for a prospective customer holding a dated demonstration permit, and shall be carried in the vessel at all times it is being operated by such individual.

References: RCW 88.02.790, RCW 82.12.800 - 802

Documenting valid dealer use

A number of records may show exempt use of inventory vessels, including vessel logs, earnest money agreements and demonstration permits.

Demonstration permits must be dated and carried on board when a prospective buyer is being shown the vessel offsite.

Note: RCW 88.02.790 (2) states that vessels may be used for dealer business, by an officer of a corporation, or proprietor, or by a bonafide employee of the firm if a card so identifying any such individual is carried during the time the vessel is operated. This is a Department of Licensing exemption and does not provide an exemption for sales or use tax.

Dealer use examples

Example 1: XYZ Yacht Manufacturer has scheduled the annual "rendezvous" for owners and potential buyers at Port Angel, a popular resort area. The manufacturer will not be displaying any vessels but will organize some training sessions and social events. The local dealer of XYZ Yachts has decided to display three inventory vessels at Port Angel during the rendezvous with the hope of encouraging current owners to "buy up" or to "hook up" with potential buyers. The largest of the vessels has an office set up in it for business activities and the employees will all sleep in another vessel.

All three vessels were moved directly from moorage to the display location. Because one vessel is used as a business office and another provides living accommodations, use tax is due on these two based on the rental value. The third vessel is merely displayed and/or demonstrated to potential buyers and is not taxable.


Example 2: During Neptune Days in the area, many vessel dealers "lend" inventory to media for broadcasts during the model sailboat races. This activity results in free publicity for the dealer. The vessel is subsequently sold as new to a buyer.

The dealer owes use tax on the rental value of the vessel. Although the dealer did not use the vessel directly, they owe tax as the bailor of the boat. Taxable use was created with the dealer loaned the boat to the media.

Co-brokering – B&O Tax implications for commission split

Co-brokering is a sale facilitated between two or more boat brokers. The commission fee is taxed according to the pre-determined conditions of the listing agreement.

When no special commission splits/arrangements are authorized by the owner prior to the time of granting authority to sell as a broker,the person entitled to the commission pursuant to the listing agreement must pay B&O tax on the full amount of the commission. This applies even if they subsequently pay a portion of the funds to another broker outside of contract requirements (See co-broker example below) (Chapter 82.04 RCW).

For tax purposes, the owner of the boat must authorize a split commission in order for the listing broker to report only the actual amount of commission retained. An example of suitable language for listing agreements that authorizes a split commission is:

If a cooperative Brokerage situation occurs, whereby the Listing Broker is not the Selling Broker, the Owner agrees to pay the Listing Broker and the Selling Broker a total commission, not to exceed XX percent (XX%) of the gross selling price of the vessel. The commission split shall be determined at the time of negotiating the sale. This agreed commission split shall be disclosed in writing, and this written disclosure shall become a part of this Agreement. These fees shall be paid directly to each independent Broker at the time the sale is closed.