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Dual residents
Many persons claim residency in both Washington and another state by virtue of spending near equal amounts of time in each state.
In state delivery
When such a person buys and takes possession of a vehicle in the state of Washington, the retail sales tax and B&O tax are due.
Out of state delivery
If the dual resident purchases the vehicle in Washington and has the seller (dealer) deliver the vehicle to him/her outside the state of Washington, no retail sales tax is charged at the time of sale and no B&O tax is due. The sale and delivery outside the state must be documented as described in WAC 458-20-193.
The Washington dealer may not order or place Washington license plates on the vehicle. If Washington plates are on the vehicle, the dealer must remove them. The dealer must also document such removal. This documentation may simply be a filed photocopy of the plates after they have been removed.
The buyer cannot take possession or use the vehicle in Washington before shipment outside the state.
If the dealer is involved in obtaining Washington Licensing, or Washington license plates are attached, (when delivering outside the state) the dealer must collect use tax.
The shipping or delivery charges are part of the selling price and therefore taxed in the same manner as the vehicle.
See also Nonresident.
Reference
Revised Code of Washington (RCW) 82.08.0269
Washington Administrative Code (WAC) 458-20-193
Washington residents taking delivery outside of Washington
Washington residents who purchase a vehicle from a Washington dealer and have that vehicle delivered to them at a point outside of Washington are also exempt from the retail sales tax. This is true when the dealer ships the vehicle to the customer outside the state. The dealer must be listed as the consignor on the bill of lading.
No B&O or retail sales tax is due on this transaction.
Washington license plates must not be ordered or placed on the vehicle by the dealer. If Washington plates are on the vehicle, they must be removed. The dealer must document such removal.
If the dealer is involved in obtaining Washington Licensing, or Washington license plates are attached, (when delivering outside the state) the dealer must collect use tax.
The buyer cannot take possession or use the vehicle in Washington before shipment outside the state.
If, at any time, the customer brings the vehicle into Washington, use tax and licensing fees will be due.
References
Revised Code of Washington (RCW) 82.08.0269
Washington Administrative Code (WAC) 458-20-193
Car washes and detailing
Generally, the dealership must pay retail sales tax on purchases of car washes. When the dealer purchases a car wash for their inventory prior to sale, they are considered the consumer of these purchases and may not use their reseller permit.
In contrast to a mere car wash, the cost of reconditioning or detailing is primarily intended to improve the resale value of the vehicle and is a wholesale sale not subject to sales tax. Examples of these services can include but are not limited to minor paint repair, paint polishing, headlight buffing, carpet and upholstery cleaning, repair or replacement.
Insurance life/health
Many dealers will offer the buyer the opportunity to purchase insurance to cover payments of the vehicle in the event of illness or loss of employment or to pay off the vehicle in the case of death. When the dealer is acting as an agent for the insurance company providing the insurance, the dealer must pay the Service and Other B&O tax on the commission earned for sales of the insurance.
If the dealer is licensed under Section 48.17 RCW as an insurance agent, broker, or solicitor, the amount received for these sales is subject to the Insurance Agents B&O tax classification.
For the taxability of commissions on warranties and service contracts, see Maintenance Agreements and Warranties
References
Washington Administrative Code (WAC) 458-20-164
Washington Administrative Code (WAC) 458-20-257
Duty on imported cars
On occasion, a dealer will order a vehicle for a customer directly from the factory outside the United States. Delivery is to be made directly to the customer. The import duty added to the price of the vehicle is part of the selling price and is subject to the retail sales tax and the Retailing B&O tax.
Reference
Washington Administrative Code (WAC) 458-20-107
Exports to Canada
Dealers in Washington in close proximity to the Canadian border may be requested to deliver the vehicle to the customer in Canada. The delivery must be made on the Canadian side of the U.S./Canadian border. The vehicle may not be turned over to the customer or his/her agent on the American side, even when there is a certainty of actual crossing.
For the transaction to be exempt from the B&O and retail sales taxes, the shipping documents must show that the vehicle was, in fact, delivered to the buyer in Canada.
Reference
Washington Administrative Code (WAC) 458-20-193
Interest/carrying charges/penalties/finance income
Interest and finance income received by dealerships for carrying contracts on sales of vehicles is subject to the Service and Other Activities B&O tax.
When interest is added to delinquent repair or parts invoices, the interest, penalty, or late fee is subject to the Service B&O tax.
Reference
Washington Administrative Code (WAC) 458-20-109
Sales of scrap and obsolete parts
Sales of scrap metal, obsolete parts and junked vehicles to wrecking yards, hulk haulers, metal dealers or anyone else who will use the metal or parts for resale are sales at wholesale and subject to the Wholesaling B&O tax. A reseller permit must be obtained from the buyer. For sales after Jan. 1, 2010 the resale certificate was replaced by the reseller permit. For further information refer to Reseller Permits.
Bad debts
Amounts of credit losses actually sustained by dealerships whose records are kept on an accrual basis may be deducted from the gross amount of business, if the tax has already been paid. The deductions should be taken during the period when the bad debts were actually written off the dealer's books of account. These bad debts must also be written off for federal income tax purposes.
The amount of the deduction must be adjusted to exclude amounts attributable to all of the following:
- Amounts due on property that remains in the possession of the seller until the full purchase price is paid.
- Expenses incurred in attempting to collect debt.
- The value of repossessed property taken in payment of debt.
A bad debt deduction may be taken under the B&O tax and the retail sales tax.
For write-offs of the retail sales tax during a period when the retail sales tax rate was different than the current retail sales tax rate, a Schedule B, Credit for Sales Taxes Paid on Bad Debts (pdf), must be used. If the tax rate is the same, the deduction may be taken on the excise tax return.
Also see Repossessions.
References
Washington Administrative Code (WAC) 458-20-196
Courtesy deliveries
Motor vehicle dealers located outside Washington often sell new motor vehicles to Washington customers and use in-state dealers to facilitate the sales. The in-state dealers prepare the vehicles for delivery and deliver them to the buyers in this state as a courtesy to the out-of-state sellers.
Definitions
A "courtesy dealer" is any licensed new motor vehicle dealer authorized to prepare or deliver a new motor vehicle to a customer in this state. For excise tax purposes, the in-state courtesy dealer is deemed to be the agent for the "selling dealer." A "selling dealer" is defined as a motor vehicle dealer not licensed to prepare or deliver a new motor vehicle to a customer in this state, such as an out-of-state car dealer.
Reporting requirements
Unless the selling dealer is registered, reporting, and remitting taxes to the Washington Department of Revenue (DOR), the courtesy dealer must report and pay the taxes on the transaction, in addition to its own taxes. When completing the excise tax return, the courtesy dealer must do all of the following:
- Report the sales transaction under the appropriate B&O tax classification (generally the retailing classification).
- Collect and remit the retail sales tax, unless an exemption applies.
- Report commissions received for facilitating the sale under the service and other activities classification of the B&O tax.
Other requirements
The B&O tax paid on behalf of the selling dealer constitutes a debt from the selling dealer to the courtesy dealer. The courtesy dealer is authorized to withhold the amount from the proceeds of the sale. Such amounts are deemed to be held in trust by the courtesy dealer until paid to DOR.
When the selling dealer claims to be registered with DOR, the courtesy dealer must document this fact. The courtesy dealer can obtain an affidavit from the selling dealer that provides the name and signature of the selling dealer and the selling dealer's UBI/Account ID. The affidavit must also contain a statement that the selling dealer will report and remit the B&O tax and the sales tax associated with the courtesy transaction.
A courtesy dealer must also obtain appropriate documentation when a sale of a vehicle is exempt from retail sales tax. For example, when a courtesy transaction involves a sale to a member of the military, the courtesy dealer must obtain affidavits and military orders as if the sale were made in the courtesy dealer's own name. See Exempt Vehicle Sales.
Document service fees
What is a document service fee?
A document service fee may be charged by a dealer to recover administrative costs for collecting motor vehicle excise taxes, licensing and registration fees and other agency fees, verifying and clearing titles, transferring titles, perfecting, releasing, or satisfying liens or other security interests, and other administrative and documentary services rendered by a dealer in connection with the sale or lease of a vehicle and in carrying out the requirements of this chapter or any other provisions of state law.
When can a dealer charge a documentary service fee?
A dealer may charge the documentary service fee under all of the following conditions:
- The documentary service fee is disclosed in writing to a prospective purchaser or lessee before the execution of a purchase and sale or lease agreement.
- The documentary service fee is not represented to the purchaser or lessee as a fee or charge required by the state to be paid by either the dealer or prospective purchaser or lessee.
- The documentary service fee is separately designated from the selling price or capitalized cost of the vehicle and from any other taxes, fees, or charges.
- Dealers disclose in any advertisement that a documentary service fee in an amount up to one hundred fifty dollars may be added to the sale price or the capitalized cost.
How much can the dealer charge for a document service fee?
- Effective July 26, 2009, a dealer can charge up to $150.
- Effective July 1, 2022, a dealer can charge up to $200.
Document service fees are not subject to sales tax. This income is subject to B&O tax under the Service and Other Activities classification.
Auction sales
Wholesale sales of used motor vehicles are exempt from B&O tax when sold at auction by licensed vehicle dealers to other licensed dealers.
Wholesale sales of motor vehicles are exempt from B&O tax when sold at auction by motor vehicle manufacturers, as defined in RCW 19.118.021, to licensed vehicle dealers.
The dealer must be licensed under chapter 46.70 RCW or licensed by another state. When completing the excise tax return, the sellers should report the gross amount from these sales under the wholesaling classification of the B&O tax and take a deduction under the "other" category.
References
Tire fee reimposed
Effective July 1, 2005, retailers must collect a $1 per tire fee on the retail sale of new replacement vehicle tires.
The tire fee is paid by the buyer to the seller. The tire fee is not subject to sales tax. Tire sellers may retain 10% of the fee and must remit the remainder to the Department of Revenue. The seller must report the retained amount as gross income subject to tax under the Service and Other Activities classification of the B&O tax.
The tire fee does not apply to sales of tires to the federal government that are exempt of sales tax under WAC 458-20-190, to sales to Indians that are exempt of sales tax under WAC 458-20-192, to the sales of re-treaded vehicle tires, nor to tires provided free of charge under the terms of a recall or a warranty service. If a customer returns the purchased new tire and the entire selling price is refunded to the customer, the $1 tire fee is likewise refundable.
References
WAC 458-20-272
Tire Fee Special Notice (pdf)
Clean alternative fuel vehicles and plug-in hybrids
The sales and use tax exemptions on purchases or leases of new and used clean alternative fuel vehicles or certain plug-in hybrids will begin with sales made or lease agreements signed, on or after Aug. 1, 2019. The exemptions expire on Jul. 31, 2025.
The exemption applies to:
A qualifying new vehicle with a sales price or fair market value of leases $45,000 or less.
- The sales and use tax exemptions vary for new qualifying vehicles. Purchased or leased vehicles between:
- Aug. 1, 2019 - July 31, 2021 are eligible for an exemption on up to $25,000 of the sales or lease price.
- Aug. 1, 2021 - July 31, 2023 are eligible for an exemption on up to $20,000 of the sales or lease price.
- Aug. 1, 2023 - July 31, 2025 are eligible for an exemption on up to $15,000 of the sales or lease price.
A qualifying used vehicle with a sales price or fair market value of leases $30,000 or less.
- The sales and use tax exemptions on used vehicles sold or leased between Aug. 1, 2019 and Jul. 31, 2025, are eligible for an exemption on up to $16,000 of the sales price or fair market value of the lease.
See New clean alternative fuel and plug-in hybrid vehicle sales and use tax exemption
