TPS-TIE

A business selling some of its assets may carry a contract on the sale of these assets by accepting installment payments with interest. These sales may or may not be part of its usual business activity.

A recent case before the Washington State Supreme Court clarifies that “dealer cash” (a specific amount of extra money) from American Honda’s incentive program is subject to B&O tax under the Service & Other Activities classification. The payment represents income and is taxable.

(Steven Klein, Inc., dba Klein Honda, v. State of Washington, Department of Revenue, Wash. No. 91072-3 (August 27, 2015))

The Court also ruled:

All automotive repair facilities must post a sign, in a place that can be easily viewed by customers, with the following information:

Your customer rights

You are entitled by law to:

In most cases, transactions between related parties are taxable under Washington’s tax system. 

Sales of goods or services are usually subject to business and occupation (B&O) tax and sales tax, if applicable, when made between:

• Affiliated corporations.
• Partnerships, even though some or all the partners may be the same.
• Related individuals.
• Shareholders and a corporation.
• Partners and their partnership.

Non-taxable transactions between related parties:

Prepaid wireless calling services provide the right to use a mobile device for phone calls, text messages, web browsing services, and accessing and downloading content. The services are paid for in advance for predetermined units or dollars that decline with usage.

Prepaid wireless calling services are subject to sales tax when purchased. Sellers source sales tax to the location where the purchaser took ownership of the prepaid wireless service card.

Please note: this sourcing information does not apply to 911 taxes.

Businesses that make sales through vending machines for car washes, the operation of vacuum equipment, or to dispense air or water are making retail sales.

Sales made through vending machines are not required to separately state the retail sales tax from the selling price or collect it separately from the buyer.

What is a restocking fee?

A restocking fee is charged to a customer when merchandise is returned for a refund.

Are restocking fees subject to tax?

Yes. The restocking fee is subject to business and occupation (B&O) tax under the service and other activities classification. 

Many auto dealers sell maintenance agreements (service contracts) and warranties with vehicle sales and leases. If a customer purchases or leases a vehicle and purchases a service contract or warranty, the customer may pay for the contract or warranty upfront or finance those charges.

This article explains how sales tax applies to sales of service contracts and warranties.

Are service contracts or warranty sales to the customer subject to sales tax at the time of sale?

Yes. Retail sales tax applies to a service contract or warranty sold to a consumer.

When you sell your business, you may need to report all or part of the sale on your excise tax return. Also, you may be required to collect retail sales tax on certain capital assets and consumable supplies that are included in the sale. 

When does litter tax apply?

Litter tax applies when sales of food and beverages are:

• Assumed that the food will be eaten away from the seller's place of business.
• Packaged for sale in take-out or to-go containers.
• Wrapped in a way that makes it easy to carry the food away from the seller’s premises.
• Catered meals and beverages served with disposable plates, forks, spoons, cups, etc.

When does litter tax not apply?

Litter tax does not apply when food or beverages are served: