Wash. Admin. Code § 458-20-208
(2) Wholesale sales of new motor vehicles by new car dealers. Effective July 1, 2001, RCW 82.04.422 provides a B&O tax exemption for wholesale sales of new motor vehicles by new car dealers to other new car dealers. This exemption does not apply to amounts derived by a manufacturer, distributor, or factory branch as defined in chapter 46.70 RCW.
(b) Wholesale sale between new car dealers selling the same make of new motor vehicles. The sale must be a wholesale sale and must occur between new car dealers selling the same make of vehicle. For purposes of determining whether the exemption applies to transactions involving trades, the trade of each new motor vehicle is considered a separate sale.
(c) Documentation. A person claiming the B&O tax exemption under RCW 82.04.422 for a wholesale sale of a new motor vehicle must maintain sufficient documentation to verify the exemption. The documentation should identify:
New car dealers will in most cases find the statutory requirements of this exemption to be less restrictive than those of the accommodation sales exemption discussed in subsection (3) of this rule. Unlike the exemption for accommodations sales, there is no restriction on the amount that the selling dealer can charge the buying dealer, nor is there any requirement that the sale be made to fill an existing order from a customer. While these circumstances may be present in a particular transaction, there is no need to use or rely upon the B&O tax exemption for accommodation sales when the requirements for the exemption for wholesale sales between new car dealers are met. The exemption for wholesale sales of new motor vehicles between new car dealers provided by RCW 82.04.422 is subject to the following conditions.
(3) Accommodation sales. RCW 82.04.425 provides a B&O tax exemption for wholesale sales of tangible personal property by persons who regularly engage in making sales of the type of property so sold to other persons who similarly engage in the business of selling such property.
(a) Amount paid by buyer may not exceed amount paid by seller. The amount the buyer pays to the seller may not exceed the amount the seller paid to the seller's vendor in the acquisition of the property. Thus, a seller who manufactured the property sold cannot claim the exemption because the property has not been acquired from a vendor.
(i) Expenses associated with preparing property for sale. A seller may add reasonable expenses for preparing the property for sale, such as actual freight or delivery costs incurred by the seller and billed as such to the buyer. Questions concerning whether the exemption is available when other costs are included should be submitted to the department for determination at:
Department of Revenue
Taxpayer Services
P.O. Box 47478
Olympia, WA 98504-7478
(ii) What is the effect of holdbacks or discounts on amount paid? The amount paid by the seller may not be reduced by the amount of any manufacturer's holdbacks or discounts received after an article has been sold to adjust inventory levels even though the seller may retain such holdbacks or discounts.
For the following examples, presume an equipment dealer receives two tractors from the manufacturer on June 1st. The manufacturer's sales invoice indicates an invoice price of $16,600 and a holdback of $500 for each tractor. The dealer is entitled to receive the holdback on July 1st, thirty days after being billed for the tractors by the manufacturer.
(b) Sale is an accommodation to fill an existing order. The sale must occur as an accommodation to allow the buyer to fill a bona fide existing order of a customer or occur within fourteen days to reimburse in-kind a previous accommodation sale by the buyer to the seller. A bona fide existing order is present if there is a commitment by the buyer's customer to purchase the property. The buyer must retain records demonstrating the customer's commitment to purchase, such as a written agreement or deposit.
For example, Recreational Vehicle Dealer A purchases a fifth-wheel trailer from Recreational Vehicle Dealer B as an accommodation. Ten days later, Dealer A sells a travel trailer to Dealer B as reimbursement in-kind of the previous accommodation sale. For Dealer A to claim the B&O tax exemption for the sale of the travel trailer to Dealer B, Dealer A must keep sufficient records to document a bona fide existing customer order for the fifth-wheel trailer purchased from Dealer B.
(c) Documentation. A person claiming the exemption for an accommodation sale must maintain sufficient documentation to verify the exemption. In addition to the documentation noted above establishing, where pertinent, the existence of a bona fide existing customer order, this documentation must include:
The following conditions must be satisfied for the exemption to apply.
(4) Exchanges of fungible products. Persons engaged in the selling and distributing of fungible products often enter into exchange agreements. An exchange is a sale regardless of whether it results in a profit because a transfer of the ownership of, title to, or possession of property for valuable consideration occurs. RCW 82.04.040. Exchanges are subject to the B&O tax unless otherwise exempt by law.
(b) What is an exchange? Under typical exchange agreements, a person is required to furnish products to another person selling and distributing the same products, sometimes receiving payment in-kind or with a substitute product at a later date. Exchange agreements may require the person to arrange for direct delivery from his or her vendor to the third party distributor. In some cases, actual title and/or possession of the product may pass directly from the vendor to the third-party distributor.
Persons exchanging fungible products often do so on a regular and continuing basis to cover shortages occurring because of a lack of storage or production facilities, and/or to effect savings in transportation costs. Exchanges may be carried as loans on the books of account (in which case the exchanges are often referred to as "intercompany loans"). Products acquired via an exchange may or may not be carried as regular inventory on the books of account.
[Statutory Authority: RCW 82.32.300 and 82.01.060(2). WSR 04-17-025, § 458-20-208, filed 8/9/04, effective 9/9/04. Statutory Authority: RCW 82.32.300, 82.01.060(2), and 34.05.230. WSR 03-07-066, § 458-20-208, filed 3/17/03, effective 4/17/03; Order ET 70-3, § 458-20-208 (Rule 208), filed 5/29/70, effective 7/1/70.]