WAC 107

"Gross proceeds of sales."

Definitions.

Vending machine and other sales.

Records to be preserved--Examination--Estoppel to question assessment--Unified business identifier account number records.

Selling price - advertised prices, including sales tax.

Requirement to separtely state sales tax explains that retail sales tax must be separately stated from the selling price on sales invoices or other instruments of sale. This rule has been revised to recognize Dep't of Revenue v. Bi-Mor, Inc., 171 Wash.App. 197, 286 P.3d 417 (2012).

Selling price - advertised prices, including sales tax. Effective 6/2/90

TRANSFER OF CAPITAL ASSETS TO JOINT VENTURES Revised 2/2/09. See ETA 3137.2009

COLLECTION OF RETAIL SALES TAX ON CASUAL SALES OF MOTOR VEHICLES Revised 2/2/09. See ETA 3132.2009

Credit Cards Service Charges on Transactions The issues addressed in this ETA have been incorporated into revised WAC 458-20-108, which became effective on August 21, 2015.

Sale of tangible personal property by a joint venturer to the joint venture

Taxable transfers of capital assets

Foreign currency The issues addressed in this ETA have been incorporated into revised WAC 458-20-108, which became effective on August 21, 2015.

Collection of retail sales tax on casual sales of motor vehicles

Reimbursement of a venturer in a joint venture

Transfer of capital assets to joint ventures

Business and Occupation Tax on Sale of or Granting a License to Use Intangibles

SALES AND/OR TRADE-INS OF TANGIBLE PERSONAL PROPERTY FROM RENTAL INVENTORY -Revised 12/31/92 - Cancelled effective December 29, 2006 This document explains that when trading-in rental property towards the purchase of new property, the lessor is making a taxable wholesale sale of the trade-in property to the dealer. This document is no longer needed because this issue is adequately addressed in WAC 458-20-247.

APPLICATION OF BUSINESS AND OCCUPATION TAX TO ROYALTY INCOME EARNED THROUGH GRANT OF PATENT PRIVILEGES - Cancelled effective 1/30/06 (Corrected ETB number 324.04.194.224)

BUSINESS TAX UPON SALE OR LEASE OF PATENTS Revised 2/2/09. See ETA 3142.2009

EXCHANGE AGREEMENTS INVOLVING INVENTORY- ETA cancelled 4/21/2003

TAXABLE TRANSFERS OF CAPITAL ASSETS Revised 2/2/09. See ETA 3070.2009

SALE OF TANGIBLE PERSONAL PROPERTY BY A JOINT VENTURER TO THE JOINT VENTURE Revised 2/2/09 See ETA 3009.2009

REIMBURSEMENT OF A VENTURER IN A JOINT VENTURE Revised 2/2/09. See ETA 3136.2009

What You Need to Know about Itemizing the B&O Tax

B&O TAX -- SALE AT WHOLESALE -- WARRANTY SERVICES -- PARTS --REIMBURSEMENT. Amounts received by a dealership from a manufacturer-warrantor for parts furnished in connection with warranty repair services are taxable under the wholesale classification of the B&O tax.

B&O TAX -- SALE AT WHOLESALE -- WARRANTY SERVICES. Warranty repairs are sales of services at wholesale when performed by a dealership for a manufacturer-warrantor. The dealership doing the repair is B&O taxable on the value of the services provided.

RETAIL SALE -- USE/DEFERRED SALES TAX -- CANNED SOFTWARE -- COMPUTER TELEPHONE SUPPORT SERVICES -- COMPUTER TRAINING -- WARRANTY -- MAINTENANCE -- MIXED AGREEMENTS -- SEGREGATION OF CHARGES. Payments to a vendor of canned software for the training of employees are not subject to sales tax if separately stated from the charges for software maintenance. However, charges for maintenance of canned software are subject to use/deferred sales tax. Where payments are not adequately segregated, the combined charge will be subject to use/deferred sales tax.

B&O TAX -- RETAIL SALES TAX/USE TAX -- WARRANTY V. MAINTENANCE V. "MIXED" AGREEMENTS -- CONTRACT -- CONSTRUCTION -- INTENT OF THE PARTIES.

RETAIL SALES TAX -- SELLING PRICE -- DEDUCTION -- IF SELLER ADVERTISES SELLING PRICE AS INCLUDING SALES TAX -- " BACKING OUT" THE SALES TAX. Where the seller advertises under certain conditions and by visible sign to all customers, that the selling price includes the tax or that the seller is paying the tax, the seller may deduct the tax from the selling price by "backing out" the tax from the selling price when reporting retail sales tax and the gross receipts.

RETAIL SALES TAX -- "BACKING OUT" -- SELLING PRICE ADVERTISED AS INCLUDING THE SALES TAX -- PRESCRIBED CONDITIONS FOR SUCH ADVERTISING -- COIN-OPERATED POOL TABLE. Where a Taxpayer/operator of coin-operated pool tables has a sign\notice visible and advertising to all customers that the charge/selling price includes sales tax, the sales tax may be "backed out" from the selling price.

BEST INDICATION OF SALES. Cash register reading raises a presumption that sales were made in the amount recorded. The best evidence of the minimum gross proceeds of sales is the cash register reading.

RETAILING B&O TAX -- RETAIL SALES TAX -- GROSS PROCEEDS OF SALES -- EMPLOYEE THEFT OF INVENTORY -- EMPLOYEE MEALS. Where liquor was stolen by the taxpayer's employees, such liquor cannot be used to impute income to the taxpayer. Liquor stolen by employees does not constitute "employee meals" because the taxpayer did not voluntarily give the liquor to the employees in exchange for their services.

B&O TAX -- VALUE PROCEEDING AND ACCRUING - FREE PRODUCT - CONSIDERATION. Product offered as consideration was not "free", but consideration for services. The value of consideration in the form of product accruing or proceeding to the taxpayer constituted gross income.

SALES TAX - SEPARATE STATEMENT OF - PRESUMPTION. There is a presumption that the stated price of an item does not include retail sales tax unless the amount of sales tax is separately stated. In addition to its more conventional application, this principle applies as well to the sale of merchandise punchboards.

RETAIL SALE -- USE/DEFERRED SALES TAX -- CANNED SOFTWARE -- COMPUTER TELEPHONE SUPPORT SERVICES -- COMPUTER TRAINING -- WARRANTY -- MAINTENANCE -- MIXED AGREEMENTS -- SEGREGATION OF CHARGES. Charges for mixed services to canned software are subject to use/deferred sales tax. Software maintenance includes "extended warranty" of installed software; annual software releases to fix "bugs"; new codes, security records, and tables; written documentation on the changes made, including installation instructions; and testing and distribution of system software upgrades.

RETAIL SALES TAX -- SELLING PRICE -- SEPARATELY STATED. As proof that the retail sales tax was collected on rental payments, the invoices or lessor's records must show the sales tax separately stated from the payment for the rental.

RETAIL SALES TAX -- PAYMENT -- DOCUMENTATION. A copy of a check to a seller reciting payment for sales tax for a tax quarter is, by itself, insufficient evidence of sales tax actually paid. Corroborating evidence in the form of seller invoices, contracts, or billing receipts are necessary, or the taxpayer will be barred from questioning the assessment.

RETAIL SALES TAX -- PAYMENT -- DOCUMENTATION. The law provides a conclusive presumption that the selling price quoted does not include the retail sales tax. Only when seller documentation establishes that the tax has been separately stated and charged, and that such amount has been remitted to the seller by the buyer, will the buyer be deemed to have paid the tax. Lack of such documentation will bar the taxpayer from questioning the assessment.

RETAIL SALES TAX -- OVER-COLLECTED. Over-collected retail sales tax may not be retained by the seller for its own use, but is held in trust and must be remitted to the state if not returned to the purchasers. Kitsap-Mason Dairymen's Association v. Tax Commission, 77 Wn.2d 812, 467 P.2d 312 (1970).

WHOLESALING B&O TAX - GROSS PROCEEDS OF SALE -- MEASURE. Where an out-of-state manufacturer sold products to its independent distributors in Washington for resale to customers, the out-of-state manufacturer was required to pay Wholesaling B&O tax measured by its gross proceeds of sale to its distributors.

TAX PAID AT SOURCE - RECORDS - FAILURE TO MAINTAIN. A person who did not maintain invoices separately stating retail sales tax was not entitled to a presumption that retail sales tax was paid on taxable purchases, even though the person did maintain credit card receipts showing the total amounts paid, which ended in uneven cents suggesting the that total price included retail sales tax.

RETAIL SALES TAX - MEALS - PRICE INCLUSIVE OF TAX. Statute mandates conclusive presumption that the selling price on guest checks and cash register tapes does not include retail sales tax. Where sales tax is not separately accounted for, the Department has no alternative but to conclude that the sales tax has not been accounted for on the full gross selling price as required by law.

RULE 107; RCW 82.08.050(9): RETAIL SALES TAX - SELLING PRICE - SEPARATELY STATED. The taxpayer is liable for the retail sales tax because its menu does not advertise that the prices listed include the retail sales tax or the taxpayer is paying the retail sales tax.

RULE 107; RCW 82.08.020, RCW 82.08.050: RETAIL SALES TAX - CONTRACT PRICE - ADVERTISED PRICE INCLUDING TAX. The law creates a conclusive presumption that for purposes of collecting the tax and remitting it to the state, the selling price quoted does not include the retail sales tax. The presumption is not overcome or rebutted by any written or oral agreement between seller and buyer. The taxpayer did not provide evidence to rebut the presumption that the quoted selling price included retail sales tax.

RETAIL SALES TAX -- MAINTENANCE AGREEMENT -- WARRANTIES -- RETAIL SALE. A sale of a maintenance contract calling for periodic inspection, servicing, and repair of tangible personal property is a retail sale.

RETAIL SALES TAX -- EXTENDED AUTOMOBILE WARRANTIES -- DEDUCTIBLE AMOUNTS -- REIMBURSEMENTS TO DEALERS FOR WARRANTY REPAIRS. Income from auto dealer sales of extended warranties, deductible amounts paid by customers, and compensation by insurance companies to dealers for warranty repairs are all subject to retail sales tax.

B&O AND RETAIL SALES TAX -- EXTENDED AUTOMOBILE WARRANTIES -- IDENTIFICATION OF SELLER. An automobile dealer who sells extended warranty coverage at the same time he or she sells the auto to which the warranty applies is taxable under Retailing B&O and retail sales tax on gross income from the warranty where the dealer is contractually bound to his customer to make the warranty repairs. The fact that the dealer is compensated for the warranty expenses by an insurance company does not make the latter the seller of the warranty.

B&O AND RETAIL SALES TAX -- ESTOPPEL -- INCORRECT LETTER ADVICE -- SUBSEQUENT RULE AMENDMENT -- EFFECT OF. Where Department gave incorrect letter advice and a subsequent rule amendment clarified the subject of the advice, the Department is not bound by the incorrect advice, at least from the effective date of the amendment forward.

RETAIL SALES TAX -- WARRANTIES, MAINTENANCE AGREEMENTS AND SERVICE CONTRACTS. Retail sales tax is not applicable to third party warranty contracts.

RETAIL SALES TAX -- PAYMENT -- DOCUMENTATION. The law requires that sales tax be separately stated and provides a conclusive presumption that the quoted selling price does not include sales tax. Collection of sales tax is the obligation of the seller, the Department is not obligated to act as collector by pursuing the buyer. Persons protesting assessment of sales tax must provide documentation establishing that the tax has been separately stated and charged and that such amount has been paid by the buyer to the seller or the buyer will be deemed not to have paid the tax.

RETAIL SALES TAX -- LEASE -- SELLER LIABLE FOR SALES TAX COLLECTION. A lease of tangible personal property wherein monthly payments are made is a contract for a series of transactions in which each monthly lease payment represents a retail sale. Lessor is obligated to collect retail sales tax from lessees as rental payments fall due. Where tax is not separately stated, there is a conclusive presumption that it was not collected. Presumption is not overcome by agreement between the parties. Department of Revenue is not obligated to look to the buyer/lessee for payment of the tax due.

RETAIL SALES TAX -- PAYMENT -- DOCUMENTATION. The law requires that sales tax be separately stated and provides a conclusive presumption that the quoted selling price does not include sales tax. Persons protesting assessment of sales tax must provide documentation establishing that the tax has been separately stated and charged and that such amount has been paid by the buyer to the seller or the buyer will be deemed not to have paid the tax. Lack of such documentation will bar the taxpayer from questioning the assessment.

RETAIL SALES TAX -- RECORDS -- SEPARATELY STATED -- PRESUMPTION. Retail sales taxes paid to a builder must have been separately stated on the invoice, and the invoice be made available to the Department, before a determination can be made that the tax has been paid. Otherwise, under the provisions of RCW 82.32.070 and 82.08.050, it is conclusively presumed that the tax has not been paid.

RETAIL SALES TAX -- EXTENDED WARRANTIES -- AUTO DEALER -- SELLER -- AMENDMENT OF RULE. After its amendment effective February 6, 1986, Rule 107 provided that an automobile dealer who sells extended warranty coverage at the same time it sells the auto to which the warranty applies is taxable under Retailing B&O the retail sales tax on gross income from the warranty. The dealer is the seller of the warranty if contractually bound to make the warranty repairs.

RETAIL SALES TAX -- EXTENDED WARRANTIES -- AUTO DEALER -- AMENDMENT OF RULE. Where an agent of the Department gave incorrect advice to another auto dealer after the amendment to Rule 107, and the taxpayer did not show it relied on that advise or had any right to rely, the Department is not estopped from assessing tax on warranty sales after the date of the rule amendment.

SALES TAX -- SELLING PRICE -- AUTOMOBILE REBATE. A manufacturer's automobile rebate endorsed by a customer in favor of a dealer, as part of the consideration for the purchase of an automobile, is part of the selling price of the auto and is subject to retail sales tax.

GROSS RECEIPTS -- CASH OVER & SHORT -- CASH RECEIPTS METHOD -- DEDUCTION. A taxpayer reporting on the cash receipts basis must add cash overages and may not deduct cash shortages from receipts unless it can show that the error was due to recordkeeping errors.

RETAIL SALES TAX -- SEPARATELY STATED -- CONCLUSIVE PRESUMPTION. Where retail sales tax is not separately stated, the law provides a conclusive presumption that the tax was not paid. Persons protesting the assessment of tax must provide documentation establishing that the amount has been paid by the buyer to the seller. Seller who purchases or leases equipment which manufactures oxygen for medical patients and who pays sales tax on the equipment acquisitions may take a credit for tax paid on the original acquisition price during the year in which the tax was paid. Det. No.

RETAIL SALES TAX -- LEASE -- RENTAL PRICE INCLUSIVE OF SALES TAX -- SEPARATE STATEMENT OF SALES TAX -- CONCLUSIVE PRESUMPTION. The statement in a written lease that the rental price for tangible personal property includes sales tax does not mean for tax purposes that the lessee has paid sales tax to the lessor. Unless the sales tax is separately stated from the rental amount due in the lease, in monthly billings, or in monthly statements, there is a conclusive presumption by law that rent paid did include the sales tax.

RETAILING B&0 TAX -- SERVICE B&O TAX -- AUTOMATIC SPRINKLER SYSTEM -- INSPECTION. The inspection, testing and lubricating of automatic sprinkler systems, as an improvement of personal or real property, is held to be a Retailing B&O activity, not a Service B&O activity. ETB 425.08.107.