Wash. Admin. Code § 458-20-132 - Automobile dealers/demonstrator and executive vehicles
(1) Introduction. This section accounts for
the unique practices of the retail automobile dealer's industry and reflects
administrative notice of the customs of this trade. The tax reporting formulas
explained in this rule represent a compromise of tax liabilities and offsetting
deductions. It recognizes that demonstrators and vehicles used by executives or
persons associated with a dealer are actually used for limited periods of time
without significantly affecting their marketability or retail selling value,
and that such used vehicles have a high trade-in value when returned to
inventory for sale.
(2)
Definitions. The following definitions apply to this section.
(a) The terms "demonstration" and
"demonstrator" mean the use of automobiles provided by dealers to their sales
staff, without charge, for any personal or business reason other than (or in
addition to) the mere display of such vehicles to prospective
purchasers.
(b) The term "display"
means the showing for sale of vehicles to prospective purchasers, at or near
the dealer's premises, including the short term test driving, operating, and
examining by prospective purchasers.
(c) The term "executive use vehicle" means
any vehicle from sales inventory, used by any person associated with the
automobile dealership for personal driving, other than for demonstration or
display purposes as defined above, when such person does not have a recent
model vehicle registered and licensed in that person's own name on which retail
sales tax was paid.
(d) The term
"recent model vehicle" refers to a car of the current model year or either of
the two preceding model years.
(e)
The terms "purchase price" and "total cost" mean the amount charged to the
dealer for the purchase of a vehicle and includes any additional charges for
accessories installed on the vehicle. If the vehicle was acquired through a
trade-in by a customer, these terms then mean the trade-in value given to the
customer by the dealer (with consideration of underallowances and
overallowances) as well as any costs of refurbishing and repairs in preparing
the vehicle for resale or use. These values will generally be the amounts shown
as the vehicle cost within the dealer's inventory records.
(f) The phrase "pickup truck" refers only to
trucks having a commercial pickup body rated at three-quarter ton capacity or
less.
(3) Business and
occupation tax. Automobile dealers are taxable under the retailing
classification upon the sale or lease of automobiles to their employees or
other representatives for personal use, including demonstration. The business
and occupation tax does not apply upon the transfer of vehicles to employees or
other representatives for their personal use, including demonstration where no
sale occurs.
(4) Retail sales tax.
The retail sales tax applies upon the sale or lease of automobiles, parts, and
accessories by dealers to their employees or other representatives for the
personal use by such persons. The retail sales tax does not apply to the
display of automobiles where no sale takes place.
(5) Use tax. The use tax does not apply to
the display of new or used automobiles by dealers, their employees or other
representatives. Neither does use tax apply upon the personal use or
demonstration of automobiles which have been sold or leased to dealers'
employees or other representatives and upon which the retail sales tax has been
paid. Also, use tax does not apply upon demonstrator vehicles if no such
vehicles are actually used. However, where an automobile dealer purchases a
passenger car or pickup truck without paying a retail sales tax and uses such
car or truck for personal use or demonstration purposes, the use tax applies
even if such personal car or demonstrator may later be sold by the
dealer.
(6) Computation of use tax.
For practical purposes, automobile dealers may elect to compute the use tax
upon the use of demonstrators by sales staff on either a "one per one hundred
vehicles sold" basis or on an "actual number of demonstrators used" basis. Use
of the one per one hundred vehicles sold method will satisfy the use tax
liability for personal or business use of demonstrators by sales staff employed
by a new car dealer. However, the one per one hundred vehicles sold method will
not satisfy the use tax liability for the personal or business use of vehicles
by persons other than sales staff employed by the dealership.
(a) One per one hundred demonstrator
reporting basis. The use of demonstrators is subject to the use tax on the
basis of one demonstrator for each one hundred new automobiles and pickup
trucks, or fractional part of such number, of all makes or models sold at
retail including lease transactions during a calendar year. The use tax on each
such demonstrator is measured by twenty-five percent of the average selling
price, including dealer preparation, transportation, and factory or dealer
installed accessories, of all makes and models of new passenger cars and new
pickup trucks sold during the preceding calendar year divided by the number of
such units sold: Provided, That the first such vehicle reported during any
calendar year shall be subject to use tax measured by the full average retail
selling price.
(i) The average retail selling
price is computed by dividing the total retail sales of new passenger cars and
trucks in the preceding year by the total units sold in the preceding year.
Thus, for example, a dealer with $3,000,000.00 in gross sales for the previous
year, who sold 250 units that year derives an average selling price of
$12,000.00. The very first demonstrator use in the current year will be
$12,000.00 multiplied by the prevailing use tax rate. All subsequent
demonstrators reported in the current year, based upon the formula of one
demonstrator for each one hundred units sold, will be $3,000.00 multiplied by
the prevailing use tax rate.
(ii)
The use tax is paid as of the date of the first sale in any calendar year and
subsequently upon the sale of the one hundred and first automobile or pickup
truck. If a dealer sold 340 units in the current year, use tax would be due on
four units (the first at one hundred percent of the average retail selling
price of all new vehicles sold in the preceding year and the remaining three at
twenty-five percent of the previous year's average selling price of new
vehicles).
(b) Actual
demonstrator reporting basis. Dealers who decide to report use tax on
demonstrators on an actual basis are required to report use tax on each vehicle
assigned to demonstrator use. The value is computed in the same manner as under
the one per one hundred basis. The first vehicle in the current year which is
used for demonstrator use is taxable on the full average selling price of all
new vehicles sold in the preceding year. Additional vehicles during the year
which are put to use as demonstrators are taxable at twenty-five percent of the
average selling price of new vehicles sold in the preceding year.
(c) The above method of computation applies
only in respect to use by sales staff of demonstrator vehicles operated under
dealer plates issued to the dealership. Vehicles which are required to be
licensed other than to the dealership are presumed to be used substantially for
purposes other than demonstration and are subject to the use tax measured by
the actual value (purchase price) of such vehicles.
(d) Change in reporting method. When an
automobile dealer has elected to report the use tax under the "one per one
hundred basis," or upon the actual number of demonstrators used, it will not be
permitted to change the manner of reporting without the written consent of the
department of revenue.
Dealers are required to provide reasonably accurate records reflecting the use of dealer plates.
(7) Executive vehicles - personal use of
vehicles by executives and persons associated with a dealer. When a dealer or a
person associated with a dealer (firm executive, corporate officer, partner, or
manager) does not have a recent model car registered and licensed in its own
name and regularly uses either one or various new cars from inventory for
personal driving (whether or not such cars are also used for demonstration
purposes) the use tax applies to the value of one such car for each two
calendar years in addition to the tax which applies to demonstrator use by
sales staff. The measure of the use tax is the same as the measure for the
computation of use tax on subsequently used demonstrator vehicles, that is,
twenty-five percent of the average selling price of all makes and models of new
passenger cars and pickup trucks sold at retail during the preceding year.
(a) The dealer may not include within the
executive car reporting method the use of a new vehicle which is not of the
type or model of new vehicles authorized to be sold by the dealer's franchise
agreement. The executive car reporting method applies only to vehicles removed
from inventory for use by the executives. Vehicles purchased specifically for
use by the executives are taxable on the purchase price of each
vehicle.
(b) No use tax in addition
to that outlined above will be due if members of the immediate family of the
executive also use a vehicle from inventory which is not otherwise licensed or
required to be licensed. "Immediate family" includes only the executive's
spouse or state registered domestic partner and children or state registered
domestic partner's children, who live in the same household as the
executive.
(8) Vehicles
used by automobile manufacturers or distributors. Automobile manufacturers or
distributors will often assign vehicles to their employee representatives for
demonstration purposes, sales solicitation and personal use in the state. It is
common practice to replace these vehicles frequently so that several vehicles
may be used by a company representative during the course of the year. Under
these circumstances, the department of revenue will allow computation of the
use tax based on the average selling price of all new cars sold in the
preceding year multiplied by the maximum complement of cars of each model year
in use at any time during the year. The tax is due at the start of the model
year. No use tax is due on the usual turnover or replacement of cars within the
model year.
(9) Vehicles loaned to
nonprofit or other organizations. The use tax applies to the value of vehicles
that are required to be licensed and are loaned or donated to civic, religious,
nonprofit or other organizations. The use tax may be computed for loaned
vehicles on a value of two percent per month multiplied by the purchase price
of the vehicle. Such tax is in addition to the tax on the use of demonstrators
as provided in this rule. Vehicles that are not required to be licensed which
are used for the purpose of promoting or participating in an event such as a
parade, pageant, convention, or other community activity are not subject to the
use tax provided the dealer obtains a temporary letter of authority or a
special plate in accordance with RCW 46.16.048.
(10) Service department vehicles. Vehicles
removed from inventory and committed to use as service vehicles, parts trucks,
or service department loaner cars are subject to use tax. Dealers will often
use vehicles for this purpose for only short periods of time. In recognition of
this, dealers may elect to report use tax on either the purchase price of the
vehicle or on two percent per month of the purchase price for each month or any
fraction thereof that the vehicle is being used as a service vehicle or loaner.
If use tax is reported based on total purchase price rather than on the two
percent method, a trade-in deduction is allowed if the vehicle is returned to
inventory and concurrently another vehicle replaces this vehicle for use as a
loaner or service vehicle. The trade-in value is the wholesale value and
generally will be the value recorded by the dealer in the inventory records
exclusive of any refurbishing costs at the time the vehicle is returned to
inventory.
(11) Personal use of
used vehicles. Used vehicle dealers who provide used cars for personal use to
their sales staff or managers without charge are subject to use tax on one
vehicle per year for each sales person or manager to whom a used vehicle is
provided. The value for use tax reporting is the average selling price of all
used vehicles sold in the preceding year multiplied by twenty-five percent. The
use tax is due in the month in which the vehicle is first used for personal
use. New vehicle dealers will also be taxable in this manner for used cars
furnished to sales staff or managers, but only if no new cars are provided
during the course of the year to the manager or sales person. If both new and
used cars are provided by a new vehicle dealer to a manager or sales person,
use tax liability is as provided in subsections (6) and (7) of this section.
Where used car dealers satisfy the criteria for executive car use (no current model vehicle registered in the user's name) they are deemed to be using one executive or personal use vehicle per calendar year. In such cases use tax must be reported under the same formula as for subsequently used new demonstrator cars, that is, measured by twenty-five percent of the average selling price of all used cars sold during the preceding calendar year. Use tax also is due on all vehicles that are capitalized for accounting purposes or removed from inventory and used for personal use. In such cases, the use tax measure is the purchase price of the vehicle. If the vehicle was acquired through a trade-in by a customer, the value will generally be that recorded by the dealer in the inventory records including any costs incurred in repairing or refurbishing the vehicle. Purchase of a new car by a used car dealer and used personally by the dealer or person associated with the dealer is subject to use tax measured by the purchase price of the vehicle.
(12) Examples. The following examples
identify a number of facts and then state a conclusion. These examples should
be used only as a general guide. The tax status of each situation must be
determined after a review of all of the facts and circumstances.
(a) Dealer A makes a specific charge each
month to its sales person for the use of a vehicle. The sales person uses the
vehicle for personal use as well as displaying the vehicle to potential
customers. The dealer is required to report the gross charges under the
retailing and retail sales tax classifications. No use tax is due on this
vehicle.
(b) Dealer A assigns a
vehicle from its new vehicle inventory for personal and business use to each of
its new vehicle sales staff. No charge is made to the sales staff for the use
of the vehicle. Dealer A is subject to use tax and may elect to report the tax
on each vehicle assigned to the sales staff or may report on the "one per one
hundred" method discussed above. Once a method is elected, the dealer may not
change methods without approval from the department.
(c) Dealer A assigns a vehicle from its new
vehicle inventory for personal use to its service manager. The service manager
will use the vehicle for approximately ninety days when it will be replaced
with another new vehicle. The service manager does not have a recent model car
registered and licensed in his/her name. The dealer is subject to use tax on
the vehicles assigned to the service manager. The tax will apply on only one
vehicle every second year and will be measured by twenty-five percent of the
average selling price of all new passenger cars and trucks sold in the previous
year.
(d) Dealer A has the
franchise to sell Chevrolets. Dealer A purchases a new Mercedes Benz for its
personal use. The dealer attaches a "dealer plate" to this vehicle. Dealer A is
subject to use tax on the purchase price of this vehicle. The dealer may not
report use tax on the method authorized for reporting executive cars for this
vehicle since the dealer is not an authorized dealer for this make of vehicle
and the vehicle was not removed from the dealer's new vehicle
inventory.
(e) Vehicle Manufacturer
A has five employees who live and work from their homes in Washington. These
employees call on dealers in Washington to resolve warranty disputes. Each
employee is given a new vehicle at the start of the model year. The vehicle
will be replaced every sixty days. Manufacturer A owes use tax on five vehicles
at the start of the model year. No additional use tax will be due when these
vehicles are replaced during the same model year. However, should a sixth
employee be added during the course of the year, an additional vehicle will be
subject to use tax.
(f) Dealer A
uses a vehicle from inventory as a service truck. This vehicle is used to pick
up parts from local suppliers, transportation for making emergency repairs on
customer's vehicles, and similar activities. The dealer is liable for use tax
on this vehicle. At its option, the dealer may report use tax on two percent
per month of the purchase price of the vehicle or may report use tax on the
full value of the vehicle at the time it is put to use.
(g) Dealer A uses a new vehicle from
inventory for his/her own personal use. Dealer A's spouse also uses a new
vehicle. Dealer A's son who lives in the same household will occasionally use a
new vehicle. All of these vehicles are operated with dealer plates attached.
Dealer A does not have a recent model car licensed in Washington. Dealer A is
subject to use tax on one vehicle as an "executive" car every second year as
provided above.
(h) Dealer A loans
a vehicle to a civic organization for a thirty-day period. The dealer is unable
to obtain a temporary letter of authority for use of the vehicle under RCW
46.16.048. The dealer is liable for use tax, but the dealer may report the use
tax based on two percent of the purchase price of the vehicle per month as the
measure of the tax. No use tax would be due if the dealer had obtained a letter
of authority under RCW 46.16.048 for the use of the vehicle.
(i) Dealer A, who sells new and used
vehicles, assigns a used vehicle to the used car sales manager for personal
use. However, if the sales manager exceeds the sales goals for the preceding
quarter, the manager will be assigned a new vehicle for personal use for the
following quarter. The manager will generally exceed the sales goal at least
once during the year. Since the manager uses both a new and used car from
inventory during the course of a year, use tax will be computed based on
twenty-five percent of the average selling price of all new cars and trucks
sold in the preceding year. The use tax will be due on one such vehicle every
second year.
(j) Dealer A, who
sells new and used vehicles, regularly assigns a used vehicle from inventory to
its service manager for personal use. This vehicle is replaced approximately
every sixty days. Use tax is due on one vehicle every year measured by
twenty-five percent of the average selling price of all used vehicles sold in
the preceding year.
Notes
Statutory Authority: 2009 c 521. 10-07-133, § 458-20-132, filed 3/23/10, effective 4/23/10. Statutory Authority: RCW 82.32.300. 92-05-066, § 458-20-132, filed 2/18/92, effective 3/20/92; 86-09-002 (Order ET 86-5), § 458-20-132, filed 4/3/86; 83-07-034 (Order ET 83-17), § 458-20-132, filed 3/15/83; Order ET 70-3, § 458-20-132 (Rule 132), filed 5/29/70, effective 7/1/70.
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
(1) Introduction. This section accounts for the unique practices of the retail automobile dealer's industry and reflects administrative notice of the customs of this trade. The tax reporting formulas explained in this rule represent a compromise of tax liabilities and offsetting deductions. It recognizes that demonstrators and vehicles used by executives or persons associated with a dealer are actually used for limited periods of time without significantly affecting their marketability or retail selling value, and that such used vehicles have a high trade-in value when returned to inventory for sale.
(2) Definitions. The following definitions apply to this section.
(a) The terms "demonstration" and "demonstrator" mean the use of automobiles provided by dealers to their sales staff, without charge, for any personal or business reason other than (or in addition to) the mere display of such vehicles to prospective purchasers.
(b) The term "display" means the showing for sale of vehicles to prospective purchasers, at or near the dealer's premises, including the short term test driving, operating, and examining by prospective purchasers.
(c) The term "executive use vehicle" means any vehicle from sales inventory, used by any person associated with the automobile dealership for personal driving, other than for demonstration or display purposes as defined above, when such person does not have a recent model vehicle registered and licensed in that person's own name on which retail sales tax was paid.
(d) The term "recent model vehicle" refers to a car of the current model year or either of the two preceding model years.
(e) The terms "purchase price" and "total cost" mean the amount charged to the dealer for the purchase of a vehicle and includes any additional charges for accessories installed on the vehicle. If the vehicle was acquired through a trade-in by a customer, these terms then mean the trade-in value given to the customer by the dealer (with consideration of underallowances and overallowances) as well as any costs of refurbishing and repairs in preparing the vehicle for resale or use. These values will generally be the amounts shown as the vehicle cost within the dealer's inventory records.
(f) The phrase "pickup truck" refers only to trucks having a commercial pickup body rated at three-quarter ton capacity or less.
(3) Business and occupation tax. Automobile dealers are taxable under the retailing classification upon the sale or lease of automobiles to their employees or other representatives for personal use, including demonstration. The business and occupation tax does not apply upon the transfer of vehicles to employees or other representatives for their personal use, including demonstration where no sale occurs.
(4) Retail sales tax. The retail sales tax applies upon the sale or lease of automobiles, parts, and accessories by dealers to their employees or other representatives for the personal use by such persons. The retail sales tax does not apply to the display of automobiles where no sale takes place.
(5) Use tax. The use tax does not apply to the display of new or used automobiles by dealers, their employees or other representatives. Neither does use tax apply upon the personal use or demonstration of automobiles which have been sold or leased to dealers' employees or other representatives and upon which the retail sales tax has been paid. Also, use tax does not apply upon demonstrator vehicles if no such vehicles are actually used. However, where an automobile dealer purchases a passenger car or pickup truck without paying a retail sales tax and uses such car or truck for personal use or demonstration purposes, the use tax applies even if such personal car or demonstrator may later be sold by the dealer.
(6) Computation of use tax. For practical purposes, automobile dealers may elect to compute the use tax upon the use of demonstrators by sales staff on either a "one per one hundred vehicles sold" basis or on an "actual number of demonstrators used" basis. Use of the one per one hundred vehicles sold method will satisfy the use tax liability for personal or business use of demonstrators by sales staff employed by a new car dealer. However, the one per one hundred vehicles sold method will not satisfy the use tax liability for the personal or business use of vehicles by persons other than sales staff employed by the dealership.
(a) One per one hundred demonstrator reporting basis. The use of demonstrators is subject to the use tax on the basis of one demonstrator for each one hundred new automobiles and pickup trucks, or fractional part of such number, of all makes or models sold at retail including lease transactions during a calendar year. The use tax on each such demonstrator is measured by twenty-five percent of the average selling price, including dealer preparation, transportation, and factory or dealer installed accessories, of all makes and models of new passenger cars and new pickup trucks sold during the preceding calendar year divided by the number of such units sold: Provided, That the first such vehicle reported during any calendar year shall be subject to use tax measured by the full average retail selling price.
(i) The average retail selling price is computed by dividing the total retail sales of new passenger cars and trucks in the preceding year by the total units sold in the preceding year. Thus, for example, a dealer with $3,000,000.00 in gross sales for the previous year, who sold 250 units that year derives an average selling price of $12,000.00. The very first demonstrator use in the current year will be $12,000.00 multiplied by the prevailing use tax rate. All subsequent demonstrators reported in the current year, based upon the formula of one demonstrator for each one hundred units sold, will be $3,000.00 multiplied by the prevailing use tax rate.
(ii) The use tax is paid as of the date of the first sale in any calendar year and subsequently upon the sale of the one hundred and first automobile or pickup truck. If a dealer sold 340 units in the current year, use tax would be due on four units (the first at one hundred percent of the average retail selling price of all new vehicles sold in the preceding year and the remaining three at twenty-five percent of the previous year's average selling price of new vehicles).
(b) Actual demonstrator reporting basis. Dealers who decide to report use tax on demonstrators on an actual basis are required to report use tax on each vehicle assigned to demonstrator use. The value is computed in the same manner as under the one per one hundred basis. The first vehicle in the current year which is used for demonstrator use is taxable on the full average selling price of all new vehicles sold in the preceding year. Additional vehicles during the year which are put to use as demonstrators are taxable at twenty-five percent of the average selling price of new vehicles sold in the preceding year.
(c) The above method of computation applies only in respect to use by sales staff of demonstrator vehicles operated under dealer plates issued to the dealership. Vehicles which are required to be licensed other than to the dealership are presumed to be used substantially for purposes other than demonstration and are subject to the use tax measured by the actual value (purchase price) of such vehicles.
(d) Change in reporting method. When an automobile dealer has elected to report the use tax under the "one per one hundred basis," or upon the actual number of demonstrators used, it will not be permitted to change the manner of reporting without the written consent of the department of revenue.
Dealers are required to provide reasonably accurate records reflecting the use of dealer plates.
(7) Executive vehicles - personal use of vehicles by executives and persons associated with a dealer. When a dealer or a person associated with a dealer (firm executive, corporate officer, partner, or manager) does not have a recent model car registered and licensed in its own name and regularly uses either one or various new cars from inventory for personal driving (whether or not such cars are also used for demonstration purposes) the use tax applies to the value of one such car for each two calendar years in addition to the tax which applies to demonstrator use by sales staff. The measure of the use tax is the same as the measure for the computation of use tax on subsequently used demonstrator vehicles, that is, twenty-five percent of the average selling price of all makes and models of new passenger cars and pickup trucks sold at retail during the preceding year.
(a) The dealer may not include within the executive car reporting method the use of a new vehicle which is not of the type or model of new vehicles authorized to be sold by the dealer's franchise agreement. The executive car reporting method applies only to vehicles removed from inventory for use by the executives. Vehicles purchased specifically for use by the executives are taxable on the purchase price of each vehicle.
(b) No use tax in addition to that outlined above will be due if members of the immediate family of the executive also use a vehicle from inventory which is not otherwise licensed or required to be licensed. "Immediate family" includes only the executive's spouse or state registered domestic partner and children or state registered domestic partner's children, who live in the same household as the executive.
(8) Vehicles used by automobile manufacturers or distributors. Automobile manufacturers or distributors will often assign vehicles to their employee representatives for demonstration purposes, sales solicitation and personal use in the state. It is common practice to replace these vehicles frequently so that several vehicles may be used by a company representative during the course of the year. Under these circumstances, the department of revenue will allow computation of the use tax based on the average selling price of all new cars sold in the preceding year multiplied by the maximum complement of cars of each model year in use at any time during the year. The tax is due at the start of the model year. No use tax is due on the usual turnover or replacement of cars within the model year.
(9) Vehicles loaned to nonprofit or other organizations. The use tax applies to the value of vehicles that are required to be licensed and are loaned or donated to civic, religious, nonprofit or other organizations. The use tax may be computed for loaned vehicles on a value of two percent per month multiplied by the purchase price of the vehicle. Such tax is in addition to the tax on the use of demonstrators as provided in this rule. Vehicles that are not required to be licensed which are used for the purpose of promoting or participating in an event such as a parade, pageant, convention, or other community activity are not subject to the use tax provided the dealer obtains a temporary letter of authority or a special plate in accordance with RCW 46.16.048.
(10) Service department vehicles. Vehicles removed from inventory and committed to use as service vehicles, parts trucks, or service department loaner cars are subject to use tax. Dealers will often use vehicles for this purpose for only short periods of time. In recognition of this, dealers may elect to report use tax on either the purchase price of the vehicle or on two percent per month of the purchase price for each month or any fraction thereof that the vehicle is being used as a service vehicle or loaner. If use tax is reported based on total purchase price rather than on the two percent method, a trade-in deduction is allowed if the vehicle is returned to inventory and concurrently another vehicle replaces this vehicle for use as a loaner or service vehicle. The trade-in value is the wholesale value and generally will be the value recorded by the dealer in the inventory records exclusive of any refurbishing costs at the time the vehicle is returned to inventory.
(11) Personal use of used vehicles. Used vehicle dealers who provide used cars for personal use to their sales staff or managers without charge are subject to use tax on one vehicle per year for each sales person or manager to whom a used vehicle is provided. The value for use tax reporting is the average selling price of all used vehicles sold in the preceding year multiplied by twenty-five percent. The use tax is due in the month in which the vehicle is first used for personal use. New vehicle dealers will also be taxable in this manner for used cars furnished to sales staff or managers, but only if no new cars are provided during the course of the year to the manager or sales person. If both new and used cars are provided by a new vehicle dealer to a manager or sales person, use tax liability is as provided in subsections (6) and (7) of this section.
Where used car dealers satisfy the criteria for executive car use (no current model vehicle registered in the user's name) they are deemed to be using one executive or personal use vehicle per calendar year. In such cases use tax must be reported under the same formula as for subsequently used new demonstrator cars, that is, measured by twenty-five percent of the average selling price of all used cars sold during the preceding calendar year. Use tax also is due on all vehicles that are capitalized for accounting purposes or removed from inventory and used for personal use. In such cases, the use tax measure is the purchase price of the vehicle. If the vehicle was acquired through a trade-in by a customer, the value will generally be that recorded by the dealer in the inventory records including any costs incurred in repairing or refurbishing the vehicle. Purchase of a new car by a used car dealer and used personally by the dealer or person associated with the dealer is subject to use tax measured by the purchase price of the vehicle.
(12) Examples. The following examples identify a number of facts and then state a conclusion. These examples should be used only as a general guide. The tax status of each situation must be determined after a review of all of the facts and circumstances.
(a) Dealer A makes a specific charge each month to its sales person for the use of a vehicle. The sales person uses the vehicle for personal use as well as displaying the vehicle to potential customers. The dealer is required to report the gross charges under the retailing and retail sales tax classifications. No use tax is due on this vehicle.
(b) Dealer A assigns a vehicle from its new vehicle inventory for personal and business use to each of its new vehicle sales staff. No charge is made to the sales staff for the use of the vehicle. Dealer A is subject to use tax and may elect to report the tax on each vehicle assigned to the sales staff or may report on the "one per one hundred" method discussed above. Once a method is elected, the dealer may not change methods without approval from the department.
(c) Dealer A assigns a vehicle from its new vehicle inventory for personal use to its service manager. The service manager will use the vehicle for approximately ninety days when it will be replaced with another new vehicle. The service manager does not have a recent model car registered and licensed in his/her name. The dealer is subject to use tax on the vehicles assigned to the service manager. The tax will apply on only one vehicle every second year and will be measured by twenty-five percent of the average selling price of all new passenger cars and trucks sold in the previous year.
(d) Dealer A has the franchise to sell Chevrolets. Dealer A purchases a new Mercedes Benz for its personal use. The dealer attaches a "dealer plate" to this vehicle. Dealer A is subject to use tax on the purchase price of this vehicle. The dealer may not report use tax on the method authorized for reporting executive cars for this vehicle since the dealer is not an authorized dealer for this make of vehicle and the vehicle was not removed from the dealer's new vehicle inventory.
(e) Vehicle Manufacturer A has five employees who live and work from their homes in Washington. These employees call on dealers in Washington to resolve warranty disputes. Each employee is given a new vehicle at the start of the model year. The vehicle will be replaced every sixty days. Manufacturer A owes use tax on five vehicles at the start of the model year. No additional use tax will be due when these vehicles are replaced during the same model year. However, should a sixth employee be added during the course of the year, an additional vehicle will be subject to use tax.
(f) Dealer A uses a vehicle from inventory as a service truck. This vehicle is used to pick up parts from local suppliers, transportation for making emergency repairs on customer's vehicles, and similar activities. The dealer is liable for use tax on this vehicle. At its option, the dealer may report use tax on two percent per month of the purchase price of the vehicle or may report use tax on the full value of the vehicle at the time it is put to use.
(g) Dealer A uses a new vehicle from inventory for his/her own personal use. Dealer A's spouse also uses a new vehicle. Dealer A's son who lives in the same household will occasionally use a new vehicle. All of these vehicles are operated with dealer plates attached. Dealer A does not have a recent model car licensed in Washington. Dealer A is subject to use tax on one vehicle as an "executive" car every second year as provided above.
(h) Dealer A loans a vehicle to a civic organization for a thirty-day period. The dealer is unable to obtain a temporary letter of authority for use of the vehicle under RCW 46.16.048. The dealer is liable for use tax, but the dealer may report the use tax based on two percent of the purchase price of the vehicle per month as the measure of the tax. No use tax would be due if the dealer had obtained a letter of authority under RCW 46.16.048 for the use of the vehicle.
(i) Dealer A, who sells new and used vehicles, assigns a used vehicle to the used car sales manager for personal use. However, if the sales manager exceeds the sales goals for the preceding quarter, the manager will be assigned a new vehicle for personal use for the following quarter. The manager will generally exceed the sales goal at least once during the year. Since the manager uses both a new and used car from inventory during the course of a year, use tax will be computed based on twenty-five percent of the average selling price of all new cars and trucks sold in the preceding year. The use tax will be due on one such vehicle every second year.
(j) Dealer A, who sells new and used vehicles, regularly assigns a used vehicle from inventory to its service manager for personal use. This vehicle is replaced approximately every sixty days. Use tax is due on one vehicle every year measured by twenty-five percent of the average selling price of all used vehicles sold in the preceding year.
Notes
Statutory Authority: 2009 c 521. 10-07-133, § 458-20-132, filed 3/23/10, effective 4/23/10. Statutory Authority: RCW 82.32.300. 92-05-066, § 458-20-132, filed 2/18/92, effective 3/20/92; 86-09-002 (Order ET 86-5), § 458-20-132, filed 4/3/86; 83-07-034 (Order ET 83-17), § 458-20-132, filed 3/15/83; Order ET 70-3, § 458-20-132 (Rule 132), filed 5/29/70, effective 7/1/70.