Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This section explains Washington's B&O and
retail sales tax applications to the sale of labels, name plates, tags, and
advertising material. It also gives tax reporting information to persons
offering premiums at reduced or no cost to customers.
(2)
Definitions. For the
purposes of this section, the following definitions apply:
(a) "Labels," "name plates," and "tags" are
slips, generally made of paper or cloth, which are affixed to articles or
containers for identification or description.
(b) A "premium" is an item offered free of
charge or at a reduced price to prospective customers as an inducement to
buy.
(3)
Sales for
resale. Sales of labels, name plates, tags, premiums, and advertising
material to persons for use in the following manner are sales for resale
(wholesale sales) and not subject to retail sales tax:
(a) Sales of labels, name plates, and tags to
persons who will attach these items to articles or containers sold by them, or
enclose these items with articles sold by them. However, the labels, name
plates, or tags may not be purchased for resale if they will be put to
intervening use by such persons.
(b) Sales of premiums to persons who pass
title to the premium along with other articles which are sold by them, when the
passing of title to the premiums is not contingent upon the returning of
coupons or other evidence of prior purchase.
(c) Sales of premiums to persons who in turn
sell the same to customers at a reduced price.
(d) Sales of advertising material to persons
who enclose the advertising material with articles sold by them, when such
advertising material relates primarily to the articles with which it is
enclosed. Persons who enclose advertising material with articles being sold for
the purpose of promoting sales of other products are consumers and may not
purchase this advertising material for resale. (See
RCW
82.12.010(5).)
(4)
Retail sales tax.
Sales of labels, name plates, tags, premiums, and advertising material to
consumers are retail sales. The retail sales tax applies to the following:
(a) Sales of labels, name plates, and tags to
persons who attach the same to containers enclosing articles sold by them, when
such persons retain title to the containers which are to be returned. Such
sales are sales for consumption and subject to the retail sales tax. Since the
container is not being resold, any labels, name plates, tags, or similar items
attached to the container are also not being resold.
(b) Sales of labels, name plates, and tags to
persons who use them for inventory, statistical, or other business purposes.
Such sales are sales for consumption and the retail sales tax applies,
notwithstanding the labels, name plates, or tags remain attached to the
articles or containers delivered to the customer.
(c) Sales of premiums to persons who do not
pass title thereto with other articles which are sold by them, but which are
given as an inducement to perform a service, or are given upon the returning of
coupons or other evidence of prior purchase. Such sales are sales for
consumption and are subject to the retail sales tax.
(d) Sales of premiums to persons who offer
them as an inducement to potential customers at no charge and with no
requirement that the customer purchase any other article or service as a
condition to receive the premium. Such sales are sales for consumption and
subject to the retail sales tax.
(5)
Business and occupation tax.
The B&O tax applies to the sale of labels, name plates, tags, premiums, and
advertising material as follows:
(a)
Wholesaling. Persons who sell labels, name plates, tags, premiums,
and advertising material to persons who will resell these items as described in
subsection (3) of this section are subject to the wholesaling B&O tax on
the gross proceeds of these sales. Sellers must obtain resale certificates for
sales made before January 1, 2010, or reseller permits for sales made on or
after January 1, 2010, from their customers to document the wholesale nature of
any sale as provided in WAC
458-20-102A (Resale certificates)
and WAC 458-20-102 (Reseller permits).
Even though resale certificates are no longer used after December 31, 2009,
they must be kept on file by the seller for five years from the date of last
use or December 31, 2014.
(b)
Retailing. Persons who sell labels, name plates, tags, premiums,
and advertising material to consumers are subject to the retailing B&O tax
on such sales.
(6)
Deferred sales or use tax. If the seller fails to collect the
appropriate retail sales tax, the purchaser is required to pay the deferred
sales or use tax directly to the department.
(7)
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) ABC Timber purchases log tags which are
attached to logs as they are received in ABC's yard. These tags are used by ABC
to keep track of the logs for inventory purposes. These tags remain on the logs
after sale, and are also used by ABC's customers to verify receipt of the logs.
ABC must remit retail sales or use tax upon the purchase of the log tags,
notwithstanding they remain attached to the logs after sale to ABC's customers.
The use of these tags for inventory purposes by ABC prior to actual sale is
intervening use as a consumer.
(b)
MT Gas, a gasoline and service station, offers customers a free set of stemware
with any gasoline purchase of ten gallons or more. Customer purchasing seven to
nine gallons of gasoline may purchase the same set of stemware for a nominal
amount. MT Gas may purchase the stemware without paying retail sales tax. The
stemware is offered as a premium, and is considered to be resold along with the
gasoline. It is immaterial that the sale of gasoline is exempt from the retail
sales tax. MT Gas must report the retailing B&O tax and collect and remit
retail sales tax on the price charged for the stemware sold to those customers
purchasing seven to nine gallons of gasoline.
(c) KMP Company is a camping club which
purchases gift items which are used as premiums. These gift items are offered
free of charge to potential customers on condition that the potential customer
attend a sales presentation. No purchase of a membership or anything else is
required to receive the premium. KMP must remit retail sales or use tax upon
the purchase of the premiums. KMP is the consumer of premiums given away free
of charge where the recipient has no requirement to purchase any service or
article as a condition of receiving the premium.
(d) BC Bank offers a choice of various
premiums to customers opening new savings accounts. In some cases, a charge may
be made to the customer for the premium, with the amount of the charge based on
the amount of deposit the customer makes in the new savings account. BC Bank
may give a resale certificate (WAC
458-20-102A ) for purchases made
before January 1, 2010, or a reseller permit (WAC
458-20-102 ) for purchases made
on or after January 1, 2010, to its suppliers for those premiums which will be
resold to its new customers. For those premiums which will be given to
customers without charge, BC Bank must pay either the retail sales tax to its
suppliers or use tax to the department on the cost of the premiums. It also
must report the retailing B&O tax and collect and remit retail sales tax on
any amounts charged to its customers.
Statutory Authority:
RCW
82.32.300,
82.01.060(2),
chapters
82.04,
82.08,
82.12 and
82.32 RCW. 10-06-069, §
458-20-116, filed 2/25/10, effective 3/28/10. Statutory Authority:
RCW
82.32.300. 93-19-018, § 458-20-116,
filed 9/2/93, effective 10/3/93; 83-07-034 (Order ET 83-17), § 458-20-116,
filed 3/15/83; Order ET 70-3, § 458-20-116 (Rule 116), filed 5/29/70,
effective 7/1/70.