Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule
explains the application of the business and occupation tax on sales to for
hire motor carriers operating in interstate or foreign commerce.
This rule also explains the retail sales tax exemptions
provided by
RCW
82.08.0262 and
82.08.0263 for sales to for hire
motor carriers operating in interstate or foreign commerce, and addresses the
requirements that must be met and the documents that must be preserved to
substantiate a claim of retail sales tax exemption. Motor carriers should refer
to WAC 458-20-17401 for a discussion of
the use tax and use tax exemptions available to motor carriers for the purchase
or use of vehicles and parts under
RCW
82.12.0254. Use tax complements the retail
sales tax, and in most but not all cases mirrors the retail sales tax.
Purchases of tangible personal property used or certain services purchased in
Washington are subject to use tax if the retail sales tax has not been paid, or
where an exemption for sales and use taxes are not available.
(2)
Definitions. For the
purposes of this rule, the following definitions apply:
(a)
Component parts mean any
tangible personal property that is attached to and becomes an integral part of
the motor vehicle or trailer. It includes such items as motors, motor and body
parts, batteries, paint, permanently affixed decals, and tires.
(i) Component parts include the axle and
wheels, referred to as a "converter gear" or "dolly," that is used to connect a
trailer behind a tractor and trailer. Component parts also include tangible
personal property that is attached to the vehicle and used as an integral part
of the motor carrier's operation of the vehicle, even if the item is not
required mechanically for the operation of the vehicle. It includes cellular
telephones, communication equipment, fire extinguishers, and other such items,
whether they are permanently attached to the vehicle or held by brackets that
are permanently attached. If held by brackets, the brackets must be permanently
attached to the vehicle in a definite and secure manner with these items
attached to the bracket when not in use and intended to remain with that
vehicle.
(ii) Component parts do
not include antifreeze, oil, grease, and other lubricants that are considered
consumed at the time they are placed into the vehicle, even though they are
required for operation of the vehicle. It does include items such as spark
plugs, oil filters, air filters, hoses, and belts.
(b)
Primary property location is
the address for the property provided by the lessee that is available to the
lessor from its records maintained in the ordinary course of business, when use
of this address does not constitute bad faith. The primary property location is
not altered by intermittent use at different locations, such as use of business
property that accompanies employees on business trips and service
calls.
(3)
Business
and occupation tax. Business and occupation (B&O) tax is due on all
sales to motor carriers that are sourced to Washington, notwithstanding that
the retail sales tax may not apply because of the specific statutory exemptions
provided by
RCW
82.08.0262 and
82.08.0263.
(a)
Retailing of interstate
transportation equipment B&O tax classification. The retailing of
interstate transportation equipment B&O tax classification (see
RCW
82.04.250) applies to the following if the
retail sales tax exemption requirements for
RCW
82.08.0262 or
82.08.0263 are met:
(i) Sales of motor vehicles, trailers, and
component parts thereof;
(ii)
Leases of motor vehicles and trailers without operator; and
(iii) Charges for labor and services rendered
in respect to constructing, cleaning, repairing, altering or improving vehicles
and trailers or component parts thereof.
(b)
Retailing B&O tax
classification. The retailing B&O tax classification applies to the
following:
(i) Sales and services as described
in (a)(i) through (iii) of this subsection, that do not meet the exemption
requirements provided in
RCW
82.08.0262 or
82.08.0263;
(ii) Sales of equipment, tools, parts and
accessories which do not become a component part of a motor vehicle or trailer
used in transporting persons or property therein;
(iii) Sales of consumable supplies, such as
oil, antifreeze, grease, other lubricants, cleaning solvents and ice;
and
(iv) Towing
charges.
(c)
Allocation of income. Except as provided in (d) of this
subsection, all income from sales to motor carriers is allocated to where the
sales are sourced under the general sourcing provisions of
RCW
82.32.730. This includes leases to motor
carriers that do not require recurring periodic payments.
(d)
Periodic lease payments.
(i) Recurring periodic lease payments of
leasing transactions described in (a) of this subsection are sourced as
follows:
(A) The first payment is sourced to
the location where the lessee takes possession of the transportation equipment.
This is often the lessor's store location or a delivery location.
(B) Periodic payments made after the first
payment are sourced for each period covered by the payment to the primary
property location.
(ii)
All recurring periodic lease payments of leasing transactions described in (b)
of this subsection are sourced to the primary property location provided by the
lessee to the lessor. The location where the lessee takes delivery of this type
of equipment is immaterial.
(4)
Retail sales tax.
RCW
82.08.0262 and
82.08.0263 provide retail sales
tax exemptions for certain sales to motor carriers when the sale is sourced to
Washington.
(a)
Sales or leases of
motor vehicles and trailers.
RCW
82.08.0263 provides an exemption from the
retail sales tax for sales and leases of motor vehicles and trailers to be used
for transporting persons or property for hire in interstate or foreign
commerce. This exemption is available whether such use is by a for hire motor
carrier, or by persons operating the vehicles and trailers under contract with
a for hire motor carrier. The for hire carrier must hold a carrier permit
issued by the Interstate Commerce Commission (ICC) or its successor agency to
qualify for this exemption. The seller, at the time of the sale, must retain as
a part of its records an exemption certificate that must be completed in its
entirety. The buyers' retail sales tax exemption certificate is available on
the department's website at dor.wa.gov, or can be obtained by contacting the
department at:
Taxpayer Services
Department of Revenue
P.O. Box 47478
Olympia, WA 98504-7478
360-705-6705
If the department's buyers' retail sales tax exemption
certificate is not used, the form used must be in substantially the following
form:
Exemption Certificate
The undersigned hereby certifies that it is, or has contracted
to operate for, the holder of carrier permit No....., issued by the Interstate
Commerce Commission or its successor agency, and that the vehicle this date
purchased from you being a (specify truck or trailer and make), Motor No.....,
Serial No....... is entitled to exemption from the Retail Sales Tax under
RCW
82.08.0263. This certificate is given with
full knowledge of, and subject to, the legally prescribed penalties for fraud
and tax evasion. Dated......
Dated.........
................................
(name of carrier-purchaser)
By...............................
(title)
.................................
(address)
The lease of motor vehicles and trailers to motor carriers,
with or without operator, must satisfy all conditions and requirements provided
by RCW
82.08.0263 to qualify for the retail sales
tax exemption. Failure to meet these requirements will require the lessor to
collect the retail sales tax on the lease as provided in (c) of this
subsection.
(b)
Sales
of component parts of motor vehicles and trailers and charges for repairs,
etc.
RCW
82.08.0262 provides an exemption from the
retail sales tax for sales of component parts and repairs of motor vehicles and
trailers. This exemption is available only if the user of the motor vehicle or
trailer is the holder of a carrier permit issued by the ICC or its successor
agency that authorizes transportation by motor vehicle across the boundaries of
Washington. Because carriers are required to obtain these permits only when the
carrier is hauling for hire, the exemption applies only to parts and repairs
purchased for vehicles that are used in hauling for hire. The exemption
includes labor and services rendered in constructing, repairing, cleaning,
altering, or improving such motor vehicles and trailers.
(i) This exemption is available whether the
motor vehicles or trailers are owned by, or operated under contract with,
persons holding the carrier permit. This exemption applies even if the motor
vehicle or trailer to which the parts are attached will not be used
substantially in interstate hauls, provided the vehicles are used in for hire
hauling.
(ii) The seller must
retain as a part of its records a completed exemption certificate. This
certificate may be:
(A) Issued for each
purchase;
(B) Incorporated in or
stamped upon the purchase order; or
(C) In blanket form certifying all future
purchases as being exempt from sales tax. Blanket exemption certificates are
valid for as long as the buyer and seller have a recurring business
relationship. A "recurring business relationship" means at least one sale
transaction within a period of 12 consecutive months.
RCW
82.08.050.
(iii) The buyers' retail sales tax exemption
certificate is available on the department's website at dor.wa.gov, or can be
obtained from the department using the address provided in (a) of this
subsection.
If the department's buyers' retail sales tax exemption
certificate is not used, the form used must be in substantially the following
form:
Exemption Certificate
The undersigned hereby certifies that it is, or has contracted
to operate for, the holder of a carrier permit,
No......., issued by the Interstate Commerce
Commission or its successor agency authorizing transportation
by motor vehicle across the boundaries of this state. The undersigned further
certifies that the motor truck or trailer to be constructed, repaired, cleaned,
altered, or improved by you, or to which the subject matter of this purchase is
to become a component part, will be used in direct connection with the business
of transporting therein persons or property for hire; and that such sale and/or
charges are exempt from the Retail Sales Tax under
RCW
82.08.0262. This certificate is given with
full knowledge of, and subject to, the legally prescribed penalties for fraud
and tax evasion.
Dated.......
................................
(name of carrier-purchaser)
................................
(address)
By...............................
(title)
(c)
Taxable sales. Sales that do
not qualify for exemption under the provisions of
RCW
82.08.0262 or
82.08.0263, are subject to the
retail sales tax or deferred sales tax when sourced to Washington as follows.
(i) Sales, including single payment leases,
are sourced under the general sourcing provision of
RCW
82.32.730.
(ii) All recurring periodic lease payments
are sourced to the primary property location provided by the lessee to the
lessor.
Statutory Authority:
RCW
82.32.300,
82.01.060(2),
82.08.0262, and
82.08.0263. 08-14-018, §
458-20-174, filed 6/20/08, effective 7/21/08. Statutory Authority:
RCW
82.32.300. 97-11-022, § 458-20-174,
filed 5/13/97, effective 6/13/97; 94-18-003, § 458-20-174, filed 8/24/94,
effective 9/24/94; 83-07-033 (Order ET 83-16), § 458-20-174, filed
3/15/83; Order ET 71-1, § 458-20-174, filed 7/22/71; Order 70-3, §
458-20-174 (Rule 174), filed 5/29/70, effective
7/1/70.