Washington Supreme Court “Clarifies” That Sellers Cannot “Add” B&O Tax to the Selling Price Regardless of Disclosure, But Can “Include” B&O Tax as Part of the Selling Price

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The Washington Supreme Court recently held that businesses are statutorily barred from recouping Business and Occupation (“B&O”) tax as an added charge to the selling price, regardless of disclosure. In answering a question certified to it by the U.S. Ninth Circuit Court of Appeals, the Washington Supreme Court undertook to “reconcile” two earlier cases and “clarify any confusion” regarding the itemization of B&O tax. (Peck v. AT&T Mobility, Wn.2d, April 26, 2012). Thus, the Court clarified that it would be permissible to include the B&O tax as an itemized part of the selling price, but provided no guidance on how to distinguish between an impermissible addition to the selling price and a permissible inclusion in the selling price.

In 2007 the Washington Supreme Court held that an automobile dealer’s practice of adding B&O tax to the negotiated sales price of a vehicle was prohibited. (Nelson v. Appleway Chevrolet, 160 Wn.2d 173.) In Nelson, the Court explained that it would have been “lawful for Appleway to disclose a B&O tax to Nelson during the course of negotiating a purchase price,” leading many, including the Ninth Circuit, to interpret Nelson as permitting itemization of B&O taxes so long as it was disclosed before the sales price was finalized. In 2009 the Washington Court of Appeals, following Nelson, held that a different automobile dealer’s itemization of B&O tax was permitted because, in that case, “the Johnsons negotiated with Camp about the B&O tax before reaching the agreed price.” (Johnson v. Camp Automotive, 148 Wn. App. 181.)

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Published In: General Business Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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