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


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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