(1) Introduction. This rule explains the tax-reporting responsibilities of persons making installment sales of tangible personal property under the business and occupation (B&O), retail sales, and use taxes.
(2) How is income from installment sales of tangible personal property reported? The seller must report the full selling price of installment sales of tangible personal property in the tax-reporting period during which the sale is made. This is true even when the buyer pays the tax to the seller in installments over time.
(a) Leases not taxable as installment sales.
A lease under WAC 458-20-211
(Leases or rentals of tangible personal property, bailments) is not taxable as an installment sale.
(b) Interest income.
Persons who receive interest or finance charges from an installment sale must pay B&O tax under the service and other business activities classification on receipt of these amounts. Retail sales and use taxes do not generally apply to these amounts. Refer to WAC 458-20-109
(Finance charges, carrying charges, interest, penalties) for further information.
(c) Assignment of rights to receive payments.
A seller may sell or assign the right to receive payments on an installment sale to another business. The assignee should not report any sales or use taxes on such payments because the seller is responsible for remitting the full amount of sales tax. For information on how to report a buyer's default on an installment obligation, refer to WAC 458-20-196
[Statutory Authority: RCW 82.32.300
, 82.01.060(1), and 34.05.230. WSR 05-04-048, § 458-20-198, filed 1/27/05, effective 2/27/05. Statutory Authority: RCW 82.32.300
. WSR 83-07-032 (Order ET 83-15), § 458-20-198, filed 3/15/83; Order ET 70-3, § 458-20-198 (Rule 198), filed 5/29/70, effective 7/1/70.]