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Washington Supreme Court “Clarifies” Rules for Collecting Washington B&O Tax

Posted Tuesday, May 1, 2012 by Michael A. Larson

alt text In a decision last week, Peck v. AT&T Mobility, the Washington Supreme Court ruled that a seller is prohibited from recouping its B&O taxes by collecting a surcharge in addition to its monthly service fee. The case involved cell phone services billed by Cingular. Prior to the purchase of cell phone service, Cingular disclosed that it would bill its customers for a monthly charge and a surcharge to recoup B&O taxes incurred by Cingular. The court found that “Cingular’s monthly service fee, the sales price of its service contract, did not include the B&O surcharge.” Thus, the service charge was “added on to its monthly service fee” and Cingular was not allowed to recoup the B&O tax per RCW 82.04.500.

The Washington Supreme Court distinguished a recent Washington Appeals Court decision, Johnson v. Camp Automotive, Inc., that allowed an automobile seller to recoup its Washington B&O tax as a part of the negotiated sales price for an automobile. The court noted that in the summary judgment proceedings the seller submitted “unopposed declarations establishing that the purchase price included a B&O tax that was disclosed and negotiated,” thereby establishing that the B&O tax was “factored into the sales price.”

The court dismissed language in Camp Automotive that seemed to indicate that disclosure prior to negotiation of the sales price was the determinative factor. Instead, the court found that the B&O tax simply cannot be added to a sales price.

By confirming the holding in Camp Automotive, the court appears to allow for sellers to separately itemize a B&O tax reimbursement, provided that this separate itemization is merely precedent to setting the sales price. This would then appear to allow sellers to obtain reimbursement for the Washington B&O tax, but only where that tax is identified and is treated as an element in negotiating the final sales price. However, in situations where a sales price is advertised, it would appear that there can be no subsequent alteration of that sales price to include a reimbursement of Washington B&O tax.

For more information, please contact Ronald Bueing at RBueing@PivotalLawGroup.com.

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