Washington Provides Guidance on Taxability of Business Assets

The Washington Department of Revenue (DOR) has issued guidance regarding the taxability of sales of business assets. Sales of capital assets and consumable supplies are retail sales. They are not subject to Washington Business & Occupation (B&O) tax if you do not regularly sell this type of property. These sales qualify for the “casual sales” B&O tax deduction. If you make a casual sale, it is subject to retail sales tax.

The DOR’s guidance provides examples of capital assets, including machinery and equipment, office furniture, and vehicles. Examples of consumable supplies include office supplies and forms, reference books, and canned software.

If you sell the inventory of the business, it is subject to B&O tax. If a reseller permit is obtained from the purchaser, the sale is subject to wholesaling B&O tax. If a reseller permit is not obtained, retailing B&O tax and retail sales tax apply.

If you sell intangible assets (such as goodwill), they are typically not subject to either B&O tax or retail sales tax.

If you sell your business, a final tax return must be filed with payment within ten days of the sale. The DOR advises that the purchaser of a business may be liable for the unpaid taxes of the former owner. If tax due is not paid within 10 days of the sale of the business, the new owner is liable for the full amount of tax. The purchaser should require the seller to provide a Tax Status letter obtained from the DOR. Under Washington’s successor liability law, the purchaser must hold back enough money to pay any taxes due, unless the former owner can prove that they have paid the tax or that no tax is owed. (Tax Topics: Selling Your Business, Washington Department of Revenue, August 22, 2023)

Posted on September 13, 2023