(a) Other rules that may apply. Readers may also want to refer to other rules for additional information, including those in the following list:

(ii) WAC 458-20-211, Leases or rentals of tangible personal property, bailments.

(iii) WAC 458-20-247, Trade-ins, selling price, sellers' tax measures.

(b) Examples: Examples found in this rule identify a number of facts and then state a conclusion. These examples should be used only as a general guide. The tax results of other situations must be determined after a review of all facts and circumstances.

(a) The seller's cost of the property sold;

(b) The cost of materials used, labor or service cost, interest, losses, costs of transportation to the seller, taxes imposed on the seller, and any other expense of the seller;

(c) Charges by the seller for any services necessary to complete the sale other than delivery and installation charges;

(d) Delivery charges; and

(e) Installation charges.

(a) The seller actually receives consideration from a party other than the buyer, and the consideration is directly related to a price reduction or discount on the sale;

(b) The seller has an obligation to pass the price reduction or discount through to the buyer;

(c) The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of sale of an item to the buyer; and

(d) One of the following criteria is met:

(i) The buyer presents a coupon, certificate, or other documentation to the seller to claim a price reduction or discount where the coupon, certificate, or documentation is authorized, distributed, or granted by a third party with the understanding that the third party must reimburse any seller to whom the coupon, certificate, or documentation is presented;

(ii) The price reduction or discount is identified as a third-party price reduction or discount on the invoice received by the buyer or on a coupon, certificate, or other documentation presented by the buyer; or

(iii) The buyer identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount; however, a "preferred customer" card that is available to any patron does not constitute membership in such a group. RCW 82.08.010.

(e) Example 1. The Sporting Goods Store offers a 10% discount to all members of the local credit union. Dave, the customer and credit union member, must present an identification card or other evidence of membership in the credit union to claim the 10% discount on his $100 purchase. As the credit union reimburses The Sporting Goods Store for the discount of $10, the store must compute sales tax on the full price of $100. The discount of $10 is deducted from the total price after sales tax has been added to the purchase price. The store must compute retailing business and occupation (B&O) tax on $100.

(a) Discounts, including cash, term, or coupons that are not reimbursed by a third party that a seller allows a buyer to take on a sale;

(b) Interest, financing, and carrying charges from credit extended on the sale of tangible personal property, extended warranties, digital goods, digital codes, digital automated services, or other services or anything else defined as a retail sale in RCW 82.04.050, if the amount is separately stated on the invoice, bill of sale, or similar document given to the buyer; and

(c) Any taxes legally imposed directly on the buyer that are separately stated on the invoice, bill of sale, or similar document given to the buyer. RCW 82.08.010.

Example 3. ABC Company (ABC) sells a sweater for $100, plus $8 in retail sales tax, for a total of $108. ABC accepts payment in the form of $108 Canadian. The exchange rate for Canadian dollars at ABC's bank is 0.95 Canadian to 1 U.S. dollars at the time of the sales transaction. In terms of U.S. currency, ABC has actually accepted a payment of $102.60 (108 Canadian x 0.95). The selling price or gross proceeds of sale for determining the measure of tax liability is $95 ($102.60 less $7.60 retail sales tax).

The selling price or sales price of a service or article of tangible personal property does not include bona fide discounts actually taken by the buyer. The amount of bona fide discounts may be deducted only if the amount has been included in the gross amount reported.

Discounts are not deductible when the retail sales tax is based on the selling price or sales price before the discount is taken and no portion of the tax is refunded to the buyer.

• Is obtained by the customer from a discount voucher provider that has an agreement with the seller, and the seller determined the price of the voucher sold;

• Allows the customer to acquire the voucher for less than its face value;

• Is redeemable either for a specific good or service (product) or for a certain dollar amount towards the sales price of any product sold by the seller; and

• The seller, at the time of redemption, knows the amount paid by the customer for the voucher.

For additional information that may apply see subsection (3) of this rule.

(A) The purchase of a discount voucher prior to redemption is not taxable.

(B) The seller of a product or products purchased using a discount voucher must include the amount the customer paid for the discount voucher in the gross proceeds of sales or gross income of the business, as the case may be.

(C) If a discount voucher is redeemed by a customer for a product subject to retail sales tax, then the amount paid by the customer is included in the taxable sales price of the product.

(D) The seller may not deduct advertising or similar expenses (fees) paid to the discount voucher provider, even if the discount voucher provider "nets out" those expenses (fees) before remitting the payment to the seller.

(A) If a discount voucher indicates the amount the customer paid, the seller must include that amount in the sales price of the product purchased.

(B) If the seller, through its agreement with the discount voucher provider, knows the amount the customer paid for the discount voucher, that amount is to be included in the sales price of the product purchased.

(C) If the seller does not know at the time of sale the amount the customer paid to obtain a payment instrument and thus does not know whether the instrument is a discount voucher, the seller must treat the consideration paid by the customer as equal to the face value of the instrument.

Example 4. Mann's Lumber Shop (Mann's) sells construction material to Ken, who builds sheds for resale. Mann's bills Ken for $2,000.00, and offers Ken a 10% discount if he pays the invoiced amount within ten days. Ken pays the invoice upon receipt and takes a 10% discount. Mann's may reduce its gross sales figure by $200 when determining its wholesaling B&O tax.

(i) Extracting or manufacturing. Discount deductions are allowed under the extracting or manufacturing classifications only when the value of the products is determined from the gross proceeds of sales. No discount is available if tax is computed by other means authorized by RCW 82.04.450 (e.g., gross proceeds determined by sales in this state of similar products of like quality and character, and in similar quantities by other taxpayers).

Example 5. Mann's sells Richard all materials needed for a shed that Richard wants to build for extra storage. Mann's bills Richard for $500 plus retail sales tax at 9.5% ($500 + $47.50). Mann's offers a 10% discount if Richard pays the invoiced amount within ten days. Richard neglects to take advantage of the offered discount even though he pays the full invoice within ten days. Mann's gives Richard a credit for $50. Mann's may deduct the $50 discount when reporting retailing B&O tax, but cannot when reporting retail sales tax as no sales tax was refunded.

Example 6. Mann's sells George all the materials needed for a shed that George plans to build for storage. Mann's bills George for $500 plus retail sales tax at 9.5% ($500 + $47.50 = $547.50). Mann's offers a 10% discount if George pays the invoiced amount within ten days. George takes advantage of the cash discount and pays $492.75. Mann's must report a sale of $450 and sales tax of $42.75 on its excise tax return.

(c) Retail stores' coupons. Retail stores' coupons are issued by retail stores and redeemable only at that store or at affiliated stores of the chain. The coupons offer a reduced price for a specific item upon presentation at the store. The price reduction is a discount, and the retail store must report the amount actually paid by the buyer when reporting retail sales and B&O taxes.

(8) What is not a bona fide discount? Bona fide discounts do not include discounts on the selling price to the buyer, when the buyer is required to perform a service to receive a discount. Examples of services that may be required include advertising, shelf placement of product, special in-store displays, and hiring product demonstrators to promote sales.

(a) Slotting fees. Grocers sometimes receive discounts, allowances, slotting fees, or free product from manufacturers if the grocers provide shelf space for new products or advantageous shelf space for display of the manufacturers' products. Grocers' product placement or slotting activities in exchange for consideration from manufacturers constitute business transactions. RCW 82.04.140. Receipts received by grocers for product placement or slotting activities are taxable income to the grocers under the service and other activities B&O tax classification.

• The expenses of doing business;

• The volume of sales to other members; and

• The proportion of business the specific member has conducted with the cooperative.

A patronage dividend determined in this manner is simply a redistribution of the cooperative's "profit," even though the cooperative may refer to accounting mechanisms such as "tentative" or "delayed" invoices, or to "deferred discounts."

A member receiving dividends may deduct the amount received from gross income if it reports the income and qualifies for the investment income deduction under RCW 82.04.4281.

Each purchase is invoiced to the dealer at the suggested wholesale price with net price to MAX also indicated. Every month dealers pay a regular flat fee plus a fixed percentage assessed on volume of purchases for payment of operational expenses. Refunds of the difference between the suggested wholesale price and the net cost are made to dealers quarterly.

The patronage dividends are distributions of the cooperative corporation's profits and are not deductible discounts because the discounts were not provided as a part of the sale of a particular article.

Payment for these services is a cost of doing business for the manufacturer. As a cost of doing business, the payment may not be deducted from the gross proceeds of sales when the manufacturer determines its B&O tax liability. Payments or credits received by the dealer for services performed are subject to the wholesaling B&O tax classification.