The short answer
- Selling your own equipment, furniture and supplies as part of the business is a retail sale in Washington, and retail sales tax applies
- The casual sales deduction helps with B&O tax, not with sales tax
- Inventory sold to a buyer with a reseller permit is a wholesale sale, so no sales tax
- Goodwill and other intangibles aren't tangible property, so the allocation drives the tax
- Seattle's combined rate is about 10.55%, which adds up on a large equipment value
In this guide
Why a Sale of Your Assets Is Taxable
Washington treats a business that sells property it doesn't normally sell, like its own desks or machines, as making a casual or isolated sale. For a business registered with the Department of Revenue, retail sales tax still applies to those sales.
Department guidance names machinery and equipment, office furniture and vehicles as capital assets, and treats sales of capital assets and consumable supplies as retail sales.
So when a buyer purchases the assets of your company, the tangible property in that deal is generally subject to retail sales tax.
B&O Tax Is Different
There is a casual sales deduction under the retailing business and occupation tax. You may be able to take that deduction on the same sale.
The deduction doesn't extend to retail sales tax. Owners sometimes mix up the two and assume the whole sale is exempt. It isn't.
Inventory Is Handled Separately
Inventory you normally sell is a different case. If the buyer gives you a reseller permit, the inventory sale is a wholesale sale, subject to wholesaling B&O tax but not retail sales tax.
If the buyer doesn't provide a reseller permit, retailing B&O tax and retail sales tax apply to the inventory too. Make collecting the permit part of your closing checklist.
The Allocation Sets the Bill
A purchase agreement usually splits the price among categories: equipment, furniture, inventory, goodwill, a non compete and so on. Only some of those are tangible property.
- Taxable: furniture, fixtures, machinery, tools, computers, supplies
- Not tangible property: goodwill, customer lists, trade names, non compete agreements
- Depends: inventory, based on whether the buyer gives a reseller permit
- Handled through licensing: vehicles, which have their own tax process
The same allocation also drives federal income tax for both sides. A buyer usually wants more allocated to equipment for faster depreciation, which can raise the sales tax. Work it out with your CPA before signing the letter of intent.
A fair equipment value backed by a list and a rationale is easier to defend than a round number.
Who Pays It
Retail sales tax is a tax on the buyer, collected by the seller. In a business sale, the purchase agreement should say who pays and how it is handled at closing.
Because you are the registered seller, you report and remit it on your final return. If you don't collect it, you may end up paying it yourself.
A Quick Example
Suppose a Seattle company sells for $1.5 million, with $200,000 allocated to equipment and furniture. At a combined rate of about 10.55%, the sales tax on that equipment would be roughly $21,100.
If the allocation were $400,000 instead, the tax would roughly double. That's why the allocation deserves attention early.
Stock Sales Work Differently
If the buyer purchases the shares of your corporation or the membership interests of your LLC, the company keeps owning its assets. There is no sale of the equipment itself.
Stock sales bring their own issues, including real estate excise tax if the company owns property. See our guide to REET on a controlling interest sale.
Records That Support the Number
Keep an equipment list with purchase dates, original cost and condition. It supports the value you agree on and answers questions if the Department ever asks how the figure was reached.
Fitting It Into the Closing
Sales tax on the assets is reported on your final excise tax return, which is due within 10 days of the sale. It ties directly to the tax clearance the buyer will want.
To talk through a possible sale, use the price check form or call (206) 555-0171.