What is Washington State’s Documentation Service Fee? Why is the Documentation Service Fee negotiable?

Washington State allows a negotiable Documentation Service Fee, often known as “doc fees”, up to $200 to cover the costs of paperwork and other administrative functions. Smart dealerships will charge this fee because it is not taxable to the dealership or to the customer – the total cost of the purchase is lower since taxes are avoided by the customer and by the dealer. Dealerships that don’t charge Documentation Service Fees either 1) like to pay taxes, 2) want to hide fees from the customer, or 3) just don’t understand taxes.
Do we like Doc Fees? Not really, because they are a weird tax concept and poorly understood. But we also want to provide the best value to our customers and that includes smartly structuring transactions for tax efficiency.