Even though the "use tax" has been in effect since 1935, many people still do not fully understand how it functions as a substitute for the sales tax.
What is use tax?
Use tax is a tax on the use of goods or certain services in Washington when sales tax has not been paid. Goods used in this state are subject to either the sales or use tax, but not both. Thus, the use tax compensates when sales tax has not been paid. Use tax is due when vehicles or other goods are purchased in another state that does not have a sales tax or has a rate lower than Washington's rate.
When must use tax be paid?
A vehicle must be licensed within 30 days after a person moves into this state. The tax is paid when the car is registered in Washington.
Credit is given for any sales tax paid in another state before the vehicle is brought to Washington.
When isn't use tax due?
Use tax is not due if the vehicle was purchased by a resident of another state more than 90 days before moving into Washington. This exemption only applies to personal vehicles – not business vehicles, motor homes, airplanes, boats, trailers or other recreational vehicles.
Also, use tax may not be due on vehicles licensed in another state and driven by full-time students, or the military.
Vehicles received as gifts or inherited
- If you can provide proof that the person who gave you the vehicle paid sales or use tax on the vehicle, no use tax is due.
- If the person who gave you the gift owned the vehicle for 7 years or more and is from a state or province with sales tax, it will be assumed that tax was paid and no proof is needed.
- If the vehicle is coming from a state or province without sales or use tax, use tax is due.
Note: Vehicles with outstanding loans that are gifted or inherited generally will not qualify. When a security interest is held by a third party, and the donee is required to assume the debt or pay off the loan, this is an outright sale. Tax would be due on the fair market value.
What is the use tax rate?
The use tax rate is the same as the sales tax rate where the vehicle is being used, generally it is the address of the purchaser.
A vehicle used in Vancouver is subject to a use tax rate of 8.7 percent of the value of the vehicle when it is first used in Washington. This includes the general sales tax of 8.4 percent plus an additional 0.3 percent tax on the sale of motor vehicles.
This applies to both vehicles brought in from out of state, and vehicles sold between private parties within the state.
How is the value of the vehicle determined?
Use tax is based on the value of the vehicle. Generally this is the amount paid to the seller. However, if the payment amount does not represent the retail value for vehicles of similar make, model and condition, the value is determined as close as possible to the retail selling price of similar vehicles. (Reference: RCW 82.12
; WAC 458-20-178
For examples and more information on determining the value, click here.
Does use tax apply on vehicles owned by dual residents of Washington and another state?
For vehicles owned by dual residents of Washington and another state, use tax is due if the vehicle is primarily garaged in Washington. If the vehicle is primarily garaged in another state, use tax is not due on that vehicle even if it comes into the state on a temporary basis.
Where can I get more information?
For more information on use tax, please see our Use Tax section, or visit the Department of Licensing website.