Use tax

• What is use tax?
• Use tax vs. sales tax
• Who is responsible for paying use tax?
• When is use tax due?
• How do you determine the value of use tax due?
• How do you determine the correct use tax rate?
• How do I pay use tax?
• References

What is use tax?

Use tax is a tax on the use of goods or certain services in Washington when sales tax was not paid at the time of purchase. Items used in the state are subject to either sales tax or use tax, but not both on the same transaction.

Essentially, use tax complements sales tax, ensuring that tax is collected on purchases where sales tax would normally apply.

Use tax vs. sales tax

It is important to understand the difference between use tax and sales tax. Sales tax is collected by the seller at the time of purchase and then paid to the state by the seller. Use tax, on the other hand, is the buyer's responsibility. The buyer pays it directly to the state when sales tax was not paid on the purchase.

Who is responsible for paying use tax?

Businesses and individuals are both responsible for paying use tax.

When is use tax due?

Understanding when use tax applies is important for both businesses and individuals to ensure they follow state tax rules. Common situations where use tax is owed include:

Equipment and supplies for business use

Businesses can buy equipment and supplies without paying sales tax if they provide a reseller permit. But if sales tax is not charged on items used for the business, the business must pay use tax on those purchases.

For example, a construction company purchases a printer and some nail guns from a seller who did not collect sales tax. Since the construction company is the consumer of the purchased items, it must report and pay use tax on them.

Note: Anyone found using a reseller permit incorrectly will owe the tax and a 50% penalty – even if no fraud was intended.

Out-of-state purchases

Goods are purchased in another state that does not have a sales tax or a state with a lower sales tax rate.

For example, a business or Washington resident purchased items in Oregon that will be used in Washington. Since sales tax was not paid on the items bought in Oregon, the buyer must report and pay use tax on the purchase.

Subscription, online, or mail order purchases

Goods are purchased by subscription, online, or from a mail-order catalog company. Many of these companies collect Washington’s sales tax, but if the company from which you order does not, you must report and pay use tax on the purchase.

Purchases without sales tax

Goods are purchased from a business that is not required to register and collect sales tax in Washington or from a person who is not authorized to collect sales tax.

For example, an individual purchases furniture from a business that does not have nexus in Washington or from an individual through a classified ad (newspaper or online platform). Since sales tax was not paid, the buyer must report and pay use tax on the purchase.

Personal property acquired with real property

All property can be divided into two major categories:

• Real property.
• Personal property.

Real property includes land and anything permanently attached to it, such as buildings or other structures. Personal property includes tangible items that are movable, such as machinery, equipment, furniture, and supplies.

When personal property is purchased or acquired with the sale of real property and the seller did not collect sales tax, the buyer must report and pay use tax.

How do you determine the value of use tax due?

Use tax is determined on the value of the goods sourced to Washington. Generally, this is the purchase price, which includes any freight, delivery, or shipping charges paid to the seller. However, a depreciated value may be determined if the goods are used outside the state for an extended period before use in Washington by the same person.

How do you determine the correct use tax rate?

The use tax rate is determined by the location in Washington where the consumer (purchaser) first uses the items purchased.

Use tax is made of the state rate (6.5%) plus the local use tax rate. The local use tax rate varies depending on the location where the goods are first used in Washington. Use our Tax Rate Lookup Tool (online) or Tax Rate Lookup App (mobile) to help you determine the correct tax rate.

How do I pay use tax?

The process for reporting and paying use tax is different for businesses and individuals.

Businesses

Businesses are encouraged to report and pay use tax for business-related purchases on their excise tax return. The use tax must be reported in the period when the goods are first used in the state.

Individuals

Individuals can report and pay use tax:

• Online through My DOR: The secure online application guides you through simple filing steps and gives you several payment options.
• By paper: Complete and mail a Consumer Use Tax Return (PDF).

References

RCW 82.12 - Use Tax

RCW 82.14 - Local retail sales and use taxes

WAC 458-20-145 - Sourcing retail sales for business and occupation and state and local retail sales tax – Sourcing of use tax on purchases.

WAC 458-20-178 - Use tax and the use of tangible personal property.

WAC 458-20-17802 - Collection of use tax by county auditors and department of licensing – Measure of tax.