Rental cars

Rental car tax

What is rental car tax?

The rental car tax is imposed on the retail rental charge for passenger cars used for rental purposes for periods of less than 30 days. Long-term leases are not affected. The Department of Licensing, Motor Vehicle Licensing division, sets the requirements for determining if a vehicle must be licensed as a rental vehicle.

What is a rental car?

A rental car is a passenger car designed for carrying 10 passengers or less and used for the transportation of persons. A rental car is not:

• A vehicle rented or loaned to a customer by an automotive repair business while the customer's vehicle is under repair.
• A vehicle licensed and operated as a taxicab.
• A vehicle that is leased.
• A vehicle that is designed, used, or maintained for the transportation of property, commodities, merchandise, produce, freight, or animals.

When is a rental for more than 30 days considered a long-term lease?

When a passenger car is contracted to be rented for more than 30 days, at the time of rental, the transaction is considered a lease. If the vehicle is rented on a daily basis and the vehicle is kept for more than 30 days, the total transaction is considered a daily rental and subject to the rental car tax.

What is the rate?

The rate is 5.9%. This rate is added to the retail sales tax for the location of the origin of the rental and is in effect throughout the state. Counties are permitted to impose a 1% rental car rate, so in certain counties the rate is 6.9%. Through September 30, 2011, King County is permitted an additional 2% stadium tax on the retail rental of passenger cars. The additional 2% in King County will no longer be in effect beginning October 1, 2011. In addition, cars rented within an area designated as being within the jurisdiction of the Regional Transit Authority (RTA), a 0.8% rate is imposed. If the car were rented in King County and within the RTA, the total rental car rate would be 9.7%.

How is this tax reported?

The rental car tax does not need to be separately stated on the customer invoice; however, it must be segregated in the business records so it can be reported on the excise tax return. The Rental Car Tax Addendum must be completed and attached to the return.

Are there any exemptions from this tax?

The federal government is not required to pay this tax. However, employees of the government must pay the tax when the rental is not paid for by government voucher or approved government credit card. Vehicles used for production purposes by motion picture and video production companies are exempt from the retail sales tax. This exemption also applies to the rental car tax.

Vehicles rented or towed under an original manufacturer's warranty

When a vehicle is rented while a customer's car is being repaired under an original manufacturer's warranty, the rental car tax is due on the retail rental. The retail sales tax is not due. The Retail Sales Tax Exemption Certificate (Original Manufacturer's Warranty) must be completed and presented to the rental car company. Under no circumstance may this certificate be used to relieve a person from paying the rental car tax.

When a customer's car is towed under an original manufacturer's warranty the Retail Sales Tax Exemption Certificate must be presented to the towing company. See Towing for more information.

Are the charges for fuel and insurance added to the bill subject to the rental car tax?

When insurance and the cost for a full tank of fuel are added to the bill without giving the renter an option, these charges are considered part of the rental price and are subject to the retail sales and rental car taxes, even when the charges are separately stated.

On the other hand, when the renter is given an option to add insurance or to have the company fill the tank upon return of the vehicle instead of doing it themselves, these charges are not part of the selling price and are not subject to the retail sales and rental car taxes. These charges are subject to B&O tax under the appropriate classifications.

Fleet loaner cars

When a fleet of "loaner" cars is maintained for customer's use while their vehicles are being serviced and the loaner cars are loaned at no cost or rented at a fixed daily charge, the rental car tax is not due. The law expressly states that passenger cars owned by an automobile repair business and used for rental or loan to their customers while their cars are being serviced are not considered rental cars.

If the "loaner" car from the fleet is rented to someone who is not having their vehicle repaired, the tax is still not due because the car is primarily for customers who are having their vehicles serviced. The vehicles must be licensed with the Department of Licensing as passenger cars, not rental vehicles, and all licensing fees must have been paid.

Rentals to auto repair shops by rental car companies

A rental car company may rent vehicles, licensed with the Department of Licensing as rental cars, to auto repair shop's customers. These are retail sales and the retail sales tax and the rental car tax must be collected. A rental car company may accept a resale certificate from an auto repair shop and not have to collect either sales tax or the rental car tax when the auto repair shop re-rents the vehicle to its customer. Retail sales tax is due and is to be collected from the auto repair shop's customer by the repair shop, however the repair facility is not required to collect the rental car tax.

Registering rental cars and trailers – use tax

Effective June 11, 2020, reseller permits are acceptable forms of documentation to show that use tax is not due when registering /transferring title of a vehicle or trailer via a licensing agent, such as the county auditor’s office. See the reseller permit section for more information.

A "rental trailer" is defined as a trailer that is used solely by a rental car business for the rental to others for a period of no more than 30 consecutive days.

References

Revised Code of Washington (RCW) 82.14.360
Revised Code of Washington (RCW) 82.08.020(2)
Revised Code of Washington (RCW) 82.14.049
Revised Code of Washington (RCW) 46.04.465
Revised Code of Washington (RCW) 81.104.160
Chapter 46.04 RCW