Motor vehicle sales/leases tax
RCW 82.08.020(3) imposes an additional tax of three-tenths of one percent (0.3%) on the sale of motor vehicles. This additional tax is referred to as the motor vehicle sales/lease tax.
What does this mean?
Motor vehicle dealers and motor vehicle leasing companies must collect the additional sales tax of three-tenths of one percent (0.3%) of the selling price on every retail sale, rental, or lease of a motor vehicle in this state.
Sales that are exempt from the retail sales tax are also exempt from the motor vehicle sales/lease tax.
Which sales are subject to the motor vehicle sales/lease tax?
Each retail sale, rental, or lease of a "motor vehicle" is subject to the additional tax. "Motor vehicle" means every vehicle that is self-propelled as described in RCW 46.04.320, but does not include farm tractors, farm vehicles, off-road vehicles, non-highway vehicles, and snowmobiles. Generally, this means that motor vehicles licensed for on-road use are subject to the additional tax.
The motor vehicle sales/lease tax applies to sales, rentals, and leases of motor vehicles including:
- Passenger cars
- Sport utility vehicles (SUVs)
- Pickup trucks
- Commercial trucks
- Recreational vehicles (RVs)
This additional tax also applies to charges for all extra features added to the vehicle prior to delivery to the buyer. For example, the charge for a tow hitch added to a vehicle prior to delivery is subject to the motor vehicle sales/lease tax.
Which sales are not subject to the motor vehicle sales/lease tax?
Note: Unless a specific exemption applies, these sales remain subject to the regular sales tax.
- Retail car rentals that are subject to the rental car tax under RCW 82.08.020(2),
- Amounts charged to the vehicle owner for post-sale/delivery equipment and installation,
- Sales of maintenance agreements and warranties by dealers and other third parties,
- Sales of trailers,
- Amounts charged for repairs of motor vehicles,
- Sales of motor vehicles that are not subject to sales tax (e.g. sales to carriers engaged in interstate commerce, sales to the US Government, etc.).
How is this tax reported?
Department of Revenue tax returns contain a separate line to report the motor vehicle sales/lease tax on motor vehicles (the line is entitled Motor Vehicle Sales/Leases).
What about use tax?
The motor vehicle sales/lease tax of three-tenths of one percent (0.3%) on motor vehicles also applies when use tax is due on a vehicle. Use tax is paid at the time a vehicle is registered with the Department of Licensing if sales tax was not paid at the time the vehicle was acquired by the current owner. This would happen if a vehicle was purchased from a private party or if it was purchased outside of Washington.
The motor vehicle sales/lease tax also applies when use tax is due on demonstration, executive, and service vehicles.
Special reporting instructions for sales or leases of motor vehicles
RCW 82.14.450(4) provides an exemption from the “public safety” component of the retail sales tax approved by voters in a city or county. The exemption applies to:
- Retail sales of motor vehicles
- The first 36 months of lease payments on motor vehicles
In order to report qualifying sales/leases, the Department has created special location codes for the partial sales tax exemption. See our web page titled Local Sales & Use Tax Rates and Changes for Car Dealers and Leasing Companies Flyer.
Note: Leases of motor vehicles that extend beyond 36 months do not qualify for the partial exemption. Lessors use the regular sales tax rate and location codes to report motor vehicle lease payments after the 36th month and the motor vehicle sales tax still applies.