Methods for determining “substantial use” in for-hire interstate commerce

The following information provides guidance for determining if carrier equipment is used at least 25% of the time in interstate and foreign commerce.

“Substantial part” means that the motor vehicle or trailer actually crosses Washington boundaries and is used a minimum of twenty-five percent in interstate hauling for hire.

Use tax is due for those vehicles which have not been used substantially (more than 25%) in interstate commerce and on which retail sales or use tax has not been paid.

Annual review information

Calendar year: Each calendar year the carrier must review the use of each vehicle and trailer for a “view period” consisting of the previous calendar year. If a vehicle was purchased or sold during the calendar year the taxpayer may choose to review the usage during the portion of the year during which the vehicle was owned or may use a twelve-month period beginning with the date of purchase of a vehicle or ending with the date of sale of a vehicle.

Example: If a vehicle is traded-in on May 30, 2006, the taxpayer must meet the substantial use test for this vehicle for either the period January through May 2006 or for the period June 1, 2005 through May 30, 2006.

Fiscal year: A carrier maintaining records on a fiscal year basis may choose to review the usage of their vehicles using the fiscal year rather than the calendar year. If a fiscal year is used, it must be used for the entire fleet of vehicles. These carriers may not change to a calendar year basis without first obtaining prior approval from the Department of Revenue.

REMEMBER: Usage will be reviewed on a calendar or fiscal year basis and not on a “moving” twelve-month period.