Generally, you are allowed to sell no more than four vehicles per year without having an auto dealers license under Department of Licensing (DOL) guidelines. However, you are not allowed to title these vehicles in your name without paying either sales tax or use tax. In other words, you are not allowed to privately use these vehicles without paying tax.
In addition, the state requires people who regularly engage in buying and selling vehicles to register with the Department of Revenue (DOR). Once registered with DOR, you can apply for a reseller permit. You can use this permit to purchase the vehicles for resale without having to pay sales tax or use tax, if you do not title the vehicle in your name.
DOR will assume that if you intend to sell vehicles three or more times in a year you are regularly engaged in the business of selling vehicles. Examples of this intention include advertising vehicles for sale on/in:
- periodicals or
- brochures that specialize in vehicle sales.
If you want to purchase a vehicle without paying sales tax or use tax, you:
- Need to register with DOR,
- Must have a reseller permit issued by DOR, and
- Cannot title the vehicle in your name.
If you are not registered with DOR and if you don’t have a reseller permit, you must pay sales tax when you purchase a vehicle from a registered seller. Or, if you title the vehicle in your name then you need to pay use tax to DOL.
If you regularly engage in selling vehicles to consumers in Washington (whether or not you restore, modify, fix or repair the vehicle before re-selling it) the Department considers you engaged in business. This means you must obtain a tax registration endorsement. DOR requires you to get a tax registration regardless of whether you need to obtain a vehicle dealers license from DOL.
You must collect, report, and pay these taxes through an excise tax return:
- Retail Sales Tax
- Motor Vehicle Sales/Lease Tax of 0.3%
- Retailing business and occupation (B&O) Tax – the small business B&O tax credit may apply
Retail Sales Tax Exemptions:
- Vehicle sales with delivery in this state to nonresidents of Washington (WAC 458-20-177). Retailing B&O tax still applies.
- Interstate and Foreign Sales with delivery outside of this state (WAC 458-20-193). This exemption also applies to Retailing B&O tax.
- Vehicle sales to Enrolled Tribal Members with delivery in their Indian country if the seller receives a completed Declaration for Motor Vehicle Sales to Enrolled Tribal Members with Delivery in Indian Country. Retailing B&O tax still applies.
- Sales to certain military members, Military Vehicle Sales.
DOL dealer licensing requirements
DOL is in charge of vehicle dealer licensing. Their website states it’s illegal to do the following if you don’t have a vehicle dealer license:
- You cannot sell more than 4 vehicles registered to you in any 12-month period.
- You cannot buy and sell vehicles for the purpose of making a profit.
- You cannot sell any number of vehicles that aren’t registered to you.
More information can be found on DOL’s laws and rules page.
- Auto Dealers Guide
- Special Notice – Motor Vehicle Sales and Use Tax Rate Increase
- Tax Registration and Tax Reporting (WAC 458-20-101)