Rental car tax

What is the rental car tax?

It is a tax paid by the consumer on the rental of a passenger car for a period of less than 30 days. Long-term leases are not affected.

How do I pay the tax?

You report the tax to the Department of Revenue on a rental car tax addendum along with your excise tax return. You do not need to separately state the rental car tax on the customer’s invoice. However, you must segregate the tax in your records to identify what was collected from the customer and reported to the department.

What rate do I pay?

The rental car tax is in addition to the retail sales tax. The rates are:

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. This includes motorized RVs and motor homes. However, 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 (e.g. “loaner” car).
• A vehicle licensed and operated as a taxicab.
• A vehicle that is leased for a period of 30 days or more.
• A shared vehicle used in peer-to-peer car sharing as defined in RCW 46.74A.010. 
• A vehicle that is designed, used, or maintained for the transportation of property, commodities, merchandise, produce, freight, or animals.

The Department of Licensing, Motor Vehicle Licensing division, sets the requirements for determining if a vehicle must be licensed as a rental vehicle.

When is a rental 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.

Are there any exemptions from this tax?

Yes. 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 both the retail sales tax and the rental car tax.

Vehicles rented or towed under an original manufacturer's warranty

The rental car tax is due on the retail rental of a vehicle while a customer's car is being repaired under an original manufacturer's warranty. 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.

Additional charges subject to the rental car tax

Additional charges added to the bill without giving the renter an option, such as insurance and the cost of fuel, are considered part of the rental price and are subject to the retail sales and rental car taxes. This is true even when the charges are separately stated.

When the renter is given an option to add insurance or to have the company fill the fuel 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.

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 an 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 reseller permit from an auto repair shop and not 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

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. 

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.

What are the funds used for?