Washington: Sales Tax Handbook
How are vehicle sales taxed in Washington?
Washington Sales Tax on Car Purchases:
Vehicles purchases are some of the largest sales commonly made in Washington, which means that they can lead to a hefty sales tax bill. This page covers the most important aspects of Washington's sales tax with respects to vehicle purchases. For vehicles that are being rented or leased, see see taxation of leases and rentals.
Washington collects standard the state sales tax rate of 6.5%, plus a 0.3% "motor vehicle sales / lease tax", so the state tax levied on the purchase or lease of all vehicles is 6.8%. Counties and cities in Washington also collect sales taxes which apply to vehicle purchases and leases, so the total sales tax you pay will also include from 0.5% to 3.5% of additional local sales taxes based on your local sales tax rate. Thus, vehicle sales taxes in Washington can range from 7.3% to 10.3% based on where the transaction is made. The statewide motor vehicle surtax or 0.03% has been collected since 2003, applies to all retail sales, leases and transfers of motor vehicles and is used to finance transportation improvements. The tax is collected by the vendor at the time of purchase and submitted by the vendor to the Department of Revenue on an excise tax return. Retail car rentals are not subject to the above taxes, and are instead taxed at a special rental vehicle rate of 5.9% of the selling price, regardless of whether the vehicle is licensed in Washington. Motor Vehicle Use Tax: If sales tax was not paid at the time of purchase of the vehicle, use tax applies at the time the vehicle is registered with the Department of Licensing. This would occur if a vehicle was purchased from a private party or if it was purchased outside of Washington. If the purchase price does not represent the true value of the vehicle acquired, the value is to be determined as nearly as possible according to the retail selling price at place of use of similar vehicle(s) of like quality and character. The amount of use tax collected is, in these cases, calculated based on the fair market value of the vehicle according to Price Digests, not the actual sales price. If you purchased a vehicle for under fair market value and believe that the vehicle is actually worth less than average fair market value, you can use a verified appraisal or an affidavit from the seller (Form 32-2501) to get the market value lowered for use tax calculation purposes. Keep in mind that the Department of Revenue may review and audit declarations of buyers and sellers regarding value of used vehicles sold with possible additional tax, interest and penalties as a result. Use Tax Exeptions: If you buy a vehicle while on active duty with the military, you may be exempt from paying use tax. Additionally, if you received a vehicle as a gift and can prove that the person who gave it to you paid sales or use tax when it was purchased, you won't have to pay any use tax. If you have any questions about the Washington sales or use tax as they apply to vehicles, you can contact the Washington Department of Revenue at 360.902.3770.
In addition to taxes, car purchases in Washington may be subject to other fees like registration, title, and plate fees. You can find these fees further down on the page.
Do Washington vehicle taxes apply to trade-ins and rebates?
How are trade-ins taxed?
Many dealerships allow you to trade-in your old car in exchange for a credit applied to the price of a new vehicle. For example, you could trade-in your old car and receive a $5,000 credit against the price of a $10,000 new vehicle, making your out-of-pocket cost only $5,000.
In Washington, the taxable price of your new vehicle will be considered to be $5,000, as the value of your trade-in is not subject to sales tax. This means that you save the sales taxes you would otherwise have paid on the $5,000 value of your trade-in.
How are rebates and dealer incentives taxed?
Many dealers offer cash incentives or manufacturer rebates on the sticker price of a vehicle in order to encourage sales. For example, a $1,000 cash rebate may be offered on a $10,000 car, meaning that the out of pocket cost to the buyer is $9,000.
Washington taxes vehicle purchases before rebates or incentives are applied to the price, which means that the buyer in this scenario will pay taxes on the vehicle as if it cost the full $10,000.
Other taxes and fees applicable to Washington car purchases
In addition to state and local sales taxes, there are a number of additional taxes and fees Washington car buyers may encounter. These fees are separate from the sales tax, and will likely be collected by the Washington Department of Motor Vehicles and not the Washington Department of Revenue.
Average DMV fees in Washington on a new-car purchase add up to $571, which includes the title, registration, and plate fees shown above.
Washington Documentation Fees
Dealerships may also charge a documentation fee or "doc fee", which covers the costs incurred by the dealership preparing and filing the sales contract, sales tax documents, etc. These fees are separate from the taxes and DMV fees listed above.
The average doc fee in Washington is $1501, and Washington law caps dealer's doc fees at 150. Because these fees are set by the dealerships and not the government, they can vary dealership to dealership or even vehicle to vehicle.
1 - Average DMV and Documentation Fees for Washington calculated by Edmunds.com
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