What Is Use Tax in Washington State?

Use tax in Washington State applies when sales tax was not collected on goods or certain services used within the state. It ensures a consistent tax burden on purchases, whether made in-state or brought from elsewhere, complementing the state’s sales tax system. Goods used in Washington are subject to either sales tax or use tax, but never both, preventing tax avoidance on out-of-state purchases.

What is Washington State Use Tax

Washington State Use Tax is a tax on the storage, use, or consumption of goods or certain services within Washington when sales tax has not been paid at the time of purchase.

Use tax is similar to sales tax in that it applies to the same types of tangible personal property and services. However, sales tax is collected by a seller from a buyer, whereas use tax is self-assessed and paid directly by the consumer to the state. The Washington State Department of Revenue (DOR) is the authority responsible for administering and collecting this tax. This mechanism ensures that tax revenue is generated on taxable items regardless of the seller’s location or their ability to collect Washington sales tax.

When Washington State Use Tax is Due

Use tax is primarily due when individuals or businesses purchase goods or services from out-of-state vendors who do not collect Washington sales tax. This often includes purchases from online retailers, mail-order catalogs, or during travel to states like Oregon with no sales tax or lower rates. For example, if furniture is bought in Oregon and brought to Washington for use, use tax is due.

Use tax also applies to goods acquired from private parties not authorized to collect sales tax, such as purchases through classified ads, online auctions, or at garage sales. It may also be owed on tangible personal property acquired as part of a real property purchase. Businesses incur use tax liability for “intervening use,” such as when they purchase goods for resale but use them for their own operations (e.g., a car dealership using inventory parts for a demonstrator vehicle).

Charges for repairs performed outside Washington on goods subsequently brought into the state may also trigger use tax. Items distributed for promotional purposes, like catalogs or branded merchandise, are subject to use tax if sales tax was not paid on their acquisition. Digital products, including downloaded music, movies, and software as a service (SAAS), are also subject to Washington use tax if sales tax was not applied at the time of purchase.

Exemptions from Washington State Use Tax

Certain items and transactions are exempt from Washington State Use Tax, generally aligning with exemptions from Washington sales tax. Common exemptions include most food products for home consumption, though prepared foods and alcoholic beverages remain taxable. Prescription drugs and over-the-counter medications are also exempt from use tax.

Newspapers and certain agricultural products, such as farm machinery and equipment, may qualify for exemptions. Sales to specific non-profit organizations or government entities are exempt, provided proper exemption certificates are presented. A credit prevents double taxation when sales tax has already been paid in another state. If sales tax paid in another state was lower than Washington’s rate, only the difference is owed as use tax. No Washington use tax is due if the sales tax paid in the other state was equal to or higher than Washington’s rate.

Reporting and Paying Washington State Use Tax

Calculating Washington State Use Tax involves applying the correct tax rate to the purchase price of the item. The use tax rate is identical to the sales tax rate for the specific location where the item is first used in Washington. This rate includes a state portion of 6.5%, plus varying local sales tax rates, resulting in combined rates that typically range from 6.5% to 10.4% across the state. The tax base includes the purchase price, along with any shipping, handling, or delivery charges paid to the seller. In certain cases, if an item was used outside of Washington for an extended period before being brought into the state, a depreciated value may be used for calculation. The Washington DOR provides a Tax Rate Lookup Tool on its website to help determine the precise rate for any location.

Individuals report and pay use tax directly to the Washington State Department of Revenue. This can be done through the My DOR online portal. Alternatively, individuals can complete and mail a Consumer Use Tax Return form, available from the DOR, along with their payment. For most individual consumers, use tax is reported annually by April 15th of the following year for the prior year’s purchases.

Businesses report their use tax obligations on their regular Combined Excise Tax Returns. This is done by including the use tax on a specific line item within the excise tax return. Businesses are assigned a filing frequency—monthly, quarterly, or annually—based on their reported or estimated taxable sales. Monthly filers submit by the 25th of the month following the reporting period, while annual filers are due by January 31st of the following year, with some small businesses having a deadline of April 15th.