In Washington state, we have a sales tax that we pay on goods or certain services. Most people are familiar with this idea. You may see sales tax on your receipts when you purchase something or online when you go to checkout.
But what many people don’t realize is that they may need to pay use tax on goods and certain services where sales tax wasn't collected.
What is use tax?
Use tax is a tax on goods and services when sales tax wasn’t collected at the time of purchase.
Who needs to pay use tax?
Businesses and individuals are both responsible for paying use tax. If you reside in a state that collects sales tax, such as Washington, you are required to pay either sales tax or use tax on goods and certain services.
What is the difference between sales tax and use tax?
Use tax compensates for sales tax on items that were not taxed at the point of purchase. Therefore, you will only need to pay sales tax or use tax on an item, but not both.
What is subject to use tax?
Use tax applies in situations where:
Items are purchased in a different state that doesn't have a sales tax, such as Oregon, and then brought or shipped to a state that requires sales tax.
Items are purchased from private parties that aren’t authorized to collect sales tax. For example, these are items purchased from classified newspaper ads or at garage sales.
Items are purchased through an online marketplace such as Craigslist or Facebook Marketplace, where sales tax isn’t collected.
Personal property is acquired with the purchase of real property.
Automobiles are purchased from private parties — however, use tax is usually paid at the Department of Licensing at the time of registration.
What is the use tax rate?
The use tax rate is the same as your local sales tax rate, which is updated every quarter. You can find the local sales and use tax rates by county on the Department of Revenue website.
Generally, use tax is calculated by multiplying the use tax rate by the purchase price. However, depreciation value may be factored in if the item was previously used in a state that doesn’t collect sales tax and then purchased and brought to one that does. For example, if you purchased a desk from Oregon, which doesn’t collect sales tax, you should determine the value of the desk when it was first used in Washington state and multiply the use tax rate by that price.
When is use tax due?
Use tax is owed when the item is first used in Washington. As a business owner, use tax is due when you pay your B&O tax. For individuals, it’s on a pay-as-you-go schedule, however, the deadline for paying and reporting use tax is April 1st of the following year the item was purchased.
How do I pay use tax?
Use tax payments go to the Washington State Department of Revenue. Businesses registered in Washington should have a My DOR account and you can pay using your account. For individuals who don’t have an account, you can pay through the DOR’s website.
Do I need to file use tax?
Yes. To report use tax, businesses need to include business-related purchases that incurred use tax on their Excise Tax Return. Individuals will file using the Consumer Use Tax Return.
Need assistance?
Use tax can be a confusing topic and one that many may not know about. If you have more questions, please feel free to give us a call at (360) 756-5020 or reach us by filling out our contact form. We provide tax reporting services at the federal, state, and local level, making it easy for you to file your use tax.
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