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Washington State: Use Tax on Leased Property


 Is your leased property subject to Washington State use tax?

A recently published Washington State Department of Revenue Excise Tax Advisory (ETA) explains when use tax is owed on leased property in Washington.

Use tax is owed on the purchase, rent, or lease of taxable tangible personal property when retail sales tax was not paid at the time of purchase. It “applies to the use of leased property brought into [Washington State], if the lessee’s purchase or use of the leased property was not previously subject to Washington’s retail sales or use tax.” Taxes paid to another state, territory, possession, or commonwealth of the United States may be claimed as a credit against the amount owed to Washington State.

Just how much use tax is owed depends on the “value of the article used,” as defined by RCW 82.12.010. Generally, the value is determined by the retail sales price. However, “In case the article used is acquired by lease or by gift… or is sold under conditions wherein the purchase price does not represent the true value thereof, the value of the article used is determined as nearly as possible according to the retail selling price at place of use of similar products of like quality and character under such rules as the department may prescribe.” [Emphasis added by the WA DOR].

Use tax on leased property is generally based on “the full amount of the lease payment of the lease period during which the property was used in Washington….”

The ETA advises against relying too heavily on the ETA for tax advice. It should “be used only as a general guide.”

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.