Avalara Taxrates > Blog > Sales Tax News > When out-of-state businesses owe use tax on items brought into Washington - Avalara

When out-of-state businesses owe use tax on items brought into Washington

 Out-of-state companies doing business in Washington may owe the state use tax.

Use tax is the counterpart to sales tax. Generally, if a retailer doesn’t collect Washington sales tax at the point of sale, the consumer owes the state the equivalent amount of use tax on tangible personal property (TPP) consumed, stored, or used in Washington. However, in certain situations the state allows an exception for out-of-state businesses that bring TPP into the state for use, storage, or consumption.

The Washington State Department of Revenue recently published an Excise Tax Advisory (ETA) on the determination of use tax on TPP brought into the state on multiple occasions by an out-of-state business. It breaks down when use tax is owed —and how the taxable value is determined.

Full value vs. ‘reasonable rental value’

Use tax is not owed on the full retail value of TPP in Washington when all three of the following circumstances are true:

  • The person or entity using the TPP is engaged in business in another state
  • The TPP is in Washington for 180 consecutive days or less
  • The TPP is temporarily used for business purposes

Instead, when the above conditions are all met, use tax is owed on “the reasonable rental value of the TPP”— typically the “rental price or fair market rental value of similar products of like quality and character of the TPP.”

If the same individual or business brings the same property into Washington on multiple occasions, the use tax paid is accumulated. When the use tax paid equals the full retail value of the TPP, that individual or business no longer owes use tax on that property.

Alternatively, if TPP is used for more than 180 days in a 365-day consecutive period, the consumer must pay the state tax on “the full value of the TPP as of the date the use exceeds 180.”

The ETA provides several examples to “be used as a general rule” (read them here). The department underscores that other situations could lead to different tax results, and that “a review of all the facts and circumstances” of each situation is required to accurately determine use tax liability.

Learn how businesses can automate consumer use tax compliance.

photo credit: Welcome to Washington via photopin (license)

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.