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.

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.

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)