Motor carrier taxes - Washington

Sales & use taxes

A sales tax is levied by the State of Washington, with some local tax rates additional. The tax is imposed on all retail sales, including successive sales of the same property. An additional 0.3 percent is imposed on the sale, rental, or lease of a motor vehicle, which includes commercial trucks and buses.

Leasing or renting tangible personal property is taxable, except when motor vehicles or trailers licensed in another state are leased to non-residents for transporting property or persons in intrastate or interstate commerce. Any vehicle sold to a non-resident to be taken directly out of the State of Washington and not registered in the state is exempt. Tangible personal property sold for use in non-contiguous states is exempt from the tax if it is delivered to a carrier's terminal and moves directly from that point to the buyer in another state.

There is an exemption from the use tax for vehicles purchased in Washington for the use of any motor vehicle or trailer while being operated under the authority of a trip permit and moving from the point of delivery in Washington to a point outside of Washington. Sales of motor vehicles and trailers used for transporting persons or property for-hire in interstate or foreign commerce are exempt from retail sales tax if the customer is the holder of a motor carrier (MC) permit issued by the Interstate Commerce Commission (ICC) or its successor agency, or the customer operates under contract with the holder of an MC permit issued by the ICC or its successor agency.

A motor carrier must continue to substantially use the motor vehicle or trailer in interstate for-hire hauls during each calendar year to retain the exemption from the use tax. Each year, the carrier must review the usage of each vehicle and trailer for a “view period” consisting of the previous calendar year.

Motor carriers must keep records to determine qualification under the use tax exemption and are encouraged to keep similar records for all trailers. However, this type of recordkeeping may be burdensome for some carriers; these carriers may elect to determine the use tax liability attributable to the use of trailers on the basis of the actual use of the tractors. Using this method, if use tax liability is incurred on a tractor, then generally, the use tax will also be incurred on one or more trailers (depending on the carrier's ratio of tractors to trailers).

To ensure all requirements and conditions are met to claim an exemption, or to ensure all tax obligations are met, contact the Washington Department of Revenue.

Franchise/Gross receipts taxes

Washington imposes a business and occupations (B&O) tax that is measured on the value of products, gross proceeds of sale, or gross income of the business. Since Washington does not collect an income tax, the B&O tax is calculated on the gross income from activities, meaning there are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business.

Washington also imposes a public utilities tax (PUT) on any business that performs hauling for-hire within the state in place of the B&O tax. This includes common and contract carriers operating motor vehicles. The PUT is an addendum to the combined excise tax return.