Did out-of-state registration prevent Washington use tax on a vehicle bought by a Washington LLC and regularly driven and stored in Washington?

Plain-English summary

Washington imposed use tax on a vehicle that a Washington LLC bought, registered, and licensed in another state where no retail sales tax was paid.

The principals owned homes in both states, but the wife lived in Washington, held a Washington driver's license, opened the Washington business most mornings, and drove the vehicle about 75% of the time. The vehicle was regularly used and stored in Washington.

Use tax complements sales tax and arises when a consumer first exercises dominion or control over untaxed tangible property in Washington. The buyer listed on the order was the LLC, which had been registered in Washington since 2007. Out-of-state title and registration did not override the vehicle's actual Washington use.

Result: petition denied and the use-tax assessment sustained.

What this means for you

Registering a vehicle elsewhere does not determine Washington use-tax liability. Ownership, where the vehicle is kept, who drives it, and actual Washington use matter.

Businesses and owners should preserve evidence of sales tax paid in another state and of any exemption claimed before bringing a vehicle into Washington.

Common questions

Q: Did paying the loan and insurance personally change the LLC's liability?

A: No. The vehicle purchase order named the LLC as buyer.

Q: Why did Washington impose use tax?

A: No sales tax had been paid, and the vehicle was used in Washington by a Washington consumer.

Q: Does this ruling apply the current version of Rule 178?

A: No. The PDF states that it applied the version in effect during the audit period, before a May 11, 2014 amendment.

Citations and references

• RCW 82.12.020
• RCW 82.12.010(5)-(6)
• RCW 82.04.030
• WAC 458-20-178

Source

• Landing page: Washington Tax Decisions ZIP files
• Original PDF: 35WTD448.pdf
• Source archive: Volume 35 ZIP (member 35 WTD 448.pdf)

Original ruling text

Det. No. 15-0299, 35 WTD 448 (September 30, 2016)

448

Cite as Det. No. 15-0299, 35 WTD 448 (2016)

BEFORE THE APPEALS DIVISION
DEPARTMENT OF REVENUE
STATE OF WASHINGTON
In the Matter of the Petition for Correction of )
Assessment of
)
)
)
...
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DETERMINATION
No. 15-0299
Registration No. . . .

RULE 178; RCW 82.12.020, RCW 82.12.0251: USE TAX – OUT OF STATE VEHICLE PURCHASE – VEHICLE USED IN WASHINGTON. The taxpayers own a home and a business located in Washington. The taxpayers also own a home located in Oregon. The vehicle was registered and licensed in Oregon but the evidence showed regular use and storage of the vehicle in Washington. The primary driver of the vehicle resides in Washington and has a Washington driver’s license. Thus, the taxpayers were liable for payment of use tax for use of the vehicle in Washington. Headnotes are provided as a convenience for the reader and are not in any way a part of the decision or in any way to be used in construing or interpreting this Determination. Valentine, A.L.J. – A Washington limited liability company [(LLC)] appeals the assessment of use tax on a motor vehicle it purchased, registered, and licensed [out-of-state]. Petition denied. We conclude that the company is liable for use tax on the vehicle it purchased and licensed in another state, but uses in Washington.1 ISSUE Pursuant to RCW 82.12.020, RCW 82.12.0251, and WAC 458-20-1782 (Rule 178), is a Washington [LLC] liable for use tax when it purchased and licensed a vehicle in another state, but uses the vehicle in Washington? FINDINGS OF FACT
[Taxpayer] registered with the Washington Secretary of State as a domestic [LLC] in April of 2007. Taxpayer’s mailing address, as well as its physical location, is in . . . , Washington.

1

Identifying details regarding the taxpayer and the assessment have been redacted pursuant to RCW 82.32.410. Rule 178 was amended, effective May 11, 2014. All citations in this determination are to the version of Rule 178 in existence during the audit period [and before that amendment].

2

Det. No. 15-0299, 35 WTD 448 (September 30, 2016)

449

In November of 2011, Taxpayer purchased a vehicle out-of-state. No retail sales tax was paid at the time of purchase.3 Taxpayer also registered and licensed the vehicle [out-of-state]. In addition to Taxpayer, the vehicle was licensed to Taxpayer’s two principals, [Husband] and
[Wife].
Through its Compliance Division, the Department of Revenue (Department) issued Taxpayer an assessment in the amount of $ . . . (this amount represents the assessment of use tax, [local] motor vehicle tax, penalties, and interest).4
[Husband and Wife] own a home out-of-state and a home in Washington. [Husband] is licensed to drive [out-of-state]; [Wife] is licensed to drive in Washington. According to [Wife], she resides in Washington, and [Husband] resides [out-of-state]. The address of their [out-of-state] home was used as the licensing address.
[Wife] asserts that the loan officer approved the purchase loan through the business entity to give them a lower interest rate. [Wife] also asserts that the vehicle was purchased for personal use.
[Wife] estimates that she drives the vehicle 75 percent of the time ([Wife] also reports that she opens the business most mornings), and [Husband] drives it for the remainder. In addition,
[Wife] reports that the monthly loan installments and insurance are paid with personal rather than business funds. ANALYSIS RCW 82.12.020 imposes the use tax. RCW 82.12.020(1) reads, in pertinent part: (1) There is levied and collected from every person in this state a tax or excise for the privilege of using within this state as a consumer any: (a) Article of tangible personal property acquired by the user in any manner,
....
The definition of the term “person,” for use tax purposes, includes a limited liability company. RCW 82.12.010(5); RCW 82.04.030. Rule 178 implements the use tax statute and explains that the use tax complements the retail sales tax by imposing a tax of like amount upon the use, within this state, by a consumer, of any article of tangible personal property where the user or other specified persons have not paid retail sales tax. Rule 178(2). In addition, use tax is owed “irrespective of where [the tangible personal property] may have been purchased or how acquired.” Id. Use tax liability arises at the time the property purchased is first put to use in this state. Rule 178(5)(a). RCW 82.12.010(6) defines “use” as follows: 3

[The other state] does not have a retail sales tax.
The vehicle at issue came to the Department’s notice after a Department employee noted it was parked at the U.S. Post Office in . . . , Washington. Compliance then contacted Taxpayer requesting additional information about the vehicle. 4

Det. No. 15-0299, 35 WTD 448 (September 30, 2016)

450

(6) "Use," "used," "using," or "put to use" have their ordinary meaning, and mean: (a) With respect to tangible personal property, . . . the first act within this state by which the taxpayer takes or assumes dominion or control over the article of tangible personal property (as a consumer), and include installation, storage, withdrawal from storage, distribution, or any other act preparatory to subsequent actual use or consumption within this state; There is no dispute that the motor vehicle at issue was purchased [out-of-state] and that no retail sales tax was paid at the time of purchase. The Vehicle Buyer’s Order (Order), a copy of which is contained in the record, shows that the buyer was Taxpayer and not [Husband]. and/or [Wife]. The Order does not list a buyer address. However, Taxpayer has been registered in Washington as a [LLC] since 2007 with a Washington mailing/physical address. In addition, [Wife] reported that her residence is in Washington, she has a Washington driver’s license, and that her use of the vehicle at issue equals approximately 75 percent of the total use. She also reported that she opens the store for business most mornings. Thus, it is clear that the vehicle is used in Washington. Therefore, under RCW 82.12.020(1) and Rule 178, Taxpayer owes Washington use tax on the vehicle it purchased and licensed [out-of-state]. The vehicle is used in Washington and no retail sales tax was paid at the time of purchase.
...
DECISION AND DISPOSITION
Taxpayer’s petition is denied.
Dated this 4th day of November, 2015.