PO BOX 47478 | OLYMPIA, WASHINGTON 98504-7478 | 360-705-6705 | dor.wa.gov
For tax assistance or to request this document in an alternate format, visit dor.wa.gov or call
360-705-6705. Teletype (TTY) users may use the Washington Relay Service by calling 711.
New clean alternative fuel and plug-in hybrid vehicle sales and
use tax exemption
Beginning Aug. 1, 2019, a new law provides a retail sales and use tax exemption on sales and leases of
certain clean alternative fuel vehicles and certain plug-in hybrid vehicles. The exemption expires on July
31, 2025.
Eligible vehicle sales and leases
The sales and use tax exemption applies to new or used passenger cars, light duty trucks, or medium duty
passenger vehicles that meet one of the following criteria:
Exclusively powered by a clean alternative fuel.
Plug-in hybrid vehicle that can travel at least 30 miles on battery power alone.
Department of Licensing (DOL) maintains a list of eligible vehicles on its website, dol.wa.gov. DOL will
review and update the list as needed until the exemption expires.
Eligible vehicle amounts
New vehicles Used vehicles
Sales
(selling price)
Up to $45,000 Up to $30,000
Leases
(fair market value)
Up to $45,000 Up to $30,000
The selling price includes delivery charges or any other services necessary to complete the sale (RCW
82.08.010).
Dealers may not deduct the value of any trade-in vehicle or any federal tax credits that may accrue to the
lessor when determining exemption eligibility.
Manufacturer and distributor rebates are part of the selling price. The amount of the rebate is not allowed
to be used in any way to reduce the sales price or value.
Special Notice
Intended audience: new and used auto dealers and consumers
Aug. 19, 2019
PO BOX 47478 | OLYMPIA, WASHINGTON 98504-7478 | 360-705-6705 | dor.wa.gov
For tax assistance or to request this document in an alternate format, visit dor.wa.gov or call
360-705-6705. Teletype (TTY) users may use the Washington Relay Service by calling 711.
Vehicle eligibility examples
Sale of a new vehicle
An auto dealer sells a new vehicle for $47,000. The buyer has a trade-in vehicle that is valued at $10,000.
The sale of the vehicle is not eligible for exemption. Only new vehicles that do not exceed the
$45,000 cap amount are eligible.
The value of the trade-in cannot be deducted from the selling price when determining eligibility.
Even though the nal cost to the buyer is less than $45,000 because the auto dealer will count the
value of the trade-in against the total amount due on the sale of the vehicle, the vehicle does not
qualify for the exemption.
Lease of a new vehicle
An auto dealer leases a new vehicle. The fair market value at the inception of the lease is $47,000. The
lessee has a trade-in vehicle that is valued at $10,000.
The lease of the vehicle is not eligible for exemption because the fair market value at the inception
of the lease is greater than the $45,000 cap amount.
The denition of “fair market value” is the same as “value of the article used.” Value of the article used
is dened as the purchase price. Therefore, the value of the trade-in cannot be deducted from the
fair market value when determining eligibility.
How does the exemption work?
Sales
The exemption applies to all or a portion of the vehicle’s selling price.
Leases
The exemption applies to all or a portion of the total lease payments. If the original lessee purchases the
leased vehicle before the expiration date, the exemption also applies to any additional selling price of the
leased vehicle if any allowable exemption remains.
Exempted amounts
Date of purchase
New vehicles
Used vehicles
Aug. 1, 2019 – July 31, 2021 $25,000
Total sales price or $16,000,
whichever is less.
Aug. 1, 2021 – July 31, 2023 $20,000
Aug. 1, 2023 – July 31, 2025 $15,000
PO BOX 47478 | OLYMPIA, WASHINGTON 98504-7478 | 360-705-6705 | dor.wa.gov
For tax assistance or to request this document in an alternate format, visit dor.wa.gov or call
360-705-6705. Teletype (TTY) users may use the Washington Relay Service by calling 711.
Exemption examples— How to calculate retail sales tax
1. A seller sells a vehicle for $43,000 on Sept. 1, 2021, and does not discount any trade-in value. On this
date, the amount eligible for the exemption is $20,000. The seller will subtract the $20,000 exemption
from the total price of $43,000, and only charge sales tax on the remaining $23,000.
Original sale price: $43,000
Trade-in value: -$0
Updated sale price: =$43,000
Exemption: -$20,000
Taxable amount: =$23,000
2. A seller sells a vehicle for $43,000 on Sept. 1, 2021, and discounts $2,000 as the trade-in value of the
buyer’s old vehicle. On this date, the amount eligible for the exemption is $20,000. The seller will subtract
the $2,000 trade-in value from the total sales price of $43,000. Then, they will subtract the $20,000
exemption from the updated price of $41,000, and only charge sales tax on the remaining $21,000.
Original sale price: $43,000
Trade-in value: -$2,000
Updated sale price: =$41,000
Exemption: -$20,000
Taxable amount: =$21,000
When does the sales and use tax exemption expire?
Expiration Dates
For sales of eligible vehicles, the vehicle must be delivered to the buyer between Aug. 1, 2019, and July
31, 2025, to qualify for the exemption.
For leases of eligible vehicles, the lease agreement must be signed on or after Aug. 1, 2019, but on or
before July 31, 2025, to qualify for the exemption. Leases that qualify for this tax exemption on or before
July 31, 2025, can continue to claim the exemption through July 31, 2028.
Special information for auto dealers
Are charges for accessories exempt?
Accessories purchased as part of the purchase of a qualifying vehicle are exempt from sales tax, if the
selling price or fair market value of the vehicle, including the charge for the accessories, does not exceed
the cap amount.
Are charges for extended warranties and maintenance agreements exempt?
The sales and use tax exemptions do not extend to the purchase of extended warranties or maintenance
agreements. Nor is the purchase included in determining whether a vehicle exceeds the cap amount
unless they are required (not optional) as part of the sale.
PO BOX 47478 | OLYMPIA, WASHINGTON 98504-7478 | 360-705-6705 | dor.wa.gov
For tax assistance or to request this document in an alternate format, visit dor.wa.gov or call
360-705-6705. Teletype (TTY) users may use the Washington Relay Service by calling 711.
How do dealers report the sales tax exemption?
Dealers will report the exempt sale by taking a Sales and Leases of New/Used Clean Alternative Fuel
Vehicles deduction from retail sales tax.
Dealers must submit itemized information when ling the excise tax return for each vehicle for which a
deduction is taken during the reporting period. This information must include:
Sale or lease.
New or used.
Vehicle make, model and year.
Sale or lease start date.
Term of lease in months.
Monthly lease payment amount.
Sales price or fair market value at inception of lease.
Deduction amount.
The above information is entered on a table provided when reporting the deduction on your electronic
return. Dealers ling paper returns may download an addendum from the department’s website, or call
360-705-6705 to request the form. This information is required by E2SHB 2042 and will be used by the
department to report to the Legislature on the eectiveness of the sales and use tax exemption.
How are lease payments reported?
The leasing company will report the exempt sale by taking a Sales and Leases of New/Used Clean
Alternative Fuel Vehicles deduction from retail sales tax. New leases will be reported with the rst
payment amount and deduction along with details of the lease on the new addendum as part of the
excise tax return. Ongoing lease payments must also be reported on the addendum. Leasing companies
will need to track the exemption amount allowed for each leased vehicle. The leasing company may
spread out the allowable tax exempt amount throughout the life of the lease in whatever manner it
chooses so long as the total allowable amount is not exceeded.
Special information for consumers
What if I paid retail sales tax in error?
If you believe you have paid retail sales tax in error, you should rst seek a refund directly from the
seller. However, the department may grant refunds of retail sales tax directly to consumers. Consumers
requesting a refund directly from the department must complete the Green transportation sales tax
refund request form.
PO BOX 47478 | OLYMPIA, WASHINGTON 98504-7478 | 360-705-6705 | dor.wa.gov
For tax assistance or to request this document in an alternate format, visit dor.wa.gov or call
360-705-6705. Teletype (TTY) users may use the Washington Relay Service by calling 711.
What if I bought my car out of state or from a private party? Do I still qualify?
Yes, you will still qualify if the vehicle meets the requirements for the exemption.
If use tax was paid to Department of Licensing and you did not get an exemption, you can apply for a refund by
lling out the Application for Refund of Use Tax and mailing it to the address on the form with a copy of your
purchase agreement, copy of the title, and proof of tax paid.
If use tax has not yet been paid, the exemption amount may be calculated at the Department of Licensing.
Denitions
Fair market value has the same meaning as “value of the article used” in RCW 82.12.010.
New vehicle has the same meaning as “new motor vehicle” in RCW 46.04.358.
Used vehicle is dened in RCW 46.04.660.
More information
Read Engrossed Second Substitute House Bill 2042.
Visit our Tax Incentives page under Renewable Energy/Green Incentives.
