Luxury vehicle tax update
WASHINGTON TAX UPDATE
A new luxury vehicle tax will affect motor vehicles over $100,000
Starting January 1, 2026, the state of Washington will impose an additional 8% tax on the selling price of a motor vehicle that exceeds $100,000. This is in addition to the existing general sales tax. The luxury tax also applies to the fair market value of a leased vehicle over $100,000.
While it may seem aimed at exotic sports cars and luxury sedans or SUVs, it also applies to motor homes. There will also be an additional 0.5% tax on watercraft and, beginning April 1, a 10% tax on most non-commercial aircraft sales. However, the 8% tax on motor vehicles over $100,000 is likely to have the greatest impact on Valley RV Supercenter customers purchasing motor homes.
EXEMPTIONS
Vehicles excluded from the tax
Exemptions from this tax include commercial vehicles, such as school buses and vehicles transporting 16 or more individuals; vehicles with a gross weight over 10,000 pounds, excluding motor homes; farm tractors and vehicles, unless used for cannabis production; off-road vehicles that are not road licensable; non-highway vehicles; and snowmobiles under current Washington state tax rules and existing vehicle classification guidelines.
TAX EXAMPLES
How the tax is calculated
The tax applies only to the amount of the selling price over $100,000. A vehicle sold for $110,000 would be taxed on $10,000, resulting in $800. If $90,000 is paid after trading in a $30,000 vehicle, the tax applies to $20,000 and would be $1,600. If you purchase an RV at $150,000 after the tax takes effect, you would pay an extra $4,000 in taxes. In King County, the sales tax increase from 10.5% to 10.7% would add another 0.2%, or $300.
HOW THE TAX APPLIES
How it is reported, paid, and adjusted over time
The tax also applies to leased vehicles, with the amount taxed based on the fair market value of the vehicle at the beginning of the lease minus the current deduction amount of $100,000.
Sellers, including Valley RV Supercenter, will report the selling price before trade-in, or the fair market value for leased vehicles, on their combined excise tax return under the Sales/Lease of Luxury Vehicles category. They will then take the Exempt Portion of Selling Price deduction for each vehicle sold.
If the luxury motor vehicle tax is not paid at the time of purchase, such as in a private sale, the tax is due on the purchase price when the vehicle is registered with the Department of Licensing. The tax also applies to individuals who bring in an applicable vehicle from out of state, and it is likewise paid when the vehicle is licensed in Washington.
Over time, the tax will account for inflation, with the exempt portion of the selling price, the $100,000 threshold, increasing by 2% on July 1 each year. That means the tax would apply to the amount over $102,000 a year later, then over $104,040 the following year, and so on.
The Department of Revenue has additional details. If you have questions about the new tax and how it applies to motor homes, please speak with one of our Valley RV Supercenter sales professionals.
