Effective August 1, 2009, Engrossed Substitute Senate Bill (ESSB) 6170, sections 801 and 802 repeals the sales tax and use tax exemption allowed on purchases of qualifying hybrid vehicles. The exemption from the Motor Vehicle Sales/Use Tax (.3%) remains in effect on the purchase of new hybrid vehicles until January 1, 2011.

Prospective purchasers should note that delivery must be made before August 1, 2009 and a binding contract of sale must be in place, in order to qualify for the exemption for qualifying hybrid vehicles.  For example, if a purchaser orders a qualifying hybrid on May 15, 2009 and takes delivery on July 30, 2009, the purchase qualifies for the exemption. However, if a purchaser orders a qualifying hybrid on May 15th and takes delivery on August 15, 2009, the purchase does not qualify for the exemption.

Lease payments due under the lease agreement after August 1, 2009 on qualifying hybrid vehicles will become subject to sales tax.   For example, if a lease of a qualifying hybrid vehicle was entered into on January 1, 2009, only the lease payments due under the lease agreement through July 31, 2009 qualify for the exemption from the retail sales and use tax, notwithstanding that the lease agreement was entered into prior to the effective date of the legislation.  However, the remaining lease payments due under the lease agreement through December 31, 2010, will still be exempt from the Motor Vehicle Sales/Use Tax (0.3%). 

For more information, see our special notice, "Sales and Use Tax Exemptions for Certain High Mileage Hybrid and Clean Alternative Fuel Vehicles."