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The Center for Sustainable Infrastructure Blog

Washington Passes New Clean Fuel Vehicle Sales Tax Exemption

May 4th, 2016 · 2 Comments · Energy, Transportation

Thanks to JJ McCoy, Legislative Director of Seattle Electric Vehicle Association (SEVA) for permission to post their FAQ.

On April 19, Washington Governor Jay Inslee signed into law HB 2778– the electric vehicle (EV) sales tax exemption. “This bill will help get more Washington residents behind the wheel of a great EV” says JJ McCoy of SEVA*. “Several exciting mid-market cars with 200 miles of range will be in showrooms soon, and Washington’s incentive will give them a boost.”

HB 2778 enacts a fix to Washington’s EV sales tax exemption which was sorely needed. It provides up to $3,100 off of a new car, either purchased or leased. Along with federal incentives, this can lower the cost of an EV by over $10,000! The previous Washington law capped this program at a $35,000 purchase price, whereas the new law raises that cap to $42,500. This new price cap includes models such as the Chevy Bolt, the next gen Nissan Leaf, and the Tesla Model 3 – all of which have 200 miles of electric range.

Tesla Model 3

“Electric vehicles have a host of benefits – lower carbon emissions, lower fueling costs, better air quality – but they still cost more to make than an equivalent gas car,” McCoy says. “As car makers scale up battery production and prices fall, EVs will soon be able to compete unsubsidized and provide a compelling value proposition. Fueling up costs just $0.85 a ‘gallon’ on Washington electricity rates, so once you have the car, you’re saving money with every mile.”

“They’re also just a lot of fun to drive. We find that once people try an EV, they never want to go back to their gas car.”

SEVA has applauded Washington legislators for their work on this issue, including bill sponsor, Rep. Jake Fey (D-Tacoma) who identified a compromise legislative solution that could pass both House and Senate in very partisan times. They also thank Rep. Ed Orcutt (R-Kalama), the lead Republican sponsor, and the House and Senate Transportation Chairs Rep. Judy Clibborn (D-Mercer Island) and Sen. Curtis King (R-Yakima) for their efforts.

bolt

Chevy Bolt

JJ McCoy and SEVA have given the Center for Sustainable Infrastructure Blog permission to re-post the following set of Frequently Asked Questions regarding the Clean Fuel Vehicle Sales Tax Exemption.

 How much is this tax break worth?

 Up to about $3,100.  Combined with the $7,500 federal income tax credit for an electric vehicle (EV) purchase, that takes over $10,500 off the price of your next EV!  The new law exempts the first $32,000 of vehicle sales price from state and local sales tax.  Total tax rates for motor vehicle sales vary by local jurisdiction but top out at 9.8%.  For more on state + local sales and use tax rates in your area, refer to this pdf.

Which cars qualify?

The list of cars includes many exciting mid-market cars with 200 miles range that will be in showrooms very soon.

^Soon to feature 200-mile electric range

To qualify, a car must be electrically powered or a plug-in hybrid with at least 30 miles of electric range and have a base model MSRP under $42,500.

Does this tax break apply for re-sales of an EV?

No.  It only applies to the first sale.  However, due to aggressive depreciation, many used EVs are already quite affordable without a tax break.  Used Nissan Leafs coming off leases routinely sell for $12,000 -$16,000.  For many examples, see here.

Do leased cars qualify?

Yes.  A leased car is exempt from sales tax on any down payment and monthly payments you make.  And leasing companies often factor in the $7,500 tax credit they get in the lease terms.  This could easily save you $2000 over the course

Do plug-in hybrid cars qualify?

Some do.  Cars must have all-electric range of 30 miles or more under state law to qualify.  This currently includes Chevy Volt and may include future plug-in hybrids if they have bigger batteries.

What do I have to do to claim the exemption?

Nothing at all.  Your car dealer will include the tax break as part of your sale or lease paperwork.

When does the program end?

The earlier of July 1, 2019, or one month after Washington sells 7,500 EVs that qualify for the exemption.  We appear likely to reach this cutoff in early 2018, depending on the pace of auto sales.

Why do we have incentives for electric cars?

Electric vehicles have a variety of benefits for the environment and consumers, but the industry needs a boost to scale up manufacturing and brings costs down.  EVs currently cost $10,000 – $12,000 more than their conventional gas counterparts, and they have more limited range.  That situation is changing, as battery prices fall rapidly and the battery capacity gets larger for the same price, weight and volume.  So the state and federal incentives are temporary.  They help consumers get over the upfront cost of the vehicle so they can enjoy the fuel cost savings – about $0.85 / “gallon” equivalent on Washington electricity rates.  And we can help the climate with much lower carbon emissions and our air quality with no tailpipe emissions of ozone, nitrogen oxides or particulates, which can impact human health.

Isn’t this a tax break for rich people?

EVs with 200-mile range and low fueling costs are rapidly entering the mid-market segment of car sales.  With the exciting debut of the next-generation Nissan Leaf, the Chevy Bolt, and the Tesla Model 3, driving electric will be affordable to more and more Washington households.  It’s true that upper-income households have been well represented among the early adopters, but this was true of the hybrid cars like the Toyota Prius a decade ago as well.  And now, legions of cab and Uber drivers – working class to be sure – choose the Prius, since it’s a reliable workhorse, remarkably efficient, and a compelling total cost of ownership proposition.  EVs will make the same transition in the coming years and be a great value for all households.

*SEVA is an all-volunteer organization with members in Seattle, King County, and neighboring counties.  Our members have been promoting carbon-free driving in electric vehicles (EVs) since 1979.  We share our “EVanglism” at car shows and other public events.  Through our legislative arm, we also advocate changes to public policy to better promote and support electric transportation.  More at http://www.seattleeva.org

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