The US states, not the national government, manage vehicle registration.
Sales tax and registration fees are due in the state in which a vehicle is registered.
If you buy your vehicle from a private seller (an individual), you don’t have to think about this at all. You simply pay sales tax and registration fees in the state where you register your vehicle, upon registration.
But auto dealers are required to collect sales tax on behalf of the state for “in-state” buyers.
For example, if you live in New York and buy a vehicle from a New York dealer, you are considered an “in-state” buyer, and the dealer will collect New York sales tax and registration fees at the time of sale.
But “out-of-state” buyers are usually exempt from sales tax.
For example, if you live in New Jersey and buy a vehicle from a New York dealer, you are considered an “out-of-state” buyer, and the dealer will exempt your purchase from sales tax and registration fees, knowing you’ll be charged New Jersey’s taxes and fees when you register the vehicle there.
This is how the sales tax process works in most states.
But Washington State is a little bit different.
Washington State is bordered on the south by Oregon, and is separated from Montana by Idaho, which is only 45 miles wide at its most narrow point.
Oregon and Montana charge less than 1% sales tax on vehicles, compared to rates as high as 10% in parts of Washington State.
So Washington State feels like it needs to protect its sales tax revenues from vehicle buyers registering their vehicles out of state.
Washington State does this by requiring auto dealers to provide out-of-state buyers’ proof of residency to the Washington State Department of Revenue. If the auto dealer does not provide these documents for an out-of-state buyer, the Department of Revenue will charge the dealership the applicable sales tax.
The Washington State Department of Revenue does not accept Montana LLC documents as proof of residency.
Private sellers (individuals) aren’t required to collect sales tax on behalf of the state, so, once again, if you buy your vehicle from a private seller, you simply pay sales tax and registration fees when you register the vehicle.