AN ACT Relating to
sales and use tax exemptions for manufacturing machinery and equipment;
amending RCW 82.08.02565 and 82.12.02565; adding a new section to chapter 82.08
RCW; adding a new section to chapter 82.12 RCW; creating a new section; and
providing effective dates.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
WASHINGTON:
NEW SECTION. Sec.
1. The legislature finds
that the health, safety, and welfare of the people of the state of Washington
are heavily dependent upon the continued encouragement, development, and
expansion of opportunities for family wage employment in the state's
manufacturing industries.
The legislature also
finds that sales and use tax exemptions for manufacturing machinery and
equipment enacted by the 1995 legislature have improved Washington's ability to
compete with other states for manufacturing investment, but that additional
incentives for manufacturers need to be adopted to solidify and enhance the
state's competitive position.
The legislature intends
to accomplish this by extending the current manufacturing machinery and
equipment exemptions to include machinery and equipment used for research and
development with potential manufacturing applications.
Sec. 2. RCW 82.08.02565 and 1995
1st sp.s. c 3 s 2 are each amended to read as follows:
(1) The tax levied by
RCW 82.08.020 shall not apply to sales to a manufacturer or processor for hire
of machinery and equipment used directly in a manufacturing operation or
research and development operation, or to sales of or charges made for
labor and services rendered in respect to installing the machinery and
equipment, but only when the purchaser provides the seller with an exemption certificate
in a form and manner prescribed by the department by rule, and the purchaser
provides the department with a duplicate of the certificate or a summary of
exempt sales as the department may require. The seller shall retain a copy of
the certificate for the seller's files.
(2) For purposes of
this section and RCW 82.12.02565:
(a) "Machinery and
equipment" means industrial fixtures, devices, and support facilities.
"Machinery and equipment" includes pollution control equipment
installed and used in a manufacturing operation or research and development
operation to prevent air pollution, water pollution, or contamination that
might otherwise result from the manufacturing operation or research and
development operation.
(b) "Machinery and
equipment" does not include:
(i) Hand tools;
(ii) Property with a
useful life of less than one year;
(iii) Repair parts
required to restore machinery and equipment to normal working order;
(iv) Replacement parts
that do not increase productivity, improve efficiency, or extend the useful
life of the machinery and equipment; ((or))
(v) Buildings, other
than machinery and equipment that is permanently affixed to or becomes a
physical part of a building; and
(vi) Building
fixtures that are not integral to the manufacturing operation or research
and development operation that are permanently affixed to and become a
physical part of a building, such as utility systems for heating, ventilation,
air conditioning, communications, plumbing, or electrical.
(c) Machinery and
equipment is "used directly" in a manufacturing operation or
research and development operation if the machinery and equipment:
(i) Acts upon or
interacts with an item of tangible personal property;
(ii) Conveys,
transports, handles, or temporarily stores an item of tangible personal
property at the manufacturing site;
(iii) Controls, guides,
measures, verifies, aligns, regulates, or tests tangible personal property;
(iv) Provides physical
support for or access to tangible personal property;
(v) Produces power for,
or lubricates machinery and equipment;
(vi) Produces another
item of tangible personal property for use in the manufacturing operation or
research and development operation; ((or))
(vii) Places tangible
personal property in the container, package, or wrapping in which the tangible
personal property is normally sold or transported; or
(viii) Is integral
to research and development as defined in RCW 82.63.010.
(d) "Manufacturing
operation" means the manufacturing of articles, substances, or commodities
for sale as tangible personal property. The manufacturing operation begins at
the point where the raw materials enter the manufacturing site and ends at the
point where the finished product leaves the manufacturing site. The term also
includes that portion of a cogeneration project that is used to generate power
for consumption within the manufacturing site of which the cogeneration project
is an integral part. The term does not include ((research and development,))
the production of electricity by a light and power business as defined in RCW
82.16.010((,)) or the preparation of food products on the premises of a
person selling food products at retail.
(e) "Cogeneration"
means the simultaneous generation of electrical energy and low-grade heat from
the same fuel.
(f) "Research
and development operation" means engaging in research and development as
defined in RCW 82.63.010 by a manufacturer or processor for hire.
Sec. 3. RCW 82.12.02565 and 1995
1st sp.s. c 3 s 3 are each amended to read as follows:
The provisions of this
chapter shall not apply in respect to the use by a manufacturer or processor
for hire of machinery and equipment used directly in a manufacturing operation or
research and development operation, but only when the user provides the
department with:
(1) An exemption
certificate in a form and manner prescribed by the department within sixty days
of the first use of the machinery and equipment in this state; or
(2) An annual summary
listing the machinery and equipment by January 31 of the year following the
calendar year in which the machinery and equipment is first used in this state.
NEW SECTION. Sec.
4. A new section is added
to chapter 82.08 RCW to read as follows:
The tax levied by RCW
82.08.020 shall not apply to sales of materials used in designing and
developing aircraft parts, auxiliary equipment, and aircraft modification
whether from enterprise funds or on a contract or fee basis for a taxpayer with
gross sales of less than twenty million dollars per year. This exemption may
not exceed one hundred thousand dollars for a taxpayer in a year.
NEW SECTION. Sec.
5. A new section is added
to chapter 82.12 RCW to read as follows:
The provisions of this
chapter shall not apply with respect to the use of materials used in designing
and developing aircraft parts, auxiliary equipment, and aircraft modification
whether from enterprise funds or on a contract or fee basis for a taxpayer with
gross sales of less than twenty million dollars per year. This exemption may
not exceed one hundred thousand dollars for a taxpayer in a year.
NEW SECTION. Sec.
6. (1) Sections 4 and 5 of
this act take effect July 1, 1996.
(2)
Sections 1 through 3 of this act take effect July 1, 1997.
