AN ACT
Relating to sales and use tax exemptions for manufacturing machinery and
equipment; amending RCW 82.04.190 and 82.08.02565; creating a new section; and
providing an effective date.
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 allow a sales tax exemption for labor and
service charges for repairing, cleaning, altering, or improving machinery and
equipment, and a sales and use tax exemption for repair and replacement parts
with a useful life of one year or more.
Sec.
2. RCW
82.04.190 and 1995 1st sp.s. c 3 s 4 are each amended to read as follows:
"Consumer"
means the following:
(1)
Any person who purchases, acquires, owns, holds, or uses any article of
tangible personal property irrespective of the nature of the person's business
and including, among others, without limiting the scope hereof, persons who
install, repair, clean, alter, improve, construct, or decorate real or personal
property of or for consumers other than for the purpose (a) of resale as
tangible personal property in the regular course of business or (b) of
incorporating such property as an ingredient or component of real or personal
property when installing, repairing, cleaning, altering, imprinting, improving,
constructing, or decorating such real or personal property of or for consumers
or (c) of consuming such property in producing for sale a new article of
tangible personal property or a new substance, of which such property becomes
an ingredient or component or as a chemical used in processing, when the
primary purpose of such chemical is to create a chemical reaction directly
through contact with an ingredient of a new article being produced for sale or
(d) purchases for the purpose of consuming the property purchased in producing
ferrosilicon which is subsequently used in producing magnesium for sale, if the
primary purpose of such property is to create a chemical reaction directly
through contact with an ingredient of ferrosilicon;
(2)
Any person engaged in any business activity taxable under RCW 82.04.290 and any
person who purchases, acquires, or uses any telephone service as defined in RCW
82.04.065, other than for resale in the regular course of business;
(3)
Any person engaged in the business of contracting for the building, repairing
or improving of any street, place, road, highway, easement, right of way, mass
public transportation terminal or parking facility, bridge, tunnel, or trestle
which is owned by a municipal corporation or political subdivision of the state
of Washington or by the United States and which is used or to be used primarily
for foot or vehicular traffic including mass transportation vehicles of any
kind as defined in RCW 82.04.280, in respect to tangible personal property when
such person incorporates such property as an ingredient or component of such
publicly owned street, place, road, highway, easement, right of way, mass
public transportation terminal or parking facility, bridge, tunnel, or trestle
by installing, placing or spreading the property in or upon the right of way of
such street, place, road, highway, easement, bridge, tunnel, or trestle or in
or upon the site of such mass public transportation terminal or parking
facility;
(4)
Any person who is an owner, lessee or has the right of possession to or an
easement in real property which is being constructed, repaired, decorated,
improved, or otherwise altered by a person engaged in business, excluding only
(a) municipal corporations or political subdivisions of the state in respect to
labor and services rendered to their real property which is used or held for
public road purposes, and (b) the United States, instrumentalities thereof, and
county and city housing authorities created pursuant to chapter 35.82 RCW in
respect to labor and services rendered to their real property. Nothing
contained in this or any other subsection of this definition shall be construed
to modify any other definition of "consumer";
(5)
Any person who is an owner, lessee, or has the right of possession to personal
property which is being constructed, repaired, improved, cleaned, imprinted, or
otherwise altered by a person engaged in business;
(6)
Any person engaged in the business of constructing, repairing, decorating, or
improving new or existing buildings or other structures under, upon, or above
real property of or for the United States, any instrumentality thereof, or a
county or city housing authority created pursuant to chapter 35.82 RCW,
including the installing or attaching of any article of tangible personal
property therein or thereto, whether or not such personal property becomes a
part of the realty by virtue of installation; also, any person engaged in the
business of clearing land and moving earth of or for the United States, any
instrumentality thereof, or a county or city housing authority created pursuant
to chapter 35.82 RCW. Any such person shall be a consumer within the meaning
of this subsection in respect to tangible personal property incorporated into,
installed in, or attached to such building or other structure by such person;
and
(7)
Any person who is a lessor of machinery and equipment, the rental of which is
exempt from the tax imposed by RCW 82.08.020 under RCW 82.08.02565, with
respect to the sale of or charge made for tangible personal property consumed
((and for labor and services rendered)) in respect to repairing the
machinery and equipment, if the tangible personal property has a useful life
of less than one year.
Nothing
contained in this or any other subsection of this definition shall be construed
to modify any other definition of "consumer."
Sec.
3. 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 to sales of or charges made for labor and services rendered in
respect to installing, repairing, cleaning, altering, or improving 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, and tangible personal property that becomes an
ingredient or component thereof, including repair parts and replacement parts.
"Machinery and equipment" includes pollution control equipment
installed and used in a manufacturing operation to prevent air pollution, water
pollution, or contamination that might otherwise result from the manufacturing
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
(iv)
Building fixtures that are not integral to the manufacturing 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 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
(vii)
Places tangible personal property in the container, package, or wrapping in
which the tangible personal property is normally sold or transported.
(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.
NEW SECTION. Sec. 4. This act
shall take effect January 1, 1997.
