HOUSE BILL ANALYSIS

                  HB 2927

Title:  An act relating to exempting electric generating facilities powered by wind or sun energy from sales and use taxes.

Brief Description:  Exempting wind or solar energy electric generating facilities from sales and use taxes.

Sponsors:  Representatives Poulsen, Crouse, Constantine, Morris, Cooper, O'Brien, Hatfield, Gombosky and Butler.

HOUSE COMMITTEE ON

ENERGY & UTILITIES

Meeting Date:  February 3, 1998

Bill Analysis Prepared by:  Margaret Allen (786-7110)

Background:   In 1996, the Legislature exempted machinery and equipment used directly in generating electricity using wind or sun energy (and the costs of installing the equipment and machinery) from sales and use taxes.  Only facilities capable of generating 200 kilowatts (200,000 watts) of electricity, such as utility-scale wind turbines, are eligible for the exemption.  The exemption is scheduled to expire June 30, 2005.

AUsed directly@ means that the machinery and equipment must provide some part of the process of capturing energy from the wind or sun, converting that energy to electricity, and transforming or transmitting the electricity for entry into electric transmission and distribution systems.

To receive the sales tax exemption, the purchaser of the equipment must provide the seller with an exemption certificate, the form of which is to be prescribed by the Department of Revenue (DOR) by rule.  The purchaser also is to provide the DOR either with a duplicate of the certificate, or a summary of exempt sales, as determined by the DOR.

To receive the use tax exemption, the user must provide the DOR with:  (1) an exemption certificate (in a form prescribed by the DOR) within 60 days of first using the machinery and equipment in Washington; or (2) an annual summary listing the machinery and equipment.

The state retail sales tax rate is 6.5 percent and is applied to the selling price of the article or service.  In addition, local sales taxes apply.  The total rate falls between 7 percent and 8.6 percent, depending on the location. 

The use tax is imposed on the use of articles of tangible personal property when the sale or acquisition of the property has not been subject to sales tax.  The use tax is equal to the sales tax rate multiplied by the value of the property used.  The use tax commonly applies to property acquired from out-of-state.

Summary of Bill:  The threshold for generating facilities to qualify for the exemption is reduced from 200 kilowatts to 200 watts, and the exemption is extended for an additional three years to June 30, 2008.

The definition of Aused directly@ is amended.  To qualify for the exemption, the machinery and equipment need only capture, convert, transform, store, or transmit wind or sun energy, or the electricity created from wind or sun energy.  The effect of the change is to extend the tax exemption to machinery and equipment installed by consumers who generate electricity for their own use.

The requirement that the DOR adopt a rule to prescribe the form of the sales exemption certificate is eliminated, as is the requirement that the purchaser provide the DOR with a duplicate of the certificate or a summary of exempt sales.

Also eliminated is the requirement that, to receive the use tax exemption, the user must provide the DOR with an exemption certificate within 60 days of first using the machinery and equipment in Washington, or an annual summary listing the machinery and equipment.

Appropriation:  None. 

Fiscal Note:  Requested 2/3/98. 

Effective Date of Bill:  This act takes effect July 1, 1998.