AN
ACT Relating to eliminating requirements for filing certificates or annual
summaries for sales and use tax exemptions on manufacturing machinery and
equipment; amending RCW 82.12.02565; reenacting and amending RCW 82.08.02565;
creating a new section; and providing an effective date.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
82.08.02565 and 1996 c 247 s 2 and 1996 c 173 s 3 are each reenacted and
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, 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 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)
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 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;
(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 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.
2. RCW
82.12.02565 and 1996 c 247 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. 3.
The department shall not deny exemptions under RCW 82.08.02565 or 82.12.02565
solely on the basis of failure to comply with duplicate certificate or summary
filing requirements. The amendments of RCW 82.08.02565 or 82.12.02565 in this
act do not terminate requirements to file duplicate certificates or summaries
in respect to exemptions claimed for periods before January 1, 1999.
*Sec. 3 was vetoed. See message at end of chapter.
*NEW
SECTION. Sec. 4.
Sections 1 and 2 of this act take effect January 1, 1999.
*Sec. 4 was vetoed. See message at end of chapter.
Note:
Governor's explanation of partial veto is as follows:
"I
am returning herewith, without my approval as to sections 3 and 4 of Senate
Bill No. 6348 entitled:
"AN
ACT Relating to eliminating requirements for filing certificates or annual
summaries for sales and use tax exemptions on manufacturing machinery and
equipment;"
Senate Bill No. 6348
amends the state retail sales and use tax statutes to relieve taxpayers of the
burden of making reports and annual summaries of tax exempt purchases, for
submission to the Department of Revenue.
One of my goals as
Governor is the simplification of our tax system and the reduction of
regulations for businesses. The Department of Revenue developed this
legislation in an effort to reach that goal. The original intent of the bill
was to immediately relieve taxpayers eligible for the machinery and equipment
tax exemption from the burden of submitting duplicate exemption certificates or
purchase summaries to the Department.
The Legislature amended
the bill by adding sections 3 and 4. Section 4 would require taxpayers to
submit, for an additional six months, reports of machinery and equipment
purchases before qualifying for the sales and use tax exemption. However,
section 3 would not require the Department to deny exemptions if the taxpayers
did not send in reports. This would create conflicting policies and extend the
period during which businesses must submit redundant paperwork to the
Department. This is unnecessary, burdensome, and contrary to the bill's
original purpose.
For these reasons, I have
vetoed sections 3 and 4 of Senate Bill No. 6348.
With
the exception of sections 3 and 4, Senate Bill No. 6348 is approved."
