SENATE BILL 6128
State of Washington 57th Legislature 2001 Regular Session
By Senators West, Jacobsen, Rossi, Kastama, Snyder, Morton, Fraser, Finkbeiner, Sheahan, Hochstatter, T. Sheldon, Honeyford, Roach, Rasmussen, Hale, Hewitt and Oke
Read first time 02/26/2001. Referred to Committee on Ways & Means.
AN ACT Relating to sales and use tax exemptions for alternative energy sources; amending RCW 82.63.010 and 82.08.02565; and providing an effective date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1. RCW 82.63.010 and 1995 1st sp.s. c 3 s 12 are each amended to read as follows:
Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
(1) "Advanced computing" means technologies used in the designing and developing of computing hardware and software, including innovations in designing the full spectrum of hardware from hand-held calculators to super computers, and peripheral equipment.
(2) "Advanced materials" means materials with engineered properties created through the development of specialized processing and synthesis technology, including ceramics, high value-added metals, electronic materials, composites, polymers, and biomaterials.
(3) "Alternative energy source" means a fuel cell, and any technology that converts energy from a nonfinite source to electrical energy.
(4) "Applicant" means a person applying for a tax deferral under this chapter.
"Biotechnology" means the application of technologies, such as
recombinant DNA techniques, biochemistry, molecular and cellular biology,
genetics and genetic engineering, cell fusion techniques, and new bioprocesses,
using living organisms, or parts of organisms, to produce or modify products,
to improve plants or animals, to develop microorganisms for specific uses, to
identify targets for small molecule pharmaceutical development, or to transform
biological systems into useful processes and products or to develop
microorganisms for specific uses.
"Department" means the department of revenue.
"Electronic device technology" means technologies involving
microelectronics; semiconductors; electronic equipment and instrumentation;
radio frequency, microwave, and millimeter electronics; optical and
optic-electrical devices; and data and digital communications and imaging
"Eligible investment project" means an investment project which
either initiates a new operation, or expands or diversifies a current operation
by expanding, renovating, or equipping an existing facility. The lessor or
owner of the qualified building is not eligible for a deferral unless the
underlying ownership of the buildings, machinery, and equipment vests
exclusively in the same person, or unless the lessor by written contract agrees
to pass the economic benefit of the deferral to the lessee in the form of
reduced rent payments.
"Environmental technology" means assessment and prevention of threats
or damage to human health or the environment, environmental cleanup, and the
development of alternative energy sources.
"Fuel cell" means a technology involving an electrochemical reaction
that generates electricity by combining atoms of hydrogen and oxygen in the
presence of a catalyst.
(11) "Investment project" means an investment in qualified buildings or qualified machinery and equipment, including labor and services rendered in the planning, installation, and construction or improvement of the project.
"Person" has the meaning given in RCW 82.04.030.
"Pilot scale manufacturing" means design, construction, and testing
of preproduction prototypes and models in the fields of biotechnology, advanced
computing, electronic device technology, advanced materials, and environmental
technology other than for commercial sale. As used in this subsection,
"commercial sale" excludes sales of prototypes or sales for market
testing if the total gross receipts from such sales of the product, service, or
process do not exceed one million dollars.
"Qualified buildings" means construction of new structures, and
expansion or renovation of existing structures for the purpose of increasing
floor space or production capacity used for pilot scale manufacturing or
qualified research and development, including plant offices and other
facilities that are an essential or an integral part of a structure used for
pilot scale manufacturing or qualified research and development. If a building
is used partly for pilot scale manufacturing or qualified research and
development, and partly for other purposes, the applicable tax deferral shall
be determined by apportionment of the costs of construction under rules adopted
by the department.
"Qualified machinery and equipment" means fixtures, equipment, and
support facilities that are an integral and necessary part of a pilot scale
manufacturing or qualified research and development operation. "Qualified
machinery and equipment" includes: Computers; software; data processing
equipment; laboratory equipment, instrumentation, and other devices used in a
process of experimentation to develop a new or improved pilot model, plant
process, product, formula, invention, or similar property; manufacturing
components such as belts, pulleys, shafts, and moving parts; molds, tools, and
dies; vats, tanks, and fermenters; operating structures; and all other
equipment used to control, monitor, or operate the machinery. For purposes of
this chapter, qualified machinery and equipment must be either new to the taxing
jurisdiction of the state or new to the certificate holder, except that used
machinery and equipment may be treated as qualified machinery and equipment if
the certificate holder either brings the machinery and equipment into
Washington or makes a retail purchase of the machinery and equipment in
Washington or elsewhere.
"Qualified research and development" means research and development
performed within this state in the fields of advanced computing, advanced
materials, biotechnology, electronic device technology, and environmental
"Recipient" means a person receiving a tax deferral under this
"Research and development" means activities performed to discover
technological information, and technical and nonroutine activities concerned
with translating technological information into new or improved products,
processes, techniques, formulas, inventions, or software. The term includes
exploration of a new use for an existing drug, device, or biological product if
the new use requires separate licensing by the federal food and drug
administration under chapter 21, C.F.R., as amended. The term does not include
adaptation or duplication of existing products where the products are not
substantially improved by application of the technology, nor does the term
include surveys and studies, social science and humanities research, market
research or testing, quality control, sale promotion and service, computer
software developed for internal use, and research in areas such as improved
style, taste, and seasonal design.
Sec. 2. RCW 82.08.02565 and 1999 c 211 s 5 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, to sales to a person engaged in testing for a manufacturer or processor for hire of machinery and equipment used directly in a testing 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. 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, testing operation, or research and development operation to prevent air pollution, water pollution, or contamination that might otherwise result from the manufacturing operation, testing operation, or research and development operation.
(b) "Machinery and equipment" does not include:
(i) Hand-powered 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, testing 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, testing 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 or testing site;
(iii) Controls, guides, measures, verifies, aligns, regulates, or tests tangible personal property at the site or away from the site;
(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, testing 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. A manufacturing operation begins at the point where the raw materials enter the manufacturing site and ends at the point where the processed material leaves the manufacturing site. The term also includes: (i) The manufacturing of alternative energy sources, as defined in RCW 82.63.010; and (ii) 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.
(g) "Testing" means activities performed to establish or determine the properties, qualities, and limitations of tangible personal property.
(h) "Testing operation" means the testing of tangible personal property for a manufacturer or processor for hire. A testing operation begins at the point where the tangible personal property enters the testing site and ends at the point where the tangible personal property leaves the testing site. The term also includes that portion of a cogeneration project that is used to generate power for consumption within the 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.
(3) The department, in consultation with the department of community, trade, and economic development, may define the term "nonfinite source" for the purposes of RCW 82.63.010.
NEW SECTION. Sec. 3. This act takes effect July 1, 2003.
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