BILL REQ. #:  S-4027.1 

READ FIRST TIME 02/05/14.   

     AN ACT Relating to clarifying and correcting RCW 82.08.962 and 82.12.962 regarding the sales and use tax treatment of machinery and equipment purchases by companies producing pipeline-quality natural gas using landfill gas; amending RCW 82.08.962 and 82.12.962; and creating new sections.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 82.08.962 and 2013 2nd sp.s. c 13 s 1502 are each amended to read as follows:
     (1)(a) Except as provided in RCW 82.08.963, purchasers who have paid the tax imposed by RCW 82.08.020 on machinery and equipment used directly in generating electricity or producing pipeline-quality natural gas, or both, using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas as the principal source of power or pipeline-quality natural gas, or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, are eligible for an exemption as provided in this section, but only if the purchaser develops with such machinery, equipment, and labor a facility capable of generating not less than one thousand watts of electricity or producing not less than fifty million British thermal units of pipeline-quality natural gas.
     (b) Beginning on July 1, 2009, through June 30, 2011, the tax levied by RCW 82.08.020 does not apply to the sale of machinery and equipment described in (a) of this subsection that are used directly in generating electricity or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment.
     (c) Beginning on July 1, 2007, through June 30, 2011, the tax levied by RCW 82.08.020 does not apply to the sale of machinery and equipment that are used directly in producing pipeline-quality natural gas as described in (a) of this subsection or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment.
     (d) Beginning on July 1, 2011, through January 1, 2020, the amount of the exemption under this subsection (1) is equal to seventy-five percent of the state and local sales tax paid. The purchaser is eligible for an exemption under this subsection (1)(((c))) (d) in the form of a remittance.
     (2) For purposes of this section and RCW 82.12.962, the following definitions apply:
     (a) "Biomass energy" includes: (i) By-products of pulping and wood manufacturing process; (ii) animal waste; (iii) solid organic fuels from wood; (iv) forest or field residues; (v) wooden demolition or construction debris; (vi) food waste; (vii) liquors derived from algae and other sources; (viii) dedicated energy crops; (ix) biosolids; and (x) yard waste. "Biomass energy" does not include wood pieces that have been treated with chemical preservatives such as creosote, pentachlorophenol, or copper-chrome-arsenic; wood from old growth forests; or municipal solid waste.
     (b) "Fuel cell" means an electrochemical reaction that generates electricity by combining atoms of hydrogen and oxygen in the presence of a catalyst.
     (c) "Landfill gas" means biomass fuel, of the type qualified for federal tax credits under Title 26 U.S.C. Sec. 29 of the federal internal revenue code, collected from a "landfill" as defined under RCW 70.95.030.
     (d)(i) "Machinery and equipment" means fixtures, devices, and support facilities that are integral and necessary to the generation of electricity or producing pipeline-quality natural gas, or both, using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas as the principal source of power or pipeline-quality natural gas.
     (ii) "Machinery and equipment" does not include: (A) Hand-powered tools; (B) property with a useful life of less than one year; (C) repair parts required to restore machinery and equipment to normal working order; (D) replacement parts that do not increase productivity, improve efficiency, or extend the useful life of machinery and equipment; (E) buildings; or (F) building fixtures that are not integral and necessary to the generation of electricity that are permanently affixed to and become a physical part of a building.
     (3)(a) Machinery and equipment is "used directly" in generating electricity by wind energy, solar energy, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas power if it provides any part of the process that captures the energy of the wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas, converts that energy to electricity, and stores, transforms, or transmits that electricity for entry into or operation in parallel with electric transmission and distribution systems.
     (b) Machinery and equipment is "used directly" in generating electricity by fuel cells if it provides any part of the process that captures the energy of the fuel, converts that energy to electricity, and stores, transforms, or transmits that electricity for entry into or operation in parallel with electric transmission and distribution systems.
     (c) Machinery and equipment is "used directly" in producing pipeline-quality natural gas if it provides any part of the process that captures landfill gas and converts that landfill gas to a level necessary for residential or commercial use.
     (4)(a) A purchaser claiming an exemption in the form of a remittance under subsection (1)(((c))) (d) of this section must pay the tax imposed by RCW 82.08.020 and all applicable local sales taxes imposed under the authority of chapters 82.14 and 81.104 RCW. The purchaser may then apply to the department for remittance in a form and manner prescribed by the department. A purchaser may not apply for a remittance under this section more frequently than once per quarter. The purchaser must specify the amount of exempted tax claimed and the qualifying purchases for which the exemption is claimed. The purchaser must retain, in adequate detail, records to enable the department to determine whether the purchaser is entitled to an exemption under this section, including: Invoices; proof of tax paid; and documents describing the machinery and equipment.
     (b) The department must determine eligibility under this section based on the information provided by the purchaser, which is subject to audit verification by the department. The department must on a quarterly basis remit exempted amounts to qualifying purchasers who submitted applications during the previous quarter.
     (5) This section expires January 1, 2020.

Sec. 2   RCW 82.12.962 and 2013 2nd sp.s. c 13 s 1505 are each amended to read as follows:
     (1)(a) Except as provided in RCW 82.12.963, consumers who have paid the tax imposed by RCW 82.12.020 on machinery and equipment used directly in generating electricity or producing pipeline-quality natural gas, or both, using fuel cells, wind, sun, biomass energy, tidal or wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas as the principal source of power or pipeline-quality natural gas, or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment, are eligible for an exemption as provided in this section, but only if the purchaser develops with such machinery, equipment, and labor a facility capable of generating not less than one thousand watts of electricity or producing not less than fifty million British thermal units of pipeline-quality natural gas.
     (b) Beginning on July 1, 2009, through June 30, 2011, the provisions of this chapter do not apply in respect to the use of machinery and equipment described in (a) of this subsection that are used directly in generating electricity or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment.
     (c) Beginning on July 1, 2007, through June 30, 2011, the provisions of this chapter do not apply in respect to sales of machinery and equipment that are used directly in producing pipeline-quality natural gas as described in (a) of this subsection or to sales of or charges made for labor and services rendered in respect to installing such machinery and equipment.
     (d) Beginning on July 1, 2011, through January 1, 2020, the amount of the exemption under this subsection (1) is equal to seventy-five percent of the state and local sales tax paid. The consumer is eligible for an exemption under this subsection (1)(((c))) (d) in the form of a remittance.
     (2)(a) A person claiming an exemption in the form of a remittance under subsection (1)(((c))) (d) of this section must pay the tax imposed by RCW 82.12.020 and all applicable local use taxes imposed under the authority of chapters 82.14 and 81.104 RCW. The consumer may then apply to the department for remittance in a form and manner prescribed by the department. A consumer may not apply for a remittance under this section more frequently than once per quarter. The consumer must specify the amount of exempted tax claimed and the qualifying purchases or acquisitions for which the exemption is claimed. The consumer must retain, in adequate detail, records to enable the department to determine whether the consumer is entitled to an exemption under this section, including: Invoices; proof of tax paid; and documents describing the machinery and equipment.
     (b) The department must determine eligibility under this section based on the information provided by the consumer, which is subject to audit verification by the department. The department must on a quarterly basis remit exempted amounts to qualifying consumers who submitted applications during the previous quarter.
     (3) Purchases exempt under RCW 82.08.962 are also exempt from the tax imposed under RCW 82.12.020.
     (4) The definitions in RCW 82.08.962 apply to this section.
     (5) This section expires January 1, 2020.

NEW SECTION.  Sec. 3   This act applies retroactively for all purchases made on or after July 1, 2007, through January 1, 2020.

NEW SECTION.  Sec. 4   This act is curative and remedial; however, the legislature does not intend for this act to retroactively create a right of refund for taxes paid on machinery and equipment purchases by companies producing pipeline-quality natural gas using landfill gas prior to the enactment of this section.