WSR 99-06-028

EXPEDITED ADOPTION

DEPARTMENT OF REVENUE


[ Filed February 23, 1999, 3:27 p.m. ]

Title of Rule: WAC 458-20-263 Wind, ((energy)) landfill gas, and solar energy electric generating facilities sales and use tax exemption.

Purpose: To implement the provisions of RCW 82.08.02567 and 82.12.02567 which provide retail sales and use tax exemptions for sales of or charges made for machinery and equipment used directly in generating electricity using the wind or solar energy as the principal source of power.

Statutory Authority for Adoption: RCW 82.32.300.

Statute Being Implemented: RCW 82.08.02567 and 82.12.02567.

Summary: This rule explains the sales and use tax exemptions available for machinery and equipment, as well as labor and services used for installing the machinery and equipment, used directly in generating electricity using the wind or solar energy as the principal source of power.

Reasons Supporting Proposal: This rule is being revised to reflect the expansion of the exemption to include machinery and equipment of generating facilities powered by landfill gas by chapter 309, Laws of 1998.

Name of Agency Personnel Responsible for Drafting: D. Douglas Titus, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 664-0687; Implementation: Claire Hesselholt, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 753-3446; and Enforcement: Russell Brubaker, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 586-0257.

Name of Proponent: Department of Revenue, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: This rule provides an explanation of the exemptions provided in RCW 82.08.02567 and 82.12.02567 and the exemption certificate required to take advantage of these exemptions. The exemption is available to a purchaser developing a facility meeting certain minimum statutory power requirements using wind or solar energy as a principal source of power. The exemption applies to machinery and equipment as well as installation labor and services, if the machinery and equipment is used directly in generating power using wind or solar energy. The rule assists taxpayers in taking advantage of the statutory exemption.

Proposal Changes the Following Existing Rules: This is an amendment of an existing rule, WAC 458-20-226 (Rule 263) Wind energy and solar electric generating facilities sales and use tax exemption. This rule is being revised to notify the reader that the exemption has been expanded to include facilities powered by landfill gas, effective April 3, 1998 (chapter 309, Laws of 1998).

NOTICE

THIS RULE IS BEING PROPOSED TO BE ADOPTED USING AN EXPEDITED RULE-MAKING PROCESS THAT WILL ELIMINATE THE NEED FOR THE AGENCY TO HOLD PUBLIC HEARINGS, PREPARE A SMALL BUSINESS ECONOMIC IMPACT STATEMENT, OR PROVIDE RESPONSES TO THE CRITERIA FOR A SIGNIFICANT LEGISLATIVE RULE. IF YOU OBJECT TO THIS RULE BEING ADOPTED USING THE EXPEDITED RULE-MAKING PROCESS, YOU MUST EXPRESS YOUR OBJECTIONS IN WRITING AND THEY MUST BE SENT TO D. Douglas Titus, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, e-mail dougt@dor.wa.gov , AND RECEIVED BY May 3, 1999.


February 23, 1999

Claire Hesselholt

Rules Manager

Legislation and Policy Division

OTS-2842.1


AMENDATORY SECTION(Amending WSR 97-03-027, filed 1/8/97, effective 2/8/97)

WAC 458-20-263
Wind ((energy)), landfill gas, and solar energy electric generating facilities sales and use tax exemption.

(1) Introduction. ((Effective July 1, 1996, chapter 166, Laws of 1996, (HB 2290) provides a retail sales tax exemption for sales of or charges made for:

(a) Machinery and equipment used directly in generating electricity using the wind or solar energy as the principal source of power; or

(b) Labor and services for installing the machinery and equipment.

The sales tax exemption applies if the purchaser develops with the machinery, equipment, labor, and services a facility capable of generating not less than two hundred kilowatts of electricity using the wind or solar energy as the principal source of power.  The law provides a corresponding use tax exemption for the use of machinery and equipment used directly in generating not less than two hundred kilowatts of electricity using the wind or solar as the principal source of power.

(2) Expiration.  The sales and use tax exemptions expire on June 30, 2005.

(3))) This rule explains the retail sales and use tax exemptions provided by RCW 82.08.02567 and 82.12.02567 for the sale and/or use of machinery and equipment used directly in generating electricity using wind, landfill gas, or solar energy as the principal source of power. These exemptions expire on June 30, 2005.

(2) Definitions. The following definitions apply to this section:

(a) "Machinery and equipment" means industrial fixtures, devices, and support facilities that are integral and necessary to the generation of electricity using the wind, landfill gas, or solar energy as the principal source of power.

(i) "Machinery and equipment," where solar energy is the principal source of ((energy)) power, includes, but is not limited to: Solar modules; power conditioning equipment; batteries; transformers; power poles; power lines; and connectors to the utility grid system.

(ii) "Machinery and equipment," where wind is the principal source of power, includes, but is not limited to: ((Wind)) Turbines; blades; generators; towers and tower pads; substations; guy wires and ground stays; control buildings; power conditioning equipment; anemometers; recording meters; transmitters; power poles; power lines; and connectors to the utility grid system.

(iii) "Machinery and equipment," where landfill gas is the principal source of power, includes, but is not limited to: Turbines; blades; blowers; burners; heat exchangers; generators; towers and tower pads; substations; guy wires and ground stays; control buildings; pipe; valves; power conditioning equipment; pressure control equipment; recording meters; transmitters; power poles; power lines; and connectors to the utility grid system.

(iv) "Machinery and equipment" does not include: The utility grid system and any tangible personal property used to connect electricity directly to consumers; hand tools; property with a useful life of less than one year; repair parts required to restore machinery and equipment to normal working order; replacement parts that do not increase productivity, improve efficiency, or extend the useful life of the machinery and equipment; buildings; or 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.

(b) "Used directly" means the machinery and equipment provides any part of the process that captures the energy of the wind, landfill gas, or solar, converts that energy to electricity, and transforms or transmits that electricity for entry into electric transmission and distribution systems.

(c) "Installation charges" means sales of or charges made for labor and services rendered in respect to installing the machinery and equipment.

(i) Labor and services to install machinery and equipment includes both the charges for labor and charges for the rental of equipment with an operator.

(ii) Labor and services to install machinery and equipment does not include the rental of tangible personal property used by the ((purchaser)) buyer to install machinery and equipment.  See WAC 458-20-211.

(((4))) (3) Retail sales tax exemption. The retail sales tax does not apply to the purchase ((of or charges for machinery and equipment used directly in generating electricity using the wind or solar energy as the principal source of power or labor and services for installing the machinery and equipment.)) or lease of machinery and equipment used directly in generating electricity using wind, landfill gas, or solar energy as the principal power source, but only if the purchaser develops with such machinery and equipment a facility capable of generating not less than two hundred kilowatts of electricity. Retail sales tax also does not apply to installation charges for this machinery and equipment. RCW 82.08.02567.

(a) The exemption is effective July 1, 1996, for machinery and equipment using wind and solar energy, and April 3, 1998, for machinery and equipment using landfill gas (chapter 309, Laws of 1998).

(b) Prior approval is not required from the department of revenue in order to claim the retail sales tax exemption.  However, the ((purchaser)) buyer is required to provide the seller with an exemption certificate.  ((Both the purchaser and)) The seller must retain a copy of the certificate to document the exemption.

(((a))) The exemption certificate may be ((in the form shown below, or may be in any other form that contains substantially the following information and language)):

(i) Issued for each purchase; or

(ii) In blanket form certifying all future purchases as being exempt from sales and use tax. Blanket forms must be renewed every four years.

(c) This certificate should be in substantially the following form:

Sales and Use Tax Exemption Certificate for Wind, Landfill Gas, or Solar Powered Electrical Generation Facilities


The ((purchaser)) buyer (user) certifies that the items listed below are machinery and equipment, or are labor and services rendered to install the machinery and equipment, used directly in generating electricity using the wind, landfill gas, or solar energy as the principal source of power at a facility capable of generating not less than two hundred kilowatts of electricity, and that such purchase is exempt from the retail sales tax under RCW 82.08.02567. This certificate is given with full knowledge of, and subject to, the legally prescribed penalties for fraud and tax evasion.

((Purchaser)) Buyer (User) UBI/Registration # . . . . . . . . . . . .
Name of ((Purchaser)) Buyer (User) . . . . . . . . . . . .
Address of ((Purchaser)) Buyer (User) . . . . . . . . . . . .
Seller UBA/Registration # . . . . . . . . . . . .
Name of Seller. . . . . . . . . . . . . . . Date . . . . . . . . . . . .
Item or category of items . . . . . . . . . . . .
((Authorized agent for Purchaser))

Buyer or Buyer's Agent (Print) . . . . . . . . . . . .

Authorized signature . . . . . . . . . . . . . . . Title . . . . . . . . . . . .
Date . . . . . . . . . . . .
(((b) In lieu of providing the certificate to the department each time a purchase is made, the purchaser may provide the department with an annual summary of exempt purchases by January 31 of the year following the calendar year in which the items were purchased.  The annual summary must provide the same information required in (a) of this subsection.

(5))) (4) Use tax. ((The use tax does not apply to the use of machinery and equipment used directly in generating not less than two hundred kilowatts of electricity using the wind or solar energy as the principle source of power.  The user of exempt machinery and equipment is required to file an annual summary of exempt machinery and equipment similar to that described for the sales tax exemption.

Instead of an annual summary the user may elect to file with the department of revenue an exemption certificate, similar to the retail sales tax exemption certificate described in subsection (4) of this section.  If so, the certificate must be filed within sixty days of the first use of the machinery and equipment in this state.

(6))) The law provides a corresponding use tax exemption for the use of machinery and equipment used directly in generating not less than two hundred kilowatts of electricity using wind, landfill gas, or solar energy as the principal source of power. RCW 82.12.02567. The use tax exemption is effective July 1, 1996, machinery and equipment, using wind and solar energy and April 3, 1998, for machinery and equipment using landfill gas (chapter 309, Laws of 1998).

(5) Time of sale. The existing rules pertaining to time and place of sale and when tax liability arises apply for purposes of whether a given transaction occurred on or after the effective date of the law((,)). The effective date with respect to machinery and equipment used to generate electricity using wind or solar energy is July 1, 1996, ((for purposes of the sales and use tax exemption)) and, machinery and equipment using landfill gas, April 3, 1998.  See WAC 458-20-103, 458-20-178, and 458-20-197.

(a) In the case of an outright purchase of goods, the sale takes place when the goods are delivered to the ((purchaser)) buyer in this state.  Thus, machinery and equipment delivered to the ((purchaser)) buyer on or after July 1, 1996, or April 3, 1998, respectively, can qualify for exemption, regardless of when the order for the goods was placed.

(b) If machinery and equipment is acquired without payment of retail sales tax, use tax is due at the time of first use.  Thus, machinery and equipment for electricity generating facilities using wind or solar energy which is first put to use after July 1, 1996, can qualify for the exemption.  See WAC 458-20-178.

(c) In the case of leases or rentals of tangible personal property, liability for sales tax arises as of the time the lease or rental payment falls due.  Thus, in the case of leased machinery and equipment using landfill gas, rental payments that fall due on or after ((July 1, 1996)) April 3, 1998, can qualify for exemption, regardless of when the lease was initiated.

[Statutory Authority: RCW 82.32.300 and 82.08.02567.  97-03-027, 458-20-263, filed 1/8/97, effective 2/8/97.]

Washington State Code Reviser's Office