HOUSE BILL ANALYSIS

               HB 1460    

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

Brief Description:  Exempts from the sales and use tax electric generating facililities powered by wind or sun energy.

  Sponsors:Representatives Poulsen, Crouse, Morris, Reardon, Ruderman, Cooper, DeBolt, Constantine, Wolfe, Kastama, Bush and Wood.

HOUSE COMMITTEE ON

Meeting Date: Wednesday, February 10, 1999

Bill Analysis Prepared by: Anntonette Alberti (786-7117)

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:

The threshold for generating facilities to qualify for the exemption is reduced from 200 kilowatts (enough energy to light 2000 light bulbs) to 200 watts (enough energy to light two ligh bulbs), and the sales tax exemption is extended for an additional three years to June 30, 2009.  The use tax exemption is extended for an additional two 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.

Effective Date: July 1, 1999.