AN
ACT Relating to revising the machinery and equipment tax exemption by more
precisely describing terminology and eligibility; amending RCW 82.04.120,
82.08.02565, 82.08.02565, and 82.12.02565; creating new sections; providing an
effective date; and declaring an emergency.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
NEW
SECTION. Sec. 1. The
legislature finds that the application of the manufacturer's machinery and
equipment sales and use tax exemption has, in some instances, been difficult
and confusing for taxpayers, and included difficult reporting and recordkeeping
requirements. In this act, it is the intent of the legislature to make clear
its intent for the application of the exemption, and to extend the exemption to
the purchase and use of machinery and equipment for businesses that perform
testing of manufactured goods for manufacturers or processors for hire.
Sec.
2. RCW
82.04.120 and 1998 c 168 s 1 are each amended to read as follows:
"To
manufacture" embraces all activities of a commercial or industrial nature
wherein labor or skill is applied, by hand or machinery, to materials so that
as a result thereof a new, different or useful substance or article of tangible
personal property is produced for sale or commercial or industrial use, and
shall include: (1) The production or fabrication of special made or custom
made articles; ((and)) (2) the production or fabrication of dental
appliances, devices, restorations, substitutes, or other dental laboratory
products by a dental laboratory or dental technician; (3) cutting,
delimbing, and measuring of felled, cut, or taken trees; and (4) crushing
and/or blending of rock, sand, stone, gravel, or ore.
"To
manufacture" shall not include: Conditioning of seed for use in planting;
cubing hay or alfalfa; ((or)) activities which consist of cutting,
grading, or ice glazing seafood which has been cooked, frozen, or canned outside
this state; or the growing, harvesting, or production of agricultural
products.
Sec.
3. RCW
82.08.02565 and 1998 c 330 s 1 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, 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 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-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 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 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 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))
A manufacturing operation begins at the point where the raw materials
enter the manufacturing site and ends at the point where the ((finished
product)) processed material 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.
NEW
SECTION. Sec. 4. The
legislature intends that sections 2 and 3 of this act be clarifying in nature
and are retroactive in response to the administrative difficulties encountered
in implementing the original legislation.
Sec.
5. RCW
82.08.02565 and 1999 c . . . s 3 (section 3 of this act) 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 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.
Sec.
6. RCW
82.12.02565 and 1998 c 330 s 2 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 or to the use
by a person engaged in testing for a manufacturer or processor for hire of
machinery and equipment used directly in a testing operation.
NEW
SECTION. Sec. 7.
Sections 1 through 4 of this act are necessary for the immediate preservation
of the public peace, health, or safety, or support of the state government and
its existing public institutions, and take effect immediately.
NEW SECTION. Sec. 8.
Sections 5 and 6 of this act are necessary for the immediate preservation of
the public peace, health, or safety, or support of the state government and its
existing public institutions, and take effect July 1, 1999.
