BILL REQ. #: H-1317.1
_____________________________________________
HOUSE BILL 1970
_____________________________________________| State of Washington | 63rd Legislature | 2013 Regular Session |
By Representatives Reykdal, Pollet, Fitzgibbon, Wylie, and RyuRead first time 02/26/13. Referred to Committee on Finance.
AN ACT Relating to increasing accountability for the sales and use
tax exemption for machinery and equipment; amending RCW 82.08.02565 and
82.12.02565; and creating a new section.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1 RCW 82.08.02565 and 2011 c 23 s 2 are each amended to read
as follows:
(1)(a) The tax levied by RCW 82.08.020 does 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.
(b) Sellers making tax-exempt sales under this section must obtain
from the purchaser an exemption certificate in a form and manner
prescribed by the department by rule. The seller must retain a copy of
the certificate for the seller's files.
(((2) For purposes of this section and RCW 82.12.02565:))
(2)(a) The purchaser of exempt machinery and equipment must repay
all or a portion of the taxes exempted under subsection (1)(a) of this
section in accordance with (c) of this subsection if the exempt
machinery and equipment is moved to a location out-of-state within ten
years of the date of the sale of the exempt machinery and equipment.
For purposes of this subsection, machinery and equipment is moved to a
location outside the state if the machinery and equipment is
transported outside the state of Washington and remains outside of this
state for more than sixty consecutive days.
(b) Taxes imposed under this subsection are due ninety days after
the date that the exempted machinery and equipment left the state and
must be paid directly to the department. Penalties and interest as
provided in chapter 82.32 RCW apply to delinquent taxes under this
subsection. However, no interest or penalties may be assessed on taxes
due under this subsection if the total amount of taxes due is paid by
the due date in this subsection (2)(b).
(c)(i) The amount of taxes that must be repaid under this
subsection is determined using the appropriate schedule in (c)(i)(A) or
(B) of this subsection.
(A) The following repayment schedule must be used if the remaining
useful life of the machinery and equipment moved outside this state is
greater than the difference between ten minus the number reflecting the
year that the machinery and equipment was moved outside the state.
| Year Machinery and Equipment Moved | % of Exempt Tax Repaid |
| 1 | 100% |
| 2 | 90% |
| 3 | 80% |
| 4 | 70% |
| 5 | 60% |
| 6 | 50% |
| 7 | 40% |
| 8 | 30% |
| 9 | 20% |
| 10 | 10% |
(B) The following repayment schedule must be used if the remaining
useful life of the machinery and equipment moved outside this state is
less than or equal to the difference between ten minus the number
reflecting the year that the machinery and equipment was moved outside
the state:
| Remaining useful life | % of Exempt Tax Repaid |
| 1 | 10% |
| 2 | 20% |
| 3 | 30% |
| 4 | 40% |
| 5 | 50% |
| 6 | 60% |
| 7 | 70% |
| 8 | 80% |
| 9 | 90% |
(ii) For purposes of this subsection (2)(c), "remaining useful
life" means the remaining number of tax years for which the purchaser
is allowed to claim a depreciation deduction on its federal income tax
returns for the machinery and equipment.
(d) Taxes incurred in another state or country as a result of
moving exempt machinery and equipment out-of-state may not be credited
against the taxes due under this subsection.
The following definitions in this subsection apply throughout this
section unless the context clearly requires otherwise.
(3)(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. "Machinery and equipment" also includes
digital goods.
(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) "Manufacturer" means a person that qualifies as a manufacturer
under RCW 82.04.110. "Manufacturer" also includes a person that prints
newspapers or other materials.
(e) "Manufacturing" means only those activities that come within
the definition of "to manufacture" in RCW 82.04.120 and are taxed as
manufacturing or processing for hire under chapter 82.04 RCW, or would
be taxed as such if such activity were conducted in this state or if
not for an exemption or deduction. "Manufacturing" also includes
printing newspapers or other materials. An activity is not taxed as
manufacturing or processing for hire under chapter 82.04 RCW if the
activity is within the purview of chapter 82.16 RCW.
(f) "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. With respect to the production
of class A or exceptional quality biosolids by a wastewater treatment
facility, the manufacturing operation begins at the point where class
B biosolids undergo additional processing to achieve class A or
exceptional quality standards. Notwithstanding anything to the
contrary in this section, 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 preparation of food
products on the premises of a person selling food products at retail.
(g) "Cogeneration" means the simultaneous generation of electrical
energy and low-grade heat from the same fuel.
(h) "Research and development operation" means engaging in research
and development as defined in RCW 82.63.010 by a manufacturer or
processor for hire.
(i) "Testing" means activities performed to establish or determine
the properties, qualities, and limitations of tangible personal
property.
(j) "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 the testing of
tangible personal property for use in 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 testing of tangible personal
property for use in 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. 2 RCW 82.12.02565 and 2003 c 5 s 5 are each amended to read
as follows:
(1) The provisions of this chapter ((shall)) do 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, 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, or to the use of labor and
services rendered in respect to installing, repairing, cleaning,
altering, or improving the machinery and equipment.
(2) The purchaser of exempt machinery and equipment must repay all
or a portion of the taxes exempted under subsection (1) of this section
in accordance with RCW 82.08.02565 if the exempt machinery and
equipment is moved to a location out-of-state within ten years of the
date of the use of the exempt machinery and equipment. For purposes of
this subsection, machinery and equipment is moved to a location outside
the state if the machinery and equipment is transported outside the
state of Washington and remains outside of this state for more than
sixty consecutive days.
(3) The definitions in RCW 82.08.02565 apply to this section.
NEW SECTION. Sec. 3 This act applies to the sale or initial use
of machinery and equipment occurring on or after the effective date of
this section.
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