WSR 97-03-027

PERMANENT RULES

DEPARTMENT OF REVENUE

[Filed January 8, 1997, 3:30 p.m.]

Date of Adoption: January 8, 1997.

Purpose: To implement the provisions of RCW 82.08.02567 and 82.12.02567 (chapter 166, Laws of 1996), which provide a retail sales and use tax exemption 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.

Other Identifying Information: This rule was previously filed as an emergency rule on July 1, 1996 (WSR 96-14-080) and October 29, 1996 (WSR 96-22-017).

Citation of Existing Rules Affected by this Order: New section WAC 458-20-263 Wind and solar electric generating facilities sales and use tax exemption.

Statutory Authority for Adoption: RCW 82.32.300 and 82.08.02567.

Adopted under notice filed as WSR 96-22-093 on November 6, 1996.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 0, repealed 0; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 1, amended 0, repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.

Number of Sections Adopted on the Agency's own Initiative: New 0, amended 0, repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, amended 0, repealed 0.

Number of Sections Adopted using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 0, amended 0, repealed 0.

Effective Date of Rule: Thirty-one days after filing.

January 8, 1997

Russell W. Brubaker

Assistant Director

NEW SECTION

WAC 458-20-263 Wind energy and solar 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) 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 or solar energy as the principal source of power.

(i) Machinery and equipment, where solar energy is the principal source of energy, 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" 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 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 to install machinery and equipment. See WAC 458-20-211.

(4) 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. Prior approval is not required from the department of revenue in order to claim the retail sales tax exemption. However, the purchaser 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:

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

The purchaser (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 or solar energy as the principal source of power at a facility capable of generating not less than two hundred kilowatts of electricity.

Purchaser (User) UBI/Registration #

Name of Purchaser (User)

Address of Purchaser (User)

Seller UBI/Registration #

Name of Seller Date

Item or category of items

Authorized agent for Purchaser (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) 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) 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, July 1, 1996, for purposes of the sales and use tax exemption. 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 in this state. Thus, machinery and equipment delivered to the purchaser on or after July 1, 1996, 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 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, rental payments that fall due on or after July 1, 1996, can qualify for exemption, regardless of when the lease was initiated.

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