WASHINGTON TAXES                   river

Small Business Guide

SALES/USE TAX EXEMPTION ON MACHINERY AND EQUIPMENT – CHAPTER 82.08/82.12 RCW

Manufacturers and processors for hire are not required to pay the sales or use tax on machinery and equipment used directly in manufacturing operations. In addition, the machinery and equipment are not subject to the sales taxes.

A “manufacturing operation” means the manufacturing of articles, substances, or commodities for sale as tangible personal property. The manufacturing operation begins at the point where the raw materials enter the manufacturing site and ends at the point where the finished product leaves the manufacturing site.

HIGH TECHNOLOGY SALES/USE TAX DEFERRAL/EXEMPTION

Businesses in the following research and development technology categories may be eligible for a sales / use tax deferral / exemption, if they start new research and development or pilot scale manufacturing operations, or expand or diversify a current operation by expanding, renovating or equipping an existing facility anywhere in Washington:

  • Advanced computing
  • Advanced Materials
  • Biotechnology
  • Electronic device technology
  • Environmental technology

HIGH TECHNOLOGY BUSINESS AND OCCUPATION TAX CREDIT – CHAPTER 82.63 RCW

An annual credit of up to $2 million is allowed for businesses that perform research and development in Washington in specified high technology categories AND meet the minimum expense requirements. The credit cannot exceed the amount of the business and occupation tax due for that calendar year. The rate for the credit is:

Nonprofit corporation or association: .484 percent (.004845) of the expenses. For profit businesses: 1.5 percent (.015) of the expenses.

The technology categories are:

  • Advanced computing
  • Advanced Materials
  • Biotechnology
  • Electronic device technology
  • Environmental technology

 

WASHINGTON’S TAX STRUCTURE
No corporate income tax
No unitary tax
No inventory tax
No personal income tax
No tax on interest, dividends or capital gains
No sales or use tax on machinery and equipment used in manufacturing operations
A state and local property tax with annual increases subject to statutory limitations
The business and occupation (B&O) tax, which is based on gross receipts