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WAC 113 Ingredients or components, chemicals used in processing new articles for sale.      
SOURCE DOCUMENT DETER. NO DATE OF ISSUE DESCRIPTION
       
WAC: 458-20-113   09/23/1986 Ingredients or components, chemicals used in processing new articles for sale.
         
       
RCW: 82.04.050   1995 "Sale at retail," "retail sales."
  82.04.190   1995 Consumer.
         
       
ETA 3040.r109 12/28/09 Chemicals used in processing by the pulp industry. Effective January 1, 2010, reseller permits will replace resale certificates as the means to substantiate wholesale purchases. Chapter 563, Laws of 2009.
  3022.2009 2/2/09 Retail sales tax on items used in meat processing
3040.2009 2/2/09 Chemicals used in processing by the pulp industry
3045.2009 2/2/09 Materials used in welding process 
13.08.113 7/1/66 SALES TAX LIABILITY ON DUAL PURPOSE CHEMICALS IN THE PRODUCTION PROCESS  - This document discusses tax-reporting instructions that were subsequently removed from WAC 58-20-113 (Ingredients or components, chemicals used in processing new articles for sale).  Cancelled by ETA 2003 -0  6/30/99.

164.12.113 8/19/66 USE TAX ON WASTE PRODUCTS IN MEAT PROCESSING Revised 2/2/09. See ETA 3022.2009
216.08.113 9/9/66 CHEMICALS AND OTHER ARTICLES USED IN PURIFYING WATER Cancelled effective 02/28/07 This document explains that chlorine and other chemicals added to water and that become a component of the product sold may be purchased without payment of tax, citing RCW 82.04.050 (definition of “retail sale”). It also explains that purchases of filters and screens are subject to sales tax. This document is not needed.
217.08.113 7/1/92 CHEMICALS USED IN PROCESSING BY THE PULP INDUSTRY Revised 2/2/09. See ETA 3040.2009
218.08.113 9/9/66 CHEMICALS USED IN PROCESSING TO REMOVE GASES FROM STEEL FURNACES. -This document does not provide any information not currently in WAC 458-20-113 (Ingredients or components, chemicals used in processing new articles for sale). This document explains that oxygen used to remove unwanted gases from furnaces is subject to tax because none of the products of the oxygen’s reaction with carbon are present in the end ingredients of the final product.  The requirement that a chemical react with ingredients or components of the product being processed is sufficiently addressed in WAC 458-20-113.  Cancelled by ETA 2003 -2s 6/30/00.
225.08.113 9/9/66 DUAL PURPOSE USE OF CHEMICAL BECOMING AN INGREDIENT -This document discusses tax-reporting instructions that no longer exist in  WAC 58-20-113 (Ingredients or components, chemicals used in processing new articles for sale).  Cancelled by ETA 2003 -0  6/30/99.
322.08.113.173 10/20/67 MATERIALS USED IN WELDING PROCESSES Revised 2/2/09. See ETA 3045.2009
564.12.113 12/1/93 RETAIL SALES/USE TAX - OAK BARRELS USED BY WINERIES AND WINEMAKERS - This document explains that the retail sales or use tax applies only to that portion of the cost of oak barrels used to flavor wine representing the storage value of the “spent” barrel. This explanation is now incorrect. Under the manufacturing and equipment exemptions provided by RCW 82.08.02565 and RCW 82.12.02565, wine barrels used by wineries and winemakers are exempt from the retail sales and use taxes. Cancelled by ETA 2003 -2s  6/30/00.
         
       
INDUSTRY GUIDES:      
         
       
SPECIAL NOTICES:      
         
       
DIRECTIVE: 8113.1     Carbon Electrodes - 9/11/86Repealed 6/30/2000- This document was issued in 1986 to explain that the Department had decided to not appeal a BTA decision ruling that carbon electrodes used in the production of steel were an ingredient and not subject to either the retail sales or use tax.The information provided in this document no longer serves a useful purpose, and can be misleading.As explained in WAC 458-20-113 (Ingredients or components, chemicals used in processing new articles for sale), to be considered an ingredient or component part material must become an essential and intended ingredient or component of the finished product.
         
       
RPM: None      
         
       
WTD: 29 WTD 34 08-0243 08/18/2010 RULE 113; RCW 82.04.050 (1):  RETAIL SALES TAX - INGREDIENT
OR    COMPONENT - CHEMICALS USED IN PROCESSING.  For a
chemical to qualify as an “ingredient or component” excludable from retail sales tax or use tax, the primary purpose of the chemicals must be to create a chemical reaction directly through contact with an ingredient of a new article being produced.
  29 WTD 34 08-0243 08/18/2010 RULE 113; RCW 82.04.050 (1):  RETAIL SALES TAX - INGREDIENT OR
COMPONENT - CHEMICALS USED IN PROCESSING.  The Taxpayer bears the burden of establishing a specific reaction with an ingredient of the new article and providing evidence that this reaction is the primary purpose for using the chemical at issue.
  2 WTD 71 86-306   INGREDIENTS OR COMPONENTS. The so-called "ingredients or components exemption" from the retail sales tax is limited to desirable and intended constituents of the finished product, and does not extend to materials
  2 WTD 139 87-15   INGREDIENTS AND COMPONENTS. Under the "ingredients" exclusion from the definition of "retail sale", materials which supply essential ingredients to a finished product, and which become a part of that product, are not subject to use tax.
  2 WTD 239 87-48   INGREDIENTS AND COMPONENTS. Under the "ingredients" exclusion from the definition of "retail sale", only materials which supply essential ingredients to a finished product are not subject to use tax.
  2 WTD 379 87-74   INGREDIENT OR COMPONENT. The "primary purpose test" test does not apply to the "ingredients or components" exemption.
  2 WTD 379 87-74   INGREDIENT OR COMPONENT. A substance may qualify as an "ingredient or component" even though it contributes only a small percentage of the total ingredients involved in producing the finished product.
  2 WTD 379 87-74   INGREDIENT OR COMPONENT. A substance may qualify as an "ingredient or component" even though it undergoes a chemical reaction during the manufacturing process.
  2 WTD 379 87-74   INGREDIENT OR COMPONENT. A substance may qualify as an "ingredient or component" even though only a small portion of the substance ends up in the finished product.
  2 WTD 379 87-74   INGREDIENT OR COMPONENT -- COAL -- COKE -- ASH -- CEMENT. Coal or coke used in production of cement qualifies as an "ingredient or component. Although used primarily as a fuel to provide heat, coal and coke each contribute ash, a necessary constituent of finished cement, traceable in the finished product and identifiable as having been directly provided by coal and coke.
  6 WTD 349 88-339   RETAIL SALES TAX -- USE TAX -- EXCLUSION -- PRIMARY PURPOSE TEST -- CHEMICAL USED IN PROCESSING:Liquid caustic soda used to recover cryolite as part of the aluminum smelting process is a chemical used in processing where cryolite is a product for sale.F.I.D.
  6 WTD 349 88-339   RETAIL SALES TAX -- USE TAX -- EXCLUSION -- INGREDIENT OR COMPONENT -- PRIMARY PURPOSE TEST.Magnesite used in the aluminum smelting process is an ingredient in the final product.F.I.D.
  6 WTD 349 88-339   RETAIL SALES TAX -- USE TAX -- EXCLUSION -- INGREDIENT OR COMPONENT -- PRIMARY PURPOSE TEST.Copper/aluminum flex and aluminum/steel casing used in the smelting of aluminum are ingredients whose purchase and use is not subject to sales or use tax. Although the primary purpose of these items is not to be ingredients of a finished product they nevertheless are ingredients. The primary purpose test for ingredients was rejected in Lone Star v. Revenue, 97 Wn2d 630, 647 P.2d 1013 (1982).
  6 WTD 349 88-339   B&O TAX -- CREDIT -- INVENTORY -- INGREDIENT.If an item is an ingredient for purposes of the sales tax exemption for ingredients then it is also inventory for purposes of the inventory tax credit. F.I.D.
  7 WTD 201 89-112   INGREDIENTS AND COMPONENTS -- REAL PROPERTY.Concrete form coating must be traceable as an ingredient or component of the finished structure to be excludable from retail sales tax or use tax.
  10 WTD 406 91-051   SALES OR USE TAX -- EXEMPTION -- INGREDIENT. Chemicals are only entitled to the exemption for ingredients used in producing a new substance if some proportion of the chemical remains as a necessary ingredient in the final products.
  12 WTD 217 92-185   CHEMICALS USED IN PROCESSING -- CATALYSTS. Catalysts used by an oil refiner to break down crude oil molecules into ingredients of final products are exempt from use and/or deferred sales tax as chemicals used in processing.
  12 WTD 399 92-209   INGREDIENT EXEMPTION. A biocide qualifies as an ingredient that is exempt from use tax when it is introduced into the paper manufacturing process to inhibit the growth of spores in the finished product.
  13 WTD 75 92-161   RST AND USE TAX -- INGREDIENTS AND COMPONENTS -- STEEL MANUFACTURING -- REFRACTORY MATERIALS -- LIQUID OXYGEN -- LIMESTONE -- ALUMINUM.A retail sale or taxable use did not occur when liquid oxygen, refractory materials, limestone, and aluminum were consumed in the manufacturing of steel and became essential and intended constituents of the finished products, steel and/or slag.
  13 WTD 75 92-161   RST AND USE TAX - INGREDIENTS AND COMPONENTS - CONSECUTIVE INTERVENING USE - "DIRECT CONSUMPTION TEST".An item will not lose its "ingredients or components" sales or use tax exemption under RCW 82.04.050(1)(c) merely because it is first put to some other intervening use if: (a) the intervening use is for a purpose directly related to the manufacturing of a new article of tangible personal property or substance; (b) the item is then used as an essential and intended ingredient or component of the same manufactured article; and (c) the item is required by generally accepted accounting principles to be expensed on the taxpayer's books of account.An item which is required to be capitalized because it has a life in excess of one year will be presumed to not meet the standard for exemption even if the item eventually should become a component of the new manufactured article.
  18 WTD 153 98-133   RETAIL SALES TAX -- INGREDIENT -- BYPRODUCT.A fruit juice producer did not owe retail sales tax on a byproduct of fruit juice, rice hulls, a necessary and intended ingredient of pomace produced in the juicing process, which had a market value.
  19 WTD 753 98-157   RETAIL SALES TAX -- INGREDIENT OR COMPONENT -- PLANNED DEGRADATION --COLLECTOR BARS AND ANODE STUBS.Purchases of steel anode stubs and iron collector bars were not entitled to an ingredients or components exemption even though some ingredients contained in the bars and stubs were also found in the molten aluminum product.The exemption was disallowed because the stubs and collector bars were not entirely consumed in the manufacturing process, the taxpayer did not present clear evidence directly tracing the ingredient's source to the stubs or bars and any contributed amounts appeared insignificant.
  19 WTD 753 98-157   RETAIL SALES TAX -- CHEMICAL USED IN PROCESSING -- PRIMARY PURPOSE -- CARBON CATHODE BLOCKS.Purchases of carbon cathode blocks are not exempt as a chemical used in processing because their primary purpose is not to create a chemical reaction directly through contact with an ingredient of the final product sold.
  19 WTD 753 98-157   RETAIL SALES TAX -- CHEMICAL USED IN PROCESSING -- CARBON ANODE -- COMBINED MATERIALS.Labor charges paid to a third-party assembler to attach an exempt carbon anode to a non-exempt steel rod are subject to retail sales tax.The exemption for a chemical used in processing does not include labor charges incurred to convert an exempt chemical into a manufacturing tool.
  20 WTD 84 00-106   SALES TAX - USE TAX - DEDUCTION --CHEMICAL USED IN PROCESSING - SPRAY MATERIALS.Even if spray materials qualified as a "chemical" for purposes of the exemption, in this case their use appears to occur prior to any processing taking place because the potatoes are sprayed at the time of harvest, when they are put into storage.
  22 WTD 49 01-157R   RCW 82.04.050: RETAIL SALES TAX - INGREDIENTS OR COMPONENTS - FUEL.Diesel fuel does not qualify, for retail sales tax purposes, as an ingredient or component of asphalt paving even though a residue from the combustion of the fuel is later added to the asphalt mix.The fuel does not retain its original chemical identity in the process and is not itself an ingredient in the final product.
  22 WTD 49 01-157R   RCW 82.04.050: RETAIL SALES TAX - CHEMICAL USED IN PROCESSING - FUEL.Diesel fuel does not qualify, for retail sales tax purposes, as a chemical used in processing asphalt paving even though a residue from the combustion of the fuel is later added to the asphalt mix.The fuel does not have as its primary purpose the creation of a chemical reaction directly through contact with an ingredient of a new article being produced.
  24 WTD 36 03-0224E   RETAIL SALES TAX - INGREDIENTS OR COMPONENTS -CHEMICALS USED IN PROCESSING.Chemicals that leave residues in the finished product, which residues are not essential, necessary, or anything more than impurities, are not entitled to the ingredients or components exemption from retail sales tax.With respect to the chemicals used in processing exemption, the taxpayer has the burden to show that the primary purpose of the chemicals is to create a chemical reaction directly through contact with an ingredient of the new article being produced for sale.
         
         
OTHER: