The following is a brief summary of tax-related bills passed by the Legislature and signed into law by Gov. Inslee during the 2014 legislative session:
New Commercial Vessel Derelict Vessel Removal Fee
Effective January 1, 2015, all vessels that owe the commercial vessel tax additionally owe the Derelict Vessel Removal Fee. The fee is based on the size of the vessel and is one dollar per foot. The annual commercial vessel tax statement mailed to the owner/operator of the vessel will include the amount of the derelict vessel removal fee. The derelict vessel removal fee and the commercial vessel tax are due by April 30th, each year. (See Second Substitute House Bill 2457 (Chapter 195, Laws of 2014))
Commute Trip Reduction B&O Tax Credit Extended to June 2015
The Commute Trip Reduction (CTR) B&O tax credit provided by RCW 82.70 has been extended to June 30, 2015, effective immediately. The program was due to expire July 1, 2014. (See Engrossed Substitute Senate Bill (ESSB) 6001 (Chapter 222, Laws of 2014)) Special Notice
Contests of Chance
Effective June 12, 2014, Substitute Senate Bill (SSB) 6333 (Chapter 97, Laws of 2014) changes the definition of “contests of chance” to exclude any activities that are not subject to regulation by the gambling commission.
High Technology B&O tax Credit and Sales/Use Tax Deferral Set to Expire
The High Technology B&O Tax Credit for qualified research and development expenditures provided by RCW 82.04.4452 expires January 1, 2015. Any credit accrued in 2014 must be claimed no later than the last regular return filed for 2014 (due in January 2015). For monthly filers, this is the December 2014 return; for quarterly filers, this is the Quarter 4, 2014 return; for Annual filers, this is the Annual 2014 return. No credit can be accrued for tax periods beginning after December 31, 2014.
The High Technology Sales/Use Tax Deferral provided by RCW 82.63 on the construction or expansion of an eligible research and development facility or pilot scale manufacturing facility and certain equipment purchases also expires January 1, 2015. The Department’s authority to issue deferral certificates expires as of that date. Persons wishing to take advantage of this program are advised to apply to the Department by November 1, 2014. Applications received after this date may not be processed in time to receive a deferral certificate and would not be eligible for the program.
For more information regarding the B&O tax credit and sales/use tax deferral, visit our Tax Incentives page.
Changes to the Sales Tax Exemption for Livestock Nutrient Management
Businesses that qualify for sales and use tax exemptions on equipment and facilities used in livestock nutrient management no longer need to apply for an exemption certificate. Instead qualifying businesses must provide their vendors with a completed Farmers’ Certificate for Wholesale Purchases and Sales Tax Exemptions to obtain the exemption. This change is effective June 12, 2014. (See Substitute Senate Bill 6333 (Chapter 97, Laws of 2014)) Special Notice titled “Change to the Sales Tax Exemption for Livestock Nutrient Management” coming soon.
New Requirements for Long Term Moorage Providers
Effective June 12, 2014 persons providing long-term moorage (more than 30 consecutive days) must obtain from long term moorage tenants specific vessel information and upon request (but not more than twice per year) from either the Department of Revenue, the Department of Natural Resources and/or the Department of Licensing, a moorage provider must either:
A) Permit any authorized agent of DOR, the Department of Natural Resources (DNR), or the Department of Licensing (DOL) to:
i) Inspect the moorage facility for vessels that are not registered; and
ii) Inspect and copy records for vessels in long-term moorage that the requesting agency determines are not properly registered or listed as required by law; or
B) Provide to the requesting agency the following information on vessels in long-term moorage at the facility:
- The name of the legal owner of the vessel;
- The owner’s address and telephone number;
- The vessel’s hull identification number;
- If applicable, the vessel’s coast guard registration;
(See Second Substitute House Bill 2457 (Chapter 195, Laws of 2014)) See Special Notice titled “Requirements for Long Term Moorage Providers.”
Annual Filing Requirements Simplified for Manufacturers and Processors for Hire of Semiconductor Materials
Businesses that take advantage of the sales or use tax exemption and preferential B&O tax rate for manufacturers or processors for hire of semiconductor materials are no longer required to file both an Annual Survey and Annual Report each year. If the business files an Annual Report as required to claim the B&O tax preference, then it does not need to file an Annual Survey to fulfill its reporting requirements for the sales/use tax exemption on its purchases of chemicals and gasses used in the production of semiconductor materials. This change is effective June 12, 2014. (See Substitute Senate Bill (SSB) 6333 (Chapter 97 Laws of 2014)) Special Notice coming soon.
Marijuana Does Not Qualify for Certain Tax Exemptions and Preferential Tax Rates
Effective June 12, 2014, Senate Bill 6505 (Chapter 140, Laws of 2014), excludes businesses that produce, process, and sell recreational or medical marijuana and businesses that provide services to these marijuana businesses from eligibility for certain business and occupation (B&O) tax exemptions, retail sales and use tax exemptions, and other excise tax preferences.
Specific provisions of the bill include clarifying that:
- Marijuana is not considered a fresh fruit, vegetable or dairy product and therefore does not qualify for the B&O tax exemptions or preferential rates for processing fresh fruits, vegetables or dairy products.
- Retail sales of marijuana do not qualify for the prescription drug, food and food ingredients, and nonresident sales tax exemptions.
The bill also excludes recreational and medical marijuana from certain property tax preferences.Â Special Notice coming soon.
Tax Changes to the Production and Sale of Natural Gas Used as Transportation Fuel Effective July 1, 2015
- The compression or liquefaction of natural gas by a gas distribution business, where the gas is sold or used as transportation fuel, is considered a manufacturing activity and subject to B&O tax under the Manufacturing classification.
- The sale by a gas distribution business of liquefied natural gas (LNG), compressed natural gas (CNG), and natural gas used to produce LNG or CNG is subject to the B&O tax.
- The public utility tax (RCW 82.16) will no longer apply to these activities.
- A gas distribution business that produces LNG or CNG for sale as transportation fuel is eligible for a sales and use tax exemption, in the form of a refund, on machinery and equipment used directly in the manufacturing operation. Purchases of qualifying machinery and equipment are eligible for a refund beginning July 1, 2015. However, qualified businesses may not apply for a refund until July 1, 2017. The exemption expires July 1, 2028.
- Sales of natural gas, LNG, and CNG as transportation fuel are exempt from brokered natural gas use tax.
- The annual license fee in lieu of the special fuel tax is clarified to include vehicles that are powered by LNG or CNG.
- An existing sales tax exemption for certain items used in interstate or foreign commerce is narrowed so that:
- Until July 1, 2028, sales tax does not apply to 90% of LNG used as fuel in watercraft engaged in interstate and foreign commerce where such fuel is transported and consumed outside this state by the buyer.
- Effective July 1, 2028, LNG used as fuel for marine vessels will be ineligible for any exemption.
(See Engrossed Substitute Senate Bill (ESSB) 6440 (Chapter 216, Laws of 2014)) Special Notice coming soon.
Change to the Sales Tax Exemption for Repair Parts and/or Services for Farm Machinery and Equipment
Farmers that qualify for the sales and use tax exemptions on purchases of repair parts and/or services on qualifying Machinery and Equipment no longer need to apply for an exemption certificate. Instead qualifying businesses must provide their vendors with a completed Farmers’ Certificate for Wholesale Purchases and Sales Tax Exemptions to obtain the exemption. (See Substitute Senate Bill 6333 (Chapter 97, Laws of 2014)) Special Notice titled “Change to the Sales Tax Exemption for Repair Parts and/or Services for Farm Machinery and Equipment" coming soon.
Vessel Deconstruction Services – Sales and Use Tax Exemption
Effective October 1, 2014, a new Sales and Use tax exemption is provided for vessel deconstruction services. To qualify for the exemption, the deconstruction services must be performed at:
- A qualified deconstruction facility; or
- An area over water which has a National Pollutant Discharge Elimination System (NPDES) permit for vessel deconstruction services.
Additionally, the buyer of the services must give the seller (service provider) a completed Buyer’s Retail Sales Tax Exemption Certificate. (See Second Substitute House Bill 2457 (Chapter 195, Laws of 2014)) Special Notice titled “Vessel Deconstruction – Sales & Use Tax Exemption.”