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Sometimes, a business manufactures a piece of equipment or machinery for its own use.  For example, your employees may manufacture special equipment that is used, in turn, to manufacture a product for sale.  When you manufacture items for your own use (commercial or industrial use), there are some special tax applications that you must remember.

First of all, as a business, if you manufacture an article of tangible personal property for your own use, you owe use tax on the value of that article.  The value is determined by the selling price of similar products at comparable locations in this state.  If there are no sales of similar products to use as a guide, the tax is to be measured by the total cost of the article manufactured for commercial or industrial use.  When you use this cost approach to determine the value, every cost attributable to the manufacture of the particular article must be included, including direct and indirect overhead costs.

In addition to a use tax liability, you will owe business and occupation tax under the Manufacturing classification, measured by the same value used to determine the use tax due.

For additional information, see WAC 458-20-136 and WAC 458-20-134.