Machinery and Equipment (M&E) Sales & Use Tax Exemption

Available To:
Manufacturers and processors for hire performing manufacturing and R&D. Testing operation for a manufacturer and processor for hire.

Qualifying Activity:
Purchase of qualifying machinery and equipment used directly for manufacturing, research and development, or testing operations.

Reporting/Documentation Requirements:

• Completion of Buyers’ Retail Sales Tax Exemption Certificate or Manufacturers’ Sales and Use Tax Exemption Certificate for vendor
• No application
• No Annual Survey/Report
• Electronic filing not required

Rural County Sales & Use Tax Deferral/Waiver for Manufacturing Facilities

Available to:
Manufacturers, computer-related businesses, R&D laboratories, commercial testing facilities, and persons conditioning vegetable seeds in a rural county, a CEZ, or county with a CEZ.

Qualifying Activity:
Certain construction and equipment purchases for new and expanding businesses.

Reporting/Documentation Requirements:

• Rural County Application for Sales & Use Tax Deferral must be filed before breaking ground on project
• All businesses must maintain a qualified activity at the site of the investment project for the year in which the investment project is certified operationally complete plus seven additional years.
• Annual Survey must be filed by March 31 of the following year in which the project is certified and for the following seven years.
• Electronic filing not required
  

B&O Credit for New Employees in Manufacturing and Research & Development in Rural Counties

Available to:
Manufacturers, computer-related businesses, R&D laboratories,
and commercial testing facilities located in rural counties or within a CEZ.

Qualifying Activity:
Creating new employment positions/increase instate employment by 15%.

• $2,000 credit/position with annual wages/benefits of $40,000 or less; or
• $4,000 credit/position with wages/benefits of more than $40,000 annually.

Reporting/Documentation:

• Rural Area Application for B&O Tax Credit on New Employees must be filed within 90 days after the first position is filled.
• Annual Letter/Report due by January 31st. Mailed by Department to applicants.
  
• Electronic filing not required

Note: Changes to incentive effective January 1, 2008, per SHB 1566, chapter 485, Laws of 2007. Additional information will be available in the future.

B&O Credit for New Employees in Software Programming & Manufacturing in Rural Counties

Available to:
Businesses in rural counties that provide programming services or manufacture software.

Qualifying Activity:
Creating new employment positions.

Credit Amount:
A $1000 credit for each new qualified position.

Reporting/Documentation:

• No application
• Annual letter/report must be filed by January 30. Mailed by Department.
• Electronic filing not required

B&O Credit for Third Party Help Desk Services in Rural Counties

Available to:
Businesses in rural counties that provide third party information technology help desk services. 

Qualifying Activity:
Providing help desk services.

Reporting/Documentation:

• No application
• Annual letter/report must be filed by January 30. Mailed by Department.
  
• Electronic filing not required

High Technology B&O Credit for R&D Spending

Available to:
Businesses conducting research and development (R&D) in the fields of:

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

Qualifying Activity:
Research and development.

Reporting/Documentation:

• No application
• Annual Survey must be filed by March 31st of the following year
• Electronic filing of all documents required

High Technology Sales & Use Tax Deferral/Waiver

Available to:
Limited to businesses conducting R&D and pilot scale manufacturing in the fields of:

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

Qualifying Activity:
Certain construction and equipment purchases for new and expanding businesses.

Reporting/Documentation:

• High Technology Application For Sales and Use Tax Deferral must be filed before building permit is issued
• All businesses must maintain a qualified activity at the site of the investment project for the year in which the investment project is certified operationally complete plus seven additional years.
• Annual Survey must be filed by March 31st of the following year in which the project is certified and for the following seven years.
• Electronic filing not required

Biotechnology & Medical Device Manufacturing Sales & Use Tax Deferral/Waiver

Available to:
Biotechnology and medical device manufacturers.

Qualifying Activity:
Certain construction and equipment purchases for new and expanding businesses.

Reporting/Documentation:

• Biotechnology Products and Medical Devices Application For Sales and Use Tax Deferral must be filed and approved before building permit is issued
  
• All businesses must maintain a qualified activity at the site of the investment project for the year in which the investment project is certified operationally complete plus seven additional years.
• Annual Survey must be filed by March 31st of the following year in which the project is certified and for the following seven years.
• Electronic filing not required

Reduced B&O Tax Rate for Aerospace Businesses

Available to:
Manufacturers and processors for hire of commercial airplanes or component parts of commercial airplanes.

Qualifying Activity:
Manufacturing, and sales by the manufacturer, of commercial airplanes or component parts of commercial airplanes.

Reporting/Documentation:

• No application
• Annual Report must be filed by March 31 of the following year
• Reduced rate generally available on E-file tax return only
• Electronic filing not otherwise required, but recommended

B&O Credit for Preproduction Development Expenditures

Available to:
Manufacturers and processors for hire of commercial airplanes or component parts of commercial airplanes.

Qualifying Activity:
Expenditures for aerospace preproduction development.

Reporting/Documentation:

• No application
• Aerospace Credit Affidavit for Preproduction Spending must be filed each reporting period the credit is taken
• Annual Report must be filed by March 31 of the following year
• Electronic filing not required, but recommended

B&O Credit for Property/Leasehold Taxes paid on Aerospace Manufacturing Facilities

Available to:
Manufacturers and processors for hire of commercial airplanes or component parts of commercial airplanes.

Qualifying Activity:
Payment of property/leasehold taxes on new buildings, land, the increased value of renovated buildings, and equipment eligible for the machinery and equipment (M&E) exemption

Reporting/Documentation:

• No application
• Annual Report must be filed by March 31 of the following year
• Electronic filing not required, but recommended

Sales & Use Tax Exemption for Aerospace Manufacturers for Computer Hardware/Software/Peripherals

Qualifying Activity:
Purchases of computer hardware, software, and computer peripherals, and charges for labor and services related to the installation of such equipment.

Reporting/Documentation:

• Completion of Buyer's’ Retail Sales Tax Exemption Certificate for vendor
• No application
• No Annual Survey/Report
• Electronic filing not required

B&O Credit for Non-Manufacturer Preproduction Development Expenditures

Available to:
Persons who develop, design, and engineer, but do not manufacture, commercial airplanes or component parts of commercial airplanes.

Qualifying Activity:
Expenditures for aerospace preproduction development.

Reporting/Documentation:

• No application
• Annual Survey must be filed by March 31st of the following year
• Electronic filing of all documents required

Sales & Use Tax Exemption for Aerospace Non-Manufacturers for Computer Hardware/Software/Peripherals

Available to:
Persons who develop, design, and engineer, but do not manufacture, commercial airplanes or component parts of commercial airplanes.

Qualifying Activity:
Purchases of computer hardware, software, and computer peripherals, and charges for labor and services related to the installation of such equipment.

Reporting/Documentation:

• Completion of Buyers’ Retail Sales Tax Exemption Certificate for vendor
• No application
• No Annual Survey/Report
• Electronic filing not required

Reduced B&O Rate for FAR Part 145 Repair Stations

Available to:
Persons certified by the FAA to perform repair and maintenance on commercial airplanes under FAR Part 145. 

Qualifying Activity:
Performing repair and maintenance on commercial airplanes.

Reporting/Documentation:

• No Application
• Annual Survey must be filed by March 31st of the following year
• Electronic filing of all documents required

Reduced B&O Tax Rate for Timber Extracting and Manufacturing

Available to:

• Timber extractors and extractors for hire,
• Timber manufacturers and processors for hire;
• Sales of standing timber (effective July 1, 2007).

Qualifying Activity:

• Extracting timber or extracting timber for hire
• Manufacturing or processing for hire:
  • Timber into timber products or wood products; or
  • Timber products into other timber products or wood products
• Selling at wholesale:
  • Timber extracted by the seller;
  • Timber products manufactured by the seller from timber or other timber products; and
  • Wood products manufactured by the seller from timber or timber products.
• Sales of standing timber apart of land (effective July 1, 2007)
  • Buyer required to sever timber from land within 30 months

Reporting/Documentation:

• No application required
• Annual Survey required by March 31st of the following year 
• Electronic filing of all documents required

B&O Tax Exemption for Manufacturers of Fresh Fruit & Vegetables

Available to:
Manufacturers of fresh fruit and vegetables.

Qualifying Activity:
Canning, preserving, freezing, processing, or dehydrating fresh fruits and veggies or wholesale sales when goods transported out-of-state by customer in normal course of business.

Reporting/Documentation:

• No application
• Annual Survey must be filed by March 31st of the following year
• Electronic filing of all documents required

B&O Tax Exemption for Manufacturers of Dairy and Seafood Products

Available to:
Dairy and seafood product manufacturers.

Qualifying Activity:
Manufacturing and wholesale sales of dairy and seafood products when goods are transported out of state by buyer in normal course of business.

Reporting/Documentation:

• No application
• Annual Survey must be filed by March 31st of the following year
• Electronic filing of all documents required

Sales/Use Tax Deferral/Waiver for Vegetable Seed Conditioning Facilities (Rural County Sales/Use Tax Deferral/Waiver)

Available to:
Persons conditioning vegetable seeds in a rural county, CEZ, or a county with a CEZ.

Qualifying Activity:
Certain construction and equipment purchases for new and expanding businesses.

Reporting/Documentation Requirements:

• Rural County Application for Sales & Use Tax Deferral must be filed before breaking ground on project
• All businesses must maintain a qualified activity at the site of the investment project for the year in which the investment project is certified operationally complete plus seven additional years.
• Annual Survey must be filed by March 31st of the following year in which the project is certified and for the following seven years.
• Electronic filing not required

Sales Tax Deferral/Waiver on Construction of Cold Storage & Certain Food Manufacturing/Processing Facilities

Available to:
Manufacturers of dairy and seafood products, fresh fruit and vegetables processors, cold storage warehousers, and research and development activities performed by these businesses.

Qualifying Activity:
Construction or expansion of facilities and purchases of qualifying machinery and equipment.

Reporting/Documentation:

• Fruit and Vegetable Businesses Application For Sales and Use Tax Deferral must be received before building permit is issued.
• All businesses must maintain a qualified activity at the site of the investment project for the year in which the investment project is certified operationally complete plus seven additional years.
• Annual Survey must be filed by March 31st of the following year in which the project is certified and for the following seven years.  
• Electronic filing of all documents required
• Effective July 1, 2007.

Reduced B&O Tax Rate for Manufacturing Biodiesel/Alcohol Fuel, etc.

Available to:
Manufacturers of alcohol fuel, biodiesel fuel, biodiesel feedstock, or wood biomass fuel.

Note: Effective July 22, 2007, “E85 motor fuel” replaces “alcohol fuel.”

Qualifying Activity
Manufacturing alcohol fuel, biodiesel fuel, biodiesel feedstock, or wood biomass fuel.

Reporting/Documentation:

• No application
• No Annual Survey/Report
• Electronic filing not required

Property/Leasehold Tax Exemption for Manufacturers of Biodiesel/Alcohol Fuel, etc

Available to:
Manufacturers of alcohol fuel, biodiesel fuel, biodiesel feedstock, or wood biomass fuel.

Note: Effective July 22, 2007, “E85 motor fuel” replaces “alcohol fuel.”

Qualifying Activity
Manufacturing alcohol fuel, biodiesel fuel, biodiesel feedstock, or wood biomass fuel.

Reporting/Documentation:

• Application for exemption must be made by November 1 to local county assessor
• No Annual Survey/Report
• Electronic filing not required

B&O Tax Deduction for Retail Sales of Biofuels/Alcohol Fuels

Available to:
Retail sellers and distributors of biodiesel fuel, alcohol fuel, and wood biomass fuel.

Note: Effective July 22, 2007, “E85 motor fuel” replaces “alcohol fuel.”

Qualifying Activity
Retail sales and distribution of biodiesel fuel, alcohol fuel, and wood biomass fuel.

Reporting/Documentation:

• No application
• No Annual Survey/Report
• Electronic filing not required

Sales/Use Tax Exemption for Machinery/Equipment, Delivery Vehicles & Construction of Facilities for Retail Sales of Biofuels

Available to:
Retail sellers and distributors of biodiesel fuel, alcohol fuel, and wood biomass fuel.

Note: Effective July 22, 2007, “E85 motor fuel” replaces “alcohol fuel.”

Qualifying Activity
Retail sales and distribution of biodiesel fuel, alcohol fuel, and wood biomass fuel.

Reporting/Documentation:

• No application
• No Annual Survey/Report
• Electronic filing not required
• Buyer’s Retail Sales Tax Exemption Certificate provided to vendor

Reduced B&O Tax Rate for Manufacturers of Semiconductor Materials

Available to:
Manufacturing or processors for hire of semiconductor materials.

Qualifying Activity
Manufacturing or processing for hire semiconductor materials. “Semiconductor materials" means silicon crystals, silicon ingots, raw polished semiconductor wafers, and compound semiconductor wafers.

Reporting/Documentation:

• No application
• Annual Report must be filed by April 30th of the following year.
• Electronic filing of all documents required

Sales/Use Tax Exemption for Purchases of Semiconductor Gasses & Chemicals

Available to:
Manufacturing or processors for hire of semiconductor materials.

Qualifying Activity
Sales of gasses & chemicals used by manufacturer or processor for hire in the production of semiconductor materials. “Semiconductor materials" means silicon crystals, silicon ingots, raw polished semiconductor wafers, and compound semiconductor wafers.

Reporting/Documentation:

• Completion of Buyers’ Retail Sales Tax Exemption Certificate for vendor
• No application
• Annual Report filed by April 30th of the following year.
• Electronic filing of all documents required

Reduced B&O Tax Rate for Aluminum Smelting

Available to:
Aluminum smelters and processors for hire who manufacture aluminum in this state.

Qualifying Activity
Manufacturing aluminum and selling the same at wholesale by aluminum smelters and processors for hire.

Reporting/Documentation:

• No application
• Annual Report filed by March 31st of the following year.
• Electronic filing not required

B&O Tax Credit For State Portion of Sales Tax on Materials Used in Aluminum Smelter

Available to:
Aluminum smelters and processors for hire who manufacture aluminum in this state.

Qualifying Activity
B&O tax credit for state portion of sales tax paid on materials, equipment, labor and services used in aluminum smelter.

Reporting/Documentation:

• No application
• Person must pay the tax and may then take a credit equal to the state share of retail sales tax paid.
• Annual Report filed by March 31st of the following year.
• Electronic filing not required

B&O Tax Credit for Property Tax on Aluminum Smelter

Available to:
Aluminum smelter who manufacture aluminum in this state.

Qualifying Activity
B&O tax credit for property tax paid by aluminum smelter.  

Reporting/Documentation:

• No application
• Person must pay the tax and may then take a credit equal to the property tax paid.
• Annual Report filed by March 31st of the following year.
• Electronic filing not required

Brokered Natural Gas Use Tax Exemption

Available to:
Aluminum smelter who manufacture aluminum in this state.

Qualifying Activity
Use tax exemption for the use of natural or manufactured gas by an aluminum smelter.

Reporting/Documentation:

• No application
• Annual Report filed by March 31 of the following year.
• Electronic filing not required

Sales/Use Tax Exemption for Replacement Parts for Farm Machinery & Equipment

Available to:
Eligible farmers.

Qualifying Activity
Eligible farmers who purchase replacement parts for qualifying farm machinery and equipment.

Note: Effective July 22, 2007, includes charges for labor and services for repairing replacement parts of qualifying farm machinery and equipment

Reporting/Documentation:

• Application for Exemption Certificate for Replacement Parts for Farm Machinery and Equipment required
• Department issues Exemption Certificate for Replacement Parts for Farm Machinery and Equipment to farmer to provide vendor
• No Annual Survey/Report
• Electronic filing not required
• Proper record keeping required

Sales/Use Tax Exemption for Field Burning Equipment & Construction of Hay Sheds

Available to:
Qualified farmers.

Qualifying Activity
Purchase or use of certain equipment. The exemption is also available for materials, labor, and services for the construction of hay sheds.

Reporting/Documentation:

• Qualified farmer must provide vendor with Farmers’ Retail Sales Tax Exemption Certificate
• No Annual Survey/Report
• Electronic filing not required
• Proper record keeping required

Sales/Use Tax Exemption for Livestock Nutrient Management Equipment & Facilities

Available to:
Licensed dairies with certified dairy nutrient management plans and qualifying animal feeding operations.

Qualifying Activity:
Purchases that become an ingredient or component of existing livestock nutrient management equipment and facilities or services provided for operating, repairing, cleaning, altering, or improving this equipment and facilities.

Reporting/Documentation:

• Application for Retail Sales Tax Exemption Certificate for Livestock Nutrient Management Equipment Facilities required
• Eligible person will receive a Retail Sales Tax Exemption Certificate for Livestock Equipment Facilities to provide vendor when purchasing tax exempt property or services
• No Annual Survey/Report
• Electronic filing is not required
• Record keeping requirements

Sales/Use Tax Exemption for Anaerobic Digesters

Available to:
Businesses establishing or operating anaerobic digesters used to primarily (more than 50%) treat livestock manure.

Qualifying Activity:
Purchases of tangible personal property that becomes an ingredient or component of the anaerobic digester and charges for installing, repairing, constructing, cleaning, altering or improving the anaerobic digester . 

Reporting/Documentation:

• Application for Retail Sales Tax Exemption Certificate for Anaerobic Digesters required. Contact the Department before beginning construction of the anaerobic digester.
• Eligible applicants will be issued a Retail Sales Tax Exemption Certificate for Anaerobic Digesters to provide their vendors
• No Annual Survey/Report
• Electronic filing is not required
• Record keeping requirements

Sales/Use Tax Exemption for Farm Fuel Users

Available to:
Farmers producing agricultural products and persons providing horticultural services to farmers.

Qualifying Activity:
Purchases of diesel fuel, biodiesel fuel, or aircraft fuel.  

Reporting/Documentation:

• Buyer provides Farmers Retail Sales Tax Exemption Certificate to seller
• No Annual Survey/Report
• Electronic filing is not required

Solar Energy System Manufacturers & Wholesalers – Reduced B&O Tax Rate

Available to:
Manufacturers, processors for hire, or wholesalers of solar energy systems using photovoltaic modules or silicon components of these systems.

Qualifying Activity:
Manufacturers, processors for hire, or wholesalers of solar energy systems using photovoltaic modules or silicon components of these systems.

Reporting/Documentation:

• No application required
• Annual report must be filed by March 31st of following year
• Electronic filing not required

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