RETAIL SALES & USE TAX EXEMPTIONS: INTERSTATE

82.08.0254 CONSTITUTIONALLY EXEMPT SALES

82.12.0255

Description: Tangible personal property which the state is prohibited from taxing under the state and federal constitutions is exempt from sales/use tax. These statutes are "catch-all" provisions covering situations which are not covered by other specific exemptions. The major items covered by this general exemption are export sales in which shipping is arranged for by the seller, sales to and by the U.S. government, and sales to Indians.

Purpose: To recognize the prohibition against taxing the federal government and interstate commerce.

Category/Year Enacted: Commerce (majority of the impact reflects the inability to tax interstate commerce; also included is the impact of purchases by federal government and Indian tribes, and mail order transactions which the state cannot tax under existing interpretations by the Supreme Court); 1935.

Primary Beneficiaries: Manufacturers selling out of state, the federal government, and Indian tribes.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 214,880 220,897 230,660 240,463
Local taxes 56,199 57,773 60,327 62,890

If the exemption were repealed, would the estimated revenue be realized? No.

82.08.0255(2) SPECIAL FUEL USED IN COMMERCE

82.12.0256(2)

Description: Exempts from sales/use tax special fuel purchased in the state but used outside Washington by persons engaged in interstate commerce.

Purpose: The purpose is to maintain equity with other states for the application of sales tax to fuel purchased in Washington but used outside the state by interstate carriers.

Category/Year Enacted: Economic development; 1983.

Primary Beneficiaries: Interstate carriers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 786 783 805 826
Local taxes 206 205 211 217

If the exemption were repealed, would the estimated revenue be realized?

No; interstate carriers would reduce their purchases of fuel in this state.

82.08.0261 ITEMS USED IN INTERSTATE COMMERCE

Description: This exempts from sales tax tangible personal property, other than airplanes, locomotives, railroad cars and watercraft, which is used by the purchaser in connection with operation as a private or common carrier by air, rail or water in interstate or foreign commerce. Examples include linens, bedding, chairs, tableware and similar items purchased in Washington for use in other states. Use tax applies if the item is used in Washington.

Purpose: The purpose is to provide equal treatment of these items with the exempt status of other transportation equipment which is exempted by RCW 82.08.0262.

Category/Year Enacted: Economic development; 1935.

Primary Beneficiaries: Manufacturers and suppliers of repair parts and their common carrier customers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 169 174 182 189
Local taxes 44 46 48 50

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.08.0262 INTERSTATE TRANSPORTATION EQUIPMENT

Description: Sales of airplanes, locomotives, railroad cars, watercraft, and their component parts, used in interstate or foreign commerce are exempt from the sales tax, as well as watercraft used in commercial deep sea fishing outside of Washington waters. Also exempt are charges made for repairing, cleaning, altering, and improving this equipment for motor carriers with ICC permits.

Purpose: The purposes presumably include: 1) increasing the competitive position of Washington manufacturers relative to out-of-state competitors, and 2) to encourage sales of these products in Washington by allowing delivery to occur in Washington without incurring sales tax liability.

Category/Year Enacted: Economic development; 1949.

Primary Beneficiaries: Firms that manufacture and service transportation equipment.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 96,696 99,404 103,797 108,209
Local taxes 25,290 25,998 27,147 28,301

If the exemption were repealed, would the estimated revenue be realized?

Unlikely; deliveries could simply be made out of state to avoid the tax.

82.08.0263 VEHICLES IN INTERSTATE COMMERCE

Description: Sales of motor vehicles and trailers to ICC permit holders for use in interstate and foreign commerce are exempt from the sales tax.

Purpose: To increase the competitive position of Washington manufacturers relative to out-of-state competitors and to encourage sales in Washington by allowing delivery of these vehicles to occur in Washington without incurring sales tax liability.

Category/Year Enacted: Economic development; 1949.

Primary Beneficiaries: Manufacturers of motor vehicles (trucks) and trailers and their customers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 8,753 8,998 9,395 9,795
Local taxes 2,289 2,253 2,457 2,562

If the exemption were repealed, would the estimated revenue be realized?

Unlikely; delivery of vehicles to be used outside the state could simply be made to locations outside the state to avoid the tax.

82.08.0264 VEHICLES SOLD TO NONRESIDENTS

Description: Sales of motor vehicles, trailers, or campers to nonresidents are exempt from the sales tax, provided the vehicle will be taken directly outside of this state, registered in the state of the purchaser's residence and will be in Washington only temporarily.

Purpose: The purpose of this exemption is apparently to eliminate a potential disadvantage for Washington vehicle dealers who compete against dealers in other states for the business of these customers.

Category/Year Enacted: Economic development; 1935.

Primary Beneficiaries: Washington vehicle dealers, trailer and camper manufacturers, as well as nonresident purchasers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 29,814 30,649 32,003 33,364
Local taxes 7,798 8,016 8,371 8,726

If the exemption were repealed, would the estimated revenue be realized?

No; dealers could simply deliver the vehicles out of state. Also, it would result in reduced sales for Washington dealers and less tourism in this state.

82.08.0265 DELIVERIES OF REPAIRED ITEMS TO OTHER STATES

Description: Exemption is allowed for sales relating to installation or repair of property belonging to a nonresident, if it is delivered out of state.

Purpose: To increase the competitive position of Washington manufacturers and repair businesses by exempting the repair or cleaning of tangible personal property for a nonresident, and the sale of any part which becomes a component thereof, when delivery of the property is made out of state.

Category/Year Enacted: Economic development; 1959.

Primary Beneficiaries: Washington manufacturers and repair businesses which repair tangible personal property for nonresidents and who deliver the property out of state.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 1,952 2,007 2,096 2,185
Local taxes 511 525 548 571

If the exemption were repealed, would the estimated revenue be realized?

No; the items are delivered out of state.

82.08.0266 WATERCRAFT SOLD TO NONRESIDENTS

82.08.02665

Description: The sale of watercraft to nonresidents for use outside Washington is exempt from sales tax if the craft is required to be registered with the Coast Guard or in the state of principal use. The craft may not be used in Washington for more than 45 days. Note: items sold to residents of states with sales taxes lower than 3 percent (Oregon, Alaska, etc.) are included in RCW 82.08.0273; the impact of boats sold to residents of those states is not included under this statute.

Purpose: The purpose is to place Washington boat dealers in an equal competitive position relative to their out-of-state competitors who have a lower or no sales tax. Allowing the nonresident to take delivery of the boat in Washington as part of a "shake-down" cruise, encourages more sales by in-state dealers.

Category/Year Enacted: Economic development; 1959 (new statute in 1993 to allow foreign nonresidents to take delivery within the state, as residents of other states had been permitted to do).

Primary Beneficiaries: Washington boat dealers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 3,769 3,875 4,046 4,218
Local taxes 986 1,014 1,058 1,103

If the exemption were repealed, would the estimated revenue be realized?

No; dealers could simply make the deliveries to an out-of-state location. This would also result in loss of B&O tax which is currently paid.

82.08.0268 FARM EQUIPMENT SOLD TO NONRESIDENTS

Description: Sales of farm machinery to nonresidents for use outside Washington are exempt from sales tax if the machinery is immediately transported out of the state. As of 1998 the exemption includes parts and labor for repair services performed in Washington on machinery and implements that are used in farming outside the state.

Purpose: The purpose is to allow Washington farm equipment dealers to effectively compete with such dealers in neighboring states which either have a similar exemption or a lower (or no) sales tax.

Category/Year Enacted: Economic development; 1961. Expanded in 1998 to in-state repair.

Primary Beneficiaries: Washington farm equipment dealers, especially those in close proximity to neighboring states.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 3,116 3,203 3,344 3,487
Local taxes 815 838 875 912

If the exemption were repealed, would the estimated revenue be realized? No; dealers could simply make deliveries to an out-of-state location. This would result in loss of B&O tax which is currently paid.

82.08.0269 SALES TO ALASKA & HAWAII

Description: Sales to residents of states, territories, and possessions of the United States which are not contiguous to any other state are exempt from the sales tax, provided the seller delivers the property to the in-state receiving terminal of the carrier that transports the goods out of state.

Purpose: The purpose is to facilitate sales to residents of these states, territories, and possessions and to encourage trade through Washington ports.

Category/Year Enacted: Economic development; 1961.

Primary Beneficiaries: Firms that make sales to persons in Alaska, Hawaii and territories.

Conflict With Other Programs: None evident.

Tax Savings: The impact of this exemption considered separately is minimal because most sales to residents of Alaska and Hawaii would be exempt under other statutes relating to interstate commerce. This exemption only becomes relevant when the buyer actually takes possession of the goods in Washington for purposes of arranging direct shipment to the out-of-state destination. In such instances, the buyer could easily make alternate shipping arrangements to avoid the tax.

82.08.0273 ITEMS SOLD TO CERTAIN NONRESIDENTS

Description: Nonresidents who reside in a state, possession or Canadian province which levies a sales tax of less than 3.0 percent are exempt from Washington sales tax on purchases of tangible personal property in Washington for use outside the state (e.g., not meals or accommodations). Residents of other states may also be exempted if their state of residence allows similar exemption for Washington residents, but no state currently qualifies under this provision.

Purpose: The intent is to enable Washington merchants, especially in areas along the Oregon border, to compete with merchants located in states with no or low sales tax.

Category/Year Enacted: Economic development; 1965. (A fee of $5 for a nonresident permit was eliminated in 1989; in 1993 only one piece of identification was required.)

Primary Beneficiaries: Residents of Oregon, Alaska, Montana, and the Canadian Province of Alberta. Also, the exemption benefits Washington retailers in border areas.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 34,981 35,961 37,550 39,146
Local taxes 9,149 9,405 9,821 10,238

If the exemption were repealed, would the estimated revenue be realized? Not entirely; some nonresidents (mainly Oregonians) would no longer buy in this state if they had to pay sales tax here, since they would be subject to lower (or zero) sales tax at home.

82.08.0279 RENTAL OF VEHICLES TO NONRESIDENTS

Description: Renting or leasing motor vehicles and trailers to nonresidents for exclusive use in interstate commerce is exempt from the sales tax, provided the vehicle is registered and most frequently dispatched, garaged, and serviced outside of Washington.

Purpose: To relieve lessors of responsibility for collecting tax on the in-state use of motor vehicles and trailers by a nonresident motor carrier engaged in interstate commerce. This exemption is limited to those vehicles which are most frequently maintained and operated out of the lessee's out-of-state place of business. It also applies to out-of-state firms which use leased vehicles to transport goods between stores.

Category/Year Enacted: Economic development; 1980.

Primary Beneficiaries: Vehicle rental firms with locations in and outside Washington which have cars registered and licensed in other states.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 130 136 141 147
Local taxes 34 36 37 38

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.12.0251 NONRESIDENTS' PROPERTY

Description: Tangible personal property owned by nonresidents is exempt from use tax if it is brought into Washington by the nonresident for temporary use only (not for business purposes). Also exempt are motor vehicles that are registered in other states. This statute also exempts household goods, personal effects and automobiles of residents of Washington (and nonresident military personnel who are stationed in Washington) if they were purchased while the owner was a resident of another state at least 90 days prior to entry into this state.

Purpose: To encourage tourism in Washington by exempting the temporary use of tangible personal property by nonresidents and to exempt household items and vehicles brought into Washington by new residents and nonresident military personnel who had been stationed outside Washington.

Category/Year Enacted: Individuals; 1935.

Primary Beneficiaries: Nonresidents in Washington on a temporary basis and new residents who bring household goods into Washington if the items were acquired at least 3 months prior to entry into this state.

Conflict With Other Programs: None evident.

Tax Savings ($000)*: FY 2000 FY 2001 FY 2002 FY 2003
State taxes 3,529,947 3,628,786 3,789,178 3,950,218
Local taxes 923,217 949,067 991,016 1,033,134

If the exemption were repealed, would the estimated revenue be realized?

Unlikely; enforcement costs would be high and it would discourage tourism.

82.12.0254 VEHICLES USED IN INTERSTATE COMMERCE

Description: Various vehicles (airplanes, locomotives, railroad cars, and watercraft), and component parts of such vehicles, which are used in interstate/foreign commerce are exempt from use tax. Also the exemption applies to vessels used in commercial fishing outside of Washington waters.

Purpose: The purpose is to encourage the use of Washington-based transportation providers in interstate commerce and ensure competitiveness for Washington carriers with carriers in other states.

Category/Year Enacted: Commerce; 1937.

Primary Beneficiaries: Providers of interstate and foreign commerce transportation services.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 22,711 23,347 24,378 25,415
Local taxes 5,940 6,106 6,376 6,647

If the exemption were repealed, would the estimated revenue be realized? No.

82.12.0266 VEHICLES ACQUIRED IN THE MILITARY

Description: The use tax does not apply to vehicles and trailers acquired and used by state residents while they were in the armed forces and stationed outside of Washington. The exemption does not cover persons called to active duty for training of less than six months or vehicles acquired less than 30 days prior to discharge from the military.

Purpose: The purpose is apparently to support resident armed forces members and to create equity, because a similar exemption exists for previous nonresidents who bring their vehicles to Washington.

Category/Year Enacted: Individuals; 1963.

Primary Beneficiaries: Resident members of the armed forces.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 5,277 5,425 5,664 5,905
Local taxes 1,380 1,419 1,481 1,544

If the exemption were repealed, would the estimated revenue be realized? Yes.