WAC 136

Private Mailing Business Tax Guide

Manufacturing Industries

Denturists

"Sale," "casual or isolated sale."

Manufacturer.

"To manufacture."

Tax on manufacturers.

Manufacturer tax not applicable to cleaning fish

Tax on retailers.

Tax on buyers, wholesalers, manufacturers, and processors of various foods and by-products--Research and development organizations--Nuclear fuel assemblies--Travel agents--Certain international activities--Stevedoring and associated activities--Low-level waste disposers--Insurance agents, brokers, and solicitors--Hospitals--Commercial airplane activities--Timber product activities--Canned salmon processors.

Tax on wholesalers, distributors.

Exemption- Amounts received by hop growers or dealers for processed hops shipped outside of state

Value of products, how determined.

Sales in own name--Sales as agent.

Tax imposed--Retail sales--Retail car rental.

Exemptions--Sales of machinery and equipment for manufacturing, research and development.

Use tax imposed.

Exemptions--Machinery and equipment used for manufacturing, research and development, or a testing operation.

Sales and use taxes authorized--Additional taxes authorized--Maximum rates.

Deductions in computing tax.

Manufacturing, Processing for Hire, Fabricating is amended to recognize provisions of SB 6505 (chapter 140, Laws of 2014); and ESSB 6440 (chapter 216, Laws of 2014).

These rules all refer to resale certificates. Proposed action is to add standard language to recognize reseller permits for sales made on or after January 1, 2010.

Manufacturing, processing for hire, fabricating.Effective ---6/17/00 WAC 458-20-136 has been revised to address the issue of when the combining or assembly of items is a manufacturing activity.

MANUFACTURING CONTAMINANT INCIDENTALLY USED FOR OTHER PURPOSES Revised 2/2/09 See ETA 3014.2009

THE MANUFACTURING TAX EXEMPTION FOR PRODUCTS SOLD AT WHOLESALE WITHIN THE STATE -The information is incorrect as it does not recognize subsequent legislation regarding the multiple activities tax credits. Cancelled by ETA 2003 -0 6/30/99

STAINING OF LUMBER CONSTITUTES MANUFACTURING - These documents all identify specific activities that are considered manufacturing activities. A number of these activities have been incorporated as examples of manufacturing activities in the revised WAC 458-20-135 (Extracting natural products) or 458-20-136 (Manufacturing, processing for hire, fabricating) as adopted on May 17, 2000. These examples and the information provided elsewhere in the revised rules provide sufficient guidance to allow the repeal of all of the listed ETAs. Cancelled by ETA 2003 -1s 6/30/00.

SPLITTING OF PEAS AS MANUFACTURING. The document fails to recognize the special manufacturing B&O tax rate provided specifically for these activities. Cancelled by ETA 2003 -0 6/30/99.

Processing Perishable Meat Products. The purpose of this ETA is to explain who is entitled to the preferential B&O tax rate based on the Washington State Supreme Court decision, Agrilink Foods, Inc. v Washington State Department of Revenue, 153 Wn.2d 392 (2005). The scope of this ETA is limited to manufacturers and sellers of perishable meat products sold at wholesale. Revised 2/2/09 See ETA 3112.2009

USE TAX ON ARTICLES MANUFACTURED BY A PUBLIC ROAD CONTRACTOR Revised 2/2/09 See ETA 3071.2009

CHERRY PROCESSING WHICH INCLUDES BRINE CURING, WASHING, PITTING, SIZING AND SORTING - These documents all identify specific activities that are considered manufacturing activities. A number of these activities have been incorporated as examples of manufacturing activities in the revised WAC 458-20-135 (Extracting natural products) or 458-20-136 (Manufacturing, processing for hire, fabricating) as adopted on May 17, 2000. These examples and the information provided elsewhere in the revised rules provide sufficient guidance to allow the repeal of all of the listed ETAs.

MANUFACTURING AND WHAT CONSTITUTES TAXABLE ACTIVITY - These documents all identify specific activities that are considered manufacturing activities. A number of these activities have been incorporated as examples of manufacturing activities in the revised WAC 458-20-135 (Extracting natural products) or 458-20-136 (Manufacturing, processing for hire, fabricating) as adopted on May 17, 2000. These examples and the information provided elsewhere in the revised rules provide sufficient guidance to allow the repeal of all of the listed ETAs. Cancelled by ETA 2003 -1s 6/17/00.

COOKING CRABS AS MANUFACTURING WITHIN THE STATE - These documents all identify specific activities that are considered manufacturing activities. A number of these activities have been incorporated as examples of manufacturing activities in the revised WAC 458-20-135 (Extracting natural products) or 458-20-136 (Manufacturing, processing for hire, fabricating) as adopted on May 17, 2000. These examples and the information provided elsewhere in the revised rules provide sufficient guidance to allow the repeal of all of the listed ETAs. Cancelled by ETA 2003 -1s 6/17/00.

Manufacturing contaminant incidentally used for other purposes

Measure of manufacturing tax on articles produced partly within and partly without the state

A statement of purpose and intent with respect to issues involving the forestry products industry

Public Road Construction Materials – Measure of Tax

Processing Perishable Meat Products

Processing Perishable Meat Products The Department issued Excise Tax Advisory (ETA) 3122.2011 Processing Perishable Meat Products. This ETA was originally issued as ETA 2035 in March 2007 to explain who is entitled to the preferential business and occupation (“B&O”) tax rate based on the Washington State Supreme Court decision, Agrilink Foods, Inc. v. Washington State Department of Revenue, 153 Wn.2d 392 (2005). The following header has been added to this ETA to explain that it does not apply during the period of June 1, 2010 through December 1, 2010.

Withdrawal of published determinations The Department has re-issued this ETA to announce that it has withdrawn Det. No. 92-231, 12 WTD 233. The taxpayer in this determination created gift baskets that contained various individually wrapped food items. The determination correctly reached a conclusion that this activity was not manufacturing. However, WAC 458-20-136 (Manufacturing, processing for hire, fabricating.) was subsequently amended to clarify various factors that the Department considers in determining whether an activity such as creating gift baskets is manufacturing.

Aerospace "tooling" under Substitute Senate Bill 6828 Substitute Senate Bill (SSB) 6828 (Chapter 81, Laws of 2008) provides a number of incentives for the aerospace industry. Several of these incentives relate to “tooling” specifically designed for use in manufacturing commercial airplanes or commercial airplane components. This Excise Tax Advisory (ETA) addresses the Department’s interpretation of this term.

ACTIVITIES FOR HIS OWN USE OR INCIDENTAL TO THE TAXPAYER'S MAJOR ACTIVITY - This document explains the taxability of miscellaneous income associated with and the use of products manufactured for commercial or industrial while engaging in timber harvest activities. It is no longer needed because these issues are addressed in WAC 458-20-13501. Cancelled by ETA 2003-3s 07/16/2001

IN-STATE SALES OF MANUFACTURED RAW SEAFOOD PRODUCTS . The document provides incorrect tax rates and fails to recognize the tax-reporting requirements of the multiple activities tax credit provisions of RCW 82.04.440. Cancelled by ETA 2003 -0 6/30/99.

COMBINING ITEMS TO ACHIEVE A SPECIAL PURPOSE PRODUCT IS MANUFACTURING - WAC 458-20-136 has been revised to address the issue of when the combining or assembly of items is a manufacturing activity. Cancelled by ETA 2003 -1s 6/17/00.

SHEARING STEEL SHEETS & SPLITTING STEEL COILS AS MANUFACTURING. Simply stating that these activities are manufacturing. While this information may have been news on July 17th of 1974, it is of little value today. The tax principles needed to arrive at these decisions are currently provided in the rule. These documents all identify specific activities that are considered manufacturing activities.

ASSEMBLY OF FRUIT BINS AS MANUFACTURING -Simply stating that these activities are manufacturing. While this information may have been news on July 17th of 1974, it is of little value today. The tax principles needed to arrive at these decisions are currently provided in the rule.- WAC 458-20-136 has been revised to address the issue of when the combining or assembly of items is a manufacturing activity. Cancelled by ETA 2003 -1s 6/17/00.

REROLLING PAPER ROLLS, CUTTING PAPER TO SPECIFIC LENGTHS, EMBOSSING, FOLDING, AND PACKAGING AS MANUFACTURING. Simply stating that these activities are manufacturing. While this information may have been news on July 17th of 1974, it is of little value today. The tax principles needed to arrive at these decisions are currently provided in the rule. These documents all identify specific activities that are considered manufacturing activities.

TAXABILITY OF THE MANUFACTURE OF "REFINERY GAS" - WAC 458-20-121 (Sales of heat or steam—Including production by cogeneration), while not specifically identifying refinery gas, does explain that person who produce their own fuel to generate heat, steam, etc. are subject to B&O tax, even if the fuel is a by-product of a manufacturing process. Cancelled by ETA 2003 -2s 6/30/00.

USE TAX APPLIED TO MANUFACTURER'S USE OF GOVERNMENT-OWNED TOOLING The information in this document is incorrect due to subsequent legislation. Cancelled by ETA 2003 -0 6/30/99.

MIXING OF INGREDIENTS AS "MANUFACTURING" - These documents all identify specific activities that are considered manufacturing activities. A number of these activities have been incorporated as examples of manufacturing activities in the revised WAC 458-20-135 (Extracting natural products) or 458-20-136 (Manufacturing, processing for hire, fabricating) as adopted on May 17, 2000. These examples and the information provided elsewhere in the revised rules provide sufficient guidance to allow the repeal of all of the listed ETAs. Cancelled by ETA 2003 -1s 6/17/00.

MANUFACTURING WHERE PLANT AND MATERIALS USED ARE OWNED BY ANOTHER - The information provided in this document was incorporated into a revised WAC 458-20-136. Cancelled by ETA 2003 -1s 6/17/00.

LABOR COSTS PAID BY ANOTHER CORPORATION. -This document is no longer needed. It explains that in the described situation labor costs paid by the owner of a cannery and cold storage plant to the operator was subject to the processing for hire B&O tax. The document notes that cannery workmen were not employees of the cannery owner, despite the fact that the amounts received by the operator were the exact amount of all payroll expenses.

Aerospace Industry B&O Tax Credit for Preproduction Development Expenditures

Aerospace Manufacturers Tax Incentives

Aircraft Prototype Exemption

High Tech B&O Tax Credit Donation

Timber Activities - Reduced Business and Occupation Tax Rates

Employee B&O Credit for Candy Manufacturers

Direct Wine Sales to Consumers - New Registration and Tax Collection Requirements

Reporting Instructions for Composting Facilities

New Apportionment Method

New and Extended Aerospace Tax Preferences

Biotechnology Product & Medical Device Manufacturers - Tax Incentives (Cross Reference 24003)

Clarification for Certain Beef Processors Impacted by the Ban on American Beef Products

Employee B&O Credit for Candy Manufacturers

Semiconductor Materials Manufacturers Tax Incentives (SHB 3190 Chapter 84, Laws of 2006)

New "Economic Nexus" in Washington State May Impact "Foreign Corporations"

Business and Occupation Tax Classification and Rate Changes

Polysilicon Manufacturers Tax Incentives

Fruit and Vegetable Processors May Qualify for B&O Tax Refund

Rural County B&O Tax Credit for New Employees in Manufacturing - Modifications

High Tech B&O Tax Credit Donation

Seafood Product Manufacturers B&O Tax Exemptions

Waste Vegetable Oil Exemption

Changes to the B&O Tax Preferences for Perishable Meat Products and Fruit or Vegetable Products Updated 11/17/10

Biofuel Manufacturers

Reporting Instructions for Composting Facilities

B&O Tax Reporting Requirement Continues After Business Activity Stops (Trailing Nexus)

Semiconductor Materials Manufacturers Filing Requirements Amended for Annual Tax Incentive Survey and Report

Aerospace Industry Manufacturer Tax Incentives

Timber Activities - Reduced Business and Occupation Tax Rate

Changes to the B&O Tax Preferences for Perishable Meat Products and Fruit or Vegetable Products

B&O Tax Relief for Certain Beef Processors

Tax Exemptions Extended for Certain Purchases by Eligible Data Centers and Their Tenants

Exemptions Extended for Certain Purchases by Eligible Data Centers

Tax Incentives for Federal Aviation Regulation Part 145 Repair Stations

Aerospace Industry B&O Tax Credit for Property Taxes Paid

Tax Changes for Manufacturers of Dairy Products

Wineries May Qualify for B&O Tax Refund - For tax periods beginning January 1, 2003, through June 30, 2005

Tax Due on Commercial Use of Molds by Orthotic and Prosthetic Manufacturers

Bio-composite Manufacturing Reduced B&O Tax Rate Restored

Beer and Wine Sales to Retailers

Processing Plants and Cold Storage Warehouses

Seafood product manufacturers B&O tax exemptions extended – Change in filing requirements

Dairy Product Processors Receive B&O Tax Exemption

Semiconductor Materials Manufacturers Filing Requirements Amended for Annual Tax Incentive Survey and Report

Biofuel Manufacturers - Tax Benefits for Manufacturers of Biodiesel Fuel, Biodiesel Alcohol Fuel, Feedstock and Wood Biomass Fuel

Aerospace Tooling Manufacturers Tax Incentives

Direct Wine Sales to Consumers - New Registration and Tax Collection Requirements

Fruit and Vegetable Processors Tax Exemption - New E-file Requirement

Fruit and Vegetable Processors Tax Exemption

Energy Efficient Commercial Equipment - Sales Tax Incentive for Purchases

Fresh Fruit or Vegetable Manufacturers B&O Tax Exemptions

Registered Out-of-state Businesses Currently not Reporting Income from Service Activities - New Apportionment for Certain Income

Seafood Processors Receive B&O Tax Exemption

Direct Wine Sales to Consumers - New Registration and Tax Collection Requirements

Fresh Fruit/Vegetable, Seafood, and Dairy Product Manufacturers B&O Tax Exemptions Extended

Tax Attorneys and CPAs New "Economic Nexus" in Washington State May Impact Your Clients

Processing Perishable Meat Products

B&O Credit for Candy Manufacturers Repealed

Aerospace Industry Sales & Use Tax Exemption for Computer Hardware, Software & Peripherals

BUSINESS AND OCCUPATION TAX - MANUFACTURING - MINIMAL ACTIVITIES. Whether an activity constitutes "manufacturing" as defined for the business and occupation tax by RCW 82.04.120 is not determined by the quantity of the activity or its percentage of the taxpayer's total effort, but by a qualitative comparison of the activity with the statutory definition.

B&O TAX -- SOFTWARE -- PROCESSING FOR HIRE -- 20% RULE.In determining if one who employs a processor for hire furnishes more than 20% of the value of the materials or ingredients manufactured so as to be subject to Manufacturing B&O tax, intangible contributions such as the intelligence on an original computer diskette are to be taken into account.

B&O TAX -- SOFTWARE -- PROCESSING FOR HIRE -- 20% RULE.A seller of software who hires third parties to copy diskettes and manual will be deemed the party furnishing the original diskettes and manuals notwithstanding the fact that the originals may been shipped directly to the third parties by the parent company of the seller.

MANUFACTURING B&O TAX -- VALUE OF THE PRODUCT --GROSS PROCEEDS OF SALE -- RENTALS.Where gross proceeds from rentals are not indicative of the true value of the subject matter of the sale, the gross proceeds are not "comparable sales" for purposes of establishing the value of a product for Manufacturing B&O tax.

MANUFACTURING--FRESH FRUITS AND VEGETABLES--PROCESSOR FOR HIRE--ASEPTIC PROCESSING OF JUICE.A taxpayer who aseptically processes juice, so that it can be stored unrefrigerated for long periods of time, is performing a manufacturing activity in preserving the fruit.However, since this taxpayer is not the owner of the juice, it is taxable as a processor for hire, not as a manufacturer.

USE TAX -- B&O TAX -- TOOLING -- COMMERCIAL OR INDUSTRIAL USE.Tooling made by a manufacturer who uses it to make airplane parts is subject to use tax and Manufacturing B&O tax.

MANUFACTURING B&O TAX -- VALUE OF THE PRODUCT -- GROSS PROCEEDS OF SALE-- RENTALS.Where the gross proceeds from rental equipment are not indicative of the true value of the equipment being rented, gross rental proceeds should not be used to determine the value of a product for Manufacturing B&O tax.Accord: Det. No. 89-486A, 10 WTD 305 (1990).

B&O TAXES -- MANUFACTURING -- DEFINITION --COMBINING AND ATTACHING PARTS.The combining and attaching of parts to a precast body in addition to installing the hydraulics and electrical systems into . . .machinery constitutes a manufacturing activity.Accord: Det. No. 87-312, 4 WTD 141 (1987).

B&O TAXES -- MANUFACTURING -- DEFINITION --REPAIRING.The owner's activity of replacing worn out sorting bars into its rental equipment does not constitute a separate manufacturing activity.The labor and materials applied merely restore or prolong the utility of an existing article of tangible personal property.Accord: ETB 213; Det. No. 89-406, 8 WTD 157 (1989) distinguished.

B&O TAX -- MANUFACTURING -- CONTRACTING WITH OTHERS -- SOFTWARE DISKS AND PACKAGING.The production of software disks and their packaging results in "a new, different or useful . . . article of tangible personal property" and is thus manufacturing.

The taxpayer in this determination created gift baskets that contained various individually wrapped food items. The determination correctly reached a conclusion that this activity was not manufacturing. However, WAC 458-20-136 (Manufacturing, processing for hire, fabricating.) was subsequently amended to clarify various factors that the Department considers in determining whether an activity such as creating gift baskets is manufacturing. The determination does not address these factors and has caused taxpayers confusion.

MANUFACTURING TAX -- DEFINITION -- MODEL BOAT KITS.The activity of combining hundreds of component parts with assembly instructions in order to produce easy-to-assemble model kits is taxable under the manufacturing tax classification on the gross proceeds of sale derived from those kits.Accord: ETB 298: Dist.: Det. No. 88-443, 7 WTD 49 (1988); Det. No. 88-180, 5 WTD 307 (1988).

B&O TAX - PROCESSING FOR HIRE - MATERIALS SUPPLIED IN LARGE BY CUSTOMER.A taxpayer will be taxable as a processor for hire when it completes the assembly of manufactured galley systems shipped in from [Europe] by a foreign affiliate, using materials furnished by the foreign affiliate and supplying only the incidental fastening materials to complete the assembly, so that the value of material provided by it is less than 5% of the overall sales price for any one galley.

B&O TAX - MANUFACTURING - NONRESIDENT CORPORATION - MATERIALS PROCESSED FOR HIRE IN WASHINGTON.A foreign nonresident company will not be taxable as a manufacturer when it contracts to have materials processed for hire in this state.

THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 01-006, 20 WTD 124 (1999).

MANUFACTURING B&O TAX -- VALUE OF PRODUCT -- GROSS PROCEEDS OF SALE.Engineering drawings incorporated into the manufacture of circuit boards are materials or ingredients of the final product whose value is measured by the gross proceeds of sale of the circuit boards and not by the cost basis of the engineering itself.

MANUFACTURING TAX -- DEFINITION -- COMPRESSING HAY FOR SHIPMENT.The business activity of purchasing and compressing hay for shipping purposes is not a manufacturing activity because it does not result in a new, different or useful substance.

B&0 TAX -- RETAIL SALES TAX -- SERVICE -- DEMONSTRATION -- CATER -- TRUE OBJECT.The classification of receipts from manufacturers to demonstrate their products and provide samples to potential customers is determined by the true object of the transaction.If the true object is a marketing activity, the receipts are taxable under the catch-all "service and other" business and occupation tax classification.

MANUFACTURING -- PACKAGING -- COMBINING ITEMS TO ACHIEVE A SPECIAL PURPOSE -- ANALYSIS UNDER ETB 398.Absent new legislation, case law, or regulations, the 1993 revision to ETB 398 will be used exclusively to determine the tax consequences of combining items to achieve a special purpose product; the Department, in revising the ETB, considered and weighed all of the manufacturing/packaging cases that had been previously decided.

MANUFACTURING v. PACKAGING -- COMBINING ITEMS TO ACHIEVE A SPECIAL PURPOSE. When Taxpayer has components manufactured to its specifications in Germany, including the stamping of its name on each piece, and has these components shipped in bulk to its Washington location where it packages the components in sets of six without modifying them.Taxpayer is engaged in mere packaging, and not manufacturing for B&O tax purposes.

MANUFACTURING TAX -- DEFINITION -- PROCESSING FOR HIRE -- SIGNIFICANT CHANGE -- SORTING & COMPACTING SHEET METAL.The activity of sorting and compacting loose sheet metal into cubes for others is processing for hire if the sorting and compacting results in a "significant change" in the product.

B&O TAX CREDITS -- MANUFACTURING -- DISTRESSED AREAS -- INTERNET SERVICES.Merely providing Internet services, such as creating Web pages, without producing tangible personal property for sale, or for commercial or industrial use does not qualify a person for the B&O tax credits program for distressed areas.

B&O TAX -- MANUFACTURING -- PHYSICAL ASSEMBLY OF COMPONENTS -- ETB 398 --APPLICABILITY.ETB 398 is applicable when there is the combination and/or packaging of individual components, and not when various components are physically assembled in this state.While the source of components is one factor to be considered under ETB 398 in order to determine whether an activity is manufacturing, the source of components is not a factor when there is actual physical assembly.

B&O TAX -- MANUFACTURING - MAJOR COMPONENTS -- MINOR COST OF ASSEMBLY.The physical assembly of a motor and a pump constitute manufacturing because a "new, different and useful" product has been produced, even though the cost in time and money of such assembly is minimal when compared with the cost of its major components.

B&O TAX - PERISHABLE MEAT PRODUCTS. A person who slaughters and processes poultry is not selling the same processed meat product when he adds other foods items to the poultry to produce new or different food products, such as chicken Kiev or chicken marsala for example.Therefore, the person does not qualify for the special B&O tax classification and rate contained in RCW 82.04.260(7).Instead, the manufacturing B&O tax rate and classification found in RCW 82.04.270 applies.

WHOLESALING B&O TAX -PERISHABLE MEAT PRODUCTS. Perishable meat products that are not manufactured or processed by a wholesaler must be perishable when sold in this state by the wholesaler in order for the special B&O tax classification and rate contained in RCW 82.04.260(7) to apply to the wholesale sales.

B&O TAX -- PROCESSING FOR HIRE OR MANUFACTURING -- AGENCY SOFTWARE -- FULFILLMENT CENTER. Taxpayer's claim of agency on sales of computer software to customers was not recognized where Taxpayer failed to establish all of the requirements of Rule 159.

MANUFACTURING B&O - VALUE OF CANNED SOFTWARE - LEASED - LICENSED -- OUT-OF-STATE.A company that produces canned software in Washington, which leases or licenses the software to out-of-state users is subject to manufacturing B&O tax measured by the gross proceeds of sales, the total realized in lease or license fees from its customers for the software.

B&O TAX - PERISHABLE MEAT PRODUCTS. A taxpayer who processes perishable poultry and meat is not selling the same processed meat product when it adds other food items to the poultry and meat to produce a new or different food product, and the special B&O tax rate contained in RCW 82.04.260(7) does not apply to the wholesaling of this new product.

B&O TAX - AGRICULTURAL EXEMPTION - LIQUID EGGS.The production of liquid eggs is the creation of a new, different, and useful substance.Notwithstanding the fact that a farmer does not combine liquid eggs with anything, (s)he loses the agricultural B&O exemption because (s)he engages in a manufacturing activity.

AGRICULTURAL EXEMPTION - LIQUID EGGS.The production of liquid eggs is the creation of a new, different, and useful substance.Notwithstanding the fact that a farmer does not combine liquid eggs with anything, (s)he loses the agricultural B&O exemption because (s)he engages in a manufacturing activity.

RETAIL SALES TAX -- MANUFACTURING EQUIPMENT AND MACHINERY (M&E) EXEMPTION --EXTRACTING -- MANUFACTURING OPERATION -- WHERE MANUFACTURING OPERATION BEGINS.The use of a loader at a manufacturing site by a producer and seller of ready-mix concrete and sand and gravel products, limited to moving previously quarried but unprocessed materials from stockpiles to the sorting and washing area, is not use in a manufacturing operation.Only those activities that take place after the first screen are considered part of the manufacturing operation.

RETAIL SALES TAX -- MANUFACTURING EQUIPMENT AND MACHINERY (M&E) EXEMPTION --EXTRACTING -- MANUFACTURING OPERATION -- WHERE MANUFACTURING OPERATION BEGINS.The use of a loader at a manufacturing site by a producer and seller of ready-mix concrete and sand and gravel products, limited to moving previously quarried but unprocessed materials from stockpiles to the sorting and washing area, is not use in a manufacturing operation.Only those activities that take place after the first screen are considered part of the manufacturing operation.

RETAIL SALES TAX - MANUFACTURING MACHINERY AND EQUIPMENT ("M&E") EXEMPTION -USED DIRECTLY IN A MANUFACTURING OPERATION - EXEMPT AND NON-EXEMPT USES.The purchase of a crane is exempt from retail sales tax as manufacturing machinery or equipment under RCW 82.08.02565, even though it is used both on the manufacturing site and off-site, if the majority of its use is on-site.

MANUFACTURING AND USE TAXES -- TEST -- REPAIRING OR MANUFACTURING -- SIGNIFICANT CHANGE -- FACTORS.To determine whether an activity constitutes repairing or manufacturing one must examine whether a "significant change" has taken place in the articleafter considering a variety of factors, including the following:whether the refurbishment merely restores the article to its original condition, whether the article's original functional utility is significantly enhanced, and whether the refurbishment process is so extensive so that a new, different or useful article results.

USE TAX DEFERRAL - QUALIFYING ACTIVITIES.Mining and transportation activities do not qualify as manufacturing activities.Rock crushing and smelting activities qualify as a manufacturing activity.

BUSINESS AND OCCUPATION TAX - MANUFACTURING - COMMERCIAL OR INDUSTRIAL USE - SIGNS.A taxpayer primarily engaged in retailing, which internally produces signs and other display materials for use in its stores, is engaged in manufacturing under the business and occupation tax.

USE TAX - MANUFACTURED PROPERTY - COMMERCIAL OR INDUSTRIAL USE - SIGNS - DISPLAY MATERIALS.A taxpayer which manufactures signs for its own use in its retail stores is liable for use tax on the "value of the articles so used."

B&O TAX -- PACKING MATERIALS -- PALLETS -- VALUE OF PRODUCTS MANUFACTURED.A manufacturer's separately-itemized charges for shipping pallets on which the manufacturer's product is held for sale, where title to the pallets passes to the customer upon delivery, are part of the value of the products manufactured, and therefore are part of the measure of the manufacturing B&O tax.

FOOD MANUFACTURING.RCW 82.04.260 does not establish a sub-category of food manufacturing for B&O tax purposes, applicable to all food manufacturing.Rather, it establishes a handful of specific and narrow classifications, applicable to only a few crops and food products, and limited to certain types and stages of processing.

MANUFACTURING -- SOYBEANS INTO SOYBEAN OIL -- CANOLA INTO CANOLA OIL.RCW 82.04.260's provision relating to manufacturing soybeans into soybean oil and canola into canola oil does not cover all participants in the manufacturing process, between receipt of the beans for processing and creation of finished oil.

SOYBEAN OIL -- MODIFYING.The special tax classifications in subsections (1) and (2) of RCW 82.04.260, relating to trading in soybeans, and the manufacturing of soybeans into soybean oil, do not apply to the activity of modifying bulk soybean oil to make specialty oils.

MANUFACTURING -- NEW, DIFFERENT OR USEFUL -- SOYBEAN OIL.Where the taxpayer buys soybean and canola oil in bulk and modifies it to meet the requirements of various categories of users by adding agents that alter its physical and chemical qualities, and by heat sealing it to increase shelf life, the taxpayer's industrial activity produces a new, different or useful product under the rationale of applicable case law, because a significant change has been accomplished when the end products are compared with the article before it was subjected to the process.The activity is taxable under the ma

MANUFACTURING B&O TAX - USE TAX - STEVEDORING COMPANY - DOCKSIDE RAMP.Where a stevedoring company that leases a port facility adjacent to a navigable body of water builds a large ramp on the leased property, moves the ramp to the water's edge, and attaches it to the realty, it has not engaged in a taxable manufacturing activity.Use tax is due only on the materials used to construct the ramp.

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.

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.

B&O TAX -- "SEAFOOD" -- "MEAT" -- INTENT AND MEANING.In the absence of clear legislative guidance, the Department must make the best sense of a statute's intent and meaning using those tools that are available, including in this case a memorandum evidencing the evidence of a legislative staff's understanding of the factual circumstances surrounding a proposed amendment and the effect it would have on the then-existing RCW 82.04.260.

B&O TAX -- "PERISHABLE MEAT PRODUCTS" -- "SEAFOOD" -- DEFINITIONS.The Legislature intended the "perishable meat products" and "seafood products" sections of RCW 82.03.260 to be mutually exclusive, and "seafood" will not be considered to be "meat" when sold at wholesale in order to obtain the preferential wholesaling rate provided by RCW 82.04.260's "perishable meat products" section.

B&O TAX -- "MEAT" & "SEAFOOD" -- DIFFERENT WHOLESALING RATES -- "ESTABLISHED POLICY OBJECTIVE."There is no evidence that any established policy objective is violated by imposing different tax rates on "perishable meat products," which receive a special wholesaling rate under RCW 8204.260, and "seafood products," whose wholesale sales are taxable under the higher general wholesaling rate provided by RCW 82.04.270.

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.

MANUFACTURING B&O TAX -- HST - SELF-PRODUCED FUEL -STILL GAS - CATALYTIC COKE.Still gas produced and used by the taxpayer as a fuel is subject to tax, valued at the cost the taxpayer would have incurred to purchase a fuel of equivalent BTU value.In accordance with ETA 109, catalytic coke produced as a contaminate is not subject to B&O tax, even though it incidentally produces heat when consumed.

RCW 82.04.120: MANUFACTURING B&O TAX -- MANUFACTURING -- DEFINITION - SIGNIFICANT CHANGE -- PITCH-MELTING PROCESS.A taxpayer's coal tar pitch melting process did not constitute a manufacturing activity where the liquefied pitch did not change chemically or functionally, did not change in value, and any change in the pitch's physical state was only temporary.

B&O TAX -- MANUFACTURER -- PROCESSOR FOR HIRE -- FUNGIBLE GOODS COMMINGLING.Person who produces finished products from materials supplied by customer is a processor for hire, notwithstanding that materials or finished products, due to their fungible nature, are commingled with other materials or finished products in the person's possession.

RCW 82.04.260(4) – B&0 TAX – PERISHABLE MEAT PRODUCTS – RETAIL SALES. The preferential B&O tax rate for the slaughtering, breaking and/or processing of perishable meat products does not apply to retail sales of meat products.

RULE 458-20-136; RCW 82.04.120: MANUFACTURING TAX – DEFINITION OF “TO MANUFACTURE” – CUSTOM BUILDING OF MARINE GENERATORS AND PROPULSION SYSTEMS. The activity of custom building of marine generators and propulsion systems constitutes manufacturing under RCW 82.04.120 and WAC 458-20-136 (Rule 136) because the activity creates a new, different, or useful article of tangible personal property. The gross proceeds from the taxpayer’s sales of the resulting products is subject to the manufacturing business and occupation (B&O) tax.

WAC 458-20-136; RCW 82.04.110; RCW 82.04.120: MANUFACTURING – RESTAURANT FOOD PREPARATION. Food preparation by restaurant does not constitute manufacturing.

RULE 136(4); RCW 82.04.240: RCW 82.04.210: B&O TAX – MANUFACTURING – BYPRODUCT. A manufacturer of paper products is subject to manufacturing B&O tax on the value of paper trim it sells to recycling companies.

B&O TAX - MANUFACTURING - WHAT CONSTITUTES.Cutting, sewing, and assembling materials and hardware to make a new product is manufacturing as defined by RCW 82.04.120.

B&O TAX -- MULTIPLE ACTIVITIES EXEMPTION -- CONSISTENCY WITH RCW 82.04.440.Because the very language of the multiple activities exemption (i.e., "with respect to . . . manufacturing of the products so sold") required that one look to the individual transactions involved to determine proper tax treatment, no merit found in assertion that RCW 82.04.440 precluded taxpayers (otherwise taxable as wholesalers) from being taxable as manufacturers when goods shipped out-of-state.

B&O TAX -- MANUFACTURING -- HOPS -- PELLETS AND EXTRACT.Raw hops which have been processed into hops pellets and hops extract are "new, different, and useful articles" under the rationale of enumerated case law, because a significant change has been accomplished when the end products are compared with the article before it was subjected to the process.

B&O TAX -- MANUFACTURING -- WHAT CONSTITUTES.The taxpayer's activity of buying patches and hats and sewing the patches on the hats and silk screening t-shirts for re-sale found to constitute manufacturing for purposes of the B&O tax.Manufacturing includes producing articles for sale from prepared materials by giving them new form, qualities or combinations.

B&O TAX -- PUBLISHING -- PACKAGING -- MANUFACTURING DISTINGUISHED.A publisher and seller of educational materials does not become a manufacturer simply by packaging some items together as part of a series.To constitute manufacturing, the combining of the items must produce a new, different, or useful substance or article of tangible personal property.

B&O TAX -- PRINTING AND PUBLISHED -- IN-HOUSE PRINTING -- INSURANCE COMPANY.An insurance company that prints and publishes items for its own use is subject to B&O tax on the costs for materials, labor, and overhead.THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 93-269ER, 14 WTD 153 (1995).

B&O TAX -- EXEMPTION -- MULTIPLE ACTIVITIES -- INVALIDATION.The RCW 82.04.440 multiple activities exemption was ruled unconstitutional in Tyler Pipe Industries, Inc. v. Washington Department of Revenue, 483 U.S. ___, 97 L. Ed 2d 199, 107 S. Ct. 2810 (1987).The issue of remedy was remanded to the Washington Supreme Court.

ADMINISTRATIVE LAW -- B&O TAX -- MANUFACTURING -- PROCESSING FOR HIRE -- NONRESIDENT.An administrative agency has no authority to determine constitutionality of the law it administers.The Department may therefore not consider whether the provision in RCW 82.04.110 which exempts nonresidents whose materials are processed for hire in this state from the manufacturing tax is unconstitutional.

B&O TAX -- MANUFACTURING -- CONTRACTING WITH OTHERS -- SOFTWARE DISKS AND PACKAGING.The duplicating of software disks and their packaging with documentation into a consumer-useful product results in "a new, different or useful . . . article of tangible personal property" and is thus manufacturing.

B&0 TAX -- LIABILITY -- RELIANCE ON PRIOR AUDIT.During the period of taxpayer's audit, Washington taxpayers who made and sold products out-of-state were taxable under the Manufacturing classification of the B&O tax for those sales and under the Wholesaling or Retailing classification for their in-state sales.Taxpayers are obligated to inform themselves of tax ramifications of their activities.Prior audit which missed asserting tax on taxpayer's out-of-state sales does not entitle taxpayer to rely on error and escape taxation on those activities in later years.

B&O TAX -- MANUFACTURING -- INTERMEDIATE SUBSTANCES -- END PRODUCT MANUFACTURED.The manufacturing B&O tax does not apply to the value of each intermediate substance produced during the manufacturing process which then becomes a component of the end product being made for sale.Only if such intermediate substances are withdrawn from the process are their possessions taxable.F.I.D.

B&O TAX -- EXEMPTION MULTIPLE ACTIVITIES -- NATIONAL CAN -- REFUNDS.Refunds of business and occupation tax paid prior to June 23, 1987 will not be granted if the basis for the refund request is Tyler Pipe v. Washington, 483 U.S. ____, 97 L. Ed 2d 199, 107 S. Ct. 2810 (1987).

B&O TAX -- MANUFACTURING -- SILK SCREEN PRINTING -- SHIRTS -- NEW, DIFFERENT OR USEFUL.Where taxpayer buys blank shirts and uses a silk screen process to imprint stripes, patterns, or designs on the shirts which are then sold in interstate commerce, the taxpayer's industrial activity produced a new, different or useful product which is subject to Manufacturing B&O tax.

B&0 TAX -- PROCESSING FOR HIRE -- SERVICE --STORAGE -- MEASURE OF TAX.The activities of blending, processing, and packaging antifreeze and of mixing fuel fall within the classification of "processing for hire." Persons who process for hire are taxable under that classification upon the total charges made therefore, including associated storage, unloading and loading charges.

The determination incorrectly applied RCW 82.04.260(4) (formerly 82.04.260(8)) and ETA 3059.2008 to a rendering business whose primary function was to produce nonperishable products. Because the taxpayer in the determination was not slaughtering, breaking or processing perishable meat products, it was not entitled to the tax rate contained in RCW 82.04.260(4). Generally, when a taxpayer is engaged in a process that includes multiple related activities, the Department will look to the primary activity to determine the appropriate tax classification for the process.

B&O TAX -- PRINTING AND PUBLISHING -- IN-HOUSE PRINTING.Persons acting for business purposes as their own printers are subject tax under the manufacturing B&O tax classification upon that activity.Group Health v. Department of Rev., 106 Wn. 2d 391 (1986); Det. No. 88-186, 5 WTD 319 (1988).

USE TAX -- PACKING MATERIALS -- USE BY PROCESSORS FOR HIRE.The use of articles of tangible personal property solely as packing materials by processors for hire is not subject to use tax.

B&O TAX -- PROCESSING FOR HIRE -- PACKING OF SEAFOOD.The packing of seafood belonging to others is taxable under the processing for hire classification when performed in conjunction with other processing activities.

B&O TAX -- MANUFACTURING -- LAMINATING WITH CLEAR PLASTIC. Laminating paper materials with clear plastic through the use of a machine is a manufacturing activity.

B&O TAX -- MANUFACTURING -- EDUCATIONAL KITS.Putting books, tapes, posters and similar items into a plastic container for shipment to customers is not a manufacturing activity.Determination No 88-180, 5 WTD 307 (1988).

MANUFACTURING -- DEBARKING OF LOGS.The debarking of logs is a manufacturing activity.The fact that this activity does not meet the federal definition of "manufacturing" for the export of logs does not alter the tax consequences in Washington state.

MANUFACTURING TAX-- DEFINITION -- REMANUFACTURING ENGINES -- INTERSTATE DEDUCTION.The activity of remanufacturing used engine cores into remanufactured engines was found to constitute manufacturing within the definition of RCW 82.04.120 and 458-20-136 (Rule 136).Therefore sales of remanufactured engines sold and delivered outside the state could not be deducted as interstate sales.

B&O TAX - MANUFACTURING - VALUE OF PRODUCTS - OUT-OF-STATE LEASE - TAXPAYER LEAVES WASHINGTON.When a taxpayer which has manufactured a product in this state for lease out-of-state subsequently removes itself from this state, that taxpayer will be required to continue to report the manufacturing tax measured by the lease payments as long as this state has any taxing jurisdiction over it.If jurisdiction over the taxpayer is to cease before the taxpayer has paid manufacturing tax on a measure equaling at least the product's "cost of production," the taxpayer will owe manufacturing tax on t

USE TAX -- MEASURE OF -- PRINTED MATERIALS.A county government which makes and uses printed materials is liable for use tax on the total value of such materials which value includes labor and overhead costs expended in the printing thereof.

B&O TAXES -- MANUFACTURING -- BYPRODUCT -- MANUFACTURED IN CONJUNCTION WITH A MARKETABLE PRODUCT -- VALUE -- REFINERY GAS.The manufacturing tax applies to both products and byproducts of the same manufacturing process measured by the gross proceeds of sale of all products and byproducts sold, plus the value of any byproduct produced and put to commercial or industrial use.