Credits

Aerospace Credit

A business and occupation (B&O) tax credit available to:

1. [920]
   Manufacturers and processors for hire of commercial airplanes and component parts of commercial airplanes for qualified preproduction development expenditures. An affidavit is required and an Annual Tax Performance Report must be completed and filed by May 31 of the year following the credit. Effective December 1, 2003. Electronic filing required.
2. [910]
   Manufacturers of commercial airplanes or component parts of commercial airplanes equal to property taxes and leasehold excise taxes paid on new buildings, land upon which the new buildings are located and increased value or renovated buildings used exclusively for manufacturing commercial airplanes or component parts thereof and property taxes paid on equipment eligible for the machinery and equipment exemption. Credit is taken on the excise tax return after property taxes have been paid. An Annual Tax Performance Report must be completed and filed by May 31 of the following year. Electronic filing required. Effective December 1, 2003. Note: Effective July 1, 2006, the B&O tax credit was expanded to include leasehold excise tax paid on such property.
3. [935]
   Aerospace Non-Manufacturers. Persons who develop, design, and engineer, but do not manufacture commercial airplanes and component parts thereof are eligible for a B&O tax credit for qualified preproduction development expenditures occurring after July 1, 2006. The credit must be taken against taxes due for the same calendar year in which the qualified preproduction development expenditures are incurred and an Annual Tax Performance Report must be completed and filed by May 31 of the following year. Electronic filing required.

Aerospace Manufacturers Tax Incentives and Non-manufacturer Aerospace Incentives

Aluminum Smelter Credits

Aluminum smelters may qualify for:

1. a business and occupation (B&O) tax credit for property taxes paid, (credit ID 910) 82.04.4481
2. an exemption from the state portion of retail sales tax and use tax on tangible personal property and all construction at the aluminum smelter, and (credit ID 905) 82.08.805 and 82.12.805
3. an exemption from the natural gas use tax.

Persons selling power or gas to aluminum smelters: (credit IDs 890/895)

Qualifying companies selling electricity, natural gas, or manufactured gas to an aluminum smelter may receive a B&O or public utility tax credit provided the selling price is reduced by the amount of the credit. Complete and attach Credit for Energy Providers to Aluminum Smelters (pdf) form to Excise Tax Return. 82.16.0498; 82.04.4482

Bad Debt Tax Credit [801]

Bad debt tax credit is allowed for retail sales tax which has been remitted to the Department, but has become uncollectible and written off for IRS purposes. Completion of a Schedule B form is necessary only if the sales tax rate at the time of sale is different from the current rate. When the rates are the same, the deduction may be taken on retailing B&O [02] and retail sales [01] tax. WAC 458-20-196

Clean Alternative Fuel Commercial Vehicle and Vehicle Infrastructure Tax Credit

Businesses are eligible for a business and occupation (B&O) or public utility (PUT) tax credit based on:

• Purchases of new commercial vehicles and qualifying used commercial vehicles that are principally powered by a clean alternative fuel,
• Leases of new commercial vehicles that are principally powered by a clean alternative fuel (Effective July 1, 2016), or
• Costs to modify a commercial vehicle to be principally powered by a clean alternative fuel, including the purchase of tangible personal property incorporated into the vehicle and labor charges.
• Purchases of alternative fuel vehicle infrastructure component parts, as well as related installation and construction costs.

Special Notice - Clean alternative fuel commercial vehicles and vehicle infrastructure tax credits expanded. This tax preference is subject to public disclosure 24 months after it was claimed. See Tax Preference Transparency for more information on this public disclosure.

Commute Trip Reduction Credit [820]

Employers and property managers who provide commute trip reduction incentives to or on behalf of their own or other employees are eligible for a credit against their B&O tax or public utility tax (PUT) due. An application must be submitted to the Department between January 1 and January 31, following the calendar year in which the applicant made commute trip reduction incentive payments. This tax preference is subject to public disclosure 24 months after it was claimed. See Tax Preference Transparency for more information on this public disclosure. Special Notice - Commute Trip Reduction Tax Credit Extended to July 1, 2024

Customized Employee Workforce Training Program [940]

Effective June 7, 2006, businesses that participate in the Washington Customized Training Program may take a B&O tax credit for 50 percent of their payment to the training program. The tax credit may not exceed the B&O tax amount due. Credits may be carried over until July 1, 2026. Electronic filing of all returns, documents, and surveys is required. To document the credit, the Customized Training Credit Worksheet must be completed and submitted with the return. The credit is itemized on the Credits section of the excise tax return. Businesses must also file an Annual Tax Performance Report with the Department of Revenue by May 31 of the following year. RCW 82.04.449; Special Notice - B&O Tax Credit for Washington Customized Training Program Extended

Destination Sourcing Tax Credit [602]

This credit applies only to Washington retail businesses that ship or deliver products they sell to in-state locations.

Beginning July 1, 2008, Washington businesses that ship or deliver goods in-state are required to charge sales tax based on where the customer receives the goods - the destination of the delivery. To help retailers with this change, eligible retail businesses may receive up to $1,000 in tax credits to offset any necessary changes to their accounting system, point of sale, or other systems. Retail businesses are eligible if they meet all of the following requirements:

• Registered with the Department of Revenue prior to July 1, 2008
• Physical presence in Washington
• Gross sales for Washington State is less than $500,000 annually
• Receive at least 5% of their taxable sales income from deliveries
• Receive at least 1% of their taxable sales income from deliveries outside the jurisdiction where they collect the most sales tax

How to calculate and report the credit:

• Calculate total costs incurred one year before or after July 1, 2008, to comply with tax sourcing changes. Costs include goods and services purchased and labor costs.
• Credit is the lesser of total costs incurred or $1,000. For example, if the total cost incurred was $850, the maximum credit allowed is $850. If the total cost incurred was $1,500, the amount of the credit is limited to $1,000.
• Credit taken per return cannot exceed the total of B&O taxes plus the state portion of the retail sales tax, minus any other credits. However, any remaining credit may be carried over to the next reporting period until used.

  For example, total costs incurred equal $850. The maximum credit allowed is $850. On the July 2008 tax return, total taxable retail sales equal $8,000.

  State portion of retail sales = $520
  B&O taxes = $37.68
  Small business B&O credit (SBC) = $35
  B&O tax due less SBC = $2.68
  B&O taxes due + state portion of retail sales tax = $522.68
  Sourcing tax credit allowed on the July 2008 tax return = $522.68

  $327.32 may be carried over to the next reporting period.

• If at least a portion of the credit is not claimed on a return period within one year after the effective date of July 1, 2008, the credit is no longer available. RCW 82.32.755

Energy Efficiency Incentive Credit [999]

Effective July 1, 2021, a public utility tax credit is available for qualifying utilities that provide incentive payments to certain owners of qualifying covered commercial buildings or multifamily residential buildings. Public utility tax credit for payments made to owners meeting the state energy performance standard.

External Multiple Activities Tax Credits (MATC) – Taxes Paid to Other States

These credits are allowed for businesses that pay a qualifying gross receipts tax to other states on activities also taxable in Washington. WAC 458-20-19301; ETA 3085.2009 – Eligibility of Taxes for Multiple Activities Tax Credits (MATC).

Manufactured Outside Washington MATC [67]

The law offers this credit to extractors or manufacturers doing business and paying qualifying gross receipts taxes on their extracting or manufacturing activity. This activity takes place in other states or taxing jurisdictions that are also taxable in Washington.

Sold Outside Washington MATC [68]

The law offers this credit to extractors or manufacturers doing business and paying qualifying gross receipts taxes on their selling activity in other states or taxing jurisdictions that are also taxable in Washington.

Hazardous Substance Tax [805]

Hazardous substance tax credit is allowed for the tax paid on the value of fuel carried from this state in the fuel tank of airplanes, ships, trucks, or other vehicles. In effect, this gives a tax credit for fuel that was taxed, but not used, in Washington. WAC 458-20-252.

High Technology Credit [830] (Expired January 1, 2015)

Note: Effective June 6, 2011, RCW 82.32.800 allows businesses to voluntarily donate all or part of their high technology credit to the Opportunity Expansion Program. Special Notice – High Tech B&O Tax Credit Donation

High technology businesses may claim a B&O tax credit for research and development activities in Washington. Businesses performing research and development in the following areas qualify for the high technology credit: advanced computing, advanced materials, biotechnology, electronic device technology, and environmental technology. Persons claiming the credit must file an Annual Tax Performance Report due by May 31 of the year following any year in which credit is taken. Effective January 1, 2006, all returns, surveys, reports, and any other required forms or information must be filed in an electronic format as provided or approved by the Department of Revenue. RCW 82.04.4452; Special Notice - High Technology Business and Occupation Tax Credit Changes; Special Notice - High Technology B&O Tax Credit for Qualified R&D Expenditures and the High Technology Sales and Use Tax Deferral Set to Expire

Hospitals Safe Patient Handling Credit (Repealed - July 24, 2015) [955]

Effective June 7, 2006, ESHB 1672 requires hospitals to establish a program to improve the safety of patients who are being moved, lifted, or repositioned. Hospitals can take a B&O tax credit equal to 100 percent of the cost of patient lifting equipment. Each hospital’s total available credit is capped at $1,000 for each acute care available inpatient bed. Complete and attach the Hospital Safe Patient Handling B&O Credit Worksheet to the excise tax return each time the credit is taken. The credit is itemized on the Credits section of the excise tax return. This credit is only available for purchases made between June 7, 2006, and December 30, 2010. Special Notice - Hospital Safe Patient Handling B&O Credit; RCW 82.04.4485

International Services Credit [855]

Businesses engaging in certain international services and creating and filling new employment positions in Community Empowerment Zones, or contiguous designated census tracts meeting certain unemployment and poverty criteria, may take the international services B&O tax credit. International services must be provided to persons domiciled outside the United States or be for use primarily outside this country. See Tax topic - International service activities B&O tax credit - Q&A; RCW 82.04.44525

Main Street Credit [960/961]

Businesses can apply electronically for a credit against the B&O tax and public utility tax equal to 75% of approved contributions made to a Main Street Organization or to the Main Street Trust Fund.

In order to receive a credit, the tax credit must be applied for and approved prior to making a contribution. For more information about the program, visit our tax incentives page and Chapter 82.73 RCW.

Manufactured/Sold Inside Washington MATC [69]

The law offers this credit to a business that both extracts and/or manufactures and sells a product at wholesale or retail in Washington.

Motion Picture Competitiveness Program Contributors B&O Credit [950]

Persons who make cash contributions to an approved Motion Picture Competitiveness Program (MPCP) may qualify for a B&O tax credit. MPCP is a nonprofit organization whose sole purpose is to revitalize the state’s economic, cultural, and educational standing in the national and international market of motion picture production. The credit has a total statewide annual cap of $3.5 million and is available on a first-come basis.RCW 82.04.4489; Special Notice - B&O Tax Credit Reinstated for Contributors to Washington Filmworks.

Multiple Activities Tax Credit (MATC) [800]

When a business performs more than one taxable activity for the same product, it reports each activity under the proper classification, but takes the MATC credit so B&O tax is not paid twice on the same amount. For instance, a business that both manufactures and sells a product at wholesale in Washington does not pay both manufacturing and wholesaling B&O tax. A credit is allowed so that B&O tax is paid only once. This also applies to a business that has paid a gross receipt tax to another state. Completion of the Multiple Activities Tax Credit, Schedule C is necessary each time credit is claimed. WAC 458-20-19301

Other Credits [810]

Credit Memorandum: If you receive a credit memorandum from the Department of Revenue for previously overpaid taxes, write the credit amount on the Other Credits line of the tax return, and attach the Credit Memorandum.

Pollution Control Credits

The state made a credit available against B&O tax, public utility tax, or use tax for previously paid taxes and/or in lieu of accepting the tax exemptions. These credits are only available to issued certificate holders. We do not allow new applications after 1981.

B&O tax [805]

The state made a credit available against B&O tax for up to 50 percent of the cost of required pollution control facilities. You may take up to 2 percent of the total credit each year.

Public utility tax [836]

The state made a credit available against public utility tax for up to 50 percent of the cost of required pollution control facilities. You may take up to 2 percent of the total credit each year.

Use tax [837]

The state allows a credit against use tax for up to 50 percent of the cost of required pollution control facilities. You may take up to 2 percent of the total credit each year.

Public Utility Tax Credit for Billing Discounts/Qualified Contributions to a Low Income Home Energy Assistance Fund [880]

Public Utility Tax credit is allowed for billing discounts and qualifying contributions made by light and power businesses or gas distribution businesses. The credit is itemized on the Credits section of the excise tax return. Special Notice - Public Utility Tax Credits for "Billing Discounts" and "Qualified Contributions." For more information, please call 360-902-7025 or 360-705-6705.

Renewable Energy System Cost Recovery Credit [925]

If you are a light and power business, you can take a public utility tax credit for amounts you pay as incentives for community solar projects (CSPs) or renewable energy systems that produce customer-generated electricity. Renewable energy system means a solar energy system, an anaerobic digester (RCW 82.08.900), or a wind generator used to produce electricity.

The maximum annual PUT credit that your business can take during a fiscal year is one and one-half percent (1.5 percent) of your business’s taxable power sales or $250,000, whichever is greater.

Your business may take a public utility tax credit equal to your incentive payments and up to your public utility tax (WAC 458-20-273).

If your business takes this credit, you must electronically file an Annual Tax Performance Report by May 31 of the following year.

Sales Tax Paid in Other States [98]

You may take a credit against Washington's use tax for sales or use tax you paid to another state when the property was purchased or first used outside of Washington. RCW 82.12.035

Silicon Smelter Credits

Silicon smelters may qualify for an exemption from the brokered natural gas use tax.

Persons selling power or gas to silicon smelters: (credit IDs 892/893)

Qualifying companies selling electricity, natural gas, or manufactured gas to a silicon smelter may receive a B&O or public utility tax credit, as long as the selling price is reduced by the credit amount. Special Notice - Silicon smelters tax relief

Small Business B&O Tax Credit

Businesses below a certain B&O tax liability are entitled to a credit. The credit varies depending on the amount of B&O tax due (the total of all B&O classifications) after the business takes other available B&O tax credits. There are two credit tables:

You can take the Small Business Tax Credit [720] if:

• your taxable income was 50% or more reported under Service and Other Activities, Gambling Contests of Chance, For Profit Hospitals, and/or Scientific R&D and
• your total B&O tax liability is below:
  • $141 for monthly taxpayers
  • $421 for quarterly taxpayers
  • $1,681 for annual taxpayers

You can take the Small Business Tax Credit [815] if:

• your taxable income was less than 50% reported under Service and Other Activities, Gambling Contests of Chance, For Profit Hospitals, and/or Scientific R&D and
• your total B&O tax liability is below:
  • $71 for monthly taxpayers
  • $211 for quarterly taxpayers
  • $841 for annual taxpayers

If you file electronically, our system will automatically calculate your small business credit.

Syrup Tax Credit [945]

Effective July 1, 2006, retailers that pay syrup tax when buying carbonated beverage syrup to make carbonated fountain drinks can claim a B&O tax credit. The portion of the syrup tax allowed as a credit increases each year as follows: July 1, 2006, to June 30, 2007, – 25%; July 1, 2007, to June 30, 2008, – 50%; July 1, 2008, to June 30, 2009, – 75%; After June 30, 2009, – 100%. The credit must be claimed in the tax reporting period in which the syrup was purchased. The B&O tax credit can not be refunded. No credit is allowed for syrup tax paid prior to July 1, 2006. The credit is itemized on the Credits section of the excise tax return. (Substitute Senate Bill 6533, Chapter 245, Laws of 2006) Special Notice - Retailers of Fountain Drinks B&O Tax Credit for Syrup Tax Paid; RCW 82.04.4486

Tobacco Products/Cigar Tax Credit [930]

Distributors who first possess tobacco products in the State of Washington are allowed to take credits for:

• Interstate and foreign sales - Available to distributors of tobacco products sold to retailers and wholesalers outside the state for resale. This credit may be taken only for the amount of tobacco products tax reported and previously paid on such products. No credit may be taken for a sale of tobacco products from a stock of goods in this state to a consumer outside the state. See RCW 82.26.110.
• Returned or destroyed goods - May be taken for tax previously paid when tobacco products are destroyed or returned to the manufacturer. Credits claimed against tax owed or as a refund of tax paid must be supported by documentation.
• Sales to the United States Government - Available to distributors of tobacco products sold to the US Government, or any of its agencies or instrumentalities. This credit may be taken only for the amount of tobacco products tax reported and previously paid on such products.
• Sales to Indian Tribal Organizations - Available to distributors of tobacco products sold to any Indian Tribal Organizations. This credit may be taken only for the amount of tobacco products tax reported and previously paid on such products

Distributors must document the credits. The documentation should conform to requirements outlined in WAC 458-20-185. For help calculating your credit, use the Tobacco Products/Cigar Tax Credit Worksheet (pdf). The credit is itemized on the Credits section of the excise tax return.

Vapor Products Credit, All Other [993]

Businesses who first possess vapor products that are not accessible containers greater than 5 mL are allowed to take the All Other Vapor Products Credit for vapor products tax previously paid when the products are:

• Sold and shipped outside Washington
• Sold to the United States Government
• Sold to a federally recognized tribe or enrolled tribal member
• Returned to the manufacturer
• Destroyed

The credit is claimed on the excise tax return. You must keep documentation to substantiate this credit for five years. No credit is available for vapor products given away for free.

Vapor Solution Credit, Accessible Containers Greater than 5 mL Credit [994]

Businesses who first possess vapor products that are accessible containers greater than 5 mL are allowed to take the Accessible Containers of Vapor Solution Greater than 5 mL Credit for vapor products tax previously paid when the products are:

• Sold and shipped outside Washington
• Sold to the United States Government
• Sold to a federally recognized tribe or enrolled tribal member
• Returned to the manufacturer
• Destroyed

The credit is claimed on the excise tax return. You must keep documentation to substantiate this credit for five years. No credit is available for vapor products given away for free.

Veterans Employer B&O Tax Credit (Effective October 1, 2016) [970]

A business and occupation (B&O) tax credit is available to businesses that employ an unemployed veteran in a permanent full-time position located in Washington for at least two consecutive full calendar quarters on or after October 1, 2016, and before June 30, 2022.

The credit equals 20 percent of the wages and benefits the business paid to or on behalf of the qualified employee not to exceed $1,500 for that employee. There is no limit on the total credit an employer may receive. However, the total statewide credits may not exceed $500,000 per fiscal year. Credits are available on a first-in-time basis.

Credits are claimed through the Department's E-file system. No application is required. The business must file an Annual Tax Performance Report by May 31 of the year following the year a credit is claimed. RCW 82.04.4498 and Special Notice - Credit for hiring unemployed veterans.

Veterans Employer PUT Credit (Effective October 1, 2016) [971]

A public utility tax (PUT) credit is available to businesses that employ an unemployed veteran in a permanent full-time position located in Washington for at least two consecutive full calendar quarters on or after October 1, 2016, and before June 30, 2022.

The credit equals 20 percent of the wages and benefits the business paid to or on behalf of the qualified employee not to exceed $1,500 for that employee.

There is no limit on the total credit an employer may receive. However, the total statewide credits may not exceed $500,000 per fiscal year. Credits are available on a first-in-time basis.

Credits are claimed through the Department's E-file system. No application is required. The business must file an Annual Tax Performance Report by May 31 of the year following the year a credit is claimed. RCW 82.16.0499 and Special Notice - Credit for hiring unemployed veterans.