Washington State incentives

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Federal incentives

Manufacturers' Sales/Use Tax Exemption on Machinery and Equipment

Manufacturers, processors for hire, and manufacturers who perform research and development are not required to pay the sales or use tax on machinery and equipment used directly in the manufacturing or research operations. Charges for labor and services for installing the machinery and equipment are also not subject to the sales or use tax. Charges for repair labor and parts (if the parts have a useful life of at least one year), cleaning, altering, or improving the qualified machinery and equipment are exempt from the tax as well.

'Machinery and equipment' means industrial fixtures, devices, and support facilities, including pollution control equipment installed and used in a manufacturing operation to prevent air or water pollution, or contamination that might otherwise result from the manufacturing operation. The term does not include hand-powered tools, items with a useful life of less than one year, buildings, and building fixtures that are not an integral part of the manufacturing operation.

No prior application to the Department of Revenue is required. The purchaser must, however, provide the seller with an exemption certificate at the time of purchase. Both the seller and the purchaser must keep copies of the exemption certificates for five years. More information about this program can be obtained at www.dor.wa.gov

Warehouse Sales Tax Exemption

A Washington State Department of Revenue program is available to wholesalers, retail distribution centers, and third party warehousers. The exemption is available for warehouses of 200,000 or more square feet. Sales tax on the construction costs for new warehouses (or an expansion to a warehouse that meets the 200,000 square foot requirement) qualify for 100% exemption. Material-handling equipment and racking equipment in warehouses are eligible for 50% exemption.

The program has specific requirements for eligibility. If retail sales occur at a facility, it is ineligible for the exemption. Manufacturers do not qualify for the exemption if any part of the manufacturing operation takes place in the warehouse.

More information about this program can be obtained by contacting the Department of Revenue (1-800-647-7706) or online at http://www.dor.wa.gov/Docs/Pubs/SpecialNotices/1997/sn_97_warehs.pdf

Distressed Area B&O Tax Credit for New Employees
(Business must be located in designated area)

Businesses focused on manufacturing, R&D, or computer-related services that locate in designated 'distressed areas' (including the Tacoma Community Empowerment Zone) can received a $2,000 credit for each new qualified employment position with annual wages of $40,000 or less; or a credit of $4,000 for each new employment position with wages and benefits over $40,000 annually. The credit is taken against the B&O tax for each new employment position filled and maintained by qualified businesses located in eligible areas.

For a full-time employment position to be eligible for credit, it must be requested by application before the new position is filled. A new application must be submitted to the Department of Revenue each calendar year that a 15% average increased in the number of positions over the previous year is anticipated. New full-time employment positions must be maintained for 12 consecutive months.

More information about this program can be obtained at www.dor.wa.gov.

Distressed Area Sales and Use Tax Deferral Program
(Business may locate anywhere in Pierce County but must meet employment requirements to qualify for deferral.)

A deferral of sales/use tax is available for manufacturing, R&D, and computer-related businesses locating in Pierce County and hiring residents of the Tacoma Community Empowerment Zone. The sales/use taxes on qualified construction and equipment costs are waived when all qualifications are met for a specified period of time.

To qualify, the business must invest in facility construction, expansion or machinery and equipment acquisition. The machinery and equipment must be new to the business or the state and must be integral and necessary to the operation of the eligible business activity. Used machinery qualifies, and a new building is not required. Moreover, at least one qualified employment position must be created for every $750,000 of investment on which a deferral is requested.

An application must be filed with the Department of Revenue prior to initiation of construction or taking possession of machinery or equipment. Once an application is filed, construction or possession of machinery or equipment may begin. The granting or denial of the application will take less than 60 days.

More information about this program can be obtained at www.dor.wa.gov.

Pierce County

Economic Development Division