News & Events

News & Events

8.31.2009

Washington’s Taxation of Manufacturing — Part 2: The Sales and Use Tax Exemption for Manufacturing Machinery and Equipment

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In the first part of this series, we provided an overview of the Washington state tax consequences of engaging in manufacturing activities in Washington: see Washington’s Taxation of Manufacturing — Part 1.  Businesses engaged in manufacturing typically make significant capital investments in machinery and equipment.  Fortunately, Washington law provides manufacturers with a broad exemption from sales and use taxes for machinery and equipment used directly in a manufacturing operation (“M&E exemption”).  The M&E exemption applies to the purchase and use by a manufacturer or processors for hire of machinery and equipment that is used directly in an eligible manufacturing operation.  The exemption also applies to machinery and equipment used directly in testing a manufacturer’s or processor for hire’s tangible personal property, as well as machinery and equipment that is integral to a research and development operation. This article provides an overview of the requirements for qualifying for the M&E exemption, which can significantly reduce the state tax costs of manufacturing.  View full article (PDF).