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Washington Basic Business Taxes 2010

Washington's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include no corporate income tax, business and occupation tax credit incentives, and sales and use tax exemptions.

Feb/Mar 10
Corporate income tax:
The state levies no corporate income tax.

Unitary, inventory tax:
The state has no unitary or inventory tax.

Income tax:
There is no personal income tax in the state.

Interest, dividend, and capital gains taxes:
There are no interest, dividend, or capital gains taxes on private investments or investments by nonfinancial businesses.

Business and Occupation Tax:
Washington State's business and occupation tax (B&O) is based on gross receipts. Virtually all businesses are subject to B&O tax, including corporations, partnerships, sole proprietors, and nonprofit corporations. The only major exempt activities are farming and the sale or long term rental of real estate.

Business & Occupation Tax Credit Incentives:
• High Technology Business & Occupation Credit:
Who: Advanced computing, advanced materials, biotechnology, electronic device technology, environmental technology.
What: An annual credit of up to $2 million for high technology businesses that perform R&D in specific high technology categories.

• Business & Occupation Tax Credit for New Jobs:
Who: Manufacturing, R&D laboratories, and commercial testing facilities.
What: A $2,000 or $4,000 (if wages exceed $40,000) credit against the business and occupation tax is available for each new employment position created and filled by specific industries in rural counties and community empowerment zones.

• Business & Occupation Tax Credit for Job Training Services:
Who: Manufacturers, R&D laboratories, or commercial testing facilities (excluding light and power businesses) that locate in qualifying rural counties or community empowerment zones
What: 20 percent of the cost spent on job training. Limited to $5,000 annually.

• Business & Occupation Tax Credit for New Jobs in Programming or Software Manufacturing:
Who: Software manufacturers or programming businesses in rural counties.
What: Eligible for $1,000 per year for every new employment position, up to five years.

• Information Technology Help Desk Services Business & Occupation Tax Credit:
Who: Help desk services are telephone or electronic communications supplying technical assistance for computer software and hardware.
What: Third party help desk service firms in rural counties are eligible for a 100 percent B&O tax credit on income received.

International Services Business & Occupation Tax Credit:
Who: Firms engaged in international services.
What: May receive a tax credit of $3,000 per year for every new employment position, for up to five years. Firms must be located in community empowerment zones or a designated International Services district.

Retail Sales and Use Tax:
The state sales tax is 6.5 percent. Local governments may also levy the sales tax, adding 0.5 to 3.0 percent to the base rate. In addition to most tangible products, the following services are subject to retail sales tax: cleaning, repairing, altering or improving real property, and landscaping. Manufacturers, high-tech firms, warehousing and distribution firms locating or expanding in Washington may qualify for a Sales and Use Tax Exemption or a remittance program.

Sales and Use Tax Exemptions:
• Manufacturing Machinery Sales & Use Tax Exemption:
Who: Manufacturers, processors for hire, manufacturers who perform R&D.
What: Exempts sales and use tax on machinery and equipment used directly in manufacturing or research operations. Includes installation, maintenance, and repairs in most cases.

• Rural County Sales & Use Tax Deferral:
Who: Manufacturers (excluding light and power businesses), R&D laboratories, commercial testing facilities, and persons conditioning vegetable seeds that locate or expand in qualifying rural counties, community empowerment zones (CEZ), or counties with a CEZ.
What: Defers or waives sales and use tax on machinery and equipment, cost of expansion or modernization of existing facility if floor space or production capacity is increased; construction costs for qualified leased building.

• High-Technology Sales & Use Tax Deferral:
Who: Advanced computing, advanced materials, biotechnology, electronic device technology, environmental technology.
What: Defers or waives sales and use tax associated with new R&D or pilot scale manufacturing operations, or expanding, renovating or equipping an existing facility.

• Electricity Generating Equipment Sales & Use Tax Exemption:
Who: Anyone that generates electricity using fuel cells, sun, wind, biomass energy, tidal and wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas.
What: Provides a sales and use tax exemption for machinery and equipment used directly in generating electricity using any of the above renewable energy sources, and for the labor and services necessary to install such equipment, but only if the purchaser develops a facility capable of generating not less than 1 kW of electricity (excluding solar systems). There is currently no minimum generating capacity for solar systems.

Warehouse Tax Remittance Incentive:
Who: Wholesalers, retail distribution centers, third-party warehousers, cold storage warehouses, grain elevators; 200,000 sq ft or greater for warehouses, grain elevator with at least 1 million bushels storage capacity, cold storage warehouse must be 25,000 sq ft.
What: Refund of 100 percent of state sales tax paid on construction of qualifying structures or 50 percent on purchases of material handling/racking equipment. Cold storage warehouses receive 100 percent rebate on qualifying equipment.

Custom Computer Software Property Tax Exemption:
Who: Software companies.
What: Software designed for a specific need for a single person or group of persons is exempt from property tax. Included in the definition is modification of canned computer software.

Co-generation & Energy Conservation Public Utility Tax Deduction:
Who: Firms producing energy that constructed facilities between June 12, 1980, and before January 1, 1990.
What: A public utility tax deduction is allowed for costs of producing energy through (1) co-generation facilities as defined in RCW 82.35.020 or (2) renewable energy resources such as solar energy, wind energy, hydroelectric energy, geothermal energy, wood and wood wastes, municipal wastes, agricultural products and wastes, and end use waste heat.

Agricultural Burning Products Sales Tax Exemption:
Who: Qualified farmers
What: Sales and use tax exemptions for structures and equipment used to reduce field burning of cereal grains and field and turf grass grown seed.

Life Sciences Discovery Research Fund SB 5581:
Known as "Bio 21," the bill is designed to expand biotechnology research by building upon Washington's existing life sciences technology. The Life Sciences Discovery Fund Authority is created to manage a dedicated account in the State Treasury that will be funded by earmarking $350 million in tobacco settlement monies. The Authority must develop strategies to leverage these funds with public and private entities through a grant program. It is expected that the research will result in the creation of thousands of new jobs and health care innovations. Applicants for the grants must meet the following criteria:
• The potential to improve health outcomes and lower health care costs; the potential for leveraging additional funding;
• The potential to provide health care benefits or benefit human learning and development;
• The potential to stimulate health care delivery, biomedical manufacturing, and life sciences related employment in the state;
• The geographic diversity of the grantees within Washington; evidence of potential royalty income and contractual means to recapture such income; and
• Evidence of public and private collaboration.

Alternative Energy Development:
Machinery & Equipment Used to Generate Electricity Using Renewable Energy - Sales/Use Tax Exemption
Who: Anyone that generates electricity using fuel cells, sun, wind, biomass energy, tidal and wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas.
What: Effective July 1, 2009 through June 30, 2013, purchases and installation of machinery and equipment that will be used directly in a facility that generates no more than ten kilowatts of electricity using solar energy are exempt from sales/use tax. In addition, purchases and installation of machinery and equipment used directly in generating electricity using fuel cells, sun, wind, biomass energy, tidal and wave energy, geothermal resources, anaerobic digestion, technology that converts otherwise lost energy from exhaust, or landfill gas in a facility that generates no less than one kilowatt of electricity are exempt from sales/use tax subject to the following:
From July 1, 2009 through June 30, 2011 the exemption is 100 percent of the sales or use tax paid.
From July 1, 2011, through June 30, 2013, the exemption is in the form of a refund from the Department of Revenue of 75 percent of sales or use tax paid. Buyer will need to pay sales tax to the seller, and then request a refund from the Department of Revenue.

Energy Production Using Solar, Methane, & Wind Power - Cost Recovery Program:
Who: Individuals, businesses, local government entities that are not in the light and power business or gas distribution business, and participants in a community solar project.
What: Except for a community solar project, participants must generate electricity on their own property with an anaerobic digester, wind generator, or solar energy system and apply to their light and power company for a payment based on kWh's produced and type of equipment used to produce the electricity.

Washington State Contact:
Washington State Business and Project Development
Department of Commerce
2001 6th Avenue, Suite 2600
Seattle, WA 98121
(206) 256-6100

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.

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