Current through Register Vol. 24-06, March 15, 2024
RCW
82.08.962 and
82.12.962
provide exemptions from the "retail sales tax" described in chapter 82.08 RCW
and the "use tax" described in chapter 82.12 RCW paid with respect to the sale
or use of machinery and equipment used directly in generating electricity using
qualified renewable energy sources. This rule explains how these exemptions
apply and is divided into three parts as follows:
PART 2: Exemptions as Applied to Qualified Nonsolar Renewable
Energy Systems; and
PART 3: General Provisions.
PART
1
Exemptions as Applied to Qualified Solar Systems
(101)
Solar systems that generate more
than 500 kilowatts.(a)
Partial
exemptions.
RCW
82.08.962 and
82.12.962
provide an exemption, in the form of a remittance (refund) from the department,
equal to seventy-five percent of the retail sales and use taxes paid with
respect to the sale or use of machinery and equipment used directly in solar
energy systems capable of generating more than 500 kilowatts of electricity.
The exemption also applies to amounts paid for labor and services rendered in
respect to installing such machinery and equipment. The nameplate DC power
rating of a system, which is an industry standard, is used to determine whether
the solar energy system is capable of generating more than 500 kilowatts of
electricity. The buyer must pay the total amount of the retail sales or use
taxes due with the respect to the sale or use of the qualifying machinery,
equipment, and labor charges to install the same. The buyer may then apply to
the department for a refund of seventy-five percent of the state and local
retail sales and use taxes paid. This partial exemption is effective beginning
July 1, 2011, and expires January 1, 2020.
(b)
Required annual tax performance
report. Beginning January 1, 2018, buyers applying for a refund must
complete and submit an annual tax performance report. The annual tax
performance report must be filed with the department by May 31st of the year
immediately following the year for which the refund is claimed. For more
information see Part 3, subsection (301)(c) of this rule.
(102)
(a)
Solar systems that generate at least one kilowatt and no more than 500
kilowatts.
(b)
Partial
exemptions.
RCW
82.08.962 and
82.12.962
provide an exemption, in the form of a remittance (refund) from the department,
equal to seventy-five percent of the retail sales and use taxes paid with
respect to the sale or use of machinery and equipment used directly in solar
energy systems capable of generating at least one kilowatt and no more than 500
kilowatts of electricity. The exemption also applies to amounts paid for labor
and services rendered in respect to installing such machinery and equipment.
The nameplate DC power rating of a system, which is an industry standard, is
used to determine whether the solar energy system is capable of generating at
least one kilowatt and no more than 500 kilowatts of electricity. The buyer
must pay the total amount of the retail sales or use taxes due with the respect
to the sale or use of the qualifying machinery, equipment, and labor charges to
install the same. The buyer may then apply to the department for a refund of
seventy-five percent of the state and local retail sales and use taxes paid.
This partial exemption is effective beginning July 1, 2011, and expired
September 30, 2017.
PART
2
Exemptions as Applied to Qualified Nonsolar Renewable
Energy Systems
(201)
Qualified
nonsolar renewable energy systems generating one kilowatt or more.
(a)
Partial exemptions.
RCW
82.08.962 and
82.12.962
provide an exemption equal to seventy-five percent of the retail sales and use
taxes paid with respect to the sale or use of machinery and equipment used
directly in a renewable energy system employing a qualified power source that
generates at least 1000 watts (one kilowatt) or more of electricity. This
exemption also applies to amounts paid for labor and services rendered in
respect to installing such machinery and equipment. The buyer is eligible for
the exemption in the form of a remittance (refund) from the department and must
have paid to the seller or to the department the total amount of retail sales
or use taxes due with respect to the sale or use of the machinery, equipment,
and labor charges to install the same. To claim the exemption, the buyer must
apply to the department for a refund. See Part 3, subsection (301) of this rule
for instructions on how to file a claim for refund. This partial exemption is
effective beginning July 1, 2011, and expires January 1, 2020.
(b)
Refund procedure. Beginning
July 1, 2011, the buyer is eligible for the exemption in the form of a
remittance (refund) from the department. The buyer must pay the total amount of
the retail sales or use taxes due with the respect to the sale or use of
qualifying machinery or equipment and labor charges to install the same. The
buyer may then apply to the department for a refund of seventy-five percent of
the state and local retail sales and use taxes paid. These exemptions expire on
January 1, 2020.
(c)
Required
tax performance report. Beginning January 1, 2018, buyers applying for a
refund must complete and submit an annual tax performance report. The annual
tax performance report must be filed with the department by May 31st of the
year immediately following the year for which the refund is claimed. For more
information see Part 3, subsection (301)(c) of this rule.
(202)
Qualified power sources.
The partial exemption permitted under Part 2, subsection (201)(a) of this rule
applies only with respect to a renewable energy system that employs one of the
following qualified power sources:
* Fuel cells;
* Wind;
* Biomass energy;
* Tidal or wave energy;
* Geothermal resources; and
* Technology that converts otherwise lost energy from
exhaust.
(203)
Definitions for these power sources. For purposes of Part 2 of
this rule, the terms below are defined as or include within their definition
the following:
(a)
Biomass
energy. "Biomass energy" includes:
(i)
By-products of pulping and wood manufacturing processes;
(ii) Animal waste;
(iii) Solid organic fuels from
wood;
(iv) Forest or field
residues;
(v) Wooden demolition or
construction debris;
(vi) Food
waste;
(vii) Liquors derived from
algae and other sources;
(viii)
Dedicated energy crops;
(ix)
Biosolids; and
(x) Yard waste.
"Biomass energy" does not include wood pieces that have been
treated with chemical preservatives such as creosote, pentachlorophenol, or
copper-chrome-arsenic; wood from old growth forests; or municipal solid
waste.
(b)
Fuel cell. "Fuel cell" means an electrochemical reaction that
generates electricity by combining atoms of hydrogen and oxygen in the presence
of a catalyst.
PART
3
General Provisions
(301)
Requirements for a refund from
the department of taxes paid, referred to as the seventy-five percent
remittance.(a)
Required
application. This exemption, in the form of a remittance (refund) from
the department, equals seventy-five percent of the retail sales and use taxes
paid with respect to the sale or use of the qualifying machinery and equipment.
The form that the buyer must submit to the department is the
Application for Sales Tax Refund on Purchases & Installation of
Qualified Renewable Energy Equipment. This form is available through
the department's web site at dor.wa.gov under Get a form or
publication. The application must be completed in full and mailed to
the address provided on the form.
(b)
Required records. The
purchaser must provide records that will allow the department to determine
whether the purchaser is entitled to a refund. The records include:
* Invoices;
* Proof of tax paid;
* Documents describing the machinery and equipment; and
* Electrical capacity of the system.
(c)
File annual tax performance
report. Effective January 1, 2018, any person claiming a seventy-five
percent refund must electronically file an annual tax performance report with
the department each year. This applies to buyers of solar systems generating
electricity of more than ten kilowatts and other qualified renewable energy
systems generating electricity of one kilowatt or more.
(d)
Separate tax performance report for
each system. The buyer must file a separate tax performance report for
each system owned or operated in Washington. The annual tax performance report
is due by May 31st of the year immediately following the year for which the
exemption is claimed. (Systems installed in 2017 require a tax performance
report to be completed by May 31, 2018.)
(e)
Limitation on frequency for
claiming exemption. A buyer may not apply to the department for a
remittance (refund) more frequently than once per quarter.
(f)
Qualified retail sales and use
taxes. These exemptions apply to both state and local retail sales and
use taxes.
(302)
What is "machinery and equipment"? For purposes of
RCW
82.08.962 and
82.12.962,
"machinery and equipment" means fixtures, devices, and support facilities that
are integral and necessary to the generation of electricity from qualifying
sources of power.
A "support facility" is a part of a building, structure, or
improvement used to contain or steady a fixture or device. A support facility
must be specially designed and necessary for the proper functioning of the
fixture or device and must perform a function beyond being a building,
structure, or improvement. It must have a function relative to a fixture or a
device. To determine if some portion of a building is a support facility, the
department examines those parts of the building. For example, a highly
specialized structure, like a vibration reduction slab under generators in a
landfill gas generating facility, is a support facility. Without the slab, the
generators would not function properly. The ceiling and walls of the building
housing the generator are not support facilities if they only serve to define
the space and do not have a function relative to a fixture or a device.
"Machinery and equipment" does not include:
(a) The utility grid system;
(b) Hand-powered tools;
(c) Property with a useful life of less than
one year;
(d) Repair parts required
to restore machinery and equipment to normal working order;
(e) Replacement parts that do not increase
productivity, improve efficiency, or extend the useful life of the machinery
and equipment;
(f) Buildings;
or
(g) Building fixtures that:
(i) Are permanently affixed to and become a
physical part of a building; but
(ii) Are not integral and necessary to the
generation of electricity.
(303)
When is machinery and equipment
"used directly" in generating electricity? Machinery and equipment is
used directly to generate electricity when it is used to:
(a) Capture the energy of the qualifying
source of power;
(b) Convert that
energy to electricity; and
(c)
Store, transform, or transmit that electricity for entry into or operation in
parallel with electric transmission and distribution systems.
(304)
Examples of qualifying
machinery and equipment. This section provides examples of machinery and
equipment that may be used directly in generating electricity and could qualify
for the exemptions from retail sales and use taxes. This list is illustrative
only and is not intended to provide an exhaustive list of possible qualifying
machinery and equipment.
(a)
Solar. Where solar energy is the principal source of power: Solar
modules; inverters; Stirling converters; power conditioning equipment;
batteries; transformers; power poles; power lines; and connectors to the
utility grid system or point of use.
(b)
Wind. Where wind is the
principal source of power: Turbines; blades; generators; towers and tower pads;
substations; guy wires and ground stays; power conditioning equipment;
anemometers; recording meters; transmitters; power poles; power lines; and
connectors to the utility grid system or point of use.
(c)
Fuel cells. Where fuel cells
are the principal source of power: Fuel cell assemblies; fuel storage and
delivery systems; power inverters; transmitters; transformers; power poles;
power lines; and connectors to the utility grid system or point of
use.
(305)
Installation charges. The exemptions from retail sales and use
taxes addressed in this rule apply to installation charges for qualifying
machinery and equipment, including charges for labor and services. There are no
exemptions from retail sales and use taxes for:
(a) Charges for labor and services rendered
in respect to constructing buildings or access roads that may be necessary to
install or use qualifying machinery and equipment;
(b) Tangible personal property, such as a
crane or fork-lift, purchased or rented by the buyer, the contractor, or the
installer to be used to install qualifying machinery and equipment;
or
(c) Services that were included
in the construction contract for design, planning, studies, project management,
or other charges not directly related to the actual labor for installing the
qualifying machinery and equipment.
Statutory Authority:
RCW
82.32.300 and
82.01.060(2).
05-02-036, § 458-20-263, filed 12/30/04, effective 1/30/05. Statutory
Authority:
RCW
82.32.300. 99-11-106, § 458-20-263,
filed 5/19/99, effective 6/19/99. Statutory Authority:
RCW
82.32.300 and 82.08.02567. 97-03-027, §
458-20-263, filed 1/8/97, effective
2/8/97.