There are tax credit, waiver, and deferral programs for qualifying manufacturers, R&D, high technology, warehousing and distribution firms.
Some incentives apply everywhere in the state while others are specifically for businesses locating in designated rural or distressed areas.
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Washington State incentives can reduce the tax burden for locating or expanding a business. The following provides a brief overview of tax incentives, exemptions and deferrals found within the state.
Business & Occupation Tax Credit Incentives Statewide
Incentive
Description
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.
Who: Manufacturers, computer-related businesses, R&D laboratories,
and commercial testing facilities located in rural counties or within a CEZ.
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.
Who: Manufacturers, computer-related businesses, R&D laboratories, and commercial testing facilities(excluding light and power businesses) located in rural counties or community empowerment zones.
What: 20% of the cost spent on job training. Limited to $5,000 annually.
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.
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% tax credit on income received from these services.
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 International Service Districts.
Non-Manufacturer Aerospace B&O Credit
Who: Persons who develop, design, and engineer, but do not manufacture, commercial airplanes or component parts of commercial airplanes.
What: Provides a B&O tax credit for expenditures for aerospace preproduction development
Reduced B&O Rate for FAR Part 145 Repair Stations
Who: Persons certified by the FAA to perform repair and maintenance on commercial airplanes under FAR Part 145.
What:
Lower B&O tax rate for persons performing repair and maintenance on commercial airplanes.
B&O tax credit for workforce training
Who: All Washington employers
What: Establishes a new program for customized employment training through the community and technical colleges. Participating employers may claim a B&O tax credit for half of the amount repaid for the cost of employee training.
Sales & Use Tax Exemptions & Deferrals Statewide
Incentive
Description
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.
Who: Manufacturers, computer-related businesses, R&D laboratories, commercial testing facilities, and persons conditioning vegetable seeds (excluding light and power businesses) in a rural county, a CEZ, or county with a CEZ. What: Defers or waives sales
and use tax on machinery, equipment and construction
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 construction, expansion, or renovation of qualified buildings and acquisition of qualified machinery and equipment in research and development and pilot scale manufacturing in the above fields.
Electricity Generating Equipment Sales & Use Tax Exemption
Who: Firms producing energy.
What: Provides a sales and use tax exemption for machinery and equipment used directly in generating electricity using fuel cells, wind, solar or landfill gas energy, 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 200 watts of electricity.
Non-Manufacturer Aerospace Sales & Use Tax Exemption
Who: Persons who develop, design, and engineer, but do not manufacture, commercial airplanes or component parts of commercial airplanes.
What: Sales and use tax exemption for purchases of computer hardware, software and peripherals, and charges for labor and services related to the installation of such equipment.
Biotechnology & Medical Device Manufacturing Sales & Use Tax Deferral/Waiver
Who: Biotechnology & Medical Device Manufacturers.
What: Defers or waives sales and use tax on machinery and equipment, construction costs for new or expanded facility.
Other Tax Incentives Statewide
Incentive
Description
Warehouse Tax Incentive
Who: Wholesalers,
retail distribution centers, third-party
warehousers, cold storage warehousers; Sales tax paid on:
Construction of a 200,000 square foot warehouse or distribution center or a grain elevator with a one million bushel capacity
Construction or expansion of a cold storage warehouse by at least 25,000 square feet (effective July 1, 2007)
What: A remittance of 100% of state sales tax (6.5%) paid on construction of qualifying structures; 50% remittance for state sales tax paid 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.
Biofuel Tax Deduction & Exemptions
Who:Firms producing biofuels.
What:Tax benefits for sellers of biodiesel fuel, wood biomass fuel, alcohol and wood biomass fuel blends.
Food Processing Tax Incentives
Who:Manufacturers and processors of fresh fruit & vegetables, dairy products, and seafood products.
What:
B&O tax exemption for goods destined for outside Washington.
Defers or waives sales and use tax on machinery and equipment, construction costs for new or expanded facility. (Effective 7-1-07)
Expands the warehouse remittance program to include cold storage warehouses or fresh fruit & vegetables, dairy products, and seafood products. (Effective 7-1-07)
Timber & Wood Products Industry Incentive
Who: Extractors & Manufacturers of Timber and Wood Products
What:
Provides a two-step reduction in the tax rate for extracting and wholesaling of timber and manufacturing of timber or wood products. Partially offsetting these rate reductions is a new surcharge tax rate that takes effect July 1, 2007.
Extension of tax incentives for aluminum smelters
Who: Aluminum Manufacturers
What:
Extends, through 2011, incentives established in 2004 to encourage investment in aluminum smelting in Washington.
Motion Picture Competitiveness Program Tax Credit
Who: Any Business in Washington.
What:
Provides a B&O tax credit for businesses that make cash contributions to the Motion Picture Competitiveness Program and file their taxes electronically.
For additional information on incentives, please visit the Department of Revenue's tax incentives page at Tax Incentives (Department of Revenue)
