Reducing the cost of doing business.

The state also has a variety of incentives, some of which are geared specifically towards Biofuels and Green/Renewable Energy, which are listed below.  More details can be found on the Washington State Department of Revenue website.

• Anaerobic Digesters – Property/Leasehold Tax Exemption

This property and leasehold excise tax exemption is available to owners and operators of anaerobic digesters for buildings, equipment, and land used primarily for the digester’s operation, excluding land used for growing agricultural products. The exemption is valid for six assessment years after the facility becomes operational. Applications for property tax exemptions must be submitted to the county, while leasehold tax exemption applications go to the Department of Revenue. No annual tax performance report is required. The deadline to apply is December 31, 2024.

• Preferential B&O tax rate for manufacturing wood biomass fuel

This preferential B&O tax rate is available to people and businesses that manufacture wood biomass fuel. For details and reporting requirements, please see the link here.

• Sales and use tax exemption for anaerobic digesters

This sales and use tax exemption is available to owners and operators of anaerobic digesters for purchases of tangible personal property that become a component of the anaerobic digester and services to install, construct, repair, clean, alter or improve the anaerobic digester. For details and reporting requirements, please see the link here.

• Sales and use tax exemption for processors of biogas from a landfill or anaerobic digester

 This sales and use tax exemption is available for purchases of equipment used to process biogas into marketable coproducts. The exemption includes equipment used to condition and compress biogas, equipment used for nutrient recovery, and electrical generation equipment. This exemption also extends to the purchase of services to install, construct, repair, clean, alter, or improve this equipment. For details and reporting requirements, please see the link here.

• Alternative jet fuel (AJF) tax incentive

SB 5447 provides a preferential B&O tax rate of 0.275 percent for the manufacturing and selling of alternative jet fuels. There are also B&O or PUT credits related to the purchase and sale of alternative jet fuel. The amount of these credits is $1-per-gallon for AJF that has at least 50 percent less CO2-equivalent emissions than conventional jet fuel. The credits would increase by 2 cents for each additional 1% reduction beyond 50%, with a cap of $2 per gallon. These incentives may not be claimed until the Department of Ecology confirms that there are one or more facilities operating in Washington with cumulative production capacity of at least 20 million gallons per year.

• Sales and Use Tax Deferral Program for Clean Energy Investment Projects

This sales and use tax deferral program is available to persons making purchases of materials and equipment, labor, or services that will be incorporated into an eligible clean technology investment project.  Investment projects with costs of at least $2 million in either qualified buildings and/or qualified machinery and equipment, or both, that support clean technology manufacturing, clean alternative fuels production, and renewable energy storage are eligible for this sales/use tax deferral.

• Clean Alternative Fuel Commercial Vehicle and Infrastructure B&O or Public Utility Tax (PUT) Credit

This B&O or PUT tax credit is available to businesses for the purchase or lease of new commercial vehicles and qualifying used commercial vehicles with propulsion units that are principally powered by a clean alternative fuel. This credit also extends to costs associated with modifying a commercial vehicle to be principally powered by clean alternative fuel (including parts incorporated into the vehicle and labor or service charges), and to alternative fuel vehicle infrastructure component parts and related installation and construction costs. Vehicles must display a WA license plate.  Use this link to review the full program.

• Hydrogen Fuel Cell Electric Vehicles – Sales/Use Tax Exemption

This sales and use tax exemption is available for new or used electric vehicles powered by a hydrogen fuel. Eligible vehicles include passenger cars, light-duty trucks, and medium-duty passenger vehicles using hydrogen and oxygen to generate energy.  Use this link to review the full program.

• Electric Vessels, Marine Batteries and Shoreside Infrastructure Sales/Use Tax Exemption:

This sales and use tax exemption is available to persons who purchase batteries and shoreside infrastructure used for electric or hybrid marine propulsion systems. The exemption extends to batteries with continuous power greater than 15 kW, shoreside batteries that reduce grid demand during vessel charging, and labor for installing or repairing these systems. Use this link to review the full program, which includes the process for applying for the exemption.  

• Reduced B&O Tax Rate for Solar Energy Systems and Components of Solar Energy:

This preferential business and occupation (B&O) tax rate is available to manufacturers, processors for hire, and wholesalers of solar energy systems and their components. This rate applies to the manufacturing of photovoltaic modules, Stirling converters, solar-grade silicon, silicon solar wafers, silicon solar cells, thin-film solar devices, and compound semiconductor solar wafers to be used exclusively in solar energy systems using photovoltaic modules. It also covers wholesale sales of these products when manufactured by the seller, providing significant tax relief to support clean energy production and investment in solar manufacturing. Use this link to review the full program.

• Solar Energy System Sales Tax Exemption

This sales tax exemption is available to buyers of solar energy systems and installation related to such (when the installer meets required criteria at the time of sale). To qualify for the exemption, the system must be capable of generating at least 1 kW but no more than 100 kW, AC of electricity and the machinery. Equipment must be purchased and installation must be initiated and completed between July 1, 2019, and Dec. 31, 2029. This savings amounts to 6.5% plus the local rate. More details can be found here.

• Rural data centers – Sales/use tax exemption for purchases of server equipment and power infrastructure

This sales and use tax exemption is available for purchases of eligible server equipment and eligible power infrastructure for an eligible computer data center located in a rural county. An application is required. Learn more about this program.

• Urban data centers – Sales and use tax exemption for nonrural data centers

This sales and use tax exemption is available for purchases of eligible server equipment and eligible power infrastructure for an eligible computer data center located in a nonrural county. An application is required. Learn more about this program.

• B&O tax deduction for manufacturers of dairy products

This B&O tax deduction is available to dairy product manufacturers who manufacture and sell dairy products at retail or wholesale to purchasers who transport the goods out of state or who sell dairy products as an ingredient or component used in the manufacturing of another dairy product in Washington. For incentive details, please use this link.

• B&O tax exemption for manufacturers and sellers of seafood products

This B&O tax exemption is available to qualified seafood product manufacturers who manufacture seafood products that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person; and sell at retail or wholesale manufactured seafood products that remain in a raw, raw frozen, or raw salted state to purchasers who transport the goods out of this state. For more information on this incentive, please use this link.

• B&O tax exemption for manufacturers of fresh fruit & vegetables

This B&O tax exemption is available to manufacturers of fresh fruit and vegetables who manufacture fresh fruits or vegetables by canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables; and who sell at wholesale fruits or vegetables manufactured by the seller when sold to purchasers who transport the goods out of this state. To learn more about this tax exemption, please use this link.

• Sales and Use Tax Exemption for Replacement Parts for Farm Machinery & Equipment

This sales and use tax exemption is available to eligible farmers who purchase replacement parts for qualifying machinery and equipment. It does not apply to the purchase of new equipment. Please use this special notice to review the full qualifying activities, definitions, and more.

• Preferential B&O Tax rate for Timber Extracting and Manufacturing

This preferential  B&O tax rate is available to extractors of timber, extractors for hire of timber, manufacturers, and processors for hire who manufacture timber into timber products or wood products, timber products into other timber products or wood products, and mass timber products as defined in RCW 19.27.570. The preferential rate also extends to wholesale sales of timber extracted by the seller, timber products manufactured by the seller from timber or other timber products, wood products manufactured by the seller from timber or timber products, and mass timber products manufactured by the seller. Use the link to read more program details.

To attract further investment and innovation, the state offers manufacturing companies a range of incentives, including preferential B&O tax rates for manufacturers of solar energy systems/components, semiconductor materials, certain food products, and forest products.

Sales and Use Tax Exemption for Machinery and Equipment

Washington State offers a limited sales and use tax exemption for qualifying machinery and equipment (M&E) used directly in a manufacturing operation or research and development (R&D) operation by a manufacturer or processor for hire. This savings amounts to 6.5% plus the local rate. The current local tax rate can be found here.

To qualify for the exemption, you must give the seller a completed Manufacturers’ Sales and Use Tax Exemption Certificate each time you buy an

 B&O Tax Credit for new employees in manufacturing and research & development (R&D) in rural counties

This B&O tax credit is available to manufacturers, R&D facilities, and commercial testing facilities who create new, permanent, full-time, employment positions at qualifying facilities located in rural counties or within a community empowerment zone (CEZ). To qualify for the credit, the business’s average employment positions at the qualified facility must increase by at least 15% over the four calendar quarters directly following the period when the employee was hired. For more details, see here.

You can find a list of counties eligible for this incentive.

• Manufacturing and R&D in qualifying counties.

This sales and use deferral is available to manufacturers and research and developers located  in counties with a population less than 650,000 for construction of qualified buildings and/or machinery and equipment if they meet program requirements. The amount of sales/use tax that can be deferred is limited to $400,000 per applicant. For more details, see here.

Washington offers a strong incentive package for businesses producing semiconductor components. These incentives come in the form of tax preferences, which can significantly benefit manufacturers in the industry. Recent legislation HB 2482 – 2023-24 extended existing incentives and reinstated other incentives conditional on a significant capital investment of $500M.

• Incentives extended:
  • Preferential B&O Tax Rate: A rate of 0.275% on the manufacturing of semiconductor materials. (The regular manufacturing B&O tax rate is 0.484%.)
  • Sales and Use Tax Exemption: Applicable to gases and chemicals used in the production of semiconductor materials.
• Incentives conditional on a significant capital investment in Washington State:
  • B&O Tax Exemption: For semiconductor microchip manufacturing subject to employment requirements.
  • B&O Tax Credit: A credit of $3,000 for each manufacturing production position up to the amount of B&O due subject to employment duration requirements.
  • Property Tax Exemption: For machinery and equipment exempt from sales and use taxes used in manufacturing semiconductor materials requiring an application and subject to employment requirements.
  • Sales and Use Tax Exemptions: For labor, services, and sales of tangible personal property related to the construction of new buildings used for manufacturing semiconductor materials requiring an application and subject to employment requirements.