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Washington Tax Incentives to Assist Expanding Manufacturing and Related Businesses

Washington State has several tax incentives geared specifically toward manufacturers.  Most manufacturers are familiar with the sales and use tax exemption for manufacturing machinery and equipment purchases.  However, if your company is considering expanding, there are two additional incentives which could save your business money.

Business &Occupation (B&O) Credit for New Employees in Rural Counties or Community Empowerment Zones (CEZs)

This program provides a credit to manufacturers, R&D laboratories and commercial testing facilities for creating new jobs.  The business must increase their qualified employment positions by 15% or more over the prior four quarters.  For each qualifying employment position the credit is $2,000 or $4,000 (depending on wage and benefit levels) and is applied against the company’s Business & Occupation tax liabilities.  The business must maintain the higher employment levels for four consecutive quarters.

The employment positions must be either in a rural county (list updated annually) or in a specified Community Empowerment Zone (CEZ).  CEZs are currently located in Tacoma, Duwamish, White Center, Spokane, Bremerton and Yakima.   For companies located in a CEZ, the new employees must be residents of the CEZ.

An application must be submitted no later than 90 days after hiring the first qualified position.  Once the application has been approved, the company will receive instructions on how to use the credit.  An annual letter/report is also due at the end of the first year to verify program requirements were met.

Sales/Use Tax Deferral for New or Expanding Businesses in High Unemployment Counties or CEZs

This program grants a sales/use tax deferral on purchases of qualifying machinery, equipment and construction costs to manufacturing, research & development, or commercial testing facilities in qualified areas.  This applies to businesses either constructing new structures or the expansion and renovation of existing structures.  Additionally, if the business meets all program requirements in the year of certification and the following seven years, the deferred tax will be waived.

High Unemployment Counties are evaluated every two years and currently include: Clark, Cowlitz, Ferry, Grays Harbor, Lewis, Pacific, Pend Oreille, Skamania, Stevens and Wahkiakum.  Businesses located in a CEZ (same as noted above) have additional hiring requirements.

An application must be filed with the Department of Revenue in advance of permitting.  Once approved, the business will be issued a tax deferral certificate which must be provided to vendors and contractors for the purchases to be exempt.   The business must also file annual surveys in the year the project is operationally complete and for the following seven years in order to gain the full waiver of taxes.


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