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Machinery and Equipment Sales Tax Exemption

Equipment purchased for certain University research and development activities may qualify for a sales tax exemption allowed under RCW 82.08.05656, known as the Machinery and Equipment Tax Exemption or "M&E Exemption."  The exemption may be applied towards purchases of fixtures, equipment, and support facilities that are an integral and necessary part of pilot scale manufacturing or used directly in University manufacturing or research and development activities as defined in RCW 82.63.010 (16).

Note:  Items with a total cost of $200 or more may qualify for this exemption.  The M&E Exemption does not tie the tax exemption to the University of Washington's capitalization threshold of $5,000.

Activities performed to discover technological information, and technical and non-routine activities concerned with translating technological information into new or improved products, processes, techniques, formulas, inventions, or software.  The term includes exploration of new use for an existing drug, device, or biological product if the new use requires separate licensing by the federal food and drug administration under chapter 21, C.F.R., as amended.  The term does not include adaptation or duplication of existing products where the products are not substantially improved by application of the technology, nor does the term include surveys and studies, social science and humanities research, market research or testing, quality control, sale promotion and service, computer software developed for internal use, and research in areas such as improved style, taste, and seasonal design.

Equipment with a useful life of more than one year with ownership/title to the University of Washington.

To be considered "used directly" in a manufacturing operation or research and development operation, the machinery and equipment must:

  • Act upon or interact with an item of tangible University property;
  • Convey, transport, handle, or temporarily store an item of tangible University property at the manufacturing site;
  • Control, guide, measure, verify, align, regulate, or test tangible University property;
  • Provide physical support for or access to tangible University property;
  • Produce steam or mechanical power for, or lubricate machinery and equipment;
  • Produce another item of tangible University property for use in the manufacturing operation or research and development operation;
  • Be integral to research and development as defined in RCW 82.63.010.