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M&E Qualification

Why does my portable microscope qualify for the exemption but not my portable laptop?

Early in the University's adoption of the M&E Exemption, we learned that laptops and other portable computing equipment items would probably not qualify for the exemption under audit. This is due to the items being extremely portable as well as having the ability to be used for many different functions outside of research. To reduce the University's risk under audit, we simply don't allow these items to be purchased under the M&E Exemption.

Does software qualify for the M&E Exemption?

Yes, Definition (15) of RCW 82.63.010 specifically includes software. It states: 'Qualified machinery and equipment' includes: Computers; software; data processing equipment...

Do labor and repair costs qualify for the M&E Exemption?

Yes, please use object code 05-41 for the expenses.

Do replacement parts qualify for the M&E Exemption?

Yes, please use object code 05-41 for the expenses.

Do consumables, such as oil and gas, qualify for the M&E Exemption?

No. The law does not extend the exemption to consumables.

Do maintenance agreements and warranties qualify for the M&E Exemption?

No for warranties, yes for maintenance agreements. The DOR issued a special notice that specifically calls out warranties as being taxable even if the property is exempt. If the warranty is included in the cost of the total sales price and can't be broken out separately, then it won't be subject to tax because it is considered part of the underlying price. If it is broken out separately, then it is taxable.

Maintenance agreements separate from warranties qualify for tax exemption.

You can still include the first year of a warranty into the total cost of an M&E qualifying piece of equipment, just use the equivalent non-M&E object code for the warranty portion of the purchase (e.g. use 06-91 for the warranty if the equipment is being purchased as 06-93).

Do costs related to loaned equipment (Loaned to the UW from another institution) qualify for the M&E Exemption? Specifically, shipping and installation?

EIO consulted with the Tax Office on this question. Shipping on loaned equipment is okay to code as M&E tax exempt. The reason for this is that shipping or transportation services bought as a stand-alone purchase are not subject to sales tax. Since there is no underlying cost or sales price (to the University) for a loaned piece of equipment, shipping costs would be considered stand-alone and not subject to sales tax anyway. These costs should be coded 05-41.

Installation costs, on the other hand, are more ambiguous from a tax standpoint. Since the RCW and WACs related to the M&E Exemption do not specifically discuss loaned equipment, the University does not allow installation on a loaned piece of equipment to qualify for the M&E Exemption.

We are ordering multiple items under $200 from different vendors. These items will be fabricated together to create one piece of equipment valued at over $200. Can orders for these multiple items under $200 be purchased using 05-41 (M&E)?

Yes, these items can be purchased as 05-41 due to the fabricated item qualifying for the M&E Exemption.  The department will need to provide a comment stating that the items are going into a fabrication and also provide the fabrication tag number.

Can orders from multiple vendors (under $200) each be purchased as M&E if they are going to be add-costed to an existing M&E asset?

Yes. Allowing this is consistent with how we treat components of a fabrication that are under $200 and also aligns with the Equipment Inventory Office's System Policy.

Please include comments to this effect on the requisition.

 

Can add costs qualify for the M&E Exemption?

Yes.  Add costs to existing pieces of M&E qualifying equipment can qualify for the exemption, even if they are under $200.

Does laboratory furniture qualify for the M&E exemption?

Yes. Excise Tax Advisory 3127.2009 states, “a laboratory table…integral to an R&D operation,” as well as “a chair used in a laboratory workstation…integral to an R&D operation” both would qualify for the exemption. It specifically notes that furniture not used directly in R&D work is not considered integral and does not qualify.

Do Federally titled equipment purchases qualify for the M&E Exemption?

Yes.  The exemption applies to both "sales to" and "use by" a public research institution of machinery and equipment used primarily in a research and development operation." 

I am purchasing a welder to do some work on our department's fabricated equipment. The fabricated equipment is M&E eligible; is the welder?

No. If the welder is not going to be part of the final fabricated piece, it does not qualify. All M&E Exempt equipment must be used directly on research at least 50% of the time.