Washington Administrative Code › Title 458 - Revenue, Department of › Chapter 458-20 - Excise tax rules › Section 458-20-15501 - Taxation of computer systems and hardware

Current through Register Vol. 24-14, July 15, 2024
(1)
Taxation of computer
			 systems.
(a)
What is a
			 computer?
A "computer" is an electronic device that accepts information
			 in digital or similar form and manipulates it for a result based on a sequence
			 of instructions.
			 RCW
			 82.04.215. Examples of a computer include,
			 but are not limited to, mainframe computer, laptop, workstation, and desktop
			 computer. "Computer" also includes automatic data processing equipment, which
			 is a computer used for data processing purposes. "Computer" does not include
			 any computer software or peripheral devices.
(b)
Computer systems and computer
			 networks distinguished.
A "computer system" is a functional unit,
			 consisting of one computer and associated computer software, whereas a computer
			 network is two or more computers and associated computer software that uses
			 common storage. A computer system may or may not include peripheral
			 devices.
(c)
Wholesale sale
			 of computer systems.
Gross proceeds of sales of computer systems to
			 persons other than consumers (e.g., sales for resale without intervening use)
			 are subject to B&O tax under the wholesaling classification. To verify the
			 wholesale nature of the sale, the seller should obtain a reseller permit from
			 the buyer as provided by WAC
			 458-20-102 (Reseller
			 permits).
(d)
Retail sale of
			 computer systems.
Gross proceeds of sales of computer systems to
			 consumers are subject to B&O tax under the retailing classification.
			 Persons making retail sales are responsible for collecting retail sales tax at
			 the time of sale and remitting the tax to the department, unless the sale is
			 specifically exempt by law. If the seller is required to collect Washington
			 sales tax (such as in the case of the seller having nexus with Washington), but
			 does not collect Washington sales tax, the buyer is responsible for remitting
			 retail sales tax (commonly referred to as deferred sales tax), unless the sale
			 is specifically exempt by law. If the seller is not required to collect
			 Washington sales tax, then the buyer is responsible for remitting use tax,
			 unless the transaction is specifically exempt by law. Separately stated charges
			 for custom software sold with the computer system are subject to service
			 B&O tax.
(e)
Manufacturing of computer systems.
Persons manufacturing computer
			 systems are subject to manufacturing B&O tax upon the value of the
			 products. See WAC
			 458-20-112 (Value of products)
			 and 458-20-136 (Manufacturing, processing for hire, fabricating). Manufacturers
			 of computer systems who sell their products at retail or wholesale are also
			 subject to either the retailing or wholesaling B&O tax, as the case may be.
			 In such cases the manufacturer must report under both the "production"
			 (manufacturing) and "selling" (wholesaling or retailing) B&O tax
			 classifications and may claim a multiple activities tax credit (MATC). See WAC
			 458-20-19301 (Multiple activities
			 tax credits) for detailed information about the MATC.
(i) Separately stated charges for custom
			 programming sold with the computer system are not subject to manufacturing
			 B&O tax, but are subject to service B&O tax.
(ii) Separately stated charges for computer
			 software sold and installed after the sale of a computer system are not subject
			 to manufacturing B&O tax.
(iii)
			 The combining of a computer system with certain peripheral devices is
			 considered a packaging activity not subject to manufacturing B&O tax, when
			 the following occurs:
(A) The peripheral
			 devices remain in the original packaging;
(B) The person does not attach its own label
			 to the peripheral devices;
(C) The
			 person maintains a separate inventory of the peripheral devices for sale apart
			 from the sale of the computer system; and
(D) The charge for the sale of peripheral
			 devices is separately stated from the charge for the sale of computer
			 systems.