Machinery and Equipment (M&E) Sales Tax Exemption

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Effective October 1, 2004

Definitions

Machinery and Equipment Tax Exemption (M&E Exemption)

Research and Development

Tangible University Property

Used Directly 

Best Practices for M&E Purchases

Since M&E purchases require pre-approval, the only systems in which M&E purchases are allowed are the eProcurement or Non-Catalog modules of Ariba or, as a last resort, PAS.  NOTE:  PAS will be no longer be available as of January 1, 2015. 

A vendor should not allow an M&E purchase to be made without the M&E Certificate presented up front. The Procurement Card and both the Non-PO Invoice and eReimbursement modules of Ariba are "post purchase" payment methods and therefore pre-approval is not available.

Effective 5/1/2009, equipment purchases are not allowed using the Procurement Card.

Effective 11/1/2013, equipment purchases are not allowed using the Non-PO Invoice or eReimbursement modules of Ariba.  M&E object codes will still be visible in these modules, but they should not be selected.  If M&E codes are used, the order will be rejected to the department.  Eventually, the M&E codes will be completely removed from these two modules of Ariba to eliminate confusion.  However, due to programming efforts and competing priorities, this will be a future phase.

General Overview

To qualify for the M&E Exemption, equipment must:

  • Have a useful life of more than one year;
  • Be used more than 50% annually on qualifying research; and
  • Have an acquisition cost of $1,000 or more.
  • Note:  Add costs to existing pieces of M&E qualifying equipment can also qualify for the exemption, even if they are under $1,000.

Non-equipment costs that can also qualify for the M&E Exemption include:

  • Ancillary costs (use the relevant 06-XX M&E object code)
  • Labor costs (use object code 05-41)
  • Repair and maintenance costs (use object code 05-41)
  • Replacement parts (use object code 05-41)

Non-equipment costs that do not qualify for the M&E Exemption include:

  • Extended warranties and maintenance agreements
  • Consumable supplies

Responsibilities

This provides guidance as to what each of the below departments are responsible related to M&E process:

  • Principal Investigator and Department
  • Equipment Inventory
  • Procurement Services
  • Tax Office

Procedure

This provides detailed guidance for completing an M&E order under each purchasing method:

M&E Statement Examples

This gives examples of both acceptable and unacceptable statements.

Qualifying Research Programs

This describes programs that will often qualify for the M&E Exemption as well as those that do not qualify for the M&E Exemption.

M&E Equipment Examples

This gives examples of equipment that has and has not qualified for the M&E Exemption.

M&E Object Codes

This lists and describes the various M&E Object Codes.

M&E Recharge Center Guidance

This provides guidance specific to recharge centers who purchase equipment under the M&E Exemption.

Forms

eProcurement - Required Manufacturer's Sales and Use Tax Exemption Certificate

PAS - None, unless the vendor requests an official certificate after the purchase. PAS collects M&E purchase data and sends a mini-M&E certificate to the vendor with the purchase orders and on the check remittances.  If this mini-certificate is not sufficient documentation for the vendor, please complete the Manufacturer's Sales and Use Tax Exemption Certificate.

Optional - Some departments choose to collect supporting data related to M&E purchases.  The format for this varies by department and is for internal use only.

Regulations

RCW 82.08.02565 Exemptions - Sales of machinery and equipment for manufacturing, research and development, or a testing operation - Labor and services for installation - Exemption certificate - Rules.

RCW 82.63.010 Definitions

WAC 458-20-13601 Manufacturers and processors for hireSales and use tax exemption for machinery and equipment.

 

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