Machinery and Equipment (M&E) Sales Tax Exemption

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Effective October 1, 2004


Machinery and Equipment Tax Exemption (M&E 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 $1,000 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 $2,000.

Research and Development - 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.

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

Used Directly - 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.

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.

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.

Process 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.


Principal Investigator and Department should:

Ensure that all criteria for the exemption are met.  if an exemption is taken on an item that is later deemed by the Washington State Department of revenue to not qualify, the department will ultimately be required to pay the tax along with penalties and fines.

Submit the purchase request using the correct object codes.  The exemption will only be taken on items with:

  • Proper M&E object codes
  • A sufficient M&E statement detailing the type of research to be performed and the desired outcome.  The location of this comment varies by method of purchase.  See below for specific locations:
    • eProcurement - In the item detail screen, it will ask:
      • Is this item Equipment? - Check the yes button.
      • Is this M&E item? - Check the yes button and a box will appear for the M&E statement.
    • PAS - Comments section of the order
    • Non-PO Invoice - Effective 11/1/2013, M&E purchases cannot be made using the Non-PO Invoice module of Ariba.  Please use the eProcurement or Non-Catalog modules of Ariba.
    • eReimbursement - Effective 11/1/2013, M&E purchases cannot be made using the eReimbursement module of Ariba.  Please use the eProcurement or Non-Catalog modules of Ariba.
    • Procurement Card - Effective 5/1/2009, M&E purchases cannot be made on the Procurement Card.  Please use the eProcurement or Non-Catalog modules of Ariba when possible, or PAS as a last resort.

Note:  If during the useful life of the asset, it is determined it will not be used 50% or more on qualifying research, the department will be required to pay the tax due.

Equipment Inventory should:

Review and approve requisitions and M&E statement in the comments section of PAS and eProcurement purchases.

Respond to vendor questions regarding allowable exceptions.

Assist department in applying the M&E Exemption.

Procurement Services should:

Place orders.

Work with vendor to ensure tax is not included on invoices with purchases qualifying for the M&E Exemption.

Review the M&E Exemption when paying the invoice.

Deduct the tax from payment to vendor where appropriate.

Tax Office should:

Assist Equipment Inventory in applying the M&E Exemption.

Research unique purchases over $100,000.




Confirming Orders

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.

Frequently Asked Questions and Unique Situations

This section details frequently asked questions and unique situations that the Equipment Inventory Office and the Tax Office have worked through related to the M&E Exemption.


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.


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


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