HB 1924
In CommitteeHouse
Manufacturing/sales tax
Providing a sales and use tax exemption for manufacturing facilities and green manufacturing facilities.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates a temporary sales and use tax exemption for construction-related purchases and services used to build or renovate manufacturing and green manufacturing facilities in Washington. The exemption is available only to facilities that apply for and receive a certificate from the Department of Revenue before July 1, 2035, and all exemptions expire by January 1, 2037.
- Creates a sales and use tax exemption for construction materials, equipment, labor, and services used at qualifying manufacturing facilities and green manufacturing facilities.
- Requires facilities to apply for and receive an exemption certificate from the Washington Department of Revenue before claiming the exemption—applications must be submitted by July 1, 2035.
- Exemptions expire on January 1, 2036 for new certificates, and all exemptions fully sunset on January 1, 2037.
- Requires annual tax performance reports to be filed with the Department of Revenue, including details on construction firms used and employment levels.
- Allows certificate transfers only under specific conditions (e.g., mergers, acquisitions, or common control), and only with prior written approval from the Department of Revenue.
Who is affected
- Manufacturing and green manufacturing businesses — Businesses operating manufacturing or green manufacturing facilities in Washington may be eligible to avoid paying sales and use taxes on construction materials, equipment, and related labor/services used to build or renovate their facilities—provided they apply for and receive an exemption certificate before July 1, 2035.
- Construction and contracting firms — Construction firms that work with qualifying manufacturing or green manufacturing facilities may need to collect and retain exemption certificates and report employment data annually, but will not collect sales tax on covered services or materials for those clients.
- Washington Department of Revenue — The Washington Department of Revenue will be responsible for issuing and managing exemption certificates, reviewing applications, collecting annual reports, and tracking compliance.
- Retailers and suppliers of construction materials — Suppliers and retailers of construction materials and equipment may benefit from increased demand from qualifying facilities, but must ensure they properly verify and retain exemption certificates to avoid liability for uncollected taxes.
Pro/Con Analysis
Stronger case for concerns
Potential Benefits (5)
The exemption may incentivize new construction or renovation of manufacturing and green manufacturing facilities, potentially increasing local employment in construction trades and supporting long-term job creation in manufacturing sectors — though the net job effect depends on whether the facilities are new or merely repurpose existing ones.
Business & EmploymentPeopleRef: Sec. 1(1)(a), Sec. 2(1)By including 'green manufacturing facilities' in the exemption, the bill creates a financial incentive for facilities to pursue third-party sustainability certifications, which may encourage adoption of cleaner production processes and reduce environmental externalities — though the environmental benefit depends on the rigor and enforcement of the certification standards.
EnvironmentLean peopleRef: Sec. 1(5)(a), Sec. 1(5)(b)The annual tax performance reporting requirement may improve state and local data on construction activity, employment, and firm participation in manufacturing, which could support better-informed economic development planning — though the data utility depends on the quality and transparency of reporting.
Local GovernmentLean peopleRef: Sec. 1(3), Sec. 2(3)The requirement that exemption certificates only apply to purchases made on or after the certificate's effective date — and that no refunds are authorized for prior purchases — reduces windfall gains and ensures the exemption functions as an incentive for future activity rather than rewarding past investment, which helps maintain policy integrity.
Business & EmploymentLean peopleRef: Sec. 1(2)(c), Sec. 1(2)(d)The certificate transfer provisions (allowing transfers only under specific conditions and with DOR approval) help prevent speculative resale of exemptions and preserve the policy’s intent to support ongoing manufacturing operations, though the requirement adds administrative overhead.
Business & EmploymentRef: Sec. 1(4)
Potential Concerns (5)
The bill reduces state sales and use tax revenue by exempting construction-related purchases and services for qualifying manufacturing and green manufacturing facilities; this reduction in revenue reduces funding for public services that benefit all Washingtonians, especially low- and middle-income households who rely most heavily on those services.
FinancialIndustryRef: Sec. 1(1)(a), Sec. 2(1)The requirement to apply for and receive an exemption certificate before July 1, 2035 — and the two-year certificate expiration unless construction has commenced — creates a rushed, time-limited incentive that disproportionately benefits large, well-resourced firms with legal and permitting capacity to act quickly, while small and mid-sized manufacturers may lack the administrative capacity to apply in time or meet the construction-start deadline.
Business & EmploymentIndustryRef: Sec. 1(2)(a), Sec. 1(2)(d), Sec. 1(4)The definitions of 'manufacturing facility' and 'green manufacturing facility' rely on existing statutory definitions that exclude many small-scale or home-based manufacturers, and the 'green' certification requirement favors large facilities with the resources to obtain third-party sustainability certifications — effectively limiting the benefit to larger, more capital-intensive operations.
Business & EmploymentIndustryRef: Sec. 1(5)(a), Sec. 1(5)(b)The annual tax performance reporting requirement (including construction firm names and employment levels) imposes administrative burdens on small local contractors and municipalities that must coordinate with the Department of Revenue and maintain compliance documentation, without compensating funding or streamlined processes.
Local GovernmentIndustryRef: Sec. 1(4), Sec. 2(3)The tax exemption applies only to construction-related purchases and services — not to equipment purchases, operational inputs, or ongoing energy or labor costs — meaning the largest financial benefit accrues to firms that are already in the process of expanding or renovating, and the exemption does not meaningfully help firms that are capital-constrained or need operational support rather than construction support.
FinancialIndustryRef: Sec. 1(1)(a), Sec. 2(1)
Who Is Most Affected
Large manufacturing firms with existing or planned construction projects are the primary beneficiaries — they can quickly apply for certificates, meet deadlines, and realize meaningful tax savings on multi-million-dollar construction projects. Small manufacturers may struggle to meet deadlines or certification requirements, reducing their ability to benefit.
Large regional or national construction firms with experience in industrial projects are well-positioned to take advantage of the exemption by providing services to qualifying facilities; small local contractors may lack the capacity to navigate the application process or meet reporting requirements, limiting their access to this work.
The Department of Revenue gains new administrative responsibilities (certificate issuance, compliance monitoring, report review), but receives no additional funding to support this work — potentially straining existing resources and diverting staff from other high-priority tax administration tasks.
Local governments (counties, cities) may see modest increases in construction-related economic activity, but lose sales tax revenue that would otherwise fund local services — especially impactful in rural or lower-revenue jurisdictions that rely heavily on sales tax collections.
Low- and middle-income households may be indirectly harmed through reduced public service funding (e.g., education, transportation, housing programs) due to lost tax revenue, while high-income households and business owners benefit from the tax break — the policy is regressive in net effect.