Extracting and manufacturing activities

Logging

Extracting: Felling, cutting (severing), or taking of trees are extracting activities. The Extracting business and occupation (B&O) tax applies to the value of the products, which is the value of the severed trees prior to any cutting, delimbing, or other manufacturing activity.

Manufacturing: Cutting, delimbing, and measuring of felled, cut, or taken trees are manufacturing activities. The Manufacturing B&O tax applies to the value of the products, which is generally the gross proceeds of sale. This is true whether the manufactured product is sold at retail or wholesale.

Mining and quarrying

Extracting: Mining and quarrying are extracting activities. Extracting includes the following activities related to the rock, sand, stone, gravel, or ore:

• First screening.
• Sorting after first screening.
• Piling after first screening.

The Extracting B&O tax applies to the value of the products extracted.

Manufacturing: The crushing and/or blending of rock, sand, stone, gravel, or ore are manufacturing activities. These are manufacturing activities even if there is no separate first screen or sort. If crushing or blending take place at the site where the materials are taken or produced, the following activities that take place after the first screen are part of the manufacturing activity:

• Screening.
• Sorting.
• Piling.
• Washing.

If there is no separate first screen, only those activities that occur after the materials have been deposited into the screen are considered manufacturing activities.

The Manufacturing B&O tax applies to the value of the product manufactured, which is generally the gross proceeds of sale. This is true whether the manufactured product is sold at retail or wholesale.

Note: If a business both crushes rock and builds roads (public or logging), it does not qualify for the manufacturer’s machinery and equipment sales/use tax exemption. This is because the crushed rock is not sold as a separate product but is instead used directly in constructing the road.

Selling

Extractors and manufacturers must also report their sales under the Wholesaling B&O or Retailing B&O and Retail Sales tax classifications.

They may take an Interstate and Foreign Sales deduction from each selling classification for goods delivered to customers outside of Washington.

Multiple activities tax credit (MATC)

Businesses that perform more than one taxable activity for the same product will report each activity under the proper classification and then take the MATC so that B&O tax is only paid once. Businesses that perform one production activity (extracting or manufacturing) and a selling activity (wholesaling or retailing) will take one MATC. However, businesses that perform two production activities and a selling activity will take two MATCs.

For more information, please see the MATC section of this guide.