Manufacturing semiconductor materials

Manufacturing

Businesses that manufacture or process for hire semiconductor materials are taxable under the Manufacturers/Processors for Hire of Semiconductor Materials business and occupation (B&O) tax classification at a preferential rate.

Note: The preferential tax rate expires January 1, 2034. The activity will then be taxable under the standard manufacturing B&O tax rate.

Selling

Businesses that manufacture semiconductor materials must also report their sales under either 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.

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

Employment requirement

Businesses that report under the preferential manufacturing rate must maintain at least 90% of their employment average for the previous three years in the year they claim the tax preference, or they must repay 50% of the preference claimed.

Reporting/documentation requirements

Businesses that report under the preferential tax rate must file an Annual Tax Performance Report by May 31 of each year following a year when they claim the preferential rate. This requirement will not apply when the preferential rate expires.

Definitions

For purposes of the preferential B&O tax rate, semiconductor materials means silicon crystals, silicon ingots, raw polished semiconductor wafers, and compound semiconductor wafers.

Additional resources

Semiconductor industry incentives