Washington—Automobile Crushing Not a Manufacturing Activity

SALT Report 1802 – The Washington Tax Appeals Division upheld a use tax and deferred sales tax assessment imposed on a Taxpayer who operates a mobile automobile crushing business.  The Taxpayer’s business consists of crushing automobile shells after they have been stripped of all saleable parts. When providing crushing services for his customers, the Taxpayer transports his mobile crusher to the customer and performs the crushing services at that location. The Taxpayer then loads the shell onto a flatbed for transport and further sale to a shredding facility.

During an audit it was determined that the Taxpayer’s crushing activities did not qualify as manufacturing and the Department issued a sales and use tax assessment. The Taxpayer appealed the assessment arguing that the crushing of automobile shells constitutes a manufacturing operation under RCW 82.08.02565 and the crushing equipment used to provide the service should be exempt from retail sales and use tax.

The state of Washington provides an exemption under RCW 82.08.02565 for sales of machinery and equipment sold to a manufacturer and “used directly in a manufacturing operation.”  However, in this case, the Department rejected the claimed exemption for crushing activities based on its conclusion that the Taxpayer’s business of purchasing and crushing automobile shells for further sale to metal recyclers does not constitute a manufacturing operation.

As a result, the Appeals Division upheld the Department’s determination that the Taxpayer was not entitled to the manufacturing and equipment exemption from sales and use tax because the machinery was not used to create a new, different, or useful substance. The Taxpayer’s petition was dismissed and he was ordered to pay the original assessment.

For Further Information:

Washington Department of Revenue – Tax Determination No. 11-0053


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