The Washington Department of Revenue issued a notice clarifying the sales and use tax exemption for manufacturing machinery and equipment. Recently enacted legislation made several clarifications for the purposes of the exemption: state agencies are not manufacturers; public service businesses are not manufacturers; activities taxed under the state public utility tax are not manufacturing, but; printing of newspapers or other materials is manufacturing. A taxpayer must report income under a “manufacturing” or “processing for hire” business and occupation tax classification in order to qualify for the exemption. The exemption also applies to businesses that would otherwise be taxed under these classifications if such activities were conducted in Washington or if not for an exemption or deduction. The legislation took effect on April 1, 2011, but the amendments to the manufacturing exemption apply retroactively to any tax period open for assessment or refund of taxes. The legislation provides that the production of Class A or exceptional quality biosolids by a wastewater treatment facility is considered to be a manufacturing activity. As a result, a wastewater treatment facility may qualify for the manufacturing exemption for machinery and equipment used in the production of Class A or exceptional quality biosolids for sale if the requirements of the exemption statute are met. (Special Notice, Washington Department of Revenue, June 7, 2011)