Qualified infrastructure project: coastal internet and telecommunications

A wholly owned subsidiary of a federally recognized tribe in a county on the Pacific Ocean can buy building materials, telecommunications equipment and construction labor for a coastal internet and telecommunications project, such as a cable landing station, free of the state sales and use tax. Local sales and use tax still applies. The owner gets the certificate from DOR; the seller keeps a copy for five years. It ends January 1, 2030.

Who qualifies

• A qualified infrastructure project owner: a wholly owned subsidiary of a federally recognized tribe located in a county that borders the Pacific Ocean, developing a qualified infrastructure project.
• The project is construction of buildings and utilities for modern global internet and telecommunications infrastructure that occurs in part in a distressed area (RCW 43.168.020) on the Washington coast, such as cable landing stations, communications hubs, buried utility connections and related equipment and buildings that add broadband capacity.
• The owner must apply to DOR and hold the certificate DOR issues; it is effective on the date DOR receives the application.

What qualifies

• Building materials, telecommunications equipment and other goods incorporated into the project.
• Labor and services to construct the project, or to install equipment incorporated into it. DOR's examples: building materials, construction labor, telecommunication equipment.
• Only property and services received on or after July 1, 2023 and before January 1, 2030.

Not covered

• Local sales and use taxes (RCW 82.08.989(2), 82.12.989(2)); only the state portion is exempt.
• DOR's examples that do not qualify: dyed fuels, form lumber, tools, and rental of heavy equipment.
• Purchases after the certificate expires: on the date the owner certifies the project operationally complete, or January 1, 2030, whichever is first.
• State tax above the $8,000,000 program cap; the owner must pay any excess within 60 days after the certificate expires.

What the buyer gives

A copy of the certificate DOR issued to the project owner. DOR: "the qualified infrastructure project owner must provide a copy of the department of revenue issued exemption certificate to their seller." The owner applies to DOR with the information DOR requires; there is no buyer-completed form.

What the seller keeps

RCW 82.08.989(3)(b): the owner "must provide the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files." DOR: sellers give the exemption at the point of sale, keep a copy of the certificate "in their records for five years," take the deduction on the return under "Tribal Qualified Internet/Telecom Infrastructure Project," and keep reporting the income under the Retailing B&O classification. Collect the local sales tax: the exemption does not apply to local sales taxes.

Common mistakes

• Dropping all sales tax from the invoice. Only the state sales tax is exempt; local sales tax still applies.
• Exempting tools, form lumber, dyed fuel or heavy equipment rentals. DOR lists these as not qualifying.
• Selling to the tribe itself or to a contractor without the owner's certificate. The exemption is for the qualified project owner, a wholly owned tribal subsidiary, holding a DOR certificate.
• Continuing exempt sales after the project is operationally complete; the certificate expires then.

Common questions

Is a cable landing station on the Washington coast exempt from sales tax?

The state sales tax on its building materials, telecom equipment and construction labor is, when the buyer is a wholly owned subsidiary of a federally recognized tribe in a Pacific coast county holding a DOR certificate (RCW 82.08.989). Local sales tax still applies.

How long does the seller keep the certificate?

DOR says five years. RCW 82.08.989(3)(b) requires the seller to keep a copy.

How does the seller report the exempt sale?

Report it under Retailing B&O and Retail Sales, and take the "Tribal Qualified Internet/Telecom Infrastructure Project" deduction from retail sales tax (DOR).

When does the exemption end?

The certificate expires when the project is certified operationally complete or on January 1, 2030, whichever comes first, and the statute expires January 1, 2030.

Sources

• RCW 82.08.989 (1)-(6)
• RCW 82.12.989 (1)-(5) use tax
• DOR: Sales and Use Tax Exemption for Tribal Telecommunication Infrastructure Projects What qualifies; Examples that don’t qualify; Documenting the exemption; Definitions
• RCW 82.32.070 (1) five-year record retention