Off-Site Component Fabrication by Speculative Builders May Be Subject to Manufacturing Business and Occupation Tax in Washington State

On May 9, 2017, the Washington State Department of Revenue issued Excise Tax Advisory (ETA) 3152.2017. It provides guidance that speculative builders who fabricate components off-site for construction projects may be subject to the manufacturing business and occupation tax (B&O tax) based on the value of the fabricated components.

Washington Administrative Code (WAC) Section 458-20-170(2)(a) defines a speculative builder as “one who constructs buildings for sale or rental upon real estate owned by him.” The code also provides attributes of ownership to help determine if a taxpayer is a speculative builder or not.

How This Could Affect You

If a speculative builder fabricates components at a permanent, off-site facility, that speculative builder will now be subject to manufacturing B&O tax and use tax on the value of the fabricated items, provided the permanent off-site manufacturing facility is located within Washington State. The ETA also states that “a speculative builder is the consumer of all tangible property that becomes part of the construction project. Use tax is due on the value of the finished fabricated items.”

If a speculative builder fabricates components at a construction site that are incorporated into a building, that activity is considered part of the construction and isn’t subject to manufacturing B&O tax. The speculative builder is the consumer of the components that become part of the building and may owe use tax on the materials if retail sales tax hasn’t previously been paid. Goods in Washington State are subject to either sales or use tax, but not both.

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If you’d like more information or help determining how this ETA could affect you and your business, contact your Moss Adams professional or email

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