Director's Rule 5-044
Value of Products
Value of products
(1) Introduction. In cases where there is not a selling price for the goods, or the goods are manufactured for the person's own use, the value of products is used to measure the amount subject to tax. This rule explains how to ascertain the value of products and when it is used.
(2) Definitions. The term "value of products" includes the value of by-products, extracted or manufactured, and except as provided herein, shall be determined by "gross proceeds of sales" whether such sales are at wholesale or at retail, to which shall be added all subsidies and bonuses received with respect to the extraction, manufacture, or sale thereof (see SMC 5.30.060 G).
The term 'gross proceeds of sales' means the value proceeding or accruing from the sale of tangible personal property and/or for services rendered, without any deduction on account of the cost of property sold, the cost of materials used, labor costs, interest, discount paid, delivery costs, taxes, or any other expense whatsoever paid or accrued and without any deduction on account of losses." (See also SMC 5.30.035 and RCW 82.04.070.)
(3) In the case of bona fide sales of products. Under the extracting and manufacturing classifications of the business license tax the value of products extracted or manufactured shall be determined by the gross proceeds of sales in every instance in which a bona fide sale of such products is made, whether sold at wholesale or at retail.
(4) Sales to points outside the state. In determining the value of products delivered to points outside the state, a deduction is allowed for actual transportation costs from the point at which the shipment originates in this state to the point of delivery outside the state.
(5) Research and development. The value of products developed as a prototype for the development of a new or improved product is the retail selling price of the new or improved product when first offered for sale, or the value of the materials used to create the prototype in the event that the prototype is not offered for sale.
(6) All other cases. The law provides that where products extracted or manufactured are:
(a) For commercial or industrial use (by the extractor or manufacturer—see Seattle Rule 5-112); or
(b) Shipped, transported or transferred out of the state, or to another person without prior sale; or
(c) Sold under circumstances such that the stated gross proceeds from the sale are not indicative of the true value of the subject matter of the sale;
The value shall correspond as nearly as possible to the gross proceeds from other sales at comparable locations in this state of similar products of like quality and character, in similar quantities, under comparable conditions of sale, to comparable purchasers, and shall include subsidies and bonuses.
(7) Absence of Comparable Value. In the absence of sales of similar products as a guide to value, such value may be determined upon a cost basis. In such cases, there shall be included every item of cost attributable to the particular article or article extracted or manufactured, including direct and indirect overhead costs.
Effective: May 15, 2007
DIRECTOR'S CERTIFICATION
I Dwight D. Dively, Director of the Department of Finance of the City of Seattle, do hereby certify under penalty of perjury of law, that the within and foregoing is a true and correct copy as adopted by the City of Seattle, Department of Finance.