TAXATION - ASSESSMENT OF PROPERTY - PERSONAL PROPERTY TAX EXEMPTION - GOODS IN TRANSIT.
Where property of the type designated in RCW 84.36.171 is brought into the state, held in storage in a public or private warehouse within the county, kept physically segregated, and then shipped out of the state by the end of the year in which a "free port" tax exemption is claimed, this exemption must be denied if, while being held in storage within this state, it is subjected to some process which changes its form or nature; e.g., bending or cutting metal rails, laminating plywood, custom cutting and shaping of structural "I" beams, etc.
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August 20, 1968
Honorable R. DeWitt Jones
301 Court House
Vancouver, Washington 98660
Cite as: AGO 1968 No. 26
By letter previously acknowledged, you have requested our opinion on a question relating to the "free port" tax exemption statutes, which we paraphrase as follows:
Where property of the type designated in RCW 84.36.171 is brought into the state, held in storage in a public or private warehouse within the county, kept physically segregated, and then shipped out of the state by the end of the year in which a "free port" tax exemption is claimed, must that exemption be denied if, while being held in storage within this state, it is subjected to some process which changes its form or nature such as bending or cutting metal rails, laminating plywood, custom cutting and shaping of structural "I" beams, etc.?
We answer this question in the affirmative for the reasons set forth in our analysis.
In order to place your question in proper context, we must first indicate the basic requirements which must be met in order for in-transit personal property to qualify for the "free [[Orig. Op. Page 2]] port" tax exemption under RCW 84.36.171-184.108.40.206/ They are set forth in RCW 84.36.171, which reads as follows:
"Goods, wares, raw furs and merchandise manufactured or produced in any of the states, territories, or possessions of the United States or foreign countries and brought into this statefor the purpose of transportation or sale through and to points without the state, and identified at the time the affidavit is filed as property ultimately destined for out-of-state shipment, while being so transported, or while held in storage in a public or private warehouse awaiting such transportation, shall be considered and held to be property in transit and nontaxable if actually shipped to points outside the state. All such goods, wares and merchandise shall be listed and assessed as of January 1st of each year, without regard to any average inventory, but the assessor shall cancel any such assessment in whole or in proportionate part upon receipt of the affidavit of exemption as set forth in RCW 84.36.172. A sale of or transfer of title to any such property, while being so transported or held in storage, shall not operate to defeat the intent or purpose of this section." (Emphasis supplied.)
RCW 84.36.172 provides the method for making the claim of exemption, and states the time requirements for shipping the goods out of the state:
"Any owner or agent claiming property in transit as defined in RCW 84.36.171 as of January 1st of any year shall file with his listing of property as provided by RCW 84.40.040 an affidavit of exemption in such form and manner as prescribed by the state tax commission which shall adequately describe the nature and amount of such property. [[Orig. Op. Page 3]] Such property for which an exemption is sought must be shipped to an out-of-state destination not later than December 31st of the year for which the exemption is claimed." (Emphasis supplied.)
With respect to the foregoing statutes we said, in AGO 65-66 No. 25, copy enclosed:
"To qualify for the exemption, the property described in RCW 84.36.171 must have been manufactured or produced outside the state of Washington and brought into the state '. . . for the purpose of transportation or sale through and to points without the state . . .' The affidavit required by RCW 84.36.172 must identify the property as 'ultimately destined for out-of-state shipment . . ."
". . .
". . . it should be pointed out that the exemption will apply only when it is shown that the specific goods listed in the affidavit were the identical goods which were later shipped out-of-state. Under RCW 84.36.171 the property must be '. . . identified at the time the affidavit is filed as property ultimately destined for out of state shipment . . .' and RCW 84.36.172 provides that '. . . Such property for which an exemption is sought must be shipped to an out-of-state destination . . .' 'Such property,' in our opinion, means such specific property or identical property."
The foregoing was reaffirmed in AGO 1968 No. 5, copy also enclosed, wherein we pointed out in addition that while it is essential that the specific property brought into the state and listed on the affidavit of exemption be the identical property which is later shipped out of state, actual physical segregation of the property is not necessarily required. This conclusion was in recognition of the fact that identification of specific goods can often be made without such segregation. Thus, while your question, as paraphrased, contemplates a physical segregation of the property you have in mind, this handling of the property is not essential to its qualification for the "free port" exemption if adequate identification [[Orig. Op. Page 4]] can be made without segregation.2/
With this background in mind, let us now explore the specific issue raised by your inquiry, which is whether property which is otherwise qualified for this tax exemption must be denied the exemption if, while being held in storage within this state, it is subjected to some process which changes its form or nature such as bending or cutting metal rails, laminating plywood, custom cutting and shaping of structural "I" beams, etc. For the answer to this question, we must examine the intent of the "free port" act. RCW 84.36.171,supra, grants the exemption to property brought into the state ". . . for the purpose of transportation or sale through and to points without the state . . ." The exemption is not lost while the property is being ". . . held in storage in a public or private warehouse awaiting . . ." shipment out of the state.
Subjecting the property to some processing while in this state would be permitting the exemption to extend to property brought in for a purpose other than for transportation or sale to points without the state. Further, if the property is not actually in transit, the exemption can only be preserved while the property is in storage. This excludes any other disposition, use or treatment of the property while in this state. Where a statute specifically designates the things to which it refers, there is an inference that everything not included was intentionally excluded. State ex rel. Port of Seattle v. Dept. P. S., 1 Wn.2d 102, 95 P.2d 1007 (1939).
The present "free port" act evolved from chapter 66, Laws of 1939, which read in material part:
". . . AND PROVIDED FURTHER, That goods, wares and merchandise manufactured or produced in any of the territories or possessions of the United States situated outside the boundaries thereof, and all raw furs produced outside the State of Washington and brought into the state for the sole purpose of transportation through and to points without the state, . . ."
Section 3, chapter 168, Laws of 1961, amended the foregoing [[Orig. Op. Page 5]] statute by deleting the word "sole" preceding the word "purpose," but at the same time adding the words "or sale" following the word "transportation." As a result of this amendment, transportation is no longer the sole purpose for which property can be brought into the state to qualify for the exemption. The act was broadened to include property entering the state for the purpose of sale for out-of-state delivery, but the act was not opened to embrace any other purpose.
InHalferty & Co. v. King County, 30 Wn.2d 561, 192 P.2d 736 (1948), the court stated that chapter 66, Laws of 1939, was intended to encourage the storage of property in the state of Washington. We find nothing in subsequent amendments which in any way changes that intent. In particular, there is no indication that the act is meant to encourage the manufacturing or the processing of property brought into the state -whereas the legislature has, by other statutes, made provision for the granting of tax exemptions to imported property while being processed in this state; e.g., RCW 84.36.181 (ore and metals); RCW 84.36.176 (plywood, hardboard, and particle board panels) - to encourage the limited manufacturing or processing of these items in this state.
The term "storage" means the safekeeping of property in a warehouse or other depository. Black's Law Dictionary (4th ed.). It implies that the property is being kept in an immobile or dormant status. Tres Ritos Ranch Co. v. Abbott, 44 N.M. 556, 105 P.2d 1070 (1940). In addition, a public or private warehouse connotes a place apart from manufacturing or processing facilities.
As we pointed out in AGO 65-66 No. 25, supra, the exemption afforded under RCW 84.36.171 will apply only when it is shown that the specific property brought into the state and listed on the affidavit required by RCW 84.36.172, is the identical property which was later shipped out of state by the end of the year. Being able to trace the property is essential and any physical alteration in form or nature could render identification difficult if not impossible and greatly handicap the proper administration of the act.
We therefore conclude that property brought into this state under the provisions of the "free port" act may not, without losing its exemption status be subjected to any process, use [[Orig. Op. Page 6]] or handling other than what is directly related to the storage, transportation, or sale of that property within this state.
We trust the foregoing will be of assistance to you.
Yours very truly,
JOHN J. O'CONNELL
HENRY W. WAGER
Assistant Attorney General
*** FOOTNOTES ***
1/This opinion, it should be understood, will be limited to the qualification of in-transit personal property for this exemption only; as will be pointed out again at page 5 of this opinion, certain in-transit property may qualify for a specific tax exemption under other statutory provisions even though it is undergoing some processing while in this state.
2/For specific methods of adequate identification, see WAC 458-12-290(2).