“[E]ase of administration cannot justify reading limitations into a statute that the legislature did not adopt.” So stated the Court of Appeals of the State of Washington when it ruled that a manufacturer was entitled to a use tax exemption for gases and chemicals used in the production of semiconductor materials. REC Solar Grade Silicon LLC v. Wash. Dep’t of Revenue, No. 40685-7-III (Wash. Ct. App. Dec. 11, 2025) (Unpublished). Often, we face tax administration that can be summarized along the lines of “we say so” or “we read the statute that way.” That is unfair tax administration, a failure to turn square corners when dealing with regulated persons, and bad tax policy, particularly when dealing with a manufacturing exemption for use tax that is designed to boost economic activity (and the taxable income of employees and businesses)!

Here, the company produces high-purity polysilicon for sale to third parties. Third parties use the polysilicon to produce solar panels. The polysilicon manufacturer-company uses natural gas in the production process to grow its polysilicon product. Specifically, metallurgical grade silicon is ground to fine particles and reacted with hydrogen gas to form trichlorosilane (“TCS”). Then, the TCS is distilled and purified into silane gas. Next, the silane gas and hydrogen are introduced into a fluidized bed reactor, where the gas decomposes and deposits silicon onto silicon seed particles. These particles grow and eventually form solar grade polysilicon. Natural gas is used to create the hydrogen used in the reactor and to fire heaters that heat oil. The heated oil, in turn, provides the energy used to purify and react the materials being distilled, resulting in the production of silane. It is undisputed that the natural gas does not directly contact the silicon during the manufacturing process—and that is the nub of the dispute.

A use tax applies to natural gas consumed in Washington State unless an exemption applies. RCW 82.12.022. The tax statute provides the exemption at issue:

The provisions of this chapter do not apply with respect to the use of gases and chemicals used by a manufacturer or processor for hire in the production of semiconductor materials. This exemption is limited to gases and chemicals used in the production process to grow the product, deposit or grow permanent or sacrificial layers on the product, to etch or remove material from the product, to anneal the product, to immerse the product, to clean the product, and other such uses whereby the gases and chemicals come into direct contact with the product during the production process, or uses of gases and chemicals to clean the chambers and other like equipment in which such processing takes place. 

RCW 82.12.9651(1) (emphasis added).

In claiming a refund, the company contended that the phrase “whereby the gases and chemicals come into direct contact with the product during the production process” qualifies only the phrase “other such uses.” The Department of Revenue (“Department”) denied the refund and asserted that such “whereby” phrase qualifies the entire list of uses and that a use tax exemption did not apply “because the statute requires that the gas ‘must directly contact the product being produced.’” Slip Op. at 5. The Board of Tax Appeals agreed with the Department. The company appealed, and the Court of Appeals reversed.

The Court of Appeals stated, “[w]e start with the language of the statute [and a]s written, the phrase following ‘whereby’ most naturally modifies only ‘other such uses,’ and not the entire preceding series.” Slip Op. at 13. The Court noted that the exemption language has three distinct sections: (1) the exemption is for gases used “in the production process” for certain listed purposes; (2) the exemption can apply to “other such uses” but only when the gases are used “during the production process[;]” and (3) the exemption applies after the production process, when gases are used to clean the equipment “in which such processing takes place.” Id. The Department had read the distinctions out of the statute.

The Court concluded that “the qualifying phrase ‘whereby the gases and chemicals come into direct contact with the product during the production process’ refers to only the last antecedent ‘other such uses,’ and does not apply to the entire series.” (The interpretation rule is known as last antecedent rule). Slip Op. at 15. Similarly, the Court concluded that “the lack of a comma between ‘other such uses’ and ‘whereby’ reinforces that the qualifier is intended to apply only to the last antecedent.” Id. 

The Court rejected the Department’s assertion that under the series qualifier rule, the qualifier that follows “whereby” would apply to the entire series listed, not just apply to “other such uses.” It noted that the syntax of each listed use is varied and those variations make it “difficult and unnatural for the reader” to apply the Department’s reading of the statute. Id. By way of example of applying the Department’s view, the Court stated that the statute would read: “This exemption is limited to gases and chemicals used in the production process . . . to grow the product . . . whereby the gases and chemicals come into direct contact with the product during the production process.” Slip Op. at 15-16.

The Department further unsuccessfully argued that a “direct contact” rule would make an easy “bright-line” rule. We often hear such prayers by taxing agencies as claims of “administrability.” Administrability should now override statutory language.

The takeaway: Words matter! Start with the specific language of the statute as drafted by the legislature and read the language in a natural way.