Plantation Christmas Trees
Persons growing or producing plantation Christmas trees on their own lands or
upon lands in which they have a present right of possession are farmers.
Plantation Christmas trees are Christmas trees that are exempt from the timber
excise tax under
RCW
84.33.170. This requires that the Christmas trees be grown on land prepared
by intensive cultivation and tilling, such as irrigating, plowing, or turning
over the soil, and on which all unwanted plant growth is controlled continuously
for the exclusive purpose of raising Christmas trees.
Wholesale sales of plantation Christmas trees by farmers are exempt from B&O
tax, provided that the farmer receives a resale certificate from the buyer documenting
the wholesale nature of the sale.
Retail sales of plantation Christmas trees by farmers are subject to the retailing
B&O and retail sales doingbusiness/businesstypes.
Farmers growing or producing plantation Christmas trees may purchase seeds, seedlings,
fertilizer, and spray materials at wholesale.
Other Christmas tree operations. Persons who either directly or by contracting
with others for the necessary labor or mechanical services fell, cut, or take
Christmas trees other than plantation Christmas trees are extractors. Tax-reporting
instructions for persons who fell, cut, or take Christmas tress other than plantation
Christmas trees are provided in
WAC
458-20-13501 (Timber harvest operations).
References: RCW
82.04.213,
RCW
82.04.035,
RCW
82.04.100.
Short Rotation Hardwoods
Effective July 22, 2001, persons cultivating short rotation hardwoods are considered
farmers. Short rotation hardwoods are trees, such as but not limited to, hybrid
cottonwoods, cultivated by agricultural methods in growing cycles shorter than
15 years.
Sales of short rotation hardwoods to others for resale are exempt from the B&O
tax, provided that the grower receives a resale certificate from the buyer documenting
the wholesale nature of the sale.
Farmers growing or producing short rotation hardwoods may purchase seeds, seedlings,
fertilizer, and spray materials at wholesale.
References: RCW
82.04.213 and
84.33.035.
Public Markets - Roadside Stands
Many farmers sell their agricultural products to consumers at public markets
or roadside stands. These sales are sales at retail.
Farmers making retail sales of agricultural products at public markets or roadside
stands may sell food products for human consumption, which are exempt from retail
sales tax, or they may make sales of agricultural products that are not food
products.
Food sales: Although retail sales of agricultural products that are food
for human consumption are exempt from sales tax, farmers that make such sales
are subject to the retailing classification of the B&O tax. If the farmer
expects to have sales of at least $12,000 in a year, the farmer will need to obtain
a tax registration number from the Department of Revenue.
Non-food sales: Farmers that sell agricultural products that are not considered
food for human consumption are subject to the retailing classification of the
B&O tax and must collect retail sales tax from the buyer, unless specifically
exempt by law.
Combination sales: Farmers that sell agricultural products that are exempt
from retail sales tax as food products and also sell agricultural products that
are not tax-exempt food products are subject to the retailing classification of
the B&O tax on all sales. The farmer must collect retail sales tax from the
buyer on those non-food item sales, unless another exemption applies. These farmers
must obtain a tax registration number from the Department of Revenue if they are
required to collect retail sales tax or if they have sales of at least 12,000
per year.
References: WAC
458-20-210 and
458-20-244
Feedlots
Introduction: A feedlot feeds cattle owned by others or cattle that the
feedlot purchases for resale. The cattle are fed on the land owned by the feedlot.
Feeding for hire: Income received by a feedlot for feeding cattle owned
by others is exempt from B&O tax under
RCW
82.04.330 if the cattle are held by the feedlot for at least sixty days while
the cattle are prepared for market. If the feedlot raises the cattle for less
than sixty days, the income received for feeding the cattle is subject to service
and other activities B&O tax.
Cattle owned by feedlot: A feedlot which fattens its own cattle for at
least sixty days before selling them at wholesale will be treated as a farmer
(not subject to B&O tax on its wholesale sales of cattle). If a feedlot owns
the cattle for less than sixty days, the sales are subject to the wholesaling
classification of the B&O tax.
References: WAC
458-20-210
Nurseries
Introduction: For the purpose of this discussion, a "nursery"
is a person who grows, propagates or produces for sale upon the person's own lands
or upon land in which the person has a present right of possession, any flowers,
trees, shrubs or vines.
Wholesale sales: Nurseries are exempt from B&O tax for sales at wholesale
of flowers, trees, shrubs, and vines. Sales of seeds, fertilizers, and spray materials
to nurseries for use in producing for sale flowers, trees, shrubs, or vines are
wholesale sales.
Retail sales: Nurseries are subject to the retailing classification of
the B&O tax and must collect retail sales tax from the buyer on all retail
sales of flowers, trees, shrubs, and vines.
References: RCW
82.04.330 and
WAC
458-20-158 (Florists and nurserymen.)
Turf Farmers
Introduction: Turf grass is an agricultural product. Sales of turf grass
by farmers are either wholesale or retail sales.
Wholesale sales: Sales of turf grass by farmers for resale are not subject
to the B&O tax. Sales of seed, fertilizer, and spray materials to turf grass
farmers are wholesale sales, provided the seller receives a completed resale certificate
from the farmer.
Retail sales: Sales of turf grass by farmers at retail are subject to the
retailing classification of the B&O tax and retail sales tax must be collected
from the buyer.
References: RCW
82.04.213 and
82.04.330
Shellfish or Other Aquatic Products
Introduction: The term "agricultural product" includes products
of "aquaculture" and animals that are "cultured aquatic products."
Aquaculture means the process of growing, farming, or cultivating private sector
cultured aquatic products in marine or freshwaters and includes management by
an "aquatic farmer." An aquatic farmer is a private sector person who
commercially farms and manages the cultivating of private sector cultured aquatic
products on the person's own land or on land in which the person has a present
right of possession.
Wholesale sales: Sales of products of aquaculture by aquatic farmers for
resale are not subject to the B&O tax. Sales of feed to aquatic farmers for
use in the cultivating or raising for sale of fish are wholesale sales.
Retail sales: Sales of products of aquaculture by aquatic farmers at retail
are subject to the retailing classification of the B&O tax and retail sales
tax must be collected from the buyer, unless specifically exempt by law.
References: RCW
15.85.020,
82.04.050,
82.04.060,
82.04.213,
82.04.330,
and
82.08.0294
Farmers Using Agricultural Products in a Manufacturing Process
Introduction: The B&O tax exemption for farmers that sell agricultural products at wholesale does not apply to any person selling manufactured substances or articles that were manufactured using agricultural products that they have grown, raised, or produced.
Manufacturing: Farmers who manufacture products using agricultural products
that they have grown, raised, or produced are subject to manufacturing B&O
tax on the value of products manufactured.
Wholesale sales: Farmers who sell their manufactured products at wholesale
in the state of Washington are subject to the wholesaling B&O tax. A multiple
activities tax credit (MATC) may be available.
Retail sales: Farmers who sell their manufactured products at retail
in the state of Washington are subject to the retailing B&O tax and retail
sales tax must be collected from the buyer, unless specifically exempt by law.
A multiple activities tax credit (MATC) may be available.
Example: WG Vineyards (WG) produces wine from grapes that it grows in
its vineyards located within this state. WG makes wholesale sales of its wine
to customers both within and outside of this state. WG is subject to manufacturing
B&O tax on the value of the wine it produces. WG is also subject to wholesaling
B&O tax on wholesale sales of wine delivered to buyers within this state,
and WG is entitled to a multiple activities tax credit. In addition, WG is subject
to litter tax on the value of wine sold within this state.
Purchases: Effective July 22, 2001, Farmers that manufacture agricultural products into new products
may purchase feed, seed, fertilizer, spray materials, and agents for enhanced
pollination without paying sales tax.
Manufacturing Equipment Sales/Use Tax Exemption: An exemption from sales
and use tax for manufacturing machinery and equipment is available for manufacturers.
More information is available on this exemption in
WAC
458-20-13601 and our publication,
Manufactures'
Sales/Use Tax Exemption (pdf).
Rural County Sales/Use Tax Deferral: The Rural County Deferral/Exemption Program grants a waiver of sales/use tax on pre-approved construction of manufacturing facilities and purchases of qualified machinery and equipment for new and expanding businesses in certain geographical areas. See
Rural County Sales/Use Tax Deferral Program brochure.
Hauling
Introduction: The transportation by motor vehicle of agricultural products or other property is subject to either the public utility tax or the B&O tax.
Motor/Urban Transportation: If any of the transportation occurs on the
public roads, the income is taxable under either the motor or urban transportation
classification of the public utility tax.
Service B&O: If the transportation occurs only on private land,
the income is taxable under the service and other activities B&O tax.
References: WAC
458-20-180
Compressing or Cubing of Hay
Compressing Hay: Bales of hay are placed into a compressor. No foreign substances or materials are added to the pure hay. Hydraulic presses then compress the bales. No physical change involving grinding or cubing occurs. The bale is merely compressed into a more convenient size for shipping.
Cubing Hay: Involves both the addition and/or subtraction of additional
moisture, and an extensive amount of processing which results in significant
changes in form, demand, and value. Cubing hay is excluded from the definition
of "to manufacture."
Service B&O: Income received from compressing or cubing hay for
hire is subject to the service and other B&O tax.
References: RCW
82.04.120 and Det. No. 94-255, 14
WTD 092 (1994)
Pollination
Sales of Insects: The sale of insects such as leaf-cutter bees for the purpose of pollination to a farmer is subject to the wholesaling B&O tax. The farmer must complete a resale certificate and give it to the seller.
Beekeepers: Beekeepers provide bees (usually honey bees) to farmers
for the purpose of pollination. Income of the beekeeper is subject to the service
and other B&O tax as a horticultural service.
References: WAC
458-20-210
Cold Storage
Cold Storage Warehouse: A storage warehouse used to store fresh and/or frozen perishable fruits or vegetables, meat, seafood, dairy products, or fowl at a desired temperature to maintain the quality of the product. It does not include providing of freezer space or frozen food lockers.
Warehousing B&O Tax: The gross income from operating a warehouse
includes all income from the storing, handling, sorting, weighing, measuring,
and loading or unloading for storage of items stored in a cold storage warehouse.
References: WAC
458-20-182
Seed Furnished Under Grower Contracts
Introduction: Many seed companies contract with farmer-growers to raise seed. These companies provide the seed, and in turn agree to purchase the crop if it meets specified standards. These contracts will often provide that ownership of the crop is retained by the seed company, while the risk of crop loss is borne by the farmer-grower. However, the farmer-grower is obligated to pay for the seed, whether or not the crop meets the specified standard.
Wholesaling B&O: The transfer of possession of the seed to the farmer-grower
is a sale. There is a transfer of ownership or possession for a valuable consideration.
These sales transactions are sales for resale, and subject to the wholesaling
B&O tax.
Purchases: Fertilizer and spray materials may be purchased by the farmer-grower
with a resale certificate, without payment of sales tax. The companies that
provide the seeds are not farmers, therefore, they cannot purchase fertilizer
and spray materials without paying sales tax.