RETAIL SALES/USE TAX EXEMPTIONS: FARM PRODUCTS

82.04.050(3,e) HORTICULTURAL SERVICES FOR FARMERS

Description: When the retail sales tax was extended to landscaping and horticultural services in 1993, a specific exemption was included in the definition of retail sale for "horticultural services provided to farmers." Such services, as defined in WAC 458-20-209, comprise those related to the cultivation of vegetables, fruits, grains, field crops, ornamental floriculture, and nursery products and include soil preparation, crop cultivation and harvesting services.

Purpose: To support the agricultural industry.

Category/Year Enacted: Agriculture; 1993.

Primary Beneficiaries: Agricultural producers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 5,037 5,037 5,037 5,037
Local taxes 1,085 1,085 1,085 1,085

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.04.050(8) FEED AND SEED

Description: Sales of feed and seed are exempt from the retail sales/use taxes if they are used in the commercial production of any agricultural commodity.

Purpose: The purpose may originally have been to provide economic relief to a distressed sector of the economy.

Category/Year Enacted: Agriculture; 1935 (seed added in 1943).

Primary Beneficiaries: Agricultural producers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 46,220 47,140 48,090 49,050
Local taxes 10,000 10,150 10,360 10,560

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.04.050(8) FERTILIZER & CHEMICAL SPRAY

Description: Fertilizer and chemical spray used in the commercial production of agricultural commodities are exempt from retail sales/use tax.

Purpose: To assist an economically distressed industry. Also, it can be argued that fertilizer and spray are similar to component parts, if they are actually absorbed into the product that is being produced.

Category/Year Enacted: Agriculture; 1943.

Primary Beneficiaries: Agricultural producers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 41,430 43,500 45,680 47,960
Local taxes 8,920 9,370 9,840 10,330

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.04.050(8) POLLINATION AGENTS

Description: This exemption pertains to bees which are purchased by farmers for pollination purposes. (Most pollination is done with honey bees which are rented to farmers by bee keepers, but such rental is not subject to sales tax.) Leaf-cutter bees are the principal pollination agents that are purchased.

Purpose: To aid a segment of the agricultural sector and make the tax treatment uniform with other forms of pollination.

Category/Year Enacted: Agriculture; 1993.

Primary Beneficiaries: Farmers that use leaf-cutter bees for pollination.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 18 18 18 20
Local taxes 4 4 4 5

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.04.050(8) CONSERVATION & HABITAT DEVELOPMENT

Description: This exemption pertains to sales of feed, seed, fertilizer and spray materials to landowners that participate in specified federal conservation and habitat protection programs or under a cooperative habitat agreement with the Washington State Department of Fish & Wildlife.

Purpose: To encourage land conservation and protection of wildlife habitat.

Category/Year Enacted: Agriculture; 1997.

Primary Beneficiaries: Farmers and other landowners.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 22 35 47 47
Local taxes 6 9 12 12

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.04.213 CHRISTMAS TREE PRODUCTION

Description: Items purchased for the production of plantation Christmas trees are exempt from retail sales/use tax because plantation Christmas trees are included in the definition of "agricultural products" in RCW 82.04.213 and items used in their production are excluded from the definition of "retail sale" in RCW 82.04.050(7).

Purpose: This exemption recognizes that production of Christmas trees is similar to other agricultural activities, thereby warranting exemption of materials used in production.

Category/Year Enacted: Agriculture; 1987.

Primary Beneficiaries: Growers of plantation Christmas trees.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 517 573 602 632
Local taxes 119 132 139 146

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.08.0257 FARM AUCTION SALES

82.12.0258

Description: Sales of tangible personal property that were used in a farm activity (e.g., farm machinery and implements) sold through auctioneers, if the seller is a farmer and the sale is held on a farm are exempt from sales tax. Most such sales occur due to bankruptcy.

Purpose: The purpose is apparently part of legislative policy to aid the agricultural sector, especially when the auction is due to bankruptcy.

Category/Year Enacted: Agriculture; 1943.

Primary Beneficiaries: Farmers who sell personal property at farm auctions.

Conflict With Other Programs: Yes; sales of similar property by farm equipment dealers are taxable.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 215 215 215 215
Local taxes 50 50 50 50

If the exemption were repealed would the estimated revenue be realized? Yes.

82.08.0259 BREEDING LIVESTOCK & CATTLE

82.12.0261

Description: Sales of purebred livestock for breeding purposes, and sales of cattle and milk cows used on a farm are exempt from the sales tax.

Purpose: This part of a series of exemptions supporting the agricultural industry.

Category/Year Enacted: Agriculture; 1945.

Primary Beneficiaries: Sellers and buyers of purebred livestock, cattle, and milk cows.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 4,897 5,044 5,195 5,352
Local taxes 1,130 1,164 1,199 1,235

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.08.0267 POULTRY

82.12.0262

Description: Sales of poultry for use in production of poultry or poultry products are exempt from the sales tax.

Purpose: This part of a series of exemptions constituting legislative policy to support agriculture.

Category/Year Enacted: Agriculture; 1961.

Primary Beneficiaries: Sellers and buyers of poultry for production.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 1,587 1,635 1,684 1,734
Local taxes 366 377 388 400

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.08.0272 SEMEN

82.12.0267

Description: The sale of semen used for artificial insemination of livestock is exempt from the retail sales/use taxes.

Purpose: The primary intent of this exemption is to lower the cost of production to the producer and is part of a number of exemptions constituting legislative policy in support of agriculture. An argument could also be made that such products constitute component parts of other products being produced for sale.

Category/Year Enacted: Agriculture; 1965.

Primary Beneficiaries: The primary beneficiaries of this exemption are the ranchers who purchase semen for artificial insemination of livestock.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 239 239 239 239
Local taxes 55 55 55 55

If the exemption were repealed, would the estimated revenue be realized?

Perhaps; unless the courts rule that semen be considered as a component part.

82.08.02745 FARM-WORKER HOUSING

82.12.02685

Description: Exemption from sales and use tax is provided for goods and services used in construction, repairing or improving of new or existing structures used for housing of temporary farm workers. Ownership of the facilities may be by agricultural employers, governmental entities, nonprofit organizations or for-profit housing providers.

Purpose: To encourage construction of housing for temporary farm workers.

Category/Year Enacted: Agriculture; 1996.

Primary Beneficiaries: Owners of housing for temporary farm workers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 624 624 624 624
Local taxes 163 163 163 163

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.08.0277 POLLEN

82.12.0273

Description: Sales of pollen are exempt from the sales tax.

Purpose: This part of a legislative policy to support the agricultural and horticultural sectors.

Category/Year Enacted: Agriculture; 1967.

Primary Beneficiaries: Sellers and buyers of pollen.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 21 21 21 21
Local taxes 5 5 5 5

If the exemption were repealed, would the estimated revenue be realized?

Yes, unless pollen were considered as a component part.

82.08.0288 LEASED IRRIGATION EQUIPMENT

82.12.0283

Description: Exempts from sales/use tax leases of irrigation equipment which is in whole or in part attached to the land and is an incidental part of the land lease, provided the sales or use tax was paid on the original purchase of the equipment by the owner.

Purpose: The primary purpose is to avoid double taxation. Normally, persons who lease tangible personal property pay sales tax but the owner is exempt from sales tax upon the original acquisition because the item is being purchased for resale.

Category/Year Enacted: Agriculture; 1983.

Primary Beneficiaries: Lessees of farm land which include leased irrigation equipment.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 5,800 5,940 6,120 6,304
Local taxes 1,330 1,370 1,410 1,450
If the exemption were repealed, would the estimated revenue be realized?

Unlikely, because of the resulting double taxation.

82.08.0294 FISH FEED FOR AQUACULTURE

82.12.0294

Description: Persons who raise fish for sale at wholesale are exempt from the sales or use tax on purchases of feed.

Purpose: To provide equal treatment with those persons who are exempt under the general agriculture statutes. This recognizes that aquaculture and agriculture are similar activities and should be treated the same for tax purposes.

Category/Year Enacted: Agriculture; 1985.

Primary Beneficiaries: Approximately 95 commercial fish farmers.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 434 435 436 437
Local taxes 100 100 101 101

If the exemption were repealed, would the estimated revenue be realized?

Only if the broader definition of agricultural product in RCW 82.04.213 were similarly repealed.

82.08.0295 PROCESSING EQUIPMENT, SALE/LEASEBACKS

82.12.0295

Description: Property and equipment used in the business of processing fresh fruit, vegetables or fish is exempt from sales tax if it is leased by the original owner under the terms of a sale/leaseback transaction.

Purpose: The exemption eliminates tax liability for the previous owner, who had originally paid sales tax on such property and equipment, but who incurred sales tax liability on lease payments associated with the same property under a sale/leaseback. The exemption is probably now superfluous because of the enactment of the general exemption for manufacturing machinery and equipment in 1995.

Category/Year Enacted: Agriculture; 1986.

Primary Beneficiaries: No known firms.

Conflict With Other Programs: None evident.

Tax savings ($000): No current impact; it is understood that only one firm benefitted from this exemption and it ceased operation during FY 1991. Further, the exemption appears to be redundant with the 1995 manufacturing machinery exemption in RCW 82.08.02565.

82.08.0296 LIVESTOCK FEED

82.12.0296

Description: Feed consumed by livestock at public livestock markets is exempt from sales/use tax.

Purpose: Exempts public livestock markets from tax liability on feed provided to animals owned by others that are awaiting sale.

Category/Year Enacted: Agriculture; 1986.

Primary Beneficiaries: Operators of public livestock markets.

Conflict With Other Programs: None evident.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 85 85 85 85
Local taxes 21 21 21 21

If the exemption were repealed, would the estimated revenue be realized? Yes.

82.08.0311 FRUIT/VEGETABLE PACKING MATERIALS

82.12.0311

Description: Sales/use tax exemption is provided for materials and supplies used in the washing, sorting and packing of fresh horticultural products by any person who is exempt from B&O tax under RCW 82.04.4287.

Purpose: This extends sales tax exemption for packing materials, similar to the B&O exemption that already exists for packing of fresh horticultural products.

Category/Year Enacted: Agriculture; 1988.

Primary Beneficiaries: Fresh fruit and vegetable packing facilities.

Conflict With Other Programs: Yes; packers of other agricultural products and packaging operations in other industries are taxable.

Tax Savings ($000): FY 2000 FY 2001 FY 2002 FY 2003
State taxes 188 188 188 188
Local taxes 43 43 43 43

If the exemption were repealed, would the estimated revenue be realized? Yes; but the packer could structure the sale so that the packing materials were sold prior to packing and thereby reduce the tax liability to the fair rental value.