Sales and use tax exemptions

Sales and use tax exemptions

When making tax-exempt purchases, buyers must provide an appropriate exemption certificate, properly completed, to the seller. The seller is required to keep the certificate on file for a period of five years. For more information on documenting sales tax exemptions please see the Department's Retail Sales Tax Exemption Documentation Matrix.


Farmworker employee housing

Retail sales tax does not apply to labor and services charges for the construction, repair, decoration, or improvement of new or existing structures in which at least 50% of housing units in the development are used as farmworker housing. Retail sales tax does not apply to sales of tangible personal property that becomes part of the structures during the construction, repair, decoration, or improvement of the structures.

In addition, use tax does not apply to the use of tangible personal property that becomes a component of buildings or other structures used as farmworker housing.

These exemptions require that the structures are used to house "farmworkers" (as defined by RCW 19.30.010) for at least five consecutive years from the date approved for occupancy. Farmworker housing for year-round agricultural employees must meet the state building code (chapter 19.27 RCW) for single-family or multi-family dwellings.

These exemptions do not apply to housing built for the occupancy of an agricultural employer (as defined by RCW 19.30.10), family members of an agricultural employer, or persons owning stock or shares in a farm partnership or corporation business. Additionally, the exemption does not apply to housing built exclusively for workers in the United States on an H-2a Visa under the United States citizenship and immigration services.

References: RCW 82.08.02745, RCW 82.12.02685, & WAC 458-20-262

 


Anaerobic digesters

Retail sales or use tax does not apply to anaerobic digesters when purchased or used by eligible persons. These taxes also do not apply to services rendered installing, constructing, repairing, cleaning, altering, or improving an anaerobic digester; nor to the sale or use of tangible personal property that becomes a component of the anaerobic digester. The anaerobic digester must be used primarily to treat livestock manure.

The retail sales tax exemption is available only when the buyer provides the seller with a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions.

References: RCW 82.08.900 & RCW 82.12.900


Animal pharmaceuticals

Certain animal pharmaceuticals are exempt from retail sales and use taxes when sold to, or used by, farmers or veterinarians. To qualify for the exemption, the animal pharmaceutical must be administered to an animal that is raised by a farmer for the purpose of producing an agricultural product for sale. Also, the animal pharmaceutical must be approved by the United States Department of Agriculture (USDA) or the United States Food and Drug Administration (FDA).

Example: Dairy Farmer purchases sterilizing agents. The sterilizing agents are applied to the equipment and facilities where Dairy Farmer's cows are milked. Dairy Farmer also purchases teat dips, antiseptic udder washes, and salves that are not listed in either the FDA's Green Book of approved animal pharmaceuticals or the USDA's Veterinary Biologics Product Catalogue of approved biotechnology products. The purchases of sterilizing agents are not exempt as animal pharmaceuticals because the sterilizing agents are not administered to animals. The teat dips, antiseptic udder washes, and salves are likewise not exempt because they have not been approved by the FDA or USDA. This is the case even if these products are approved by the United States Environmental Protection Agency or any other governmental agency.

References: RCW 82.08.880, RCW 82.12.880 & WAC 458-20-210


Auction sales of farm property

Retail sales and use taxes do not apply to tangible personal property, including household goods, which have been used in conducting a farm activity, if the property was purchased from a farmer at an auction sale held or conducted by an auctioneer on a farm.

References: RCW 82.08.0257 & RCW 82.12.0258

 

Beef cattle and/or dairy cows for use by a farmer

Cattle and milk cows used on a farm are exempt from retail sales and use taxes.

References: RCW 82.08.0259 & RCW 82.12.0261

 

Chicken bedding materials

Retail sales and use tax does not apply to bedding materials used by farmers to accumulate and facilitate the removal of chicken manure. To qualify for the exemption, the farmer must be raising chickens that are sold as agricultural products.

"Bedding materials" are wood shavings, straw, sawdust, shredded paper, and other similar materials.

References: RCW 82.08.920 & RCW 82.12.920

 

Farm fuel

Qualifying fuel is exempt from sales and use taxes when used for producing agricultural products by farmers and persons providing horticultural services for farmers (“farm fuel users”).

Qualifying Fuels

  • Biodiesel fuel as defined in RCW 19.112.010.
  • Diesel fuel as defined in 26 U.S.C. 4083, as amended or renumbered as of January 1, 2006. This includes clear diesel and red-dyed diesel.
  • Aircraft fuel as defined in RCW 82.42.010.
  • Fuel blends if all the component fuels would otherwise be exempt

Exempt uses of fuel
The exemption applies to fuel used to produce agricultural products and provide horticultural services to farmers. Use of fuel on roadways does not qualify for this exemption.

To receive the exemption, a farm fuel user must give the seller a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions.

Taxable uses of fuel
The exemption does not apply to uses other than producing agricultural products or providing horticultural services. Also, the exemption does not apply to any use of the fuel by someone other than a farm fuel user.

Examples of taxable use:

  • Space or water heating for human habitation
  • Generators for producing electrical power for human habitation
  • Growing, raising, or producing agricultural products for a person's own consumption
  • Transportation (public road use)
  • Aerial or other spray applications for timber
  • Logging operations

 

Fuel tax refunds

If you paid the “special fuel tax” on your purchase of diesel or biodiesel fuel within the last 13 months and used the fuel for non-highway purposes, you may be eligible for a refund of the special fuel tax. For more information and to submit a request for a refund, go to the Department of Licensing's Fuel Tax Section.

Include a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions with your fuel tax refund request to avoid having use tax deducted from your refund.

References: RCW 82.08.865 & RCW 82.12.865

 

Feed for feeding livestock at public livestock markets

Feed to be consumed by livestock at a public livestock market is exempt from retail sales and use taxes.

References: RCW 82.08.0296 & RCW 82.12.0296

 

Food and food ingredients for human consumption

Food products for human consumption are exempt from retail sales and use taxes. This exemption includes livestock sold and/or used for human consumption.

References: RCW 82.08.0293, RCW 82.12.0293, & WAC 458-20-244

 

Fruit/vegetable packing materials

Retail sales and use taxes do not apply to materials and supplies directly used in the packing of fresh, perishable horticultural products by any person who is entitled to a B&O tax deduction under RCW 82.04.4287 either as an agent or independent contractor.

References: RCW 82.08.0311 & RCW 82.12.0311

 

High unemployment county sales/use tax deferral

The High Unemployment County Deferral/Exemption Program grants a waiver of sales/use tax on pre-approved construction of manufacturing facilities and on purchases of qualified machinery and equipment for new and expanding businesses in certain geographical areas.

 

Leased irrigation equipment

Retail sales and use taxes do not apply to the lease or use of irrigation equipment if:

  • The irrigation equipment was purchased by the lessor for the purpose of irrigating land controlled by the lessor;
  • The lessor has paid sales or use tax in respect to the irrigation equipment;
  • The irrigation equipment is attached to the land in whole or in part; and
  • The irrigation equipment is an incidental part of the lease of the underlying land and is used solely on such land.

References: RCW 82.08.0288 & RCW 82.12.0283

 

Livestock for breeding purposes

The sale or use of livestock for breeding purposes where the animals are registered in a nationally recognized breed association is exempt from retail sales and use taxes.

References: RCW 82.08.0259 & RCW 82.12.0261

 

Machinery and equipment used directly in a manufacturing operation by farmers

Machinery and equipment used directly in a manufacturing operation by a manufacturer or processor for hire is exempt from sales or use tax provided that all requirements for the exemption are met. This exemption is commonly referred to as the M&E exemption. Farmers who use agricultural products that they have grown, raised, or produced as ingredients in a manufacturing process may be entitled to the M&E exemption on the acquisition of machinery and equipment used directly in their manufacturing operation.

References: RCW 82.08.02565, RCW 82.12.02565 & WAC 458-20-13601

 

Machinery and implements to nonresidents (sales of)

The retail sales tax does not apply to sales to nonresidents of this state for use outside of this state of:

  • Machinery and implements for use in conducting a farming activity;
  • Parts for machinery and implements for use in conducting a farming activity; and
  • Labor and services for the repair of machinery, implements, and parts for use in conducting a farming activity.

To qualify for the exemption, the machinery, implements, and parts must be transported immediately outside the state.

References: RCW 82.08.0268 & WAC 458-20-239

 

Pollen

Pollen is exempt from retail sales and use taxes.

References: RCW 82.08.0277 & RCW 82.12.0273

 

Poultry

Retail sales or use tax does not apply to poultry used in the production for sale of poultry or poultry products.

References: RCW 82.08.0267 & RCW 82.12.0262

 

Propane or natural gas to heat chicken structures

Retail sales or use tax does not apply to propane or natural gas used to heat structures housing chickens. The propane or natural gas must be used exclusively to heat the structures. The structures must be used exclusively to house chickens that are sold as agricultural products.
"Structures" are barns, sheds, and other similar buildings in which chickens are housed.

References: RCW 82.08.910 & RCW 82.12.910

 

Replacement parts

A sales and/or use tax exemption is available to eligible farmers for purchases of replacement parts for qualified farm machinery and equipment.

The exemption applies to charges for:

  • Parts that replace an existing part, or which are essential to maintain the working condition, of a piece of qualifying farm machinery and equipment;
  • Installing replacement parts for qualifying farm machinery and equipment; and
  • Repairing qualifying farm machinery and equipment.

A replacement part does not include paint, fuel, oil, grease, hydraulic fluids, anti-freeze, and similar items except when the seller incorporates these items when installing exempt replacement parts or making repairs to qualifying farm machinery and equipment.

If exempt installation or repair services are provided in a single transaction that also involves the provision of nonexempt services, the exemptions apply to the exempt services as long as the charge for the exempt services are separately itemized and does not exceed the seller's usual and customary charge for such services. The exemptions do not apply if the seller makes a single non-itemized charge for all of the services.

The separate charge for qualifying parts and labor cannot exceed the seller's usual and customary charge for such services. A seller that does not separately itemize the charges is responsible for collecting and remitting sales tax on the entire charge and will be held personally responsible for any uncollected sales tax due on such a transaction.

In order to obtain the exemption an eligible farmer must provide their vendor with a completed Farmers' Certificate for Wholesale Purchases and Sale Tax Exemptions.

In order to be eligible for this exemption:

a) A Farmer must have gross sales or harvested value of agricultural products grown, raised, or produced of least ten thousand dollars for the immediately preceding tax year; or

b) A farmer must have agricultural products that had an estimated value of at least ten thousand dollars for the immediately preceding tax year, if the person did not sell or harvest an agricultural product during that year; or

c) A Farmer who has merely changed identity or the form of ownership of an entity that was an eligible farmer, where there was no change in beneficial ownership, and the combined gross sales, harvested value, or estimated value of agricultural products by both entities met the requirements of above for the immediately preceding tax year;

d) A farmer who does not meet the definition of "eligible farmer" as defined above, and who did not engage in farming for the entire immediately preceding tax year, because the farmer is either new to farming or newly returned to farming.

For more information please refer to RCW 82.08.855

Qualifying farm machinery and equipment:
Qualifying machinery and equipment includes farm tractors and other farm implements, and means machinery and equipment used primarily by an eligible farmer for growing, raising, or producing agricultural products.

A “farm tractor” is a motor vehicle that is designed and used primarily as a farm implement for drawing plows, mowing machines, and other farm implements of husbandry. (RCW 46.04.180)

“Farm vehicles” are vehicles used primarily in agricultural pursuits on farms for the purpose of transporting machinery, equipment, implements, farm products, supplies and or farm labor and are incidentally operated on or moved along public highways for the purpose of going from one farm to another. (RCW 46.04.181)

Example: Sales tax does not apply to replacement parts for motor vehicles licensed with the Department of Licensing specifically for “farm use,” “farm exempt,” or “farm combination,” including farm tractors and farm implements, unless it is specifically excluded from the definition of farm machinery and equipment (as discussed below).

A “farm implement” is machinery or equipment that is manufactured, designed, or reconstructed for agricultural purposes and used primarily by an eligible farmer to grow, raise, or produce agricultural products, but does not include lawn tractors and all-terrain vehicles.

For the purposes of these exemptions, qualifying farm machinery and equipment does not include:

  • Vehicles, except for those specifically noted above
  • Lawn tractors
  • All-terrain vehicles
  • Aircraft
  • Hand tools and hand powered tools; and
  • Property with a useful life of less than one year

The purchase or use of the following items and services remain subject to retail sales or use tax, unless some other exemption applies:

  • All machinery and equipment used in farming, including farm vehicles and other motor vehicles, tractors, and other farm implements;
  • Parts for non qualifying farm machinery and equipment, including replacement parts for vehicles other than farm vehicles, farm tractors, and other farm implements;
  • Other tangible personal property that does not meet the statutory definition of replacement parts, such as GPS equipment installed on a combine that did not previously have GPS equipment;
  • Items that are specifically excluded from the statutory definition of replacement parts, such as paint, fuel, oil, grease, hydraulic fluids, antifreeze, and similar items, when purchased by a farmer for installation in qualifying or non-qualifying machinery or equipment. However, the purchase by a farmer of otherwise exempt installation or repair services remain exempt if the seller installs, incorporates, or places such items in qualifying farm machinery and equipment during the course of installing replacement parts or repairing the qualifying farm machinery and equipment;
  • Installation services for items that do not qualify as replacement parts;
  • Repair services for non-qualifying farm machinery or equipment; and
  • Otherwise exempt installation or repair services included in a single transaction involving nonexempt services, if the charge for the otherwise exempt services is not separately itemized or exceeds the seller's usual and customary charge for such services.

References: Special Notice on Replacement Parts & RCW 82.08.855

 

Semen for use in the artificial insemination of livestock

Semen for use in the artificial insemination of livestock is exempt from retail sales and use taxes.

References: RCW 82.08.0272 & RCW 82.12.0267

 

Warehouse and grain elevators and distribution centers

Wholesalers or third-party warehousers who own or operate warehouses or grain elevators and retailers who own or operate distribution centers, and who have paid sales or use tax on:

  • Material-handling and racking equipment, and labor and services rendered in respect to installing, repairing, cleaning, altering, or improving the equipment; or
  • Construction of a warehouse or grain elevator, including materials, and including service and labor costs, are eligible for an exemption from all or part of the state's portion of the sales tax in the form of a remittance.

A person claiming an exemption from state tax in the form of a remittance under this section must pay the sales tax. The buyer may then apply to the Department for a refund of all or part of the tax paid.

References: RCW 82.08.820