B&O and public utility tax deductions and exemptions

B&O and public utility tax deductions and exemptions

Agricultural fairs

B&O tax does not apply to any business of any bona fide agricultural fair, if no part of the net earnings benefits any stockholder or member of the association conducting the agricultural fair. Any amount paid for admission to any exhibit, grandstand, entertainment, or other feature conducted within the fairgrounds by others is subject to B&O tax, except as otherwise provided by law.

References: RCW 82.04.335


Agricultural products by a farmer (wholesaling)

B&O tax does not apply to any farmer that sells any agricultural product at wholesale or to any farmer who grows, raises, or produces agricultural products owned by others, such as custom Feed operations. This exemption does not apply to any person selling agricultural products at retail or to any person selling manufactured substances or articles.

References: RCW 82.04.330


Buying and selling at wholesale wheat, oats, dry peas, dry beans, lentils, triticale, canola, corn, rye, and barley.

B&O tax does not apply to amounts received from buying and selling, at wholesale, wheat, oats, dry peas, dry beans, lentils, triticale, canola, corn, rye, and barley. The exemption does not include buying or selling of any manufactured products made from wheat, oats, dry peas, dry beans, lentils, triticale, canola, corn, rye, and barley.

References: RCW 82.04.332


Custom farming services

The B&O tax and public utility tax exemptions for certain providers of custom farming and other farming-related services were previously available between August 1, 2007 and December 31, 2020.

Effective July 1, 2022, the tax exemptions for certain providers of custom farming and other farming-related services for farmers are restored.

B&O tax does not apply to a person performing custom farming services for a farmer, when the person performing the custom farming services is:

  • An eligible farmer.
  • At least fifty percent owned by an eligible farmer. 

Also, B&O tax does not apply to persons that perform one or any combination of specific farming services for a farmer or a person performing custom farming services when the person performing the service and the farmer or custom farmer receiving the service are related.  The specific farming services eligible for the exemption are:

  • Farm management services.
  • Contract labor services.
  • Services provided to animals that are defined as agricultural products in RCW 82.04.213.

Please see our Special Notice: Services for farmers – B&O and public utility tax exemptions for additional information and definitions.

Federal conservation reserve program (payments received from)

B&O tax does not apply to any persons who participate in the federal conservation reserve program or its successor administered by the United States Department of Agriculture with respect to land enrolled in that program.

References: RCW 82.04.330


Hatching eggs or poultry (sales of)

B&O tax does not apply to amounts received by poultry farmers for the sale of hatching eggs or poultry, when the hatching eggs or poultry are for use in the production of poultry or poultry products for sale.

References: RCW 82.04.410


Farm Hauling by related parties

Persons that haul agricultural products, farm machinery, or equipment for a farmer or person performing custom farming services are exempt from public utility tax when the person performing the hauling and the farmer or custom farmer receiving the service are related.

Please see our Special Notice: Services for farmers – B&O and public utility tax exemptions for additional information and definitions.  


Interest on loans to farmers, ranchers, or producers or harvesters of aquatic products

A B&O tax deduction is available for amounts derived as interest on loans to bona fide farmers and ranchers, producers or harvesters of aquatic products, or their cooperatives. The lending institution must be owned exclusively by its borrowers or members. The lending institution must be engaged solely in the business of making loans and providing finance-related services to bona fide farmers and ranchers, producers or harvesters of aquatic products, their cooperatives, rural residents for housing, or persons engaged in furnishing farm-related or aquatic-related services to these individuals or entities.

References: RCW 82.04.4294


Interstate or foreign sales

Washington State does not impose B&O tax on sales of goods that originate in Washington if receipt of the goods occurs outside Washington.

References: WAC 458-20-193


Processed hops for use out-of-state (sales of)

B&O tax does not apply to amounts received by hop growers or dealers for hops that are shipped outside the state of Washington for first use if the hops have been processed into extract, pellets, or powder in this state. This exemption does not apply to a processor or warehouser on amounts charged for processing or warehousing hops.

References: RCW 82.04.337


Receiving, washing, sorting, and packing horticultural products (income from)

A B&O tax deduction is available for amounts received by any person as income for receiving, washing, sorting, and packing fresh perishable horticultural products, and the material and supplies used therein, when performed for a farmer, either as agent or as independent contractor.

References: RCW 82.04.4287 & ETA 3160


Seed sold at wholesale to farmers or conditioning seed for planting

B&O tax does not apply to amounts received by a person engaging within this state in the business of:

  • Making wholesale sales to farmers of seed conditioned for use in planting and not packaged for retail sale; or
  • Conditioning seed for planting owned by others.

References: RCW 82.04.331 & RCW 15.49.011