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. A farmers' exemption certificate, a copy of a valid reseller permit, or other approved exemption certificate must be given to the seller.
However, sales of honey bee products by “eligible apiarists” are exempt from B&O tax. This exemption expires July 1, 2017.
Pollination services: Beekeepers provide bees (usually honey bees) to farmers for the purpose of pollination. Generally, the income of the beekeeper is subject to B&O tax under the service and other activities classification, as a horticultural service. However income received by an eligible apiarist for providing bee pollination services is exempt from B&O tax. This exemption expires July 1, 2017.
Sales/use tax exemptions
Sales and use tax exemptions are provided for the following:
- Purchases of bees by an eligible apiarist.
- Purchases of feed used by an eligible apiarist in the raising of a bee colony used to make honey products.
To document the exempt purchases, the eligible apiarist (buyer) must give the seller a properly completed Buyer's Retail Sales Tax Exemption Certificate at the time of purchase.
Sales or use tax is owed on the purchase of other items such as bee hives, hive components, extractors, protective clothing, and beekeeping equipment.
Christmas tree farmers
Plantation christmas trees: Persons growing plantation Christmas trees on their own land or on land 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 an appropriate exemption certificate or permit 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 tax.
Farmers growing or producing plantation Christmas trees may purchase seeds, seedlings, fertilizer, and spray materials at wholesale; as long as the farmer provides the seller with an appropriate exemption certificate.
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. See WAC 458-20-13501 (Timber harvest operations).
Cold storage warehousing
A cold storage warehouse is 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 freezer space or frozen food lockers.
The gross income from operating a warehouse includes all income from the storing, handling, sorting, weighing, measuring, and loading or unloading of items for storage in a cold storage warehouse. Persons operating a cold storage warehouse are subject to B&O tax under the warehousing classification.
References: WAC 458-20-182
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 B&O tax under the service and other activities classification.
Cattle owned by feedlot: A feedlot that 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
Hay compressing or cubing
Hay compressing: Compressing hay is the process of placing bales of hay 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.
Hay cubing: Cubing hay involves the addition and/or subtraction of 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."
Income received from compressing or cubing hay for hire is subject to the service and other activities B&O tax classification.
References: RCW 82.04.120
Hauling for hire
The transportation by motor vehicle of agricultural products or other property for others is subject to either public utility tax or B&O tax.
Motor/urban transportation: If any of the transportation occurs on public roads, the income is taxable under either the motor or urban transportation classification of the public utility tax.
B&O tax: If the transportation occurs only on private land, the income is subject to the service and other activities B&O tax classification.
Please also see the exemption for Hauling by Related Parties.
References: WAC 458-20-180
Effective June 12, 2014, recreational and medical marijuana producers (growers) and businesses that provide services to marijuana producers are excluded from certain B&O tax deductions and exemptions, retail sales and use tax exemptions, and other excise tax exemptions and deductions. (See Senate Bill (SB) 6505 [Chapter 140, Laws of 2014].)
Please see our Special Notice: Recreational and Medical Marijuana – Repeal and Clarification of Excise Tax Deductions, Exemptions, and Preferential Rates for all tax deductions, exemptions, and preferential rates that do not apply on the production, processing, and sale of marijuana.
Marijuana producers are not farmers and marijuana is not an agricultural product: Marijuana, useable marijuana, and marijuana-infused products, including marijuana concentrates, are excluded from the definition of an “agricultural product” under RCW 82.04.213. Since these products are not defined as agricultural products, marijuana producers are not farmers as defined in that statute.
Marijuana producers and business selling goods and services to marijuana businesses do not qualify for the following tax deductions and exemptions:
B&O tax deductions and exemptions:
- Wholesale sales of agricultural products by farmers. Marijuana producers must pay wholesaling B&O tax on their wholesale sales of marijuana. RCW 82.04.330.
- Wholesale sales to farmers of seed conditioned for use in planting and conditioning seed for planting owned by others. RCW 82.04.331.
- Businesses receiving, washing, sorting, and packing of fresh perishable horticultural products for a farmer. RCW 82.04.4287.
- Interest received from loans to farmers. RCW 82.04.4294.
- Businesses performing custom farming services, farm management services, and contract labor services for a farmer. RCW 82.04.625.
Businesses must pay B&O tax on the gross income received from the sale of these goods and services when sold to marijuana producers. When performing these activities for marijuana producers, these activities may be considered a retail sale subject to retail sales tax.
Retail sales tax and use tax exemptions:
- The leveling of land used for farming or agriculture. RCW 82.04.050(2)(b).
- Horticultural services provided to farmers. RCW 82.04.050(3)(e).
- Sales of seeds, seedlings, fertilizer, chemical sprays and washes, spray materials (pesticides), and agents for enhanced pollination. RCW 82.04.050(11).
- Auction sales of personal property that has been used in conducting a farm activity. RCW 82.08.0257 and RCW 82.12.0258.
- Sales of machinery and implements, parts for machinery and implements, and labor for repair of machinery and implements to nonresident farmers. RCW 82.08.0268.
- The constructing, repairing, decorating, or improving of buildings or other structures used as agricultural employee housing. RCW 82.08.02745 and RCW 82.12.02685.
- The leasing of irrigation equipment. RCW 82.08.0288 and RCW 82.12.0283.
- Purchases of materials and supplies directly used in the packing of fresh perishable horticultural products. Businesses must pay retail sales tax or use tax on materials and supplies directly used in the packing of marijuana for marijuana producers. RCW 82.08.0311 and RCW 82.12.0311.
- Sales to farmers of replacement parts for qualifying machinery and equipment. RCW 82.08.855 and RCW 82.12.855.
- Sales of diesel fuel, biodiesel fuel, or aircraft fuel, to a farm fuel user for agricultural purposes. RCW 82.08.865 and RCW 82.12.865.
Marijuana producers must pay retail sales tax or use tax on their purchases of these goods and services. Marijuana producers may not use a Farmer's Certificate for Wholesale Purchases and Sales Tax Exemptions or reseller permit to purchase these goods and services without paying sales tax.
Motor vehicle sales and lease tax exemption: Marijuana producers must pay retail sales tax plus this additional 0.3% motor vehicle sales and lease tax on all purchases and leases of motor vehicles. While sales of farm tractors and farm vehicles are exempt from the additional 0.3% motor vehicle sales and lease tax, marijuana producers do not qualify for this exemption. RCW 82.08.020(4).
Public Utility Tax (PUT) deduction and exemption:
- The deduction from gross income received from the distribution of water through an irrigation system. RCW 82.16.050(7).
- The exemption for gross income received from hauling agricultural products or farm machinery or equipment for a farmer or for a person performing custom farming services. RCW 82.16.300.
Businesses must pay PUT on the gross income received from providing these services to marijuana producers.
Leasehold Excise Tax (LET) credit on product leases: Property used in the production of marijuana does not qualify for the LET credit on a product lease as this property is excluded from the definition of a “product lease.” RCW 82.29A.120 and RCW 82.29A.020(3).
Mushrooms and other forest products
Sales of mushrooms and other forest products (plants, moss, branches, etc.): Persons who sell mushrooms and other forest products are not considered farmers for this type of income. If your income from this activity is $12,000 (or more) or you make retail sales of these items, you are required to be registered with the Department.
Income from wholesale sales of mushrooms and other forest products is subject to B&O tax under the wholesaling classification. Sellers must obtain a copy of an approved exemption certificate.
Income from sales to consumers of mushrooms and other forest products is subject to B&O tax under the retailing classification. Sellers must collect retail sales tax on sales unless specifically exempt.
A "nurseryman" 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: Nurserymen are exempt from B&O tax on income from wholesale sales of flowers, trees, shrubs, and vines.
Sales to nurseries: 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: Nurserymen are subject to the retailing B&O tax classification on income from sales to , and must collect retail sales tax from buyers on all retail sales of flowers, trees, shrubs, and vines.
Public markets, roadside stands, CSA sales, etc.
Sales of agricultural products to consumers at public markets or roadside stands are retail sales. Farmers that make these types of sales are required to register with the Department and obtain an Account ID.
Food sales: Agricultural products sold as food or food ingredients are exempt from sales tax, but farmers making these sales are subject to the retailing B&O tax classification.
Non-food sales: Farmers that sell agricultural products that are not considered food or food ingredients are subject to the retailing B&O tax classification and must collect retail sales tax from the buyer, unless specifically exempt by law.
Seed furnished under grower contracts
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 classification.
Purchases: Fertilizer and spray materials may be purchased by the farmer-grower with a reseller permit or a Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions , 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.
Reference: WAC 458-20-210
Shellfish or other aquatic products
The term "agricultural products" 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 aquatic products by farmers for resale are not subject to the B&O tax. Sales of Feed to aquatic farmers for use in the cultivating or raising of fish for sale are wholesale sales; Aquatic farmers must provide their vendor with either a reseller permit or a Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions to document the wholesale purchases of these items.
Retail sales: Sales of aquatic products by farmers to consumers are subject to B&O tax under the retailing classification and retail sales tax must be collected from the buyer, unless specifically exempt by law.
Short rotation hardwoods short rotation hardwoods
Short rotation hardwoods are trees, such as but not limited to, hybrid cottonwoods, cultivated by agricultural methods in growing cycles shorter than 15 years. Persons cultivating short rotation hardwoods are considered farmers.
Wholesale sales: Sales of short rotation hardwoods to others for resale are exempt from the B&O tax.
Purchases: Farmers growing or producing short rotation hardwoods may purchase seeds, seedlings, fertilizer, and spray materials at wholesale. Farmers must provide their vendor with either a reseller permit or a Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions to document the wholesale purchases of these items.
Turf grass is an agricultural product. Sales of turf grass by farmers can be either wholesale or retail sales.
Wholesale sales: Sales of turf grass by farmers for resale are not subject to B&O tax.
Purchases: Turf grass farmers may purchase seeds, fertilizer, and spray materials at wholesale. Turf farmers must provide their vendor with either a reseller permit or a Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions to document the wholesale purchases of these items.
Retail sales: Sales of turf grass by farmers at retail (sales to consumers) are subject to the retailing B&O tax classification and retail sales tax must be collected from the buyer.
Persons that harvest and process their own fruit are considered farmers for the harvesting portion of their business. They are, therefore, eligible for all of the exemptions provided to qualified farmers as explained in this guide. The processing of the fruit into wine is considered a manufacturing activity and the equipment used directly in this processing is exempt from sales and/or use tax as explained in WAC 458-20-13601. For information on the reporting responsibilities of wineries see the Winery Guide.