Certain custom farming services: Custom farming services performed for farmers by eligible farmers or entities at least 50 percent owned by eligible farmers are exempt from B&O tax. Custom farming services include planting, cultivating, harvesting or similar activities, when: (1) the activity is directly related to growing, raising, or producing an agricultural product for sales or use by a farmer, and (2) the activity is performed for and under contract with or supervised by a farmer. An eligible farmer is one that qualifies for the Exemption Certificate for Replacement Parts for Farm Machinery and Equipment under RCW 82.08.855 at the time the custom farming services are performed. See the Special Notice “Services for Farmers – B&O and Public Utility Tax Exemption” for additional information. RCW 82.04.625
Specific farming services between related parties: Persons that perform one or any combination of specific farming services for a farmer or custom farmer are exempt from B&O tax when the person performing the service and the farmer or custom farmer receiving the service are “related” as defined section 267(b) (1), (2), and (4) through (13) of the Internal Revenue Code, as amended and renumbered as of January 1, 2007. See the Special Notice “Services for Farmers – B&O and Public Utility Tax Exemption” for the specific relationship list. RCW 82.04.625
The specific farming services eligible for this exemption are:
- Farm management services
- Contract labor services
- Services provided to animals defined as agricultural products in RCW 82.04.213.
Farmers occasionally assisting other farmers: A farmer who occasionally assists another farmer in planting, pruning, or harvesting grapes is generally not considered to be conducting farming for hire or performing horticultural services for farmers. Person that advertise or hold themselves out publicly to perform horticultural services are considered to be in the business of farming for hire/performing horticultural services.