Seafood products manufacturing and selling B&O tax exemptions

Seafood manufacturers and sellers are exempt from business and occupation (B&O) tax on certain manufacturing and selling activities through June 30, 2035. Seafood products must remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing. (RCW 82.04.4269).

What the exemptions provide

The following tax classifications and activities are exempt from B&O tax:

• Manufacturing B&O tax - the value of products that remain in a raw, raw frozen, or raw salted state at the completion of the manufacturing by that person.

• Wholesaling and retailing B&O tax - those manufactured seafood products that remain in a raw, raw frozen, or raw salted state and sold at wholesale or retail to a customer that transports the product outside this state in the normal course of business.

These exemptions expire on July 1, 2035. When they expire, they will be replaced with a reduced B&O tax rate of 0.138% (RCW 82.04.260(1)).

How to complete the excise tax return

Effective July 1, 2015, seafood manufacturers and sellers must report their income and take a deduction for the exempt amounts. There is no application required for claiming these exemptions. However, manufacturers and sellers are required to file all returns, surveys, and reports through the department’s MyDOR system.

• Income from manufacturing seafood products is reported under Manufacturing of Seafood Products B&O tax classification. A deduction should be claimed for the same amount under Exempt Manufactured Products.

• All wholesale sales should be reported under the Wholesaling B&O tax classification. A deduction may then be taken for the selling price of manufactured products sold by the seller at wholesale to a buyer that transports the product outside the state in the normal course of business. This deduction is claimed under Dairy, Fresh Fruit or Vegetable, and Seafood Manufactured Products for Transport Out of State.

• All retail sales should be reported under the Retailing B&O tax classification. A deduction may then be taken for the selling price of manufactured products sold by the seller at retail to a buyer that transports the product outside the state in the normal course of business. This deduction is claimed under Dairy and Seafood Manufactured Products for Transport Out of State.

• A deduction is allowed under the Wholesaling and the Retailing B&O tax classifications for products delivered to customers outside the state. The deduction is claimed under Interstate and Foreign Sales.

• Retail sales must also be reported under the Retail Sales tax section. Generally, sales of seafood products are exempt from sales tax under Exempt Food Sales. For more information, see WAC 458-20-244.

• If the business manufactures other products not eligible for the exemption, that income should be reported under the Manufacturing B&O tax classification or another manufacturing classification, if appropriate.

How to document the exemptions for product transported outside the state by the buyer

A seller taking a wholesale or retail B&O tax exemption for product transported outside Washington by the buyer must keep and preserve records for up to five years. Those records must establish that the goods were transported by the purchaser in the ordinary course of business out of this state. A letter from the buyer stating this fact is adequate documentation. For wholesale sales, the buyer must also supply the seller with a copy of the buyer’s reseller permit.

When should I file an Annual Tax Performance Report?

If you claimed one or more of these exemptions, you must electronically file an Annual Tax Performance Report by May 31 of the year following the year when you claimed the exemption (RCW 82.32.534). For example, if you claimed one or more of the B&O tax exemptions in 2022, your annual report would need to be filed by May 31, 2023.

What if I don’t file Annual Tax Performance Report?

If you do not timely file this report, the exemptions claimed will be disallowed and a portion of the balance owed will be billed back to you.

Questions?

For questions regarding the program or the Annual Tax Performance Report, call 360-705-6210.