Beekeepers tax guide

Effective July 1, 2015 eligible apiarists are now “farmers” for excise tax purposes. Engrossed Substitute Senate Bill 6057, Chapter 6, Laws of 2015 [1].

Updated October 2015

Definitions

Eligible Apiarist: Means a person who:

Owns or keeps one of more bee colonies and
Grows, raises, or produces honey bee products for sale at wholesale and
Registers under RCW 15.60.021 [2] (RCW 82.04.213)

(For more information about the Dept. of Agriculture's hive registration program, please visit http [3]://agr.wa.gov/Plantsinsects/apiary/ [3] or call (360) 902-2070)

Farmer: Any person engaged in the business of growing, raising, or producing, upon the person's own lands or upon the lands in which the person has a present right of possession, any agricultural product to be sold, and the growing, raising, or producing honey bee products for sale, or providing bee pollination services, by an eligible apiarist. "Farmer" does not include a person growing, raising, or producing such products for the person's own consumption; a person selling any animal or substance obtained therefrom in connection with the person's business of operating a stockyard or a slaughter or packing house; or a person in respect to the business of taking, cultivating, or raising timber.

Agricultural product: Any product of plant cultivation or animal husbandry including, but not limited to: A product of horticulture, grain cultivation, vermiculture, viticulture, or aquaculture as defined in RCW 15.85.020; plantation Christmas trees; short-rotation hardwoods as defined in RCW 84.33.035; turf; or any animal including but not limited to an animal that is a private sector cultured aquatic product as defined in RCW 15.85.020, or a bird, or insect, or the substances obtained from such an animal including honey bee products. "Agricultural product" does not include marijuana, useable marijuana, or marijuana-infused products, or animals defined as pet animals under RCW 16.70.020.

Bee colony: A natural group of honey bees containing 7,000 or more worker bees and one or more queen bees, housed in a man-made hive with moveable frames, and operated as a beekeeping unit. RCW 15.62.020

Honey bee products: Queen honey bees, packaged honey bees, honey, pollen, beeswax, propolis, or other substances obtained from honey bees. Honey bee products do not include manufactured substances or articles.

Business and occupation (B&O) tax

Business and occupation (B&O) tax is based upon the specific activity. Below are some typical activities performed by apiarists and the tax application for such activities.

Pollination services

Income from providing bee pollination services to a “farmer” by an eligible apiarist is exempt from business and occupation (B&O) tax. If you are an eligible apiarist and your business only provides pollination services to farmers, then you are not required to register with the Department of Revenue.

Income from providing pollination services to persons other than “farmers” is subject to B&O tax under the Service and Other Activities classification. Retail sales tax does not apply.

Sales of honey bee products

Wholesale sales (sales to someone who will resell your product) of honey bee products by an eligible apiarist are exempt from B&O tax. This includes sales of honey bees to farmers for the purpose of producing agricultural products for sale or for providing bee pollination services. If you are an eligible apiarist and your business only makes wholesale sales of honey bee products then you are not required to register with the Department of Revenue.

Retail sales (sales to the end consumer) of honey bee products are subject to B&O tax under the Retailing classification. Retail sales of honey bee products are also subject to litter tax. (WAC 458-20-243 [4]) Sales of honey for human consumption are exempt from sales tax as a food product; see (WAC 458-20-244 [5]).

Manufacturing and selling other products

If you manufacture (make) and sell other items (e.g. candles, soaps, etc.) then your income is subject to B&O tax under the Manufacturing classification. Additionally, the sale of such items is subject to B&O tax under either the Wholesaling or Retailing classification, depending on the type of sale. A Multiple Activities Tax Credit (MATC) [6] is allowed, so that you only pay tax under one classification on items manufactured and sold in Washington. Additionally, you must collect retail sales tax on retail sales of such items.

Sales tax exemptions

Honey bees

Purchases of honey bees by an eligible apiarist are not subject to sales tax if the apiarist provides the vendor with a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions [7].

Feed

Purchases of feed for Honey bees by an eligible apiarist are not subject to sales tax if the apiarist provides the vendor with a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions [7].

Replacement parts

Eligible apiarists are allowed a retail sales tax exemption on replacement parts and repair services on qualifying machinery and equipment: The definition of farmer for this exemption now includes:

a person who grows, raises or produces honey bee products for sale; and
a person who provides bee pollination services, and
whose annual gross income from such sales is more than ten thousand dollars.

What is a replacement part for qualifying machinery and equipment?

A replacement part is a part that replaces an existing part, or which is essential to maintain the working condition of a piece of qualifying farm machinery and equipment.

A replacement part does not include an item that may be desirable but is not essential for maintaining the working condition of a piece of qualifying farm machinery and equipment, unless the item replaces an existing part. 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.

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.

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.

Qualifying farm machinery and equipment means machinery and equipment used primarily by an eligible farmer for growing, raising, or producing agricultural products including farm tractors and other farm implements. As of July 22, 2007, qualifying farm machinery and equipment includes vehicles licensed as farm vehicles.

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 only incidentally operated on or moved along public highways for the purpose of going from one farm to another. (RCW 46.04.181) For example, sales tax does not apply to replacement parts for motor vehicles licensed with the Department of Licensing (DOL) 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.

What is not qualifying farm machinery and equipment?

For the purposes of this exemption, 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.

For more information on this exemption please see our special notice [8].

Questions and answers

With the passing of recent legislation (Engrossed Substitute Senate Bill 6057) the Department received several questions on how this new law applies to beekeepers. Below is a representative list of those questions and our answers.

If a beekeeper registers with the Washington State Department of Agriculture (RCW 15.60.021), is he or she considered to be a “farmer” if the beekeeper owns or keeps at least one hive?

The answer is yes if, in addition to registering with Washington State Department of Agriculture and owning or keeping at least one hive, the beekeeper must also meet the definition of an “eligible apiarist” (see description above)

The new legislation exempts the gross income from bee pollination services provided by all eligible apiarists to farmers from B&O tax. This means that beekeepers who don't register with WSDA are subject to B&O taxes, correct?

If an apiarist doesn't register under RCW 15.60.021 [2](with WSDA), then they do not qualify as an “eligible apiarist” and would not be considered a “farmer” even if they make wholesale sales of honey bee products. They would not qualify for any of the exemptions listed in this document that are contingent on an apiarist being an “eligible apiarist” or a “farmer.”

Note: A beekeeper that does not register with WSDA, but provides bee pollination services would be subject to B&O tax under the Service and Other Activities classification on their charges for these services.

Does Washington's litter tax apply to the sale of honey?

Retail sales of honey are subject to litter tax.
Wholesale sales of honey by an eligible apiarist are exempt from litter tax. (WAC 458-20-243 [4](5)(b))
Retail sales of manufactured honey bee products are subject to litter tax.

Are sales of food generally sales tax free?

Sales of food and food ingredients for human consumption are exempt from sales tax. (WAC 458-20-244 [5])

Are B&O taxes due from sales of honey bee products (queen honey bees, packaged honey bees, honey, pollen, bees wax, propolis, or other substances obtained from honey bees)? Will sales tax be collected on the sales of these? What is the current state of beekeepers' DOR obligations on sales of honey bee products?

Wholesale sales of honey bee products (see definition above) by an eligible apiarist are exempt from B&O tax. Such sales are also exempt from litter tax (RCW 82.19.050 [9]). If an eligible apiarist'sonly business activity is the wholesaling of honey bee products then they are not required to register with the Department of Revenue.

Retail sales (sales to end consumers) of honey bee products are subject to B&O tax under the Retailing classification and, in general, are subject to sales tax. Sales tax exemptions include:

Food and food ingredients: for example retail sales of honey are exempt from sales tax. (WAC 458-20-244 [5])

Interstate and foreign sales – Sales of honey products delivered by the seller to an out-of-state location are exempt from retail sales tax as interstate and foreign sales. Note: such sales are also exempt from B&O tax. (WAC 458-20-193 [10])

Note: Sales of honey bees by an eligible apiarist to a farmer for providing pollination services are exempt from B&O tax and sales tax.

Are eligible apiarists exempt from paying retail sales tax on the following purchases of agricultural inputs?

Chemicals for use on bees
Eligible apiarists are exempt from paying sales tax on “spray materials.” The term “spray materials” is limited to any substance or mixture of substances in liquid, powder, granular, dry flowable, or gaseous form, which is intended to prevent, destroy, control, repel, or mitigate any insect, rodent, nematode, mollusk, fungus, weed, and any other form of plant or animal life normally considered to be a pest. (Emphasis added) (WAC 458-20-210 [11])
Creatures like the varroa mite are “pests” and purchases of chemical sprays to destroy, control, repel, or mitigate the pest would qualify for this exemption from sales tax.
Medications for bees
There is a sales tax exemption for animal pharmaceuticals. Animal pharmaceuticals are only exempt when:
1. The medication is administered by the farmer (eligible apiarist); and
2. The medication is listed in either the FDA “Green Book” or the USDA “Veterinary Biologics Product Catalogue”
  If both of these requirements are met, then the purchase is exempt from sales tax; if not then the purchase is subject to sales tax. (WAC 458-20-210 [11])
Feed for bees (corn syrup, sugar, pollen patties or protein supplements containing brewers yeast, soy flour, pollen, corn syrup, vitamins, minerals, sometimes medications). Since some beekeepers make their own pollen patties, are the purchases of the components of patties also exempt from sales tax such as a 50-pound bag of sugar, pallets of soy flour, etc?:
“Feed" is any substance used as food to sustain or improve animals, birds, fish, or insects, including whole and processed grains or mixtures thereof, hay and forages or meals made therefrom, mill feeds and feeding concentrates, stock salt, hay salt, bone meal, fish meal, cod liver oil, double purpose limestone grit, oyster shell, and other similar substances. Food additives that are given for their beneficial growth or weight effects are "feed." Hormones or similar products that do not make a direct nutritional or energy contribution to the body are not "feed," nor are products used as medicines.

The purchases of “feed” by an eligible apiarist, including items purchased to make feed (e.g. pollen patties), are exempt from sales tax, except for the purchases of hormones or similar products. When making such purchases the eligible apiarist must provide their vendor with a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions [7].

Are all apiarists exempt from collecting retail sales tax on pollination services?

Yes, both eligible and non-eligible apiarists are exempt from collecting retail sales tax on pollination services to farmers. (An eligible apiarist would not owe B&O tax. While a non-eligible apiarist would owe B&O tax under the service and other activities classification.)

Can eligible apiarists use the sales tax exemption on replacement parts for qualifying farm machinery and equipment and labor and services to repair that equipment if their gross annual sales of agricultural products, including honey bee products, and bee pollination services are at least $10,000?

Yes, eligible apiarists who have at least annual gross income from pollination services or from sales of agricultural products (including honey bee products) of at least $10,000, or both qualify for this exemption.

It is up to the individual eligible apiarist to determine if they qualify for this exemption and they must maintain records documenting that they qualify for the exemption. To obtain the exemption, the eligible apiarist must provide the seller with a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions [7], and the eligible apiarist must mark block 9 (Replacement Parts and Repair Services for Qualifying Farm Machinery and Equipment).

Do the following items qualify for the exemption from sales tax for replacement parts and labor and services to repair such equipment?

Forklift (for moving bees)
A forklift primarily used to grow, raise or produce an agricultural product (e.g. honey bee products) qualifies as farm machinery and equipment. Therefore the purchase of replacement parts for such forklifts is exempt from sales tax.
Note: Only the replacement parts and repair services on such forklifts is exempt; the exemption does not extend to the purchase of a forklift.
Extracting equipment (machinery used for extracting the honey from the combs, usually stainless steel)
Extracting equipment qualifies as farm machinery and equipment. Therefore, the purchase of replacement parts for extracting equipment is exempt from sales tax.
Note: Only the replacement parts and repair services on extracting equipment is exempt; the exemption does not extend to the purchase of actual extracting equipment.
Honey bottling equipment/tanks (stainless steel again, for filling containers of honey)
Honey bottling equipment qualifies as farm machinery and equipment. Therefore, the purchase of replacement parts for honey bottling equipment is exempt from sales tax.
Note: Only the replacement parts and repair services on honey bottling equipment is exempt; the exemption does not extend to the purchase of actual honey bottling equipment.
Refrigeration units for stored pollen
Refrigeration units for storing pollen do not qualify as farm machinery and equipment. Therefore the purchase of replacement parts for refrigeration units do not qualify for this exemption.
The exemption is limited to machinery and equipment used primarily in the growing, raising or producing the agricultural product. Here the refrigeration unit is used to store the product; not grow, raise or produce the product.
Honey pumps (for transferring honey from a sump to a tank or from a tank to a barrel or jar)
Honey pumps qualify as farm machinery and equipment. Therefore the purchase of replacement parts for honey pumps is exempt from sales tax. Note: Only the replacement parts and repair services on honey pumps are exempt; the exemption does not extend to the purchase of actual honey pumps.
Syrup pumps (for putting corn syrup or sugar water from a tank into an in-hive container)
Syrup pumps qualify as farm machinery and equipment. Therefore the purchase of replacement parts for syrup pumps is exempt from sales tax.
Note: Only the replacement parts and repair services on syrup pumps are exempt; the exemption does not extend to the purchase of actual syrup pumps.
Carpentry equipment (table saw, radial arm saw, planer, etc, used for building woodenware [hive boxes, lids, pallets, frames, etc])
Carpentry equipment for building hives does not qualify as farm machinery and equipment. Therefore the purchase of replacement parts for carpentry equipment does not qualify for this exemption. The exemption is limited to machinery and equipment used primarily in the growing, raising or producing the agricultural product. Here the carpentry equipment is used to build something that is used for the raising or producing of an agricultural product. These tools are not used themselves to grow, raise or produce the agricultural product.
Hives of bees, bought as replacement hives for hives lost to fire or stolen or died by spray or other causes
Hives of bees are not “machinery or equipment” therefore they are not eligible for this exemption from sales tax. However, the sale of bees to an eligible apiarist is exempt from retail sales tax if sold to an eligible apiarist.
Bee boxes (and lids/pallets/frames), bought to replace worn out ones, by those who don't do carpentry to build replacements
Bee hive boxes to replace worn-out bee boxes are not replacement parts but are replacement equipment. Consequently, these replacements do not qualify for this exemption.
Note: The exemption only extends to parts that replace an existing part, not the entire piece of qualifying machinery or equipment.

If a frame breaks, the replacement of the frame would qualify. If a panel of a bee box is damaged and the damaged side of the bee box needs replacing, the replacement panel used to patch the bee box would be considered a replacement part.

Taxation of other beekeepers (that are not eligible apiarists)

Persons who are beekeepers, but who do not meet the definition of “eligible apiarist” should contact the Department for tax guidance.

If you have questions, please call us at 360-705-6705; or email us for a tax ruling at: rulings@dor.wa.gov [12].