Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule provides tax reporting information for
persons performing horticultural services for farmers. Persons providing
horticultural services to persons other than farmers should refer to WAC
458-20-226 (Landscape and
horticultural services). Farmers and persons making sales to farmers may also
want to refer to the following rules:
(a) WAC
458-20-210 (Sales of tangible
personal property for farming-Sales of agricultural products by farmers);
and
(b) WAC
458-20-239 (Sales to nonresidents
of farm machinery or implements, and related services).
(2)
Definitions. For the
purposes of this rule, the following definitions apply:
(a) "Farmer" means 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. "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.
RCW
82.04.213.
(b) "Agricultural product" means 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. "Agricultural product" does not
include animals defined as pet animals under
RCW
16.70.020. Effective June 12, 2014,
"agricultural product" may not be construed to include cannabis. Cannabis is
any product with a THC concentration greater than.3 percent.
RCW
82.04.213.
(c) "Horticultural services" include services
related to the cultivation of vegetables, fruits, grains, field crops,
ornamental floriculture, and nursery products.
(i) The term "horticultural services"
includes, but is not limited to, the following:
(A) Soil preparation services such as plowing
or weed control before planting;
(B) Crop cultivation services such as
planting, thinning, pruning, or spraying; and
(C) Crop harvesting services such as
threshing grain, mowing and baling hay, or picking fruit.
(ii) Effective June 12, 2014, horticultural
services does not include services related to the cultivation of cannabis.
Cannabis is any product with a THC concentration greater than.3
percent.
(3)
Business and occupation (B&O) tax. Persons performing
horticultural services for farmers are generally subject to the service and
other business activities B&O tax upon the gross proceeds. However, if the
person providing horticultural services also sells tangible personal property
for a separate and distinct charge, the charge made for the tangible personal
property will be subject to either the wholesaling or retailing B&O tax,
depending on the nature of the sale. Persons making sales of tangible personal
property to farmers should refer to WAC
458-20-210 to determine whether
the wholesaling or retailing tax applies, and under what circumstances retail
sales tax must be collected.
(a) A farmer who
occasionally assists another farmer in planting or harvesting a crop is
generally not considered to be engaged in the business of performing
horticultural services. These activities are generally considered to be casual
and incidental to the farming activity. For example, a farmer owning baling
equipment which is used primarily for baling hay produced by the farmer, but
who may occasionally accommodate neighboring farmers by baling small quantities
of hay produced by them, is not considered to be in business with respect
thereto.
(b) The extent to which
horticultural services are performed for others is determinative of whether or
not they are considered taxable business activities. Persons who advertise or
hold themselves out to the public as being available to perform farming for
hire will be considered as being engaged in business. For example, a person who
regularly engages in baling hay or threshing grain for others is engaged in
business and taxable upon the gross proceeds derived therefrom, irrespective of
the amount of such business or that this person also does some farming of his
or her own land.
(c) In cases where
doubt exists in determining whether or not a person is engaged in the business
of performing horticultural services, all pertinent information should be
submitted to the department of revenue (department) for a specific ruling. The
department may be contacted using the website dor.wa.gov and selecting "contact
us"; or by telephone at 360-705-6705.
(4)
Deferred sales or use tax.
If the seller fails to collect the appropriate retail sales tax, the purchaser
is required to pay the deferred sales or use tax directly to the department.
(a) Purchases of machinery, machinery parts
and repair, tools, and cleaning materials by persons performing horticultural
services are subject to retail sales tax.
(b) Persons taxable under the service and
other business activities B&O tax classification are defined as consumers
of anything they use in performing their services. (Refer to
RCW
82.04.190.) As such, these persons are
required to pay retail sales or use tax upon the purchase of all items used in
performing the service, such as fertilizers, spray materials, and baling wire,
which are not sold separate and apart from the service they
perform.
(5)
Examples. The following examples identify a number of facts and
then state a conclusion. These examples should be used only as a general guide.
The tax results of other situations must be determined after a review of all of
the facts and circumstances.
(a) John Doe is
a wheat farmer owning threshing equipment which is generally used only for
threshing his own wheat. Occasionally a neighbor's threshing equipment may
break down and John will use his own equipment to assist the neighbor in
completing the neighbor's wheat harvest. While John receives payment for
providing the threshing assistance, this activity is considered to be a casual
and isolated sale. John does not hold himself out as being in the business of
performing farming (threshing) for hire. John Doe is not considered to be
engaging in taxable business activities. The amounts John Doe receives for
assisting in the harvest of his neighbors' wheat is not subject to
tax.
(b) X Spraying applies
fertilizer to orchards owned by Farmer A. The sales invoice provided to Farmer
A by X Spraying reflects a "lump sum" amount with no segregation of charges for
the fertilizer and the application. When reporting its tax liability, X
Spraying would report the total charge under the service B&O tax
classification. X Spraying must also remit retail sales or use tax upon the
purchase of the fertilizer. The entire amount charged by X Spraying is for
horticultural services, and X Spraying is considered the consumer of the
fertilizer.
(c) Z Flying aerial
sprays pesticides on crops owned by Farmer B. The sales invoice Z Flying
provides to Farmer B segregates the charge for the pesticides and the charge
for the application. When reporting its tax liability, Z Flying would report
the charge for the application under the service B&O tax classification.
The charge for the sale of the spray materials is subject to the wholesaling
B&O tax provided it is properly documented by a reseller permit. Reseller
permits replaced resale certificates effective January 1, 2010. For additional
information on reseller permits see WAC
458-20-102. Z Flying's purchase
of the pesticides is a purchase for resale and not subject to the retail sales
tax. Even though resale certificates are no longer used after December 31,
2009, they must be kept on file by Z Flying for five years from the date of
last use or December 31, 2014, whichever first occurs.
Statutory Authority:
RCW
82.32.300,
82.01.060(2),
chapters
82.04,
82.08,
82.12 and
82.32 RCW. 10-06-070, §
458-20-209, filed 2/25/10, effective 3/28/10. Statutory Authority:
RCW
82.32.300. 94-07-050, § 458-20-209,
filed 3/10/94, effective 4/10/94; 83-08-026 (Order ET 83-1), § 458-20-209,
filed 3/30/83; Order ET 70-3, § 458-20-209 (Rule 209), filed 5/29/70,
effective 7/1/70.