Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule explains the application of business and
occupation (B&O), retail sales, and use taxes to the sale and/or use of
feed, seed, fertilizer, spray materials, and other tangible personal property
for farming. This rule also explains the application of B&O, retail sales,
and litter taxes to the sale of agricultural products by farmers. Farmers
should refer to WAC
458-20-101 (Tax registration and
tax reporting) to determine whether they must obtain a tax registration
endorsement or a temporary registration certificate from the department of
revenue (department).
(a)
Examples. This rule contains examples that 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 facts and circumstances.
(b)
Other rules that may be
relevant. Farmers and persons making sales to farmers may also want to
refer to rules in the following list for additional information:
(i) WAC
458-20-178 Use tax and the use of
tangible personal property;
(ii)
WAC 458-20-209 Farming for hire and
horticultural services performed for farmers;
(iii) WAC
458-20-222
Veterinarians;
(iv) WAC
458-20-239 Sales to nonresidents
of farm machinery or implements, and related services;
(v) WAC
458-20-243 Litter tax;
and
(vi) WAC
458-20-262 Retail sales and use
tax exemptions for farmworker housing.
(2)
Who is a farmer? A "farmer"
is any person engaged in the business of growing, raising, or producing, on the
person's own lands or on the lands in which the person has a present right of
possession, any agricultural product to be sold. Effective July 1, 2015, a
"farmer" also includes eligible apiarists that grow, raise, or produce honey
bee products for sale, or provide bee pollination services. A "farmer" does not
include a person growing, raising, or producing agricultural 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,
slaughterhouse, or packing house; or a person in respect to the business of
taking, cultivating, or raising timber.
RCW
82.04.213.
(3)
What is an agricultural
product? An "agricultural product" is 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, a bird, an insect, or the
substances obtained from such animals. Effective July 1, 2015, "agricultural
product" includes honey bee products. An "agricultural product" does not
include animals defined under
RCW
16.70.020 as "pet animals." Effective June
12, 2014, RCW 82.04.213 excludes cannabis
from the definition of "agricultural product." Cannabis is any product with a
THC concentration greater than .3 percent.
RCW
82.04.213.
(4)
Who is an eligible apiarist?
An "eligible apiarist" is a person who owns or keeps one or more bee colonies
and who grows, raises, or produces honey bee products for sale at wholesale and
is registered under
RCW
15.60.021.
(5)
What are honey bee products?
"Honey bee products" are queen honey bees, packaged honey bees, honey, pollen,
bees wax, propolis, or other substances obtained from honey bees. "Honey bee
products" do not include manufactured substances or articles.
RCW
82.04.213.
(7)
Sales to farmers. Persons
making sales of tangible personal property to farmers are generally subject to
wholesaling or retailing B&O tax, as the case may be, on the gross proceeds
of sales. Sales of some services performed for farmers, such as installing or
repairing tangible personal property, are retail sales and subject to retailing
B&O tax on the gross proceeds of such sales. Persons making retail sales
must collect retail sales tax from the buyer, unless the sale is specifically
exempt by law. Refer to subsection (9) of this rule for information about
specific sales tax exemptions available for sales to farmers.
(a)
Documenting wholesale sales.
A seller must take and retain from the buyer a copy of the buyer's reseller
permit, or a completed "Farmers' Certificate for Wholesale Purchases and Sales
Tax Exemptions" to document the wholesale nature of any transaction.
(b)
Buyer's responsibility when the
seller does not collect retail sales tax on a retail sale. If the seller
does not collect retail sales tax on a retail sale, the buyer must pay the
retail sales tax (commonly referred to as "deferred sales tax") or use tax
directly to the department, unless the sale is specifically exempt by law. The
excise tax return does not have a separate line for reporting deferred sales
tax. Consequently, deferred sales tax liability should be reported on the use
tax line of the buyer's excise tax return. If a deferred sales tax or use tax
liability is incurred by a farmer who is not required to obtain a tax
registration endorsement from the department, the farmer must report the tax on
a "Consumer Use Tax Return" and remit the appropriate tax to the department.
For detailed information regarding use tax see WAC
458-20-178.
The Consumer Use Tax Return may be obtained by calling the
department's telephone information center at 360-705-6705. The return may also
be obtained from the department's website at dor.wa.gov.
(c)
Feed, seed, seedlings, fertilizer,
spray materials, and agents for enhanced pollination. Sales to farmers
of feed, seed, seedlings, fertilizer, spray materials, and agents for enhanced
pollination, including insects such as bees, to be used for the purpose of
producing an agricultural product, whether for wholesale or retail sale, are
wholesale sales.
However, when these items are sold to consumers for purposes
other than producing agricultural products for sale, the sales are retail
sales. For example, sales of feed to riding clubs, racetrack operators,
boarders, or similar persons who do not resell the feed at a specific charge
are retail sales. Sales of feed for feeding pets or work animals, or for
raising animals for the purpose of producing agricultural products for personal
consumption are also retail sales. Sales of seed, fertilizer, and spray
materials for use on lawns and gardens, or for any other personal use, are
likewise retail sales.
(i)
What
is feed? "Feed" is any substance used as food to sustain or improve
animals, birds, fish, bees, or other 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, sugar, pollen patties, 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.
(ii)
What is seed? "Seed" is the propagative portions of plants
commonly used for seeding or planting whether true seed, bulbs, plants,
seed-like fruits, seedlings, or tubers. For purposes of this rule, "seed" does
not include seeds or propagative portions of plants used to grow
cannabis.
(iii)
What is
fertilizer? "Fertilizer" is any substance containing one or more
recognized plant nutrients and is used for its plant nutrient content and/or is
designated for use in promoting plant growth. "Fertilizer" includes limes,
gypsum, and manipulated animal and vegetable manures. There is no requirement
that fertilizers be applied directly to the soil.
(iv)
What are spray materials?
"Spray materials" are 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, mite, mollusk,
fungus, weed, and any other form of plant or animal life normally considered to
be a pest. The term includes treated materials, such as grains, that are
intended to destroy, control, or repel such pests. "Spray materials" also
include substances that act as plant regulators, defoliants, desiccants, or
spray adjuvants.
(v)
Examples.
(A)
Example
1. Sue grows vegetables for retail sale at a local market. Sue purchases
fertilizers and spray materials that she applies to the vegetable plants. She
also purchases feed for poultry that she raises to produce eggs for her
personal consumption. Because the vegetables are an agricultural product
produced for sale, retail sales tax does not apply to Sue's purchases of
fertilizers and spray materials, provided she gives the seller a copy of her
reseller permit, or a completed Farmers' Certificate for Wholesale Purchases
and Sales Tax Exemptions. Retail sales tax applies to her purchases of poultry
feed, as the poultry is raised to produce eggs for Sue's personal
consumption.
(B)
Example
2. WG Vineyards (WG) grows grapes that it uses to manufacture wine for
sale. WG purchases pesticides and fertilizers that are applied to its
vineyards. WG may purchase these pesticides and fertilizers at wholesale,
provided WG gives the seller a copy of their reseller permit, or a completed
Farmers' Certificate for Wholesale Purchases and Sales Tax
Exemptions.
(C)
Example
3. Seed Co. contracts with farmers to raise seed. Seed Co. provides the
seed and agrees to purchase the crop if it meets specified standards. The
contracts provide that ownership of the crop is retained by Seed Co., and the
risk of crop loss is borne by the farmers. The farmers must pay for the seed
whether or not the crop meets the specified standard. The transfer of the
possession of the seed to each farmer is a wholesale sale, provided Seed Co.
obtains a copy of their reseller permit, or a completed Farmers' Certificate
for Wholesale Purchases and Sales Tax Exemptions from that
farmer.
(d)
Chemical sprays or washes. Sales of chemical sprays or washes,
whether to farmers or other persons, for the purpose of post-harvest treatment
of fruit for the prevention of scald, fungus, mold, or decay are wholesale
sales.
(e)
Farming
equipment. Sales to farmers of farming equipment such as machinery,
machinery parts and repair, tools, and cleaning materials are retail sales and
subject to retailing B&O and retail sales taxes, unless specifically exempt
by law. Refer to subsections (7)(i) and (9) of this rule for information about
sales tax exemptions available to farmers.
(f)
Packing materials and
containers. Sales of packing materials and containers, or tangible
personal property that will become part of a container, to a farmer who will
sell the property to be contained therein are wholesale sales, provided the
packing materials and containers are not put to intervening use by the farmer.
Thus, sales to farmers of binder twine for binding bales of hay that will be
sold or wrappers for fruit and vegetables to be sold are subject to wholesaling
B&O tax. However, sales of packing materials and containers to a farmer who
will use the items as a consumer are retail sales and subject to retailing
B&O and retail sales taxes. Thus, sales of binder twine to a farmer for
binding bales of hay that will be used to feed the farmer's livestock are
retail sales.
(g)
Purchases
for dual purposes. A buyer normally engaged in both consuming and
reselling certain types of tangible personal property who is unable to
determine at the time of purchase whether the particular property purchased
will be consumed or resold must purchase according to the general nature of his
or her business.
RCW
82.08.130. If the buyer principally consumes
the articles in question, the buyer should not give a copy of its reseller
permit for any part of the purchase. If the buyer principally resells the
articles, the buyer may provide a copy of its reseller permit for the entire
purchase. For the purposes of this subsection, the term "principally" means
greater than 50 percent.
If a buyer makes a purchase for dual purposes and does not give
a copy of their reseller permit for any of the purchase and thereafter resells
some of the articles purchased, the buyer may claim a "taxable amount for tax
paid at source" deduction. For additional information regarding purchases for
dual purposes and the "taxable amount for tax paid at source" deduction see WAC
458-20-102.
(i)
Potential deferred sales tax
liability. If the buyer gives a copy of its reseller permit for all
purchases and thereafter consumes some of the articles purchased, the buyer is
liable for deferred sales tax and must remit the tax directly to the
department. Refer to (b) of this subsection, WAC
458-20-102 and
458-20-178 for more information
regarding deferred sales tax and use tax.
(ii)
Example 4. A farmer
purchases binder twine for binding bales of hay. Some of the hay will be sold
and some will be used to feed the farmer's livestock. More than 50 percent of
the binder twine is used for binding bales of hay that will be sold. Because
the farmer principally uses the binder twine for binding bales of hay that will
be sold, the farmer may provide a copy of their reseller permit, or a completed
Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions to the
seller for the entire purchase. The farmer is liable for deferred sales tax on
the binder twine used for binding bales of hay that are used to feed the
farmer's livestock and must remit the tax directly to the department.
(h)
"Fruit bin rentals" by
fruit packers. Fruit packers often itemize their charges to farmers for
various services related to the packing and storage of fruit. An example is a
charge for the bins that the packer uses in the receiving, sorting, inspecting,
and storing of fruit (commonly referred to as "bin rentals"). The packer
delivers the bins to the grower, who fills them with fruit for eventual storage
in the packer's warehouse. Charges by fruit packers to farmers for such bin
rentals do not constitute the rental of tangible personal property to the
farmer where the bins are under the control of the packer for use in the
receiving, sorting, inspecting, and storing of fruit. These charges are income
to the packer related to the receipt or storage of fruit. The packer, as the
consumer of the bins, is subject to retail sales or use tax on the purchase or
use of the bins. For information regarding the taxability of fruit packing by
cooperative marketing associations and independent dealers acting as agents for
others in the sales of fruit and produce see WAC
458-20-214.
(i)
Machinery and equipment used
directly in a manufacturing operation. Machinery and equipment used
directly in a manufacturing operation by a manufacturer or processor for hire
is exempt from sales and use taxes provided that all requirements for the
exemptions are met.
RCW
82.08.02565 and
82.12.02565. These exemptions are
commonly referred to as the M&E exemption. Farmers who use agricultural
products that they have grown, raised, or produced as ingredients in a
manufacturing process may be entitled to the M&E exemption on the
acquisition of machinery and equipment used directly in their manufacturing
operation. For more information on the M&E exemption see WAC
458-20-13601.
(8)
Sales by farmers. Farmers
are not subject to B&O tax on wholesale sales of agricultural products.
Effective July 1, 2015, bee pollination services provided to farmers by
eligible apiarists also qualify for the exemption provided by
RCW
82.04.330. Farmers who manufacture products
using agricultural products that they have grown, raised, or produced should
refer to (b) of this subsection for tax-reporting information.
Farmers are subject to retailing B&O tax on retail sales of
agricultural products and retailing or wholesaling B&O tax on sales of
nonagricultural products, as the case may be, unless specifically exempt by
law. Also, B&O tax applies to sales of agricultural products that the
seller has not grown, raised, or produced on the seller's own land or on land
in which the seller has a present right of possession, whether these products
are sold at wholesale or retail. Likewise, B&O tax applies to sales of
animals or substances derived from animals in connection with the business of
operating a stockyard, slaughterhouse, or packing house. Farmers may be
eligible to claim a small business B&O tax credit if the amount of B&O
tax liability in a reporting period is under a certain amount. For more
information about the small business B&O tax credit see WAC
458-20-104.
(a)
Litter tax. The gross
proceeds of sales of certain products, including food for human or pet
consumption, are subject to litter tax.
RCW
82.19.020. Litter tax does not apply to sales
of agricultural products that are exempt from B&O tax under
RCW
82.04.330.
RCW
82.19.050. Thus, farmers are not subject to
litter tax on wholesale sales of agricultural products but are liable for
litter tax on the gross proceeds of retail sales of agricultural products that
constitute food for human or pet consumption. In addition, farmers that
manufacture products for use and consumption within this state (e.g., a farmer
who produces wine from grapes that the farmer has grown) may be liable for
litter tax measured by the value of the products manufactured. For more
information about the litter tax see chapter 82.19 RCW and WAC
458-20-243.
Example 5. RD Orchards (RD) grows apples at its
orchards. Most apples are sold at wholesale, but RD operates a seasonal
roadside fruit stand from which it sells apples at retail. The wholesale sales
of apples are exempt from both B&O and litter taxes. The retail sales of
apples are subject to retailing B&O and litter taxes but are exempt from
sales tax because the apples are sold as a food product for human consumption.
Refer to subsection (9)(d) of this rule for more information about the retail
sales tax exemption applicable to sales of food products for human
consumption.
(b)
Farmers using agricultural products in a manufacturing process.
The B&O tax exemption provided by
RCW
82.04.330 does not apply to any person
selling manufactured substances or articles. Thus, farmers who manufacture
products using agricultural products that they have grown, raised, or produced
are subject to manufacturing B&O tax on the value of products manufactured.
Farmers who sell their manufactured products at retail or wholesale in the
state of Washington are also generally subject to the retailing or wholesaling
B&O tax, as the case may be. In such cases, a multiple activities tax
credit (MATC) may be available. Refer to WAC
458-20-136 (Manufacturing,
processing for hire, fabricating) and WAC
458-20-19301 (Multiple activities
tax credits), respectively, for more information about the manufacturing
B&O tax and the MATC.
(i)
Manufacturing fresh fruits and vegetables.
RCW
82.04.4266 provides a B&O tax exemption
to persons manufacturing fresh fruits or vegetables by canning, preserving,
freezing, processing, or dehydrating fresh fruits or vegetables. For purposes
of this rule, "fruits" and "vegetables" does not include cannabis.
Wholesale sales of fresh fruits or vegetables canned,
preserved, frozen, processed, or dehydrated by the seller and sold to
purchasers who transport the goods out of this state in the ordinary course of
business are also eligible for this exemption. A seller must keep and preserve
records for the period required by
RCW
82.32.070 establishing that the purchaser
transported the goods out of Washington state.
(A) A person claiming the exemption must file
a complete annual tax performance report with the department under
RCW
82.32.534. In addition, persons claiming this
tax preference must report the amount of the exemption on their monthly or
quarterly excise tax return. For more information on reporting requirements for
this tax preference see
RCW
82.32.808.
(B)
RCW
82.04.4266 is scheduled to expire July 1,
2035, at which time the preferential B&O tax rate under
RCW
82.04.260 will apply.
(ii)
Manufacturing dairy
products.
RCW
82.04.4268 provides a B&O tax exemption
to persons manufacturing dairy products, not including any cannabis-infused
product, that as of September 20, 2001, are identified in 21 C.F.R., chapter 1,
parts 131, 133, and 135. These products include milk, buttermilk, cream,
yogurt, cheese, and ice cream, and also include by-products from the
manufacturing of dairy products such as whey and casein.
The exemption also applies to persons selling manufactured
dairy products to purchasers who transport the goods out of Washington state in
the ordinary course of business and, until July 1, 2025, to purchasers who use
such dairy products as an ingredient or component in the manufacturing of a
dairy product in Washington state. Unlike the exemption for certain wholesale
sales of fresh fruits or vegetables (see (b)(i) of this subsection), the
exemption for sales of qualifying dairy products does not require that the
sales be made at wholesale.
A seller must keep and preserve records for the period required
by RCW
82.32.070 establishing that the purchaser
transported the goods out of Washington state or the goods were sold to a
manufacturer for use as an ingredient or component in the manufacturing of a
dairy product in Washington state.
(A)
A person claiming the exemption must file a complete annual tax performance
report with the department under
RCW
82.32.534. In addition, persons claiming this
tax preference must report the amount of the exemption on their monthly or
quarterly excise tax return. For more information on reporting requirements for
this tax preference see
RCW
82.32.808.
(B)
RCW
82.04.4268 is generally scheduled to expire
July 1, 2035, at which time the preferential B&O tax rate under
RCW
82.04.260 will apply. The exemption for sales
of dairy products to purchasers who use such dairy products as an ingredient or
component in the manufacturing of a dairy product in Washington state expires
July 1, 2025.
(c)
Raising cattle for wholesale
sale.
RCW
82.04.330 provides a B&O tax exemption to
persons who raise cattle for wholesale sale provided that the cattle are held
for at least 60 days prior to the sale. Persons who hold cattle for fewer than
60 days before reselling the cattle are not considered to be engaging in the
normal activities of growing, raising, or producing livestock for sale.
Example 6. A feedlot operation purchases cattle
and feeds them until they attain a good market condition. The cattle are then
sold at wholesale. The feedlot operator is exempt from B&O tax on wholesale
sales of cattle if it held the cattle for at least 60 days while they were
prepared for market. However, the feedlot operator is subject to wholesaling
B&O tax on wholesale sales of cattle held for fewer than 60 days prior to
the sale.
(d)
B&O
tax exemptions available to farmers. In addition to the exemption for
wholesale sales of agricultural products, several other B&O tax exemptions
available to farmers are discussed in this subsection.
(i)
Growing, raising, or producing
agricultural products owned by other persons.
RCW
82.04.330 exempts amounts received by a
farmer for growing, raising, or producing agricultural products owned by
others, such as custom feed operations.
Example 7. A farmer is engaged in the business of
raising cattle owned by others (commonly referred to as "custom feeding").
After the cattle attain a good market condition, the owner sells them. Amounts
received by the farmer for custom feeding are exempt from B&O tax under
RCW
82.04.330, provided that the farmer held the
cattle for at least 60 days. Farmers are not considered to be engaging in the
activity of raising cattle for sale unless the cattle are held for at least 60
days while the cattle are prepared for market. (See (c) of this
subsection.)
(ii)
Processed hops shipped outside Washington for first use.
RCW
82.04.337 exempts amounts received by hop
growers or dealers for hops shipped outside the state of Washington for first
use, if those hops have been processed into extract, pellets, or powder in this
state. However, the processor or warehouser of such products is not exempt on
amounts charged for processing or warehousing such products.
(iii)
Sales of hatching eggs or
poultry.
RCW
82.04.410 exempts amounts received for the
sale of hatching eggs or poultry by farmers producing hatching eggs or poultry,
when these agricultural products are for use in the production for sale of
poultry or poultry products.
(9)
Retail sales tax and use tax
exemptions. This subsection provides information about a number of
retail sales tax and corresponding use tax exemptions available to farmers and
persons buying tangible personal property at retail from farmers. Some
exemptions require the buyer to provide the seller with an exemption
certificate. Refer to subsection (10) of this rule for additional information
regarding exemption certificates.
(a)
Pollen.
RCW
82.08.0277 and
82.12.0273 exempt the sale and use
of pollen from retail sales and use taxes.
(b)
Semen.
RCW
82.08.0272 and
82.12.0267 exempt the sale and use
of semen used in the artificial insemination of livestock from retail sales and
use taxes.
(c)
Feed for
livestock at public livestock markets.
RCW
82.08.0296 and
82.12.0296 exempt the sale and use
of feed to be consumed by livestock at a public livestock market from retail
sales and use taxes.
(d)
Food
products.
RCW
82.08.0293 and
82.12.0293 exempt the sale and use
of food products for human consumption from retail sales and use taxes. These
exemptions also apply to the sale or use of livestock for personal consumption
as food. For more information about food products that qualify for this
exemption see WAC
458-20-244.
(e)
Auction sales of farm
property.
RCW
82.08.0257 and
82.12.0258 exempt from retail
sales and use taxes tangible personal property, including household goods,
which has been used in conducting a farm activity, if the property is purchased
from a farmer, as defined in
RCW
82.04.213, at an auction sale held or
conducted by an auctioneer on a farm. Effective June 12, 2014, these exemptions
do not apply to personal property used by a person in the production of
cannabis.
(f)
Poultry.
RCW
82.08.0267 and
82.12.0262 exempt from retail
sales and use taxes the sale and use of poultry used in the production for sale
of poultry or poultry products.
Example 8. A poultry hatchery produces poultry
from eggs. The resulting poultry are sold to egg producers. These sales are
exempt from retail sales tax under
RCW
82.08.0267. (They are also exempt from
B&O tax. See subsection (8)(d)(iii) of this rule.)
(g)
Leases of irrigation
equipment.
RCW
82.08.0288 and
82.12.0283 exempt the lease or use
of irrigation equipment from retail sales and use taxes, but only if:
(i) The lessor purchased the irrigation
equipment for the purpose of irrigating land controlled by the
lessor;
(ii) The lessor has paid
retail sales or use tax upon the irrigation equipment;
(iii) The irrigation equipment is attached to
the land in whole or in part;
(iv)
Effective June 12, 2014, the irrigation equipment is not used in the production
of cannabis; and
(v) The irrigation
equipment is leased to the lessee as an incidental part of the lease of the
underlying land and is used solely on such land.
(h)
Beef and dairy cattle.
RCW
82.08.0259 and
82.12.0261 exempt the sale and use
of beef and dairy cattle, to be used by a farmer in producing an agricultural
product, from retail sales and use taxes.
Example 9. John operates a farm where he raises
beef and dairy cattle for sale. He also raises other livestock for sale
including hogs, sheep, and goats. John's sales of beef and dairy cattle for use
on a farm are exempt from retail sales tax. However, John must collect retail
sales tax on all retail sales of sheep, goats, and hogs unless the sales
qualify for either the food products exemption described in (d) of this
subsection, or the exemption for sales of livestock for breeding purposes
described in this subsection (9)(i) of this rule.
(i)
Livestock for breeding
purposes.
RCW
82.08.0259 and
82.12.0261 exempt the sale or use
of livestock, as defined in
RCW
16.36.005, for breeding purposes where the
animals are registered in a nationally recognized breed association from retail
sales and use taxes.
Example 10. ABC Farms raises and sells quarter
horses registered in the American Quarter Horse Association (AQHA). Quarter
horses are generally recognized as a definite breed of horse, and the AQHA is a
nationally recognized breed association. Therefore, ABC Farms is not required
to collect sales tax on retail sales of quarter horses for breeding purposes,
provided it receives and retains a completed exemption certificate from the
buyer.
(j)
Bedding
materials for chickens.
RCW
82.08.920 and
82.12.920 exempt from retail sales
and use taxes the sale to and use of bedding materials by farmers to accumulate
and facilitate the removal of chicken manure, provided the farmer is raising
chickens that are sold as agricultural products.
(i)
What are bedding materials?
"Bedding materials" are wood shavings, straw, sawdust, shredded paper, and
other similar materials.
(ii)
Example 11. Farmer raises chickens for use in producing eggs for
sale. When the chickens are no longer useful for producing eggs, Farmer sells
them to food processors for soup and stew meat. Farmer purchases bedding
materials used to accumulate and facilitate the removal of chicken manure. The
purchases of bedding materials by Farmer are exempt from retail sales tax as
long as Farmer provides the seller with a completed Farmers' Certificate for
Wholesale Purchases and Sales Tax Exemptions. See subsection (10) of this rule
for where to find an exemption certificate. The seller must retain a copy of
the exemption certificate for its records.
The exemption merely requires that the chickens be sold as
agricultural products. It is immaterial that Farmer primarily raises the
chickens to produce eggs.
(k)
Propane or natural gas used to heat
structures housing chickens.
RCW
82.08.910 and
82.12.910 exempt from retail sales
and use taxes the sale to and use of propane or natural gas by farmers to heat
structures used to house chickens. The propane or natural gas must be used
exclusively to heat the structures, and the structures must be used exclusively
to house chickens that are sold as agricultural products.
(i)
What are "structures"?
"Structures" are barns, sheds, and other similar buildings in which chickens
are housed.
(ii)
Example
12. Farmer purchases natural gas that is used to heat structures housing
chickens. The natural gas is used exclusively to heat the structures, and the
structures are used exclusively to house chickens. The chickens are used to
produce eggs. When the chickens are no longer useful for producing eggs, Farmer
sells the chickens to food processors for soup and stew meat. The purchase of
natural gas by Farmer is exempt from retail sales tax as long as Farmer
provides the seller with a completed Farmers' Certificate for Wholesale
Purchases and Sales Tax Exemptions. See subsection (10) of this rule for where
to find an exemption certificate. The seller must retain a copy of the
exemption certificate for its records.
The exemption merely requires that the chickens be sold as
agricultural products. It is immaterial that Farmer primarily houses these
chickens to produce eggs.
(iii)
Example 13. Farmer
purchases natural gas that is used to heat structures used in the incubation of
chicken eggs and structures used for washing, packing, and storing eggs. The
natural gas used to heat these structures is not exempt from retail sales tax
because the structures are not used exclusively to house chickens that are sold
as agricultural products.
(l)
Diesel, biodiesel, and aircraft
fuel for farm fuel users.
RCW
82.08.865 and
82.12.865 exempt from retail sales
and use taxes the sale and use of diesel fuel, biodiesel fuel, and aircraft
fuel, to farm fuel users for agricultural purposes. The exemptions apply to a
fuel blend if all of the component fuels of the blend would otherwise be exempt
if the component fuels were sold as separate products. The buyer must provide
the seller with a completed Farmers' Certificate for Wholesale Purchases and
Sales Tax Exemptions. See subsection (10) of this rule for where to find an
exemption certificate. The seller must retain a copy of the exemption
certificate for its records.
(i) The
exemptions apply to nonhighway uses for production of agricultural products and
for providing horticultural services to farmers. Horticultural services
include:
(A) Soil preparation
services;
(B) Crop cultivation
services;
(C) Crop harvesting
services.
(ii) The
exemptions do not apply to uses other than for agricultural purposes.
Agricultural purposes do not include:
(A)
Heating space for human habitation or water for human consumption; or
(B) Transporting on public roads individuals,
agricultural products, farm machinery or equipment, or other tangible personal
property, except when the transportation is incidental to transportation on
private property and the fuel used for such transportation is not subject to
tax under chapter 82.38 RCW.
(m)
Nutrient management equipment and
facilities.
RCW
82.08.890 and
82.12.890 provide retail sales and
use tax exemptions for the sale to or use by eligible persons of:
(i) Qualifying livestock nutrient management
equipment;
(ii) Labor and services
rendered in respect to installing, repairing, cleaning, altering, or improving
qualifying livestock nutrient management equipment; and
(iii) Labor and services rendered in respect
to repairing, cleaning, altering, or improving qualifying livestock nutrient
management facilities, or to tangible personal property that becomes an
ingredient or component of qualifying livestock nutrient management facilities
in the course of repairing, cleaning, altering, or improving such
facilities.
(iv) Nonqualifying
labor and services. This subsection (9)(m)(iii) of this rule does not include
the sale of or charge made for labor and services rendered in respect to the
constructing of new, or replacing previously existing, qualifying livestock
nutrient management facilities, or tangible personal property that becomes an
ingredient or component of qualifying livestock nutrient management facilities
during the course of constructing new, or replacing previously existing
qualifying livestock nutrient management facilities.
(v) Nutrient management plan must be
certified or approved. The exemptions provided by
RCW
82.08.890 and
82.12.890 apply to sales made
after the livestock nutrient management plan is:
(A) Certified under chapter 90.64
RCW;
(B) Approved as part of the
permit issued under chapter 90.48 RCW; or
(C) Approved by a conservation district and
who qualifies for the exemption provided under
RCW
82.08.855. A Farmers' Certificate for
Wholesale Purchases and Sales Tax Exemptions should be completed and provided
to the seller. In lieu of the exemption certificate, a seller may capture the
relevant data elements as allowed under the streamlined sales and use tax
agreement. The seller must retain a copy of the certificate or the data
elements for the seller's files.
(vi)
Definitions. For the purpose of
these exemptions, the following definitions apply:
(A)
"Animal feeding operation"
means a lot or facility, other than an aquatic animal production facility,
where the following conditions are met:
* Animals, other than aquatic animals, have been, are, or will
be stabled or confined and fed or maintained for a total of 45 days or more in
any 12-month period; and
* Crops, vegetation, forage growth, or post-harvest residues
are not sustained in the normal growing season over any portion of the lot or
facility.
(B)
"Conservation district" means a subdivision of state government
organized under chapter 89.08 RCW.
(C)
"Eligible person" means a
person:
* Licensed to produce milk under chapter 15.36 RCW who has a
certified dairy nutrient management plan, as required by chapter 90.64 RCW;
or
* Who owns an animal feeding operation and has a permit issued
under chapter 90.48 RCW; or
* Who owns an animal feeding operation and has a nutrient
management plan approved by a conservation district as meeting natural resource
conservation service field office technical guide standards and who qualifies
for the exemption provided under
RCW
82.08.855.
(D)
"Handling and treatment of
livestock manure" means the activities of collecting, storing, moving,
or transporting livestock manure, separating livestock manure solids from
liquids, or applying livestock manure to the agricultural lands of an eligible
person other than through the use of pivot or linear type traveling irrigation
systems.
(E)
"Permit"
means either a state waste discharge permit or a National Pollutant Discharge
Elimination System permit, or both.
(F)
"Qualifying livestock nutrient
management equipment" means the tangible personal property listed below
for exclusive use in the handling and treatment of livestock manure, including
repair and replacement parts for the same equipment:
Aerators
Agitators
Augers
Conveyers
Gutter cleaners
Hard-hose reel traveler irrigation systems
Lagoon and pond liners and floating covers
Loaders
Manure composting devices
Manure spreaders
Manure tank wagons
Manure vacuum tanks
Poultry house cleaners
Poultry house flame sterilizers
Poultry house washers
Poultry litter saver machines
Pipes
Pumps
Scrapers
Separators
Slurry injectors and hoses
Wheelbarrows, shovels, and pitchforks.
(G)
"Qualifying livestock nutrient
management facilities" means the exclusive use in the handling and
treatment of livestock manure of the facilities listed below:
Flush systems
Lagoons
Liquid livestock manure storage structures, such as concrete
tanks or glass-lined steel tanks
Structures used solely for dry storage of manure, including
roofed stacking facilities.
(n)
Anaerobic digesters (effective July
1, 2018).
(i)
RCW
82.08.900 and
82.12.900 provide retail sales and
use tax exemptions for purchases and uses by eligible persons:
(A) In respect to equipment necessary to
process biogas from a landfill into marketable coproducts including, but not
limited to, biogas conditioning, compression, and electrical generation
equipment, or to services rendered in respect to installing, constructing,
repairing, cleaning, altering, or improving equipment necessary to process
biogas from a landfill into marketable coproducts; and
(B) Establishing or operating anaerobic
digesters or to services rendered in respect to installing, constructing,
repairing, cleaning, altering, or improving an anaerobic digester. The
exemptions include sales of tangible personal property that becomes an
ingredient or component of the anaerobic digester. Anaerobic digester means a
facility that processes organic material into biogas and digestate using
microorganisms in a decomposition process within a closed, oxygen-free
container as well as the equipment necessary to process biogas or digestate
produced by an anaerobic digester into marketable coproducts including, but not
limited to, biogas conditioning, compression, nutrient recovery, and electrical
generation equipment.
(ii)
Records retention and exemption
certificate. Persons claiming the exemptions under
RCW
82.08.900 and
82.12.900 must keep records
necessary for the department to verify eligibility. Sellers may make tax exempt
sales only if the buyer provides the seller with a completed Farmers'
Certificate for Wholesale Purchases and Sales Tax Exemptions, and the seller
retains a copy of the certificate for its files. See subsection (10) of this
rule for where to find an exemption certificate.
(o)
(i)
Anaerobic digesters (effective until January 1, 2029).
RCW
82.08.900 and
82.12.900 provide retail sales and
use tax exemptions for purchases and uses by eligible persons establishing or
operating anaerobic digesters or to services rendered in respect to installing,
constructing, repairing, cleaning, altering, or improving an anaerobic
digester. The exemptions include sales of tangible personal property that
becomes an ingredient or component of the anaerobic digester. The anaerobic
digester must be used primarily (more than 50 percent measured by volume or
weight) to treat livestock manure. Anaerobic digester is a facility that
processes manure from livestock into biogas and dried manure using
microorganisms in a decomposition process within a closed, oxygen-free
container.
(ii)
Records
retention and exemption certificate. Persons claiming the exemptions
under RCW
82.08.900 and
82.12.900 must keep records
necessary for the department to verify eligibility. Sellers may make tax exempt
sales only if the buyer provides the seller with a completed Farmers'
Certificate for Wholesale Purchases and Sales Tax Exemptions, and the seller
retains a copy of the certificate for its files. See subsection (10) of this
rule for where to find an exemption certificate.
(p)
Animal pharmaceuticals.
RCW
82.08.880 and
82.12.880 exempt from retail sales
and use taxes the sale of and use of certain animal pharmaceuticals when sold
to, or used by, farmers or veterinarians. To qualify for the exemption, the
animal pharmaceutical must be administered to an animal raised by a farmer for
the purpose of producing an agricultural product for sale. In addition, the
animal pharmaceutical must be approved by the United States Department of
Agriculture (USDA) or the United States Food and Drug Administration (FDA).
(i)
Who is a veterinarian? A
"veterinarian" means a person who is licensed to practice veterinary medicine,
surgery, or dentistry under chapter 18.92 RCW.
(ii)
How can I determine whether the
FDA or USDA has approved an animal pharmaceutical? The FDA and USDA have
an established approval process set forth in federal regulations. The FDA
maintains a list of all approved animal pharmaceuticals called the
"Green Book." The USDA maintains a list of approved
biotechnology products called the "Veterinary Biologics Product
Catalogue." Pharmaceuticals that are not on either of these lists have
not been approved and are not eligible for the exemption.
(iii)
Example 17. Dairy Farmer
purchases sterilizing agents. The sterilizing agents are applied to the
equipment and facilities where Dairy Farmer's cows are milked. Dairy Farmer
also purchases teat dips, antiseptic udder washes, and salves that are not
listed in either the FDA's Green Book of approved animal
pharmaceuticals or the USDA's Veterinary Biologics Product
Catalogue of approved biotechnology products. The purchases of
sterilizing agents are not exempt as animal pharmaceuticals because the
sterilizing agents are not administered to animals. The teat dips, antiseptic
udder washes, and salves are likewise not exempt because they have not been
approved by the FDA or US-DA.
(iv)
What type of animal must the pharmaceutical be administered to? As
explained above, the exemptions are limited to the sale and use of animal
pharmaceuticals administered to an animal that is raised by a farmer for the
purpose of producing an agricultural product for sale. The conditions under
which a farmer may purchase and use tax-exempt animal pharmaceuticals are
similar to those under which a farmer may purchase and use feed at wholesale.
Both types of purchases and uses require that the particular product be sold to
or used by a farmer (or a veterinarian in the case of animal pharmaceuticals),
and that the product be given or administered to an animal raised by a farmer
for the purpose of producing an agricultural product for sale.
(v)
Examples of animals raised for the
purpose of producing agricultural products for sale. For purposes of the
exemptions, the following is a nonexclusive list of examples of animals that
are being raised for the purpose of producing an agricultural product for sale,
presuming all other requirements for the exemption are met:
(A) Horses, cattle, or other livestock raised
by a farmer for sale;
(B) Cattle
raised by a farmer for the purpose of slaughtering, if the resulting products
are sold;
(C) Milk cows raised
and/or used by a dairy farmer for the purpose of producing milk for
sale;
(D) Horses raised by a farmer
for the purpose of producing foals for sale;
(E) Sheep raised by a farmer for the purpose
of producing wool for sale; and
(F)
"Private sector cultured aquatic products" as defined by
RCW
15.85.020 (e.g., salmon, catfish, and
mussels) raised by an aquatic farmer for the purpose of
sale.
(vi)
Examples
of animals that are not raised for the purpose of producing agricultural
products for sale. For purposes of the exemptions, the following
nonexclusive list of examples do not qualify because the animals are not being
raised for the purpose of producing an agricultural product for sale:
(A) Cattle raised for the purpose of
slaughtering if the resulting products are not produced for sale;
(B) Sheep and other livestock raised as
pets;
(C) Dogs or cats, whether
raised as pets or for sale. Dogs and cats are pet animals; therefore, they are
not considered to be agricultural products. (See subsection (3) of this rule);
and
(D) Horses raised for the
purpose of racing, showing, riding, and jumping. However, if at some future
time the horses are no longer raised for racing, showing, riding, or jumping
and are instead being raised by a farmer for the purpose of producing foals for
sale, the exemption will apply if all other requirements for the exemption are
met.
(vii)
Do
products that are used to administer animal pharmaceuticals qualify for the
exemption? Sales and uses of products that are used to administer animal
pharmaceuticals (e.g., syringes) do not qualify for the exemptions, even if
they are later used to administer a tax-exempt animal pharmaceutical. However,
sales and uses of tax-exempt animal pharmaceuticals contained in a product used
to administer the animal pharmaceutical (e.g., a dose of a tax-exempt
pharmaceutical contained in a syringe or cotton applicator) qualify for the
exemption.
(q)
Replacement parts for qualifying farm machinery and equipment.
RCW
82.08.855 and
82.12.855 exempt from retail sales
and use taxes sales to and uses by eligible farmers of replacement parts for
qualifying farm machinery and equipment. Also included are: Labor and services
rendered during the installation of repair parts; and labor and services
rendered during repair as long as no tangible personal property is installed,
incorporated, or placed in, or becomes an ingredient or component of the
qualifying equipment other than replacement parts.
(i)
The following definitions apply to
this subsection:
(A) "Eligible farmer"
as defined in
RCW
82.08.855(4).
(B) "Qualifying farm machinery and equipment"
means machinery and equipment used primarily by an eligible farmer for growing,
raising, or producing agricultural products, and effective July 1, 2015,
providing bee pollination services, or both.
(C) "Qualifying farm machinery and equipment"
does not include:
* Vehicles as defined in
RCW
46.04.670, other than farm tractors as
defined in
RCW
46.04.180, farm vehicles and other farm
implements. "Farm implements" means machinery or equipment 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;
* Aircraft;
* Hand tools and hand-powered tools; and
* Property with a useful life of less than one year.
(D) "Replacement parts" means
those parts that replace an existing part, or which are essential to maintain
the working condition, of a piece of qualifying farm machinery or equipment.
Paint, fuel, oil, hydraulic fluids, antifreeze, and similar items are not
replacement parts except when installed, incorporated, or placed in qualifying
farm machinery and equipment during the course of installing replacement parts
as defined here or making repairs as described above in (p) of this
subsection.
(ii)
Records retention and exemption certificate. Persons claiming the
exemptions must keep records necessary for the department to verify
eligibility. Sellers making tax-exempt sales must obtain, and retain in its
files, a completed Farmers' Certificate for Wholesale Purchases and Sales Tax
Exemptions from the farmer. In lieu of the exemption certificate, a seller may
capture the relevant data elements as allowed under the streamlined sales and
use tax agreement.
(10)
Sales tax exemption
certificates. As indicated in subsection (9) of this rule, certain sales
of tangible personal property and retail services either to or by farmers are
exempt from retail sales tax. A person claiming an exemption must keep records
necessary for the department to verify eligibility for each claimed exemption.
A person claiming an exemption under subsection (9) of this rule may complete
and use the department's Farmers' Certificate for Wholesale Purchases and Sales
Tax Exemptions. Refer to the department's website at dor.wa.gov for the
exemption certificate. In lieu of an exemption certificate, a seller may
capture the relevant data elements as provided under the streamlined sales and
use tax agreement as allowed under
RCW
82.08.050. Sellers must retain a copy of the
exemption certificate or the data elements in their files. Without proper
documentation, sellers are liable for payment of the retail sales tax on sales
claimed as exempt.
Statutory Authority:
RCW
82.01.060(2),
82.32.300, and
34.05.230. 03-18-024, §
458-20-210, filed 8/25/03, effective 9/25/03. Statutory Authority:
RCW
82.32.300. 94-07-048, § 458-20-210,
filed 3/10/94, effective 4/10/94; 86-21-085 (Order ET 86-18), §
458-20-210, filed 10/17/86; 86-07-005 (Order ET 86-3), § 458-20-210, filed
3/6/86; 83-08-026 (Order ET 83-1), § 458-20-210, filed 3/30/83. Statutory
Authority:
RCW
82.01.060(2) and
82.32.300. 78-07-045 (Order ET
78-4), § 458-20-210, filed 6/27/78; Order ET 70-3, § 458-20-210 (Rule
210), filed 5/29/70, effective 7/1/70.