Farm machinery sales tax

AN ACT Relating to providing a sales and use tax exemption for 1
qualifying farm machinery and equipment; amending RCW 82.08.855 and 2
82.12.855; and creating new sections. 3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
Sec. 1. RCW 82.08.855 and 2015 3rd sp.s. c 6 s 1106 are each 5
amended to read as follows: 6
(1) The tax levied by RCW 82.08.020 does not apply to the sale to 7
an eligible farmer of: 8
(a) Qualifying farm machinery and equipment;9
(b) Replacement parts for qualifying farm machinery and 10
equipment; 11
(((b))) (c) Labor and services rendered in respect to the 12
installing of qualifying farm machinery and equipment or the 13
installing of replacement parts; and 14
(((c))) (d) Labor and services rendered in respect to the 15
repairing of qualifying farm machinery and equipment, provided that 16
during the course of repairing no tangible personal property is 17
installed, incorporated, or placed in, or becomes an ingredient or 18
component of, the qualifying farm machinery and equipment other than 19
replacement parts. 20
S-0188.2
SENATE BILL 5289
State of Washington 69th Legislature 2025 Regular Session
By Senators Schoesler, Boehnke, Dozier, J. Wilson, MacEwen, Holy,
Warnick, Wagoner, Fortunato, King, and Krishnadasan
Read first time 01/15/25. Referred to Committee on Ways & Means.
p. 1 SB 5289
(2)(a) Notwithstanding anything to the contrary in this chapter, 1
if a single transaction involves services that are not exempt under 2
this section and services that would be exempt under this section if 3
provided separately, the exemptions provided in subsection (1)(((b) 4
and)) (c) and (d) of this section apply if: (i) The seller makes a 5
separately itemized charge for labor and services described in 6
subsection (1)(((b) or)) (c) or (d) of this section; and (ii) the 7
separately itemized charge does not exceed the seller's usual and 8
customary charge for such services. 9
(b) If the requirements in (a)(i) and (ii) of this subsection (2) 10
are met, the exemption provided in subsection (1)(((b) or)) (c) or 11
(d) of this section applies to the separately itemized charge for 12
labor and services described in subsection (1)(((b) or)) (c) or (d) 13
of this section. 14
(3)(a) A purchaser claiming an exemption under subsection (1)(b) 15
through (d) of this section must keep records necessary for the 16
department to verify eligibility under this section. Sellers making 17
tax-exempt sales under subsection (1)(b) through (d) of this section 18
must obtain an exemption certificate from the purchaser in a form and 19
manner prescribed by the department. In lieu of an exemption 20
certificate, a seller may capture the relevant data elements as 21
allowed under the streamlined sales and use tax agreement. The seller 22
must retain a copy of the certificate or the data elements for the 23
seller's files. A purchaser claiming an exemption under subsection 24
(1)(a) of this section must pay the tax and submit an application for 25
a remittance as provided under subsection (4) of this section.26
(b)(i) For a person who is an eligible farmer as defined in 27
subsection (((4))) (5)(b)(iv) of this section, the exemption is 28
conditioned upon: 29
(A) The eligible farmer having gross sales or a harvested value 30
of agricultural products grown, raised, or produced by that person or 31
gross sales of bee pollination services of at least ten thousand 32
dollars in the first full tax year in which the person engages in 33
business as a farmer; or 34
(B) The eligible farmer, during the first full tax year in which 35
that person engages in business as a farmer, growing, raising, or 36
producing agricultural products or bee pollination services having an 37
estimated value at any time during that year of at least ten thousand 38
dollars, if the person will not sell or harvest an agricultural 39
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product or bee pollination service during the first full tax year in 1
which the person engages in business as a farmer. 2
(ii) If a person fails to meet the condition provided in 3
(b)(i)(A) or (B) of this subsection, the person must repay any taxes 4
exempted under this section. Any taxes for which an exemption under 5
this section was claimed are due and payable to the department within 6
thirty days of the end of the first full tax year in which the person 7
engages in business as a farmer. The department must assess interest 8
on the taxes for which the exemption was claimed as provided in 9
chapter 82.32 RCW, retroactively to the date the exemption was 10
claimed, and accrues until the taxes for which the exemption was 11
claimed are paid. Penalties may not be imposed on any tax required to 12
be paid under this subsection (3)(b)(ii) if full payment is received 13
by the due date. 14
(4) The exemption under subsection (1)(a) of this section for 15
qualifying farm machinery and equipment is provided in the form of a 16
remittance. An eligible farmer must pay the tax imposed by RCW 17
82.08.020 on purchases eligible for the remittance. The eligible 18
farmer may then apply to the department for remittance of 100 percent 19
of the state tax paid under RCW 82.08.020 on such purchases, subject 20
to the limits and conditions of this section. As part of the 21
application, the eligible farmer must provide invoices for purchases 22
of farm machinery and equipment qualifying for a remittance under 23
this section. An eligible farmer may not apply for more than one 24
remittance under this section per calendar quarter. The department 25
must on a quarterly basis remit exempted amounts to eligible farmers 26
whose applications were approved by the department during the 27
previous quarter.28
(5) The definitions in this subsection apply throughout this 29
section unless the context clearly requires otherwise.30
(a) "Agricultural products" has the meaning provided in RCW 31
82.04.213. 32
(b) "Eligible farmer" means: 33
(i) A farmer as defined in RCW 82.04.213 whose gross sales or 34
harvested value of agricultural products grown, raised, or produced 35
by that person or gross sales of bee pollination services was at 36
least ten thousand dollars for the immediately preceding tax year;37
(ii) A farmer as defined in RCW 82.04.213 whose agricultural 38
products had an estimated value of at least ten thousand dollars for 39
the immediately preceding tax year, if the person did not sell or 40
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harvest an agricultural product or bee pollination service during 1
that year; 2
(iii) A farmer as defined in RCW 82.04.213 who has merely changed 3
identity or the form of ownership of an entity that was an eligible 4
farmer, where there was no change in beneficial ownership, and the 5
combined gross sales, harvested value, or estimated value of 6
agricultural products or bee pollination services by both entities 7
met the requirements of (b)(i) or (ii) of this subsection for the 8
immediately preceding tax year; 9
(iv) A farmer as defined in RCW 82.04.213 who does not meet the 10
definition of "eligible farmer" in (b)(i), (ii), or (iii) of this 11
subsection, and who did not engage in farming for the entire 12
immediately preceding tax year, because the farmer is either new to 13
farming or newly returned to farming; or 14
(v) Anyone who otherwise meets the definition of "eligible 15
farmer" in this subsection except that they are not a "person" as 16
defined in RCW 82.04.030. 17
(c) "Farm vehicle" has the same meaning as in RCW 46.04.181.18
(d) "Harvested value" means the number of units of the 19
agricultural product that were grown, raised, or produced, multiplied 20
by the average sales price of the agricultural product. For purposes 21
of this subsection (((4))) (5)(d), "average sales price" means the 22
average price per unit of agricultural product received by farmers in 23
this state as reported by the United States department of 24
agriculture's national agricultural statistics service for the 25
twelve-month period that coincides with, or that ends closest to, the 26
end of the relevant tax year, regardless of whether the prices are 27
subject to revision. If the price per unit of an agricultural product 28
received by farmers in this state is not available from the national 29
agricultural statistics service, average sales price may be 30
determined by using the average price per unit of agricultural 31
product received by farmers in this state as reported by a recognized 32
authority for the agricultural product. 33
(e) "Qualifying farm machinery and equipment" means machinery and 34
equipment used primarily by an eligible farmer for growing, raising, 35
or producing agricultural products, providing bee pollination 36
services, or both. "Qualifying farm machinery and equipment" does not 37
include: 38
(i) Vehicles as defined in RCW 46.04.670, other than farm 39
tractors as defined in RCW 46.04.180, farm vehicles, and other farm 40
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implements. For purposes of this subsection (((4))) (5)(e)(i), "farm 1
implement" means machinery or equipment manufactured, designed, or 2
reconstructed for agricultural purposes and used primarily by an 3
eligible farmer to grow, raise, or produce agricultural products, but 4
does not include lawn tractors and all-terrain vehicles;5
(ii) Aircraft; 6
(iii) Hand tools and hand-powered tools; and 7
(iv) Property with a useful life of less than one year.8
(f)(i) "Replacement parts" means those parts that replace an 9
existing part, or which are essential to maintain the working 10
condition, of a piece of qualifying farm machinery or equipment.11
(ii) Paint, fuel, oil, hydraulic fluids, antifreeze, and similar 12
items are not replacement parts except when installed, incorporated, 13
or placed in qualifying farm machinery and equipment during the 14
course of installing replacement parts as defined in (f)(i) of this 15
subsection or making repairs as described in subsection (1)(((c))) 16
(d) of this section. 17
(g) "Tax year" means the period for which a person files its 18
federal income tax return, irrespective of whether the period 19
represents a calendar year, fiscal year, or some other consecutive 20
twelve-month period. If a person is not required to file a federal 21
income tax return, "tax year" means a calendar year.22
Sec. 2. RCW 82.12.855 and 2014 c 97 s 603 are each amended to 23
read as follows: 24
(1) The provisions of this chapter do not apply in respect to the 25
use by an eligible farmer of: 26
(a) Qualifying farm machinery and equipment;27
(b) Replacement parts for qualifying farm machinery and 28
equipment; 29
(((b))) (c) Labor and services rendered in respect to the 30
installing of replacement parts; and 31
(((c))) (d) Labor and services rendered in respect to the 32
repairing of qualifying farm machinery and equipment, provided that 33
during the course of repairing no tangible personal property is 34
installed, incorporated, or placed in, or becomes a component of, the 35
qualifying farm machinery and equipment other than replacement parts.36
(2)(a) Notwithstanding anything to the contrary in this chapter, 37
if a single transaction involves services that are not exempt under 38
this section and services that would be exempt under this section if 39
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provided separately, the exemptions provided in subsection (1)(((b) 1
and)) (c) and (d) of this section apply if: (i) The seller makes a 2
separately itemized charge for labor and services described in 3
subsection (1)(((b) or)) (c) or (d) of this section; and (ii) the 4
separately itemized charge does not exceed the seller's usual and 5
customary charge for such services. 6
(b) If the requirements in (a)(i) and (ii) of this subsection (2) 7
are met, the exemption provided in subsection (1)(((b) or)) (c) or 8
(d) of this section applies to the separately itemized charge for 9
labor and services described in subsection (1)(((b) or)) (c) or (d) 10
of this section. 11
(3) The definitions ((and)), recordkeeping requirements , 12
conditions, and limitations in RCW 82.08.855 apply to this section.13
(4) If a person is an eligible farmer as defined in RCW 14
82.08.855(((4))) (5)(b)(iv) who cannot prove income because the 15
person is new to farming or newly returned to farming, the exemption 16
under this section will apply only if one of the conditions in RCW 17
82.08.855(3)(b)(i) (A) or (B) is met. If neither of those conditions 18
are met, any taxes for which an exemption under this section was 19
claimed and interest on such taxes must be paid. Amounts due under 20
this subsection shall be in accordance with RCW 82.08.855(3)(b)(ii).21
(5) Except as provided in subsection (4) of this section, the 22
department may not assess the tax imposed under this chapter against 23
a person who no longer qualifies as an eligible farmer with respect 24
to the use of any articles or services exempt under subsection (1) of 25
this section, if the person was an eligible farmer when the person 26
first put the articles or services to use in this state.27
NEW SECTION. Sec. 3. RCW 82.32.805 and 82.32.808 do not apply 28
to this act.29
NEW SECTION. Sec. 4. This act applies to sales or uses of 30
qualifying farm machinery and equipment occurring on or after October 31
1, 2025.32
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