BILL REQ. #:  S-4770.3 

READ FIRST TIME 02/03/06.   

     AN ACT Relating to exempting farming services from business and occupation tax; amending RCW 82.04.330; adding a new section to chapter 82.16 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 82.04.330 and 2001 c 118 s 3 are each amended to read as follows:
     (1) This chapter shall not apply to any:
     (a) Farmer that sells any agricultural product at wholesale ((or to any));
     (b) Farmer who grows, raises, or produces agricultural products owned by others, such as custom feed operations;
     (c) Person performing custom farming services;
     (d) Person performing farm management services or contract labor services, or both, for a farmer or for a person performing custom farming services, when the person providing the farm management services or contract labor services, or both, and the farmer or person performing custom farming services are related; or
     (e) Person who participates in the federal conservation reserve program or its successor administered by the United States department of agriculture with respect to land enrolled in that program.
     ((This)) (2) The exemption provided by this section shall not apply to any person selling ((such)) agricultural products at retail or to any person selling manufactured substances or articles.
     ((This chapter shall also not apply to any persons who participate in the federal conservation reserve program or its successor administered by the United States department of agriculture with respect to land enrolled in that program.))
     (3) The definitions in this subsection apply throughout this section.
     (a) "Custom farming services" means the providing of labor, by hand or the use of any farm machinery, equipment, implement, or draft animal, in the performance of specific farming operations, including the care or raising of livestock or poultry, when: (i) The specific farming operation consists of growing, raising, or producing any agricultural product to be sold or consumed by a farmer; and (ii) the performance of the specific farming operation is for, and under a contract with, or the direction or supervision of, a farmer. "Custom farming services" does not include the custom application of fertilizers, chemicals, or biologicals unless the custom applicator is related to the person for whom the service is rendered.
     (b) "Farm management services" means the consultative decisions made for the operations of the farm including, but not limited to, determining which crops to plant, the choice and timing of application of fertilizers and chemicals, the horticultural practices to apply, the marketing of crops and livestock, and the care and feeding of animals.
     (c) "Related" means having any of the relationships specifically described in section 267(b)(1) through (13) of the Internal Revenue Code, as amended or renumbered as of January 1, 2006.

NEW SECTION.  Sec. 2   A new section is added to chapter 82.16 RCW to read as follows:
     (1) This chapter shall not apply to any person hauling agricultural products or farm machinery or equipment for a farmer or for a person performing custom farming services, when the person providing the hauling and the farmer or person performing custom farming services are related.
     (2) The exemption provided by this section shall not apply to the hauling of any substances or articles manufactured from agricultural products. For the purposes of this subsection, "manufactured" has the same meaning as "to manufacture" in RCW 82.04.120.
     (3) The definitions in RCW 82.04.213 and 82.04.330 apply to this section.

NEW SECTION.  Sec. 3   This act takes effect July 1, 2006.