BILL REQ. #: H-3488.1
State of Washington | 63rd Legislature | 2014 Regular Session |
Read first time 01/22/14. Referred to Committee on Finance.
AN ACT Relating to clarifying that the definition of qualifying machinery and equipment includes all equipment used by hop farmers in harvesting the crop; amending RCW 82.08.855; creating a new section; and declaring an emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 The legislature intends to clarify that the
machinery and equipment used to get hops to a marketable farm gate
product is not processing equipment but instead production equipment
that is eligible for the sales and use tax exemption of other
qualifying farm machinery and equipment.
Sec. 2 RCW 82.08.855 and 2007 c 332 s 1 are each amended to read
as follows:
(1) The tax levied by RCW 82.08.020 does not apply to the sale to
an eligible farmer of:
(a) Replacement parts for qualifying farm machinery and equipment;
(b) Labor and services rendered in respect to the installing of
replacement parts; and
(c) Labor and services rendered in respect to the repairing of
qualifying farm machinery and equipment, provided that during the
course of repairing no tangible personal property is installed,
incorporated, or placed in, or becomes an ingredient or component of,
the qualifying farm machinery and equipment other than replacement
parts.
(2)(a) Notwithstanding anything to the contrary in this chapter, if
a single transaction involves services that are not exempt under this
section and services that would be exempt under this section if
provided separately, the exemptions provided in subsection (1)(b) and
(c) of this section apply if: (i) The seller makes a separately
itemized charge for labor and services described in subsection (1)(b)
or (c) of this section; and (ii) the separately itemized charge does
not exceed the seller's usual and customary charge for such services.
(b) If the requirements in (a)(i) and (ii) of this subsection (2)
are met, the exemption provided in subsection (1)(b) or (c) of this
section applies to the separately itemized charge for labor and
services described in subsection (1)(b) or (c) of this section.
(3)(a) A person claiming an exemption under this section must keep
records necessary for the department to verify eligibility under this
section. An exemption is available only when the buyer provides the
seller with an exemption certificate issued by the department
containing such information as the department requires. The exemption
certificate shall be in a form and manner prescribed by the department.
The seller shall retain a copy of the certificate for the seller's
files.
(b) The department shall provide an exemption certificate to an
eligible farmer or renew an exemption certificate, upon application by
that eligible farmer. The application must be in a form and manner
prescribed by the department and shall contain the following
information as required by the department:
(i) The name and address of the applicant;
(ii) The uniform business identifier or tax reporting account
number of the applicant, if the applicant is required to be registered
with the department;
(iii) The type of farming engaged in;
(iv) Either a copy of the applicant's information as provided in
(b)(iv)(A) of this subsection or a declaration as provided in
(b)(iv)(B) of this subsection, as elected by the applicant:
(A) A copy of the applicant's Schedule F of Form 1040, Form 1120,
or other applicable form filed with the internal revenue service
indicating the applicant's gross sales or harvested value of
agricultural products for the tax year covered by the return. If the
applicant has not filed a federal income tax return for the prior tax
year or is not required to file a federal income tax return, the
applicant shall provide copies of other documents establishing the
amount of the applicant's gross sales or harvested value of
agricultural products for the tax year immediately preceding the year
in which an application for exemption under this section is submitted
to the department;
(B) A declaration signed under penalty of perjury as provided in
RCW 9A.72.085 that the applicant is an eligible farmer as defined in
subsection (4)(b) of this section. Any person who knowingly makes a
materially false statement on an application submitted to the
department under the provisions of this section shall be guilty of
perjury in the second degree under chapter 9A.72 RCW. In addition, the
person is liable for payment of any taxes for which an exemption under
this section was claimed, with interest at the rate provided for
delinquent taxes, retroactively to the date the exemption was claimed,
and penalties as provided under chapter 82.32 RCW;
(v) The name of the individual authorized to sign the certificate,
printed in a legible fashion;
(vi) The signature of the authorized individual; and
(vii) Other information the department may require to verify the
applicant's eligibility for the exemption.
(c)(i) Except as otherwise provided in this section, exemption
certificates take effect on the date issued by the department are not
transferable and are valid for the remainder of the calendar year in
which the certificate is issued and the following four calendar years.
The department shall attempt to notify holders of exemption
certificates of the impending expiration of the certificate at least
sixty days before the certificate expires and shall provide an
application for renewal of the certificate.
(ii) When a certificate holder merely changes identity or form of
ownership of an entity and there is no change in beneficial ownership,
the exemption certificate shall be transferred to the new entity upon
written notice to the department by the transferor or transferee.
(d)(i) A person who is an eligible farmer as defined in subsection
(4)(b)(iii) of this section shall be issued a conditional exemption
certificate. The exemption certificate is conditioned upon:
(A) The eligible farmer having gross sales or a harvested value of
agricultural products grown, raised, or produced by that person of at
least ten thousand dollars in the first full tax year in which the
person engages in business as a farmer; or
(B) The eligible farmer, during the first full tax year in which
that person engages in business as a farmer, growing, raising, or
producing agricultural products having an estimated value at any time
during that year of at least ten thousand dollars, if the person will
not sell or harvest an agricultural product during the first full tax
year in which the person engages in business as a farmer.
(ii) If a person fails to meet the condition provided in (d)(i)(A)
or (B) of this subsection, the department shall revoke the exemption
certificate. The department shall notify the person in writing of the
revocation and the person's responsibility, and due date, for payment
of any taxes for which an exemption under this section was claimed.
Any taxes for which an exemption under this section was claimed shall
be due and payable within thirty days of the date of the notice
revoking the certificate. The department shall assess interest on the
taxes for which the exemption was claimed. Interest shall be assessed
at the rate provided for delinquent excise taxes under chapter 82.32
RCW, retroactively to the date the exemption was claimed, and shall
accrue until the taxes for which the exemption was claimed are paid.
Penalties shall not be imposed on any tax required to be paid under
this subsection (3)(d)(ii) if full payment is received by the due date.
Nothing in this subsection (3)(d) prohibits a person from reapplying
for an exemption certificate.
(4) The definitions in this subsection apply to this section.
(a) "Agricultural products" has the meaning provided in RCW
82.04.213.
(b) "Eligible farmer" means:
(i) A farmer as defined in RCW 82.04.213 whose gross sales or
harvested value of agricultural products grown, raised, or produced by
that person is at least ten thousand dollars for the tax year
immediately preceding the year in which an application for exemption
under this section is submitted to the department;
(ii) The transferee of an exemption certificate under subsection
(3)(c)(ii) of this section where the transferred certificate expires
before the transferee engages in farming operations for a full tax
year, if the combined gross sales or harvested value of agricultural
products that the transferor and transferee have grown, raised, or
produced meet the requirements of (b)(i) of this subsection;
(iii) A farmer as defined in RCW 82.04.213, who does not meet the
definition of "eligible farmer" in (b)(i) or (ii) of this subsection,
and who did not engage in farming for the entire tax year immediately
preceding the year in which application for exemption under this
section is submitted to the department, because the farmer is either
new to farming or newly returned to farming; or
(iv) Anyone who otherwise meets the definition of "eligible farmer"
in this subsection except that they are not a "person" as defined in
RCW 82.04.030.
(c) "Farm vehicle" has the same meaning as in RCW 46.04.181.
(d) "Harvested value" means the number of units of the agricultural
product that were grown, raised, or produced, multiplied by the average
sales price of the agricultural product. For purposes of this
subsection (4)(d), "average sales price" means the average price per
unit of agricultural product received by farmers in this state as
reported by the United States department of agriculture's national
agricultural statistics service for the twelve-month period that
coincides with, or that ends closest to, the end of the relevant tax
year, regardless of whether the prices are subject to revision. If the
price per unit of an agricultural product received by farmers in this
state is not available from the national agricultural statistics
service, average sales price may be determined by using the average
price per unit of agricultural product received by farmers in this
state as reported by a recognized authority for the agricultural
product.
(e)(i) "Qualifying farm machinery and equipment" means:
(A) Machinery and equipment used primarily by an eligible farmer
for growing, raising, or producing agricultural products; and
(B) For hop farmers, all machinery and equipment including, but not
limited to, deviners, top and bottom cutters, mobile and stationary
picking chambers and their components, separating equipment, and kilns
and balers used to remove hops from the bines, separate hops from
leaves, and dry and bale hops must be considered to be primarily used
for producing an agricultural product.
(ii) "Qualifying farm machinery and equipment" does not include:
(((i))) (A) 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. For purposes of this subsection (4)(e)(((i))) (ii)(A),
"farm implement" 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;
(((ii))) (B) Aircraft;
(((iii))) (C) Hand tools and hand-powered tools; and
(((iv))) (D) Property with a useful life of less than one year.
(f)(i) "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.
(ii) 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 in (f)(i) of this subsection or
making repairs as described in subsection (1)(c) of this section.
(g) "Tax year" means the period for which a person files its
federal income tax return, irrespective of whether the period
represents a calendar year, fiscal year, or some other consecutive
twelve-month period. If a person is not required to file a federal
income tax return, "tax year" means a calendar year.
NEW SECTION. Sec. 3 This act is necessary for the immediate
preservation of the public peace, health, or safety, or support of the
state government and its existing public institutions, and takes effect
immediately.