Preproposal statement of inquiry was filed as WSR 96-17-037.

Title of Rule: WAC 458-20-262 Retail sales and use tax exemptions for agricultural employee housing.

Purpose: The proposed rule explains the retail sales and use tax exemptions provided by RCW 82.08.02745 and 82.12.02685 for the construction, repair, decoration, or improvement of new or existing buildings or other structures that will be used to provide housing to the employer's agricultural employees. The rule also provides a sample exemption certificate to be used to substantiate the exempt nature of a sale.

Statutory Authority for Adoption: RCW 82.32.300 and 82.08.02745.

Statute Being Implemented: RCW 82.08.02745 and 82.12.02685.

Summary: This rule is being drafted to explain the provisions of RCW 82.08.02745 and 82.12.02685 (chapter 117, Laws of 1996), as amended by chapter 438, Laws of 1997. These statutes provide the retail sales and use tax exemptions for agricultural employee housing. This rule explains these exemptions, who is entitled to the exemptions, and the requirement that the buyer provide an exemption certificate to the seller. The department has not previously adopted a rule explaining these exemptions.

Reasons Supporting Proposal: The law requires that the department prescribe an exemption certificate by rule.

Name of Agency Personnel Responsible for Drafting: Cliff Ellenwood, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 753-4161; Implementation: Claire Hesselholt, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 753-3446; and Enforcement: Russell Brubaker, 711 Capitol Way South, Suite #303, Olympia, WA, (360) 586-0257.

Name of Proponent: Department of Revenue, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: This rule explains the retail sales and use tax exemptions provided by RCW 82.08.02745 and 82.12.02685 for the construction, repair, decoration, or improvement of new or existing buildings or other structures that will be used to provide housing to agricultural employees. These exemptions apply to the material incorporated into these structures, and the labor and services rendered in performing these activities. The rule explains that these exemptions also apply to mobile homes, travel trailers, mobile bunkhouses, modular homes, and prefabricated components of housing or tents when such items are connected to utilities (water, electricity, sewer, gas, phone, etc.).

This rule explains the amendments made by chapter 438, Laws of 1997, to these exemptions. It also provides a sample exemption certificate which by law the buyer must provide to the seller.

Proposal does not change existing rules.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Any administrative costs imposed by the rule are negligible.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. This is an interpretive rule that explains how the retail sales and use tax exemptions provided for agricultural employee housing apply.

Hearing Location: 2nd Floor Conference Room, Evergreen Plaza Building, 711 Capitol Way, Olympia, WA 98401 [98501], on September 16, 1998, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact: Arturo Haro by September 4, 1998, TDD 1-800-451-7985, or (360) 586-0721.

Submit Written Comments to: Cliff Ellenwood, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, fax (360) 664-0693, by September 16, 1998, e-mail cliffe@dor.wa.gov.

Date of Intended Adoption: October 3, 1998.

July 28, 1998

Claire Hesselholt

Rules Manager

NEW SECTION

WAC 458-20-262  Retail sales and use tax exemptions for agricultural employee housing. (1) Introduction. RCW 82.08.02745 and 82.12.02685 provide a retail sales and use tax exemption for agricultural employee housing as of March 20, 1996. Chapter 438, Laws of 1997, effective May 20, 1997, amended both RCW 82.08.02745 and 82.12.02685 by limiting the exemptions and allowing additional agricultural employee housing providers to receive the exemption. This rule also explains the exemptions, who is entitled to the exemption and the required information to be contained in an exemption certificate.

(2) Definitions. The following definitions apply throughout this section.

(a) "Agricultural employee" means any person who renders personal services to, or under the direction of, an agricultural employer in connection with the employer's agricultural activity (RCW 19.30.010).

(b) "Agricultural employer" means any person engaged in agricultural activity, including the growing, producing, or harvesting of farm or nursery products, or engaged in the forestation or reforestation of lands, which includes but is not limited to the planting, transplanting, tubing, precommercial thinning, and thinning of trees and seedlings, the clearing, piling and disposal of brush and slash, the harvest of Christmas trees, and other related activities (RCW 19.30.010).

(c) "Agricultural employee housing" means all facilities provided by an agricultural employer, housing authority, local government, state or federal agency, nonprofit community or neighborhood-based organization that is exempt from income tax under section 501(c) of the Internal Revenue Code of 1986 (26 U.S.C. sec. 501(c)), or for-profit provider of housing for housing agricultural employees on a year-round or seasonal basis, including bathing, food handling, hand washing, laundry, and toilet facilities, single-family and multifamily dwelling units and dormitories, and includes labor camps under RCW 70.54.110. The term also includes but is not limited to mobile homes, travel trailers, mobile bunkhouses, modular homes, fabricated components of a house, and tents. Agricultural employee housing does not include housing regularly provided on a commercial basis to the general public (chapter 438, Laws of 1997). Agricultural employee housing does not include housing provided by a housing authority unless at least eighty percent of the occupants are agricultural employees whose adjusted income is less than fifty percent of median family income, adjusted for household size, for the county where the housing is provided.

(d) "Person" means any individual, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, copartnership, joint venture, club, company, joint stock company, business trust, municipal corporation, political subdivision of the state of Washington, corporation, limited liability company, association, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise and the United States or any instrumentality thereof (RCW 82.04.030).

(e) "Agricultural land" has the same meaning as "agricultural and farm land" in RCW 84.34.020(2).

(3) Retail sales and use tax exemptions for agricultural employee housing. RCW 82.08.02745 and 82.12.02685, respectively, provide retail sales tax and use tax exemptions for the purchase, construction, and use of agricultural employee housing. Both exemptions require that agricultural employee housing provided to year-round employees of the agricultural employer must be built to the current building code for single-family or multifamily dwellings according to the state building code, chapter 19.27 RCW. Neither of these exemptions apply to housing built for the occupancy of an employer, family members of an employer, or persons owning stock or shares in a farm partnership or corporation business.

(a) The retail sales tax does not apply to charges for labor and services rendered by any person in respect to the constructing, repairing, decorating, or improving of new or existing buildings or other structures used as agricultural employee housing. Also exempt are sales of tangible personal property that becomes an ingredient or component of the buildings or other structures, including but not limited to septic tanks, pump houses, cisterns, and driveways. Appliances and furniture that are bolted or strapped to the actual building or structure are considered components of the building or structure. Items such as unattached furnishings, television sets, kitchen utensils, and other consumable articles do not qualify for this exemption.

(i) Purchases of labor and transportation charges necessary to move and set up mobile homes, mobile bunkhouses, and other property and component parts as agricultural employee housing are exempt of retail sales tax.

(ii) As a condition for exemption, the seller must take from the buyer an exemption certificate which substantially contains the information included in the sample form provided in subsection (5) of this section. The seller may accept a legible FAX or duplicate copy of an original exemption certificate. In all cases, the exemption certificate must be accepted in good faith by the seller, and must be retained by the seller for a period of at least five years. An exemption certificate may be provided for a single purpose, or for multiple purchases over a period not to exceed four years. Failure to comply with the provisions in this section may result in a denial of the exemption and the agricultural employer may be subject to use tax plus penalties and interest. Copies of the sample form provided in subsection (5) of this section are available through the department of revenue's taxpayer services division (360) 753-7634.

(b) The use tax exemption is available for the use of tangible personal property that becomes an ingredient or component of buildings or other structures used as agricultural employee housing during the course of constructing, repairing, decorating, or improving the buildings or other structures by any person. Again, appliances and furniture that are bolted or strapped to the actual building or structure are considered components of the building or structure.

(i) The exemption for materials incorporated into buildings or other structures used as agricultural employee housing also applies to persons/consumers constructing these buildings or structures for the federal government or county housing authorities. (See also WAC 458-20-17001 on government contracting.)

(ii) An agricultural employer claiming the exemption who retitles a used mobile home or titles a new mobile home acquired from an out-of-state seller must provide a completed exemption certificate to the department of licensing or its agent to substantiate the exempt nature of the home.

(4) Requirement to remit payment of tax if agricultural housing fails to continue to satisfy the conditions of exemption. The agricultural employee housing must be used for at least five consecutive years from the date the housing is approved for occupancy to retain the retail sales and use tax exemption. If this condition is not satisfied, the full amount of tax otherwise due shall be immediately due and payable together with interest, but not penalties, from the date the housing is approved for occupancy until the date of payment.

If at any time agricultural employee housing that is not located on agricultural land ceases to be used as agricultural employee housing for year-round employees, the full amount of tax otherwise due shall be immediately due and payable with interest, but not penalties, from the date the housing ceased to be used as agricultural employee housing for year-round employees.

Retail sales tax exemption certificate. The agricultural employer (buyer) must provide an exemption certificate to a seller to show entitlement to the exemption provided by the statute. This exemption certificate must be substantially in the form shown below.

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