INTERPRETIVE STATEMENT
The Department of Revenue has cancelled the following Excise Tax Advisory effective August 8, 2001.
ETA 367.04.172 Clearing land and moving earth for commercial farmers -- This document addresses the taxability of a taxpayer operating a bulldozer to remove stumps and construct roads for farmers. It explains that the removal of stumps and the construction of roads using a bulldozer constitute the "clearing of land" and/or "the moving of earth," and are retail sales under RCW 82.04.050. The document recognizes that income realized from for-hire cultivation activities conducted for farmers, such as plowing, rototilling, discing, and harrowing, is subject to the service and other activities B&O tax.
ETA 367 is correct with respect to the removal of stumps from land that is not currently being used for producing agricultural crops and the construction of roads. This is a retail sale subject to the retailing B&O and retail sales taxes. The tax result is also correct with respect to removing stumps from and road building on agricultural land in preparation for a nonagricultural use of the land (e.g., a housing development).
This document can be misleading, however, with respect to removing stumps from an existing orchard in preparation for continued cultivation of agricultural crops. The department considers the removal of stumps in an existing orchard in preparation for the replanting of an orchard, or the cultivation of another agricultural crop (e.g., planting a vineyard to grow grapes), to be a horticultural service subject to the service and other activities B&O tax.
Questions regarding the cancellation of this advisory may be directed to: Alan R. Lynn, Legislation and Policy Division, Department of Revenue, P.O. Box 47467, Olympia, WA 98504-7467, phone (360) 570-6125, fax (360) 664-0693, Internet alanl@dor.wa.gov.
Claire Hesselholt
Policy Counsel