Definitions

Definitions

Business & Occupation (B&O) Tax: The B&O tax is the tax applied to the gross amount received from conducting business. There are different reporting classifications for retail sales, wholesale sales, professional services, etc. Each classification has its own tax rate. Persons performing more than one activity may be subject to B&O tax under more than one reporting classification.

Consumer: A consumer is any person who uses tangible personal property and receives services defined as retail sales. Such tangible personal property or services may be for personal use or for conducting business activities. If you’re a seller, you need to know who is a consumer to know when to collect sales tax. If you’re a buyer, you need to know when to pay sales tax and, if sales tax hasn’t been paid, when to pay use tax or deferred sales tax directly to the Department of Revenue.

Deferred Sales Tax: This tax applies when a person acquired goods without paying sales tax when sales tax was due. Generally, deferred sales tax applies when someone uses a reseller permit to purchase goods that are used and not resold. When reporting deferred sale tax, the taxable amount is reported on the use tax line of the tax return.

Farmer: Any person engaged in the business of growing, raising or producing, upon the person’s own lands or upon the lands in which the person has a present right of possession, any agricultural product to be sold. “Farmer” does not include:

  • A person growing products for the person’s own consumption;

  • A person selling any animal product in connection with the person’s business of operating a stockyard, slaughter or packing house; or

  • A person cultivating or raising timber.

Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions: The buyer provides a completed exemption certificate to the seller to verify that the items purchased are exempt from retail sales tax. This certificate is not used to purchase items for resale. The seller must maintain a copy of the exemption certificate as part of its records.

Feed: Any substance used as food to sustain or improve animals, birds, fish or insects, and includes whole and processed grains or mixtures. “Feed” includes food additives which are given for their beneficial growth or weight effects. However, “feed” does not include hormones or similar products which do not make a direct nutritional or energy contribution to the body, nor does it include products which are used as medicines.

Gross amount: The “catch-all” term for whichever of the following terms is applicable to your business: “gross proceeds of sale,” “gross income of the business,” or “value products.” The gross amount includes all consideration received without deduction for the costs of doing business or other expenses.

Independent contractor: A person who engages in business activities other than as an employee. Determining whether a person is an independent contractor or an employee is important because contractors are subject to the B&O tax (and other taxes) and employees are not. Various factors determine whether a person is an employee or an independent contractor. Generally, independent contractors are:

  • entitled to the gross income of the business,

  • liable for business losses and expenses,

  • file a statement of business income and expenses (federal forms: Schedule C, 1065 or 1120) for income tax purposes, and

  • may employ others.


Retail Sales Tax: A tax imposed on the buyer of goods and certain retail services. The seller is responsible for collecting the tax from the consumer and remitting it to the Department of Revenue. The sales tax is a combined state and local tax.

Reseller Permit: Effective January 1, 2010, the resale certificate was replaced with a reseller permit issued by the Department of Revenue. Reseller permits are issued to businesses that make wholesale purchases. The permits allow businesses to purchase items or services for resale in Washington without paying retail sales tax.

The Department will issue reseller permits based on specific criteria. Businesses that don't automatically receive a permit may apply directly to the Department by submitting an application.

Use Tax: Imposed on the use of goods in Washington State as a consumer when the goods are purchased or acquired without payment of Washington’s retail sales tax. With respect to the use of goods as a consumer, either sales tax or use tax, but not both, applies. Like the sales tax, the use tax is a combined state and local tax. Use tax and sales tax rates are the same.

Veterinary Services defined for tax purposes: Veterinary services include the diagnosis, cure mitigation, treatment, or prevention of disease, deformity, defect, wounds, or injuries, of animals. It also includes the administration of any drug, medicine, dietary preparations, method or practice, or performance of any operation, or manipulation, or application of any apparatus or appliance for the diagnosis, cure mitigation, treatment, or prevention of any animal disease, deformity, defect, wound, or injury. This includes the surgical insertion of metal screws or plates either permanently or temporarily. In addition, unless specifically noted below, the term “veterinary services” includes all of the activities described under RCW 18.92.010.

For tax purposes, “veterinary services” does not include:

  • Use of an item of tangible personal property opened and partly administered by the veterinarian, and taken by the customer for further administration by the customer to the animal (providing the charge for the item is separately stated on the invoice);

  • Sale of tangible personal property, including the sale of prescribed drugs from a store or pharmacy;

  • Sale of tags, implants or other electronic devices, or any other item used for establishing or maintaining positive identification of the animal.