Manufacturing fresh fruits and vegetables by canning, preserving, freezing, processing, or dehydrating

Manufacturing fresh fruits and vegetables by canning, preserving, freezing, processing, or dehydrating

Manufacturing

Businesses that manufacture or process for hire fresh fruits and vegetables must report gross income from this activity under the Manufacturing Fresh Fruits and Vegetables business and occupation (B&O) tax classification. They may then take a deduction for the full amount under *Exempt Manufactured Products.

Note: This deduction expires July 1, 2035. The activity will then be subject to a reduced B&O tax rate.

Selling

Manufacturers of fresh fruits and vegetables must also report their sales under either the Wholesaling or Retailing B&O tax classification. However, they may then take a B&O tax deduction for the following sales of fresh fruits and vegetables they manufacture:

Note: This deduction expires July 1, 2035. The activity will then be subject to a reduced B&O tax rate.

Retail sales of fresh fruits and vegetables must also be reported under the Retail Sales tax classification. However, fresh fruits and vegetables are generally exempt from sales tax in Washington and can be deducted as Exempt Food Sales.

Sales of fresh fruits and vegetables delivered to consumers outside of Washington may be deducted from the Retailing B&O and Retail Sales tax classifications as Interstate and Foreign Sales.

Cannabis is not a fresh fruit or vegetable. Cannabis, useable cannabis, and cannabis-infused products, including cannabis concentrates, are not fresh fruits or vegetables. This means the processing of cannabis into useable cannabis, cannabis-infused products, or cannabis concentrates (including cannabis-infused products that contain fruits or vegetables) does not qualify for this B&O tax exemption or the reduced rate effective July 1, 2035.

Multiple Activities Tax Credit (MATC)

Businesses that perform more than one taxable activity for the same product will report each activity under the proper classification and then take the MATC so that B&O tax is only paid once.

Note: You may not claim the MATC if your manufacturing activity is exempt from B&O tax. For more information, please see the MATC section of this guide.

Litter tax

Manufacturers of fresh fruits and vegetables must report Litter tax on products manufactured or sold (wholesale and retail) in Washington.

Reporting/documentation requirements

Businesses that claim the starred (*) deductions must file an Annual Tax Performance Report by May 31 of each year following a year when they claim the deduction. This requirement will also apply to the reduced B&O tax rates that take effect after the deductions expire.

Businesses that sell fresh fruits and vegetables at wholesale to customers who will take the products out of state must keep documentation to support this deduction. Generally, a letter from the customer stating their intent is enough.

Additional resources

Food manufacturing industry incentives

References