Fresh fruit and vegetable manufacturers are exempt from business and occupation (B&O) tax on certain manufacturing and selling activities through June 30, 2035. Manufacturing includes canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables (RCW 82.04.4266).
To claim the tax preferences, manufacturers must report their gross income from fresh fruit or vegetable manufacturing activities and then claim a deduction for the amounts attributable to qualified activities not subject to the B&O tax.
The following tax classifications and activities are exempt from B&O tax:
Manufacturers must report their income and take a deduction for the exempt amounts. There is no application required for claiming these exemptions. However, manufacturers are required to file all returns and the Annual Tax Performance Reports through My DOR.
If the business manufactures other products not eligible for this exemption, that income should be reported under the Manufacturing B&O tax classification or another manufacturing classification, if appropriate.
A manufacturer taking a wholesale exemption for product transported outside Washington by the buyer must keep and preserve records for up to five years. Those records must establish that the goods were transported by the purchaser in the ordinary course of business out of this state. A letter from the buyer stating this fact is adequate documentation provided the buyer supplies the seller with a copy of the buyer’s reseller permit.
If you claimed one or more of these exemptions, you must electronically file an Annual Tax Performance Report by May 31 of the year following the year when you claimed the exemption (RCW 82.32.534).
For example, if you claimed one or more of the B&O tax exemptions in 2022, your annual report would need to be filed by May 31, 2023.
If you do not file this report on time, the exemptions claimed will be disallowed and a portion of the balance owed will be billed back to you.
For questions regarding the program and the Annual Tax Performance Report, call 360-705-6210.