Washington Department of Revenue Revises Policy Regarding Business and Occupation Tax Exemption for Fruit and Vegetable Processors

The Washington Department of Revenue (“Department”) recently announced that it was changing its policy regarding a Business and Occupation (“B&O”) tax exemption for fruit or vegetable processors. The law provides a B&O tax exemption for the value of fresh fruits or vegetables processed by a manufacturer by canning, preserving, freezing, processing, or dehydrating in Washington and sold at wholesale to customers outside of Washington.

The Department’s previous policy required that the end product be a fruit or vegetable. The revised policy only requires that processing begins with fresh fruit or vegetables and the end product be either food or animal feed. Businesses may qualify for refunds if they paid manufacturing B&O tax on qualifying processed products or wholesaling B&O tax on sales of qualifying processed products transported out of state.

In addition, the policy revision is retroactive and applies to B&O taxes paid for periods within the four-year look-back period. Refund requests must be submitted by December 31, 2011. The Department also requires taxpayers to electronically file annual incentive surveys for previous periods. Surveys for 2007 forward are due April 30, 2012.