The Washington State Legislature has approved ESSB 6057 that clarifies the hazardous substance tax (HST) exemption on crop protection products located in Washington State and involved in interstate commerce.
Previously, Washington law imposed the HST on Federal Insecticide, Fungicide and Rodenticide (FIFRA) crop protection products brought into the state. The HST was imposed upon the first possessor in the state even if the products were later sold out of state unless pre-sold with a through delivery “bill of lading.” The existing HST exemption was not available to the agricultural industry because products are typically brought into Washington for storage without an identified buyer.
As a result, the FIFRA inventory in Washington was reduced by more than 30 percent, which could cause potential delays in readily available products and incentivize the pre-purchase of products for storage on the farm as opposed to commercial warehouses with sophisticated spill containment technology. Delays in product availability could also contribute to increased crop damage resulting in lower yields and the use of more product due to increased pest populations or disease.
The HST exemption clarification language in ESSB 6057 allows manufacturers to strategically warehouse their products in Washington State for geographical preferences without the inclusion of the HST on FIFRA products, which will be sold out of state. The HST will continue to be paid on FIFRA products that are manufactured, used or sold in Washington State. This correction will allow for market-driven decisions dependent upon the needs of the agriculture industry instead of tax policy unique to Washington State.
The Far West Agribusiness Association and its members have been a primary proponent of the legislations and obtained the clarification, which will benefit agricultural production within the Pacific Northwest. Considering the difficult political dynamics of this lengthy legislative session, this clarification is a significant win that was made possible by the strong representation of Far West and its members in Olympia. The change to this law will provide economic, environmental and service benefits that the agricultural industry will expect to see in the very near term.