ARTICLE | August 15, 2025

Why These Changes Matter

For the first time, temporary staffing services—a lifeline for Washington agriculture—will be taxed just like tangible goods. This means when a farm engages a labor contractor or staffing agency to provide W-2 pickers, sorters, forklift drivers, or maintenance technicians, the staffing agency must now collect and remit retail sales tax on its invoice.

Although staffing firms benefit from a lower B&O “Retailing” rate classification, that savings stays with the agencies rather than with growers. Compounding the challenge, the effective date lands squarely in the middle of apple harvest season, forcing producers to account for a sudden 9–10% cost increase on contractor line items at a critical time

Beyond labor, the expanded sales tax base also captures digital platforms and technology tools. Systems for crop management, irrigation control, logistics, and even advanced third-party software like remote sensing and analytics are now taxable. These tools, once viewed as efficiency drivers, carry an additional tax burden that could erode already thin margins.

Areas of Concern for Agribusiness

• Seasonal labor services via staffing agencies – Short-term hires, temp-to-hire programs, and mobile crews moving between orchards and packing houses are all taxable. Direct hires remain exempt, but navigating 1099 versus W-2 arrangements remains an unresolved gray area.

• Technology platforms for farm operations – Cloud-based crop monitoring, irrigation automation, and supply chain tracking solutions now fall within the taxable base.

• Third-party digital tools – From precision ag apps to data analytics and GPS-based management systems, these services add both cost and compliance complexity.

For small and midsize farms—those most reliant on outside staffing and affordable cloud-based technologies—the financial strain is expected to be particularly acute.

Operational Complexity: Destination-Based Taxation

Washington’s destination-based sourcing rules add another layer of difficulty. For example:

• Fruit picked in Okanogan County will be taxed at that county’s rate.

• Sorting or packing in Wenatchee requires applying Chelan County’s rate.

• Crews working across multiple sites in a single pay period require contractors to break down invoices by location.

If contractors don’t split invoices accurately, agribusinesses risk overpaying or misallocating taxes

Strategies to Manage the Impact

While these changes create unavoidable cost increases, agribusinesses can take steps now to mitigate risk:

• Review contracts early – Ensure RFQs and agreements specify how sales tax will be handled.

• Reevaluate staffing models – For longer projects like pruning crews, direct hiring may prove more cost-effective, especially when H-2A housing infrastructure can be reused.

• Optimize operations across counties – Schedule work in lower-rate jurisdictions when feasible.

• Improve recordkeeping – Detailed production logs and GPS-based acreage maps support accurate tax sourcing and may uncover credits if allocations are challenged.

What Remains Unclear

The Department of Revenue is still developing guidance. Key uncertainties include:

• Whether 1099 contractors could be swept into the taxable base.

• How to fairly allocate taxes for mobile crews moving across multiple orchards.

• The possibility of a delayed effective date, though industry advocates acknowledge the odds of an extension remain slim.

Bottom Line for Washington Agribusiness

The expansion of sales tax to cover temporary labor and digital services marks a pivotal shift for Washington agriculture. What was once considered a straightforward cost of doing business—hiring seasonal crews or investing in digital efficiency—now requires careful tax planning and documentation.

For agribusiness owners, the message is clear: treat staffing and technology expenses the same way you would bins, cartons, or fuel—budget for sales tax, validate the correct rate, and keep documentation airtight. A proactive approach today—renegotiating contracts, educating field managers, and refining sourcing records—can help minimize disruption when the new rules take effect this harvest season.