Certain purchases by farmers may be exempt from the Iowa sales and use tax. If you claim exemption on any purchase, you must be able to show that you are entitled to it by providing a valid exemption certificate to the seller of the property. A separately completed exemption certificate is not necessary for each similar exempt purchase; if the retailer chooses, a "blanket exemption certificate" on file with a given retailer is sufficient. The exemption certificate may be obtained on this site.
Machinery and equipment
Generally, self-propelled implements, implements customarily drawn or attached to a self-propelled implement, or grain dryers used directly and primarily in agricultural production and not subject to registration as a vehicle are exempt.
Also exempt are auxiliary attachments which improve the performance, safety, operation, or efficiency of the farm machinery or equipment.
Certain purchases of non-self-propelled machinery or equipment are exempt from the Iowa sales tax if they are used directly and primarily in dairy or livestock production.
Vehicles
A 5% one-time registration fee is imposed on the purchase prices of vehicles subject to registration and on any implement customarily drawn by or attached to a registered vehicle. This includes camping trailers and livestock trailers.
Farm tractors, combines, and other such vehicles are exempt because they meet all three of the following requirements: they are used directly and primarily in agricultural production, they are self-propelled, and they are not subject to registration.
Real property
The purchase of machinery and equipment which will become real property after installation (that is, a substantially permanent part of the farm property) is usually taxable. In general, machinery or equipment is real property if its removal after installation is difficult or if removal substantially lessens the value of the machinery or the location where it was placed.
Exceptions to this general rule exist for certain items. For example, drainage tile is exempt from tax.
Also exempt for livestock or dairy production, aquaculture production, or the production of flowering, ornamental, or vegetable plants are:
- Auger systems
- Curtains and curtain systems
- Drip systems
- Fans and fan systems
- Shutters
- Inlets and shutter or inlet systems
- Refrigerators
Parts and supplies
Replacement parts used in the operation of eligible farm machinery or equipment are exempt from sales tax.
Oil filters, spark plugs, gas filters, and tires are examples of exempt replacement parts.
Do not confuse replacement parts with supplies, most of which are taxable.
Oil and grease used in the routine maintenance of a tractor, for example, are not considered parts; they are considered supplies. They are taxable.
For more information, go to our farmers guide.