Search form

Sales and Use Tax Responsibilities of Ag-Chemical Dealers, Cooperatives, Elevators, Fertilizer Dealers

"Production of Agricultural Products" Begins With:

  • Cultivation of land previously cleared for planting crops; or
  • The purchase or breeding of livestock or domesticated fowl.

"Production of Agricultural Products" Ceases When:

  • A product has been transported to the point where it will be sold by the producer or processed.

Exempt

  • Machinery and equipment used directly and primarily in the production of agricultural products
  • Machinery and equipment used directly and primarily in a manufacturing process
  • Replacement parts for exempt machinery and equipment
  • Computers used in processing or storage of data by a commercial enterprise (farmers cannot purchase computers tax free, but an agribusiness may be eligible for exemption)

Taxable

  • All vehicles subject to registration
  • All equipment attached to a vehicle subject to registration
  • Labor to repair exempt machinery and equipment
  • Parts not separately itemized from taxable labor
  • Grain testing
  • Grain storage
  • Pest eradication

Taxable vs. Exempt Examples

Example 1 - Nurse Tank (for example, an anhydrous ammonia tank)

  • Taxable if attached to a vehicle subject to registration
  • Exempt if drawn by a self-propelled implement of husbandry used in agricultural production.

Example 2 - Grain Vacuum Conveyor

  • Taxable if used at an elevator
  • Exempt if used directly and primarily on a farm in agricultural production

Example 3 - Tractor

  • Exempt if used to till fields and harvest crops
  • Taxable if purchased by an elevator to primarily haul grain from an unloading dock to a silo

Example 4 - Skidloader

  • Exempt if primarily used in agricultural production.

A co-op uses a skidloader 60% of the time to clean the feedlot of its livestock operation. The remaining 40% is used to handle fertilizer and do utility work on the co-op premises. The skidloader is exempt because it is primarily (more than 50%) used in agricultural production.

  • Taxable

A co-op uses a skidloader 100% of the time to load bags of seed, fertilizer, and feed on customer's trucks.