Sales to farmers; agricultural commodities

Sec. 3. (a) Definitions: Fertilizer. The term "fertilizer" means a commodity which contains one or more substances to increase the available

plant food content of the soil and which becomes a part of the products grown therein.

Farmer. For definition of "farmer" as used in this regulation [45 IAC 2.2] refer to Regs. 6-2.5-5-1(010) [45

IAC 2.2-5-1].

Farming. The term "farming" means engaged in the commercial production of food or agricultural commodities as a "farmer".

(b) In general, purchases of tangible personal property by farmers are taxable. The exemptions provided by this regulation [45

IAC 2.2] apply only to seeds, fertilizers, fungicides, insecticides, and other tangible personal property to be directly used by the farmer

in the direct production of food and agricultural commodities. This exemption is limited to "farmers".

(c) The state gross retail tax shall not apply to:

(1) Sales to farmers and to other persons occupationally engaged in the business of producing food and agricultural commodities for

human, animal, and poultry consumption (either for sale or further use in producing such food and agricultural commodities for sale) of seeds, plants,

fertilizers, fungicides, insecticides, and other tangible personal property to be directly used by the purchaser in the direct production of food and

agricultural commodities.

(2) Sales to farmers of seeds, plants, fertilizers, fungicides, insecticides, and other tangible personal property to be directly used by

the farmer in the direct production of food or agricultural commodities for human, animal, or poultry consumption either for sale or for further use

in producing food and agricultural commodities for sale are exempt from tax. "To be directly used in the direct production of food or agricultural

commodities for human, animal, or poultry consumption either for sale or for further use in producing food and agricultural commodities for sale,"

the property in question must have an immediate effect on the article being produced. Property has an immediate effect on the article being produced

if it is an essential and integral part of an integrated process which produces food or an agricultural commodity.

(3) Seeds and plants. Sales to farmers of seeds and plants for sale or for further use in producing food and agricultural commodities

for sale are exempt from tax provided such seeds and plants are used directly in farming.

(4) Fertilizer. Sales to farmers of fertilizer are exempt from tax provided that such fertilizer is used directly in farming.

(5) Fungicides and insecticides. Sales to farmers of fungicides and insecticides are exempt from tax provided such items are used

directly in farming.

(6) Sales to farmers of tangible personal property used to groom or treat poultry and animals used in the production of food, so as to

preserve their health, (including property such as medicines, serums, dehorners, debeakers, hoof trimmers [sic.,] hormones for productive

animals, inoculation needles, and syringes) are exempt from tax.

(d) Non-exempt purchases:

(1) Other tangible personal property. Sales to farmers of other tangible personal property are taxable unless the property is used in

direct production of food or agricultural commodities.

(2) Sales of beds, mattresses, kitchen equipment, recreation items, etc., used in conjunction with the operation of migrant labor camps

are taxable. Such items are not used directly in farming.

(3) Sales to farmers of property to be incorporated into real estate in such a manner as to become part of the real estate are taxable.

If the unit is directly used for manufacture or a process of manufacture, it is to be considered as personal property.

(4) Materials purchased for use in construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance, or

improvement of farm buildings incorporated into realty are taxable.

(5) Purchases of fences, fencing material, gates, posts, fence stretchers, and electric fence chargers are taxable.

(6) Purchases of watering tubs and troughs and tile for drainage are taxable.

(7) Tangible personal property purchased by a farmer for use in general farm maintenance of taxable items is taxable.

(8) Sales to farmers of tangible personal property to be used in managerial, sales, or other farm activities not directly related to the

production of food are taxable. The following farm activities are not directly related to the production of food or agricultural commodities: farm

management and administration; selling and marketing; exhibition of farm products; safety and fire prevention; illumination for farm buildings,

transportation of animals, poultry, feed, fertilizer, etc., to the farm for use in farming; and transportation of animals, poultry, and other farm produce

from the farm to market.

(9) Buildings which only protect the animals from adverse weather conditions are taxable.

(e) Exempt Purchases: (1) Heating, cooling, and ventilation equipment for agricultural production is exempt when it is directly used in the

direct agricultural production process provided that such equipment is directly used in the production process, i.e. has an immediate effect on the

article being produced. Property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process

which produces food or agricultural commodities.

(2) Confinement buildings that confine animals in order to (1) maintain physical integrity of the product, (2) create and control the

environment in order to facilitate production, and (3) function in conjunction with exempt machinery such as fans, thermostats, vents, cooling and

heating systems, are exempt. In addition, in order to qualify for the exemption, the confinement building must serve a breeding, gestation, farrowing,

and nursing or finishing function. For purposes of this exemption, confinement involves holding the animal within the confines of the building or

an attached confined porch area.

(3) Fences, fencing materials, gates, posts, and electric fence chargers (listed in 45 IAC 2.2-5-3(d)(6) and 2.2-5-4(c)

[45 IAC 2.2-5-4(c)]) are exempt only if the same are purchased for use in confining livestock during the production processes

of breeding, gestation, farrowing, calving, nursing, or finishing. Fencing materials are taxable if the fence is used to confine horses, ponies, donkeys,

or pets not used in agricultural production. Fencing materials are also taxable if the fence is used only as a partition fence between adjoining

landowners or as a means to keep wildlife, stray animals, or trespassers from entering cropland or farm premises.

(4) Purchases of feeding and watering equipment.