Indiana Administrative Code
Title 45 - DEPARTMENT OF STATE REVENUE
Article 2.2 - SALES AND USE TAX
Rule 5 - Exempt Transactions of a Retail Merchant
Section 5-13 - Sales of tangible personal property directly consumed in agriculture, horticulture, floriculture, or arboriculture

Universal Citation: 45 IN Admin Code 5-13

Current through September 18, 2024

Authority: IC 6-8.1-3-3

Affected: IC 6-2.5

Sec. 13.

(a) The state gross retail tax shall not apply to sales of tangible personal property as a material which is to be directly consumed in direct production by the purchaser in the business of producing agricultural, horticultural, floricultural, or arboricultural commodities.

(b) General rule. Purchases of materials to be directly consumed by the purchaser in the business of producing tangible personal property are exempt from tax provided that such materials are directly used in the production process; i.e., they have an immediate effect upon the commodities being produced. Property has an immediate effect on the commodities being produced if it is an essential and integral part of an integrated process which produces tangible personal property.

(c) Refer to Regs. 6-2.5-5-5.1(010)(7) [ 45 IAC 2.2-5-12(g) ] for the definition of "consumed" as used in this regulation [45 IAC 2.2].

(d) Refer to Regs. 6-2.5-5-1 [ 45 IAC 2.2-5-1 ] for the definition of "farmer" and "farming" as used in this regulation [45 IAC 2.2].

(e) The term "farmer" will be used in this regulation [45 IAC 2.2] to signify both "farmers" and "other persons engaged in the business of producing food and agricultural commodities".

(f) "The business of producing tangible personal property by agriculture" means "farming" for purposes of interpreting this regulation [45 IAC 2.2].

(g)

(1) "Have an immediate effect upon commodities being produced". Purchases of materials to be consumed during production of commodities are taxable unless the consumption of such materials has an immediate effect upon either (1) the food or agricultural commodities being produced, or

(2) machinery, tools, or equipment which are both used in direct production of commodities and are exempt from tax under these regulations [45 IAC 2.2]. The consumption of property has an immediate effect on the commodity being produced or on the machinery, tools, or equipment engaged in direct production of commodities if the consumption is an essential and integral part of an integrated process which produces food or an agricultural commodity.

(h) Other taxable transactions. Purchases of materials consumed in farming beyond the scope of those activities described in subsection (g) of this section are taxable. Such activities include, but are not limited to: pre-production activities; post-production activities; storage (except where it is an essential and integral part of an integrated production process); transportation (except where it is an essential and integral part of an integrated production process); maintenance; testing and inspection (except where it is an essential and integral part of an integrated production process); management and administration; sales; research and development; e xhibition of products; safety and fire prevention; space heating; ventilation a nd cooling for general temperature control; illumination; shipping and loading.

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