Current through September 18, 2024
Authority: IC 6-8.1-3-3
Affected: IC 6-2.5
Sec. 6.
(a) In
general, all purchases of tangible personal property by persons engaged in the
direct production, extraction, harvesting, or processing of agricultural
commodities are taxable. (The exemption provided in this regulation [45
IAC 2.2] extends only to agricultural machinery, tools, and
equipment.)
(b) The state gross
retail tax shall not apply to sales of agricultural machinery, tools, and
equipment to be directly used by the purchaser in the direct production,
extraction, harvesting, or processing or [sic.] agricultural
commodities.
(c) Purchasers of
agricultural machinery, tools, and equipment to be directly used by the
purchaser in the direct production, extraction, harvesting, or processing of
agricultural commodities are exempt from tax provided such machinery, tools,
and equipment have a direct effect upon the agricultural commodities produced,
harvested, etc. Property is directly used in the direct production, extraction,
harvesting, or processing of agricultural commodities if the property in
question 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, i.e. confinement buildings, cooling,
heating, and ventilation equipment. The fact that such machinery, tools, or
equipment may not touch the commodity or livestock or, by itself, cause a
change in the product, is not determinative.
(d) Exempt purchases:
(1) Feeds-Sales of agricultural machinery,
tools, and equipment used by the purchaser directly in feeding exempt animals,
poultry, etc., are exempt from tax. This exemption does not extend to
machinery, equipment, and tools used for the handling, movement,
transportation, or storage of feed prior to the actual feeding
process.
(2) Seeds and plants-Sales
of agricultural machinery, tools, and equipment to be used directly by the
purchaser to plant seeds and plants purchased exempt from tax are exempt from
tax. This exemption does not apply to lawn tractors used to plant grass seed,
storage equipment, transportation equipment, or to machinery, tools, or
equipment to be incorporated into real estate.
(3) Fertilizers-Sales of agricultural
machinery, tools, and equipment to be directly used by the purchaser to
fertilize crops. This exemption does not apply to storage equipment,
transportation equipment, or to machinery, tools, or equipment to be
incorporated into real estate.
(4)
Insecticides and fungicides-Sales of agricultural machinery, tools, and
equipment to be directly used by the purchaser to apply insecticides and
fungicides are exempt from tax. This exemption does not apply to storage
equipment, transportation equipment, or machinery, tools, or equipment to be
incorporated into real estate.
(5)
Other exempt agricultural machinery, tools, and equipment. Sales of other
agricultural machinery, tools, and equipment to be directly used by the
purchaser in the direct production, extraction, harvesting, or processing or
[sic.] agricultural commodities are exempt from tax provided
such machinery, tools, and equipment are directly used in the production
process, i.e. they have an immediate effect upon the agricultural commodities
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
agricultural commodities.
(6)
Automatic watering equipment for crops; fruit or crop harvesting or picking
equipment; machinery and equipment used to bale crops; pruning machinery and
equipment used for fruit trees; and equipment used to shear wool from sheep and
similar tangible personal property.
(7) Tangible personal property used in or for
the purpose of storing work-in-process or semi-finished goods is not subject to
tax if the work-in-process or semi-finished goods are ultimately or completely
produced for resale and are, in fact, resold. Storage facilities or containers
for materials or items currently undergoing production during the production
process are deemed temporary storage facilities and containers.
(8) Machinery, tools, and equipment used to
move a crop from the field where it was grown and harvested to equipment for
temporary storage or for further processing.
(9) Machinery, tools, and equipment used to
move exempt items such as seeds, plants, fertilizers, insecticides, and
fungicides from temporary storage to the location where such will be used in an
exempt process.
(10) Replacement
parts used to replace worn, broken, inoperative, or missing parts on exempt
machinery and equipment.
(11)
Safety clothing or equipment which is required to allow a farmer to participate
in the production process without injury or to prevent contamination of the
livestock or commodity during production.
(e) Taxable purchases:
(1) Storage equipment. Machinery, tools, and
equipment used for storage of agricultural commodities after completion of the
production of agricultural commodities are taxable.
(2) Machinery, tools, and equipment which
become incorporated into real property are taxable except such machinery,
tools, and equipment that are directly used in the production process; i.e.,
they have a direct effect upon the agricultural commodities being produced,
harvested, extracted, or processed.
(3) Machinery, tools, and equipment used in
general farm maintenance are taxable. The sale of paint brushes and sprays,
oilers, blowers, wheelbarrows, brooms, chain saws, power tools, welders, tire
spreaders, drills, sanders, wrenches, and other tools used in general cleaning
and maintenances are taxable. However, replacement parts used to replace worn,
broken, inoperative, or missing parts on exempt machinery and equipment, are
exempt from tax.
(4) Sales of
machinery, tools, and equipment to be used in managerial, sales, research, and
development, or other nonoperational activities not directly used in
production, harvesting, extraction, and processing of agricultural commodities
are taxable. This category includes, but is not limited to, machinery, tools,
and equipment used in any of the following activities: farm management and
administration; selling and marketing; exhibition of farm products; safety and
fire prevention; illumination for farm buildings; lighting fixtures for general
illumination; heating and cooling equipment for general temperature control;
transportation of animals, poultry, feed, fertilizer, etc., to the farm for use
in farming; transportation of animals, poultry, and other farm produce from the
farm to market.
(f)
"Agricultural machinery, tools, and equipment" as used in this regulation
[45 IAC 2.2] refers to machinery, tools, and equipment used on
a farm to cultivate, grow, produce, reproduce, harvest, extract or process
animals, poultry, and crops used to produce food or agricultural commodities
for human or animal consumption (or for further use in producing food or
agricultural commodities).
(g)
"Direct production, extraction, harvesting or processing agricultural
commodities" means action which has an immediate effect on the agricultural
commodities being produced by "farming" as defined in Regs. 6-2.5-5-1(010)
[ 45 IAC 2.2-5-1 ] for a human, animal, or poultry
consumption. Property has an immediate effect on the article being produced if
it is an essential and integral part of an integrated process which produces
agricultural commodities.
(h)
Farmer and farming. Refer to Regs. 6-2.5-5-1(010) [ 45 IAC 2.2-5-1 ]
for definitions of "farmer" and "farming". ; filed Dec 1,
1982, 10:35 am: 6 IR 29; filed Aug 6, 1987, 4:30 pm: 10 IR
