IN THE SUPREME COURT OF IOWA 

No. 72 / 04-1836 

Filed September 15, 2006 

IOWA AG CONSTRUCTION CO., INC., an Iowa Corporation, and IOWA 

SELECT FARM, an Iowa Limited Liability Partnership, 

Appellants, 

vs. 

IOWA STATE BOARD OF TAX REVIEW, 

Appellee. 

Appeal from the Iowa District Court for Polk County, Robert J. Blink, 

Judge. 

Taxpayers appeal judicial review decision that affirmed their tax 

assessment. AFFIRMED.

Burns Mossman of Nyemaster, Goode, West, Hansell & O’Brien, P.C., 

Des Moines, for appellants. 

Thomas J. Miller, Attorney General, and Marcia Mason, Assistant 

Attorney General, for appellee. 
2 

LAVORATO, Chief Justice. 

Iowa Ag Construction Co., Inc. (Iowa Ag) and Iowa Select Farms, 

L.L.P. (Iowa Select) appeal from a district court decision affirming the 

decision of the Iowa State Board of Tax Review (Board). The Board held that 

property used in pork production was not exempt from Iowa sales or 

consumer use tax under Iowa Code section 422.45(26), (39) (2001). 

Because we agree with the conclusions the district court reached, we affirm. 

 I. Background Facts. 

Iowa Ag constructed buildings for DeCoster Farms. Hog confinement 

buildings built by Iowa Ag were always owned by Austin J. DeCoster. Some 

of these buildings were leased to Iowa Select. 

 In the hog confinement business, different buildings are used for 

confining hogs of different ages to isolate disease and control the 

environment. Hog operations use farrowing facilities. In those facilities 

sows give birth to pigs, and those pigs stay with the sow for three to four 

weeks. Hog operations also use nurseries in which pigs are confined until 

they reach a weight of forty or fifty pounds. Finishing facilities are also 

used to confine pigs weighing 50 to 250 pounds. 

 A typical hog confinement building is 200 to 280 feet in length and 

forty feet wide. The foundation is made of poured concrete, with walls from 

one to four feet high. These walls have a two-inch ledge to allow for 

installation of slatted concrete flooring or nursery floor frames. Piers in the 

pits are poured concrete walls that run the length of the building. The pit 

walls and piers support the slats or nursery floor frames. The pigs and the 

people tending the pigs walk into a hog confinement building on the same 

level where the concrete slats or nursery floor frames are located. Below the 

slatted or nursery flooring is a manure pit that is between one and four feet 

deep. 
3 

 Farrowing and nursery barns consist of separate rooms because of 

the need to regulate the temperature in the rooms. In finishing barns, 

which are open, the hogs are separated into pens. 

 Nursery flooring is used in farrowing and nursery buildings. Nursery 

flooring is galvanized steel mesh wire cut to fit a frame. The frames are 

typically four-by-eight feet or six-by-ten feet and weigh 144 pounds and 270 

pounds, respectively. The frame rests on top of concrete beams and is 

attached by a “J” bolt to the pen dividers. Bolts are used to secure the 

flooring to the floor frame in the corners. There are four bolts for each 

frame. Nursery flooring suspends pigs from their waste, which falls through 

the wire mesh to the pit below. The nursery flooring is designed to separate 

the animals from their waste thereby keeping them clean and dry. 

 Concrete slats are used in finishing buildings. These slats are usually 

four by ten feet or four by eight feet. A four by ten feet slat weighs about 

1340 pounds. The slats are designed to separate the hogs from their waste, 

which falls through the floor into the waste pit. The weight of the slat holds 

it in place on the two-inch ledge in the wall of the building. 

 Exhaust fans are located in the sides or ends of buildings or in pits to 

exchange air. Ventilation is necessary for the pigs’ proper growth. The 

exhaust fans are made of fiberglass and vary in size and weight from eleven 

inches square to fifty-three inches square and weigh from 19 pounds to 287 

pounds. The wall fans are inserted into a hole in the wall. Four to eight 

screws or bolts attach the fan to the building. If a fan is removed, a square 

opening would be left in the building. The size of the opening would match 

the size of the fan. The pit fans typically sit on top of a rectangular concrete 

box that is part of the pit structure and located outside the building. A 

ventilation controller turns the fans on and off, and a motor powers the 

fans. 
4 

 Curtains are used in the hog confinement buildings and are part of a 

system that, together with other equipment in the building, provide proper 

ventilation for the animals. These buildings are built with rectangular 

openings along the sides of the buildings to provide for natural ventilation. 

The curtains are made of vinyl over a polyethylene material, woven together 

in strands. The curtains can be raised or lowered manually. 

 Curtain controllers control the ventilation within the hog confinement 

buildings. A curtain controller receives information from thermostats or 

sensors inside and outside the building. Based on that information, the 

curtain controller causes fans to go off and on and the curtains to go up 

and down. The controller can also control heaters and water misters that 

drip water on the animals. 

 The controller is usually attached to a control board in the center of 

the building with two to four one-half-inch screws. The controller has three 

wires coming in to it, and the number of wires going out would depend on 

how many items the controller was to control. 

 A curtain machine raises and lowers the curtains. The curtain 

machine replaces a hand crank. The curtain machine weighs between 100 

and 150 pounds and is usually attached to the outside of the confinement 

building with six screws or bolts. Three electrical wires provide power to the 

curtain machine, and additional wires connect it to the curtain and 

ventilation controller. The curtain machine has a cable attached to a drum, 

which is operated by electrical power. When the drum turns, the cable lifts 

or lowers the curtains on the side of the building. 

 As part of the biosecurity procedures at Iowa Select and DeCoster 

Farms, personnel who work in the hog confinement buildings are required 

to shower every morning upon arrival before entering a hog confinement 

building. Both Iowa Select and DeCoster Farms provide uniforms for their 
5 

employees, which are worn by the employees and are washed on-site. 

These procedures are necessary because hogs are susceptible to disease 

that is easily carried and transmitted by clothing. 

 At each building, refrigerators are used to keep medications for hogs 

at the proper temperature. Such medication might include immunizations 

or vitamin or mineral supplements that need refrigeration to maintain 

effectiveness. 

 Today, most hogs are bred artificially. After semen is collected and 

delivered to the farm, the semen must be stored at a specific temperature. 

A special refrigerator is used at the Iowa Select and DeCoster Farms to store 

the semen. 

 Iowa Select uses mowers to cut grass and weeds around the hog 

confinement buildings for rodent control. Mowers are also used around 

sewage lagoons located on the site as required by the Iowa Department of 

Natural Resources. The agency requires the mowing so that its employees 

can properly inspect the lagoons to determine if there are any cracks, leaks, 

or degradation around the outside of the lagoons. The mowers were used 

more than fifty percent of the time to cut grass and weeds to control rodents 

and to mow grass around the lagoons. 

II. Proceedings. 

On November 23, 1999, as a result of a field audit, the Iowa 

Department of Revenue and Finance (department) sent Iowa Ag a notice of 

assessment for sales/use tax, covering the period from April 1, 1992, 

through June 30, 1998. The tax, penalty, and interest amounted to 

$1,414,714.51. On January 5, 2000, Iowa Ag filed a protest, disputing the 

entire amount of the assessment. 

On November 23, 1999, as a result of a field audit, the department 

sent Iowa Select a notice of assessment for sales/use tax covering the 
6 

period from January 1, 1993, through December 31, 1998. The tax, 

penalty, and interest amounted to $708,410.87. On April 7, 2000, Iowa 

Select filed a protest, disputing the entire amount of the assessment. Later, 

Iowa Select paid the assessment under protest and filed a claim for refund 

of the amount paid. 

Iowa Ag and Iowa Select agreed to consolidate the two cases. An 

administrative law judge (ALJ) heard the case. The issues pertinent to the 

appeal before this court were whether certain items of property described 

above were exempt from tax pursuant to Iowa Code section 422.45(39) and 

whether other items of property described above were exempt from tax 

pursuant to Iowa Code section 422.45(26). The department appealed the 

ALJ’s proposed decision to the director, who issued an order reversing a 

part of the ALJ’s proposed decision. Iowa Ag and Iowa Select [hereinafter 

taxpayers] appealed the director’s order to the Board. 

Following a hearing, the Board issued its decision. The Board 

concluded that the following items of property pertinent to the appeal to this 

court and described above were subject to tax: nursery flooring, concrete 

slats, exhaust fans, curtains, curtain controllers, curtain machines, 

washers, dryers, refrigerators, and mowers. 

The taxpayers filed a petition for judicial review in the district court. 

The taxpayers alleged that the Board erred in its legal conclusion that the 

property described was subject to tax. Following a hearing, the district 

court affirmed the Board’s decision. It is from this ruling that the taxpayers 

appeal. 

III. Issues. 

The first issue is whether the following items of property are exempt 

from Iowa sales/use tax pursuant to Iowa Code section 422.45(39): nursery 
7 

flooring, concrete slats, exhaust fans, curtains, curtain controllers, curtain 

machines, washers, dryers, and refrigerators. 

The second issue is whether the mowers are exempt from such tax 

pursuant to Iowa Code section 422.45(26). 

IV. Scope of Review. 

Our review of agency action is governed by the standards set forth in 

Iowa’s Administrative Procedure Act. See Iowa Code §§ 17A.15(3), 

17A.19(1), 421.1(4), 422.55(1); Grimm v. Iowa Dep’t of Revenue, 331 N.W.2d 

137, 139-40 (Iowa 1983) (per curiam). “In exercising its judicial review 

power, the district court acts in an appellate capacity.” Mycogen Seeds v. 

Sands, 686 N.W.2d 457, 463 (Iowa 2004). When we review the district 

court’s decision, “we apply the standards of chapter 17A to determine 

whether the conclusions we reach are the same as those of the district 

court.” Id. at 464. “If they are the same, we affirm; otherwise we reverse.” 

Id. 

The issues here involve the agency’s interpretation of law, its factual 

determinations, and its application of law to the facts. Regarding the 

agency’s interpretation of the law, the court may grant relief if the 

taxpayers’ “substantial rights have been prejudiced because the agency’s 

action meets any one of several statutory criteria.” See Midwest Auto. III, 

LLC v. Iowa Dep’t of Transp., 646 N.W.2d 417, 421 (Iowa 2002). 

 Several administrative rules represent the agency’s interpretation of 

Iowa Code section 422.45(26), (39). Although we give weight to the agency’s 

interpretation, the meaning of a statute is always a matter of law for us to 

determine. See City of Marion v. Iowa Dep’t of Revenue & Fin., 643 N.W.2d 

205, 206 (Iowa 2002). 

Iowa Code section 17A.19(11) prescribes the deference that we should 

accord the view of the agency. See id. at 206-07. Iowa Code section 
8 

17A.19(11)(c) provides that we should give appropriate deference to the view 

of the agency “with respect to particular matters that have been vested by a 

provision of law in the discretion of the agency.” Iowa Code § 17A.19(11)(c). 

A statutory provision provides that “[t]he director [of revenue and finance] 

shall have the power and authority to prescribe all rules not inconsistent 

with the provisions of this chapter, necessary and advisable for its detailed 

administration and to effectuate its purposes.” Id. § 422.68(1). We 

therefore conclude that the interpretation of section 422.45(26), (39) has 

been vested in the agency. Consequently, we must give the agency’s 

interpretation of this statute through its administrative rules the deference 

directed by Iowa Code section 17A.19(11)(c). See City of Marion, 643 N.W.2d 

at 206-07. That deference requires us to uphold the agency’s interpretation 

unless that interpretation is “irrational, illogical, or wholly unjustifiable.” 

Iowa Code § 17A.19(10)(l). 

Regarding the agency’s factual determinations, the court may grant 

relief if the taxpayers’ substantial rights have been prejudiced because the 

agency action is 

[b]ased upon a determination of fact clearly vested by a 

provision of the law in the discretion of the agency that is not 

supported by substantial evidence in the record before the 

court when that record is viewed as a whole. 

Id. § 17A.19(10)(f). 

For purposes of our review, 

“[s]ubstantial evidence” means the quantity and quality of 

evidence that would be deemed sufficient by a neutral, 

detached, and reasonable person, to establish the fact at issue 

when the consequences resulting from the establishment of 

that fact are understood to be serious and of great importance. 

Id. § 17A.19(10)(f)(1). “In assessing evidentiary support for the agency’s 

factual determinations, we consider evidence that detracts from the 
9 

agency’s findings, as well as evidence that supports them, giving deference 

to the credibility determinations of the presiding officer.” Lange v. Iowa 

Dep’t of Revenue, 710 N.W.2d 242, 247 (Iowa 2006); see Iowa Code 

§ 17A.19(10)(f)(3). 

 As to the agency’s factual determinations regarding the applicability 

of the exemptions in section 422.45(26), (39), such determinations are 

clearly vested by a provision of law in the discretion of the agency. The case 

was tried as a contested case proceeding in which factual findings were 

made based on evidence produced. See Iowa Code § 422.54(2). We are 

therefore bound by the agency’s findings of fact if supported by substantial 

evidence. See Lange, 710 N.W.2d at 246-47. We can reverse the agency 

action regarding findings of fact only if they are not supported by 

substantial evidence. Mycogen Seeds, 686 N.W.2d at 465. By applying this 

requirement, we are giving “appropriate deference to the view of the agency 

with respect to particular matters that have been vested by a provision of 

law in the discretion of the agency.” Iowa Code § 17A.19(11)(c); see also 

Mycogen Seeds, 686 N.W.2d at 465. 

 Because factual determinations are by law clearly vested in the 

agency, it follows that application of the law to the facts is likewise vested 

by a provision of law in the discretion of the agency. Iowa Code 

§ 17A.19(10)(f); see also Mycogen Seeds, 686 N.W.2d at 465. We can 

therefore reverse the agency’s application of the law to the facts only if we 

determine such application was “irrational, illogical, or wholly 

unjustifiable.” Iowa Code § 17A.19(10)(m); see also Mycogen Seeds, 686 

N.W.2d at 465. By applying this standard, we are likewise giving 

“appropriate deference to the view of the agency with respect to particular 

matters that have been vested by a provision of law in the discretion of the 
10

agency.” Iowa Code § 17A.19(11)(c); see also Mycogen Seeds, 686 N.W.2d at 

465. 

 In assessing the validity of the agency action, we apply “the standards 

of review provided in [Iowa Code section 17A.19], as applied to the agency 

action at the time that action was taken.” Iowa Code § 17A.19(8)(b); see 

Marovec v. PMX Indus., 693 N.W.2d 779, 782 (Iowa 2005). This accords 

with the long-standing rule that “ ‘statutes controlling appeals are those 

that were in effect at the time the judgment or order appealed from was 

rendered.’ ” Wal-Mart Stores, Inc. v. Caselman, 657 N.W.2d 493, 498 (Iowa 

2003) (quoting Ontjes v. McNider, 224 Iowa 115, 118, 275 N.W. 328, 330 

(1937)). 

 Iowa Code section 422.45 was repealed effective July 1, 2004. 2003 

Iowa Acts 1st Ex. Sess. ch. 2, §§ 151, 205. A new sales tax exemption 

section was created, which became effective July 1, 2004. Id. ch. 2, §§ 96, 

205 (codified at Iowa Code § 423.3 (2005)). 

 The Iowa legislature passed Senate File 2268 and the Governor signed 

it on June 2, 2006. 2006 Iowa Legis. Serv. S.F. 2268 (West). Senate File 

2268 added a new subsection providing for tax refunds for several items of 

property at issue here. Id. We express no opinion on this provision. 

 Because we are dealing with issues of tax exemption, we must keep in 

mind that any doubts as to tax exemptions must be resolved in favor of 

taxation. Dial Corp. v. Iowa Dep’t of Revenue & Fin., 634 N.W.2d 643, 646 

(Iowa 2001). 

 With these principles in mind, we consider the issues before us. 

V. Exemption Afforded by Iowa Code Section 422.45(39). 

 A. Applicable law. Iowa Code section 422.45(39) exempts from sales 

tax 
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[t]he gross receipts from the sale or rental of farm machinery 

and equipment, including auxiliary attachments which improve 

the performance, safety, operation, or efficiency of the 

machinery and equipment and replacement parts, if all of the 

following conditions are met: 

a. The implement, machinery, or equipment is directly 

and primarily used in livestock or dairy production . . . . 

b. The implement is not a self-propelled implement . . . 

 c. The replacement part is essential to any repair or 

reconstruction necessary to the farm machinery’s or 

equipment’s exempt use in livestock or dairy production . . . . 

Iowa Code § 422.45(39) (emphasis added). 

 Section 423.4(4) exempts from use tax “[t]angible personal property, 

the gross receipt from the sale of which are exempted from the retail sales 

tax by the terms of section 422.45, except [as to subsections not relevant 

here] . . . .” 

 Rule 701—18.48 of the Iowa Administrative Code implements Iowa 

Code section 422.45. Iowa Admin. Code r. 701—18.48(8). This rule defines 

“equipment” as 

tangible personal property (other than a machine) directly and 

primarily used in livestock or dairy production. It may be 

characterized as property which performs a specialized 

function which, of itself, has no moving parts or if it does 

possess moving parts, its source of power is external to it. 

Id. r. 701—18.48(1)(b). 

 Iowa Administrative Code rule 701—18.48(1)(c)(1) provides that real 

property is not machinery or equipment: 

 (1) Real property. The ground or the earth is not 

machinery or equipment. A building is not machinery or 

equipment. Therefore, tangible personal property which is sold 

for incorporation into the ground or a building in such a 

manner that it will become a part of the ground or the building 

is taxable. Generally, property incorporated into the ground or 

a building has become a part of the ground or the building if 

removal of the property from the ground or building will 

substantially damage the property, ground, or building or 

substantially diminish the value of the property, ground, or 

building. Fence posts embedded in concrete and electrical 
12

wiring, light fixtures, fuse boxes, and switches are examples of 

property sold for incorporation into the ground or a building, 

respectively. The property referred to in 18.48(1)(c)(1) can be 

identified by applying the following test: Assume that the 

property is being sold to a contractor rather than a person 

engaged in livestock or dairy production. If sold to a 

contractor, would the retailer be required to consider the 

property “building material” and charge the contractor sales 

tax upon the purchase of this building material. If this is the 

case, sale of the property is not exempt from Iowa tax law. 

Iowa department of revenue and finance rule 701—19.3(422, 

423) contains a characterization of “building material” and a 

list of specific examples of building material. 

Id. r. 701—18.48(1)(c)(1) (citation omitted). 

 As pertinent here, rule 701—19.3, referred to in rule 701—

18.48(1)(c)(1), states that the term 

“building materials” . . . means materials used in construction 

work, and is not limited to materials used in constructing a 

building with sides and covering. The term may also include 

any type of materials used for improvement of the premises or 

anything essential to the completion of a building or structure for 

the use intended. 

Id. r. 701—19.3(1) (emphasis added) (citation omitted). 

Rule 701—19.3(3) lists typical items regarded as building materials. 

The list is not intended to be exclusive. Id. r. 701—19.3(3). The list regards 

as building materials floor coverings “which are shaped to fit a particular 

room or area and which are attached to the supporting floor with cement, 

tacks or tack strips or by some other method making a permanent attachment

. . . .” Id. (emphasis added). In contrast, the rule notes that carpeting, 

whether attached to the floor or not, is not considered as a building material 

and that rugs, mats, and linoleum types of floor coverings that are not 

attached but are simply laid on finished floors are not considered as 

building materials. Id. 

 Iowa Administrative Code rule 701—19.10 distinguishes between 

equipment and real property after installation: 
13

Distinguishing machinery and equipment from real 

property. A construction contract may include many 

activities, but it does not include a contract for the sale and 

installation of machinery or equipment. Machinery and 

equipment includes property that is tangible personal property 

when it is purchased and remains tangible personal property 

after installation. Generally, tangible personal property can be 

moved without causing damage or injury to itself or to the 

structure, it does not bear the weight of the structure, and it 

does not in any other manner constitute an integral part of a 

structure. Manufactured machinery and equipment which does 

not become permanently annexed to the realty remains 

tangible personal property after installation. 

Id. r. 701—19.10 (emphasis added). 

 Rule 701—19.10(2) lists “property which, under normal conditions, 

becomes a part of realty.” The list, which is nonexclusive, includes 

“improvements to buildings, including awnings, canopies, . . . floors

(including computer room floors), . . . storm doors and windows, door 

controls, air curtains, . . . and heating, cooling and ventilation systems.” Id.

r. 701—19.10(2)(c) (emphasis added). While the administrative rule does 

not define the word “integral,” we think rule 701—19.10(2) was intended to 

define the term when it used the language “property which, under normal 

conditions, becomes a part of realty.” This language tracks the ordinary 

meaning of “integral”: “of, relating to, or serving to form a whole.” 

Webster’s Third New International Dictionary 1173 (unabr. ed. 2002); see 

also Hough v. Iowa Dep’t of Personnel, 666 N.W.2d 168, 173 (Iowa 2003) 

(noting the court’s practice of looking “to the ordinary, commonly 

understood meaning of the [undefined statutory] word” and using a 

dictionary to ascertain the meaning). 

 “Directly and primarily” in section 422.45(39)(a) are defined in rule 

701—18.48(1). Rule 701—18.48(1)(e) pertinently provides that 

[i]f the machinery or equipment is used in livestock or dairy 

production, to be “directly” so used, that use must constitute an 

integral and essential part of production as distinguished from a 

use in production which is incidental, merely convenient to or 
14

remote from production. The fact that machinery or equipment 

is essential or necessary to livestock or dairy production does 

not mean that it is also “directly” used in production. 

Machinery or equipment may be necessary to livestock or dairy 

production but so remote from it that it is not directly used in that 

production. 

Iowa Admin. Code r. 701—18.48(1)(e) (emphasis added). The statute does 

not define “directly,” but rule 701—18.48(1)(e)’s definition of the term tracks 

with the dictionary meaning of “direct”: “marked by absence of an 

intervening agency, instrumentality, or influence.” Merriam-Webster’s 

Collegiate Dictionary 327 (10th ed. 2002). 

 Rule 701—18.48(1)(e)(3) lists nonexclusive examples of machinery 

and equipment that are not considered to be directly used in livestock or 

dairy production. One pertinent use includes “[m]achinery or equipment 

used to . . . repair other machinery or equipment directly used in livestock 

or dairy production.” Iowa Admin. Code r. 701—18.48(1)(e)(3)(1). 

In addition, the rule defines “primarily used in livestock or dairy 

production”: 

Machinery or equipment is “primarily used in livestock or dairy 

production” if of the total time that unit of machinery or 

equipment is used, more than [fifty] percent of the time is in 

livestock or dairy production. If a unit of machinery or 

equipment is used more than [fifty] percent of the time for 

production and the balance of time for other business 

purposes, the exemption applies. 

Id. r. 701—18.48(1)(f). 

The rule also lists the following pertinent nonexclusive example of 

machinery and equipment directly used in livestock or dairy production: 

“Machinery and equipment used in the conception . . . of livestock or dairy 

animals (e.g., artificial insemination equipment).” Id. r. 701—18.48(1)(e)(2)(2) 

(emphasis added). 

B. The merits. The Board began its analysis by stating that it 

evaluated the nursery flooring, concrete slats, exhaust fans, curtains, 
15

curtain controllers, and curtain machines on the basis of the permanency 

or degree of annexation of the structure to other real property under rules 

701—18.48, 701—19.3, and 701—19.10, as those rules are set out above. 

The Board then determined that each of these items of property had to be 

addressed in terms of those rules on an individual basis. We turn now to 

the Board’s findings and conclusions and our analysis of the same. 

1. Nursery flooring and slats. The Board noted that rule 701—19.3 

gives examples of items typically regarded as building materials such as 

floors that are shaped to fit a particular room or area and that are attached 

to the supporting floor in some permanent fashion. The Board compared 

this type of flooring to rugs, mats, or other flooring that are not so attached. 

The Board made specific findings that nursery flooring and slats (1) are not 

rugs, floor mats, or flooring coverings that are simply laid but not attached 

to finished floors; (2) constitute the floor of the building that separates the 

hogs from the waste pit below; and (3) are attached to the real property to 

an extent as to become part of the property. Based on these findings, the 

Board concluded these items were not exempt from tax. 

 According to the evidence, the buildings in question were constructed 

for the purpose of operating a hog confinement business. The evidence 

supports a reasonable inference that the nursery flooring and concrete slats 

were essential to the completion of the building for the use intended and for 

that reason were building materials and therefore subject to tax. See Iowa 

Admin. Code rs. 701—18.48(1)(c)(1), 701—19.3(1). The nursery flooring and 

concrete slats also fit the intended meaning of “floors” in rule 701—19.3(3), 

meaning they are building materials. Accordingly, they meet the definition 

of “building materials” and therefore are subject to tax. See id. r. 701—

18.48(1)(c)(1). They also fit the intended meaning of “floors” in rule 701—

19.10(2)(c), that describes “property which, under normal conditions, 
16

becomes a part of realty.” As such, the nursery flooring and concrete slats 

are “an integral part of a structure,” within the meaning of rule 701—19.10. 

The nursery flooring and concrete slats therefore fall outside the meaning of 

tangible personal property not subject to tax. See id. r. 701—19.10. 

 We conclude substantial evidence supports the Board’s findings. We 

further conclude that the Board’s interpretation of section 422.45(39), as 

implemented by the administrative rules considered by the Board, was not 

irrational, illogical, or wholly unjustifiable. Nor was its application of the 

law to the facts irrational, illogical, or wholly unjustifiable. 

2. Exhaust fans. As to the exhaust fans, the Board found that, after 

the fans were installed into the walls of the building, “they became part of 

the real property.” The Board further found that these items perform the 

same functions as a window and are necessary because of the specialized 

construction of the building. Finally, removing these items, the Board 

found, would be consequential to the building environment. For all of these 

reasons, the Board concluded these items were not exempt from tax. 

 As mentioned, the fans vary in size and weight from eleven inches 

square to fifty-three inches square and weigh from 19 pounds to 287 

pounds. The fans are inserted into a hole in the wall and are attached to 

the building with screws or bolts. Their removal would leave a hole the size 

of the fan. The fans are a necessary part of the ventilation system, which is 

essential for the animals’ health and proper growth. This evidence supports 

the Board’s findings that the fans are necessary because of the specialized 

construction of the building, and their removal would be consequential to 

the building environment. A reasonable inference from these findings is 

that the fans are essential to the completion of the building for the use 

intended and are for that reason considered building materials and 

therefore subject to tax. See id. rs. 701—18.48(1)(c)(1), 701—19.3(1). 
17

 We note that windows and window screens are listed as typical items 

meeting the description of “building materials” in rule 701—19.3(3). 

Windows and cooling and ventilation systems qualify as “property which, 

under normal conditions, becomes a part of realty.” Id. r. 701—19.10(2)(c). 

The exhaust fans here serve a similar purpose as windows, window screens, 

and cooling and ventilation systems. We therefore conclude the fans meet 

the “building materials” description in rule 701—19.3(3) and are therefore 

for that further reason subject to tax. See id. r. 701—18.48(1)(c)(1). The 

fans also meet the definition of “property which, under normal conditions, 

become[] a part of realty” in rule 701—19.10(2). As such, the fans are an 

“integral part of a structure,” within the meaning of rule 701—19.10. The 

fans therefore fall outside the parameters of tangible personal property not 

subject to tax. See id. r. 701—19.10. 

 We conclude substantial evidence supports the Board’s findings. We 

further conclude that the Board’s interpretation of section 422.45(39), as 

implemented by the administrative rules considered by the Board, was not 

irrational, illogical, or wholly unjustifiable. Nor was its application of the 

law to the facts irrational, illogical, or wholly unjustifiable. 

3. Curtains, curtain machines, and ventilation controllers. The 

Board found these items are necessary for controlling temperature in the 

confinement building. The Board further found that these items became 

part of the hog confinement structure once they were installed. For that 

reason, the Board found these items did not retain tangible personal 

property status. Consequently, the Board concluded these items were not 

exempt from tax. 

 The evidence showed that the curtains, curtain machines, and 

ventilation controllers together with the exhaust fans provide proper 

ventilation for the animals, as found by the Board. The curtain controller is 
18

attached to a control board in the center of the building with screws. The 

curtain machine is attached to the outside of the building with screws or 

bolts. 

 A reasonable inference from this evidence is that these items are 

necessary and essential to the completion of the buildings for the use 

intended and for that reason are building materials and therefore subject to 

tax. See id. rs. 701—18.48(1)(c)(1), 701—19.3(1). Air curtains and cooling 

and ventilation systems are listed in rule 701—19.10(2)(c) as “property 

which, under normal conditions, becomes a part of realty.” The items in 

question clearly meet this description. As such, the items are an “integral 

part of a structure” within the meaning of rule 701—19.10. The items 

therefore fall outside the parameters of tangible personal property not 

subject to tax. See id. r. 701—19.10. 

 We conclude substantial evidence supports the Board’s findings. We 

further conclude that the Board’s interpretation of section 422.45(39), as 

implemented by the administrative rules considered by the Board, was not 

irrational, illogical, or wholly unjustifiable. Nor was its application of the 

law to the facts irrational, illogical, or wholly unjustifiable. 

4. Washers and dryers. Regarding the washers, dryers, and 

refrigerators, the Board analyzed the exemption issue as to whether those 

items were used directly and primarily in livestock production as set out in 

Iowa Code section 422.45(39) as implemented by the administrative rules.

As mentioned, personnel who work in the hog confinement buildings 

at Iowa Select and DeCoster Farms must shower every morning before 

entering a hog confinement building. The personnel must also wear 

uniforms provided by their employers, and these uniforms are washed onsite. These procedures are necessary to protect the animals from disease 

that is easily carried and transmitted by clothing. 
19

 The Board found that the washers and dryers are one step removed 

from being “directly and primarily used in livestock production.” The Board 

therefore concluded that these items were not exempt from tax. 

While it may be necessary for the taxpayers to have these items, this 

is not the test. The test is that the items must not be remote from the 

production process. Substantial evidence supports the Board’s finding that 

these items are one step removed from being directly used in livestock 

production. The use of washers and dryers is analogous to maintaining or 

repairing equipment directly used in livestock production, which is not a 

direct production use. See id. r. 701—18.48(1)(e)(3)(1); Dain Mfg. Co. v. Iowa 

State Tax Comm’n, 237 Iowa 531, 538, 22 N.W.2d 786, 790-91 (1946) 

(holding that drill grinding machine used to service machinery or equipment 

directly used in processing property was not considered to be directly used 

in the processing). 

We conclude substantial evidence supports the Board’s findings. We 

further conclude that the Board’s interpretation of section 422.45(39), as 

implemented by the administrative rules considered by the Board, was not 

irrational, illogical, or wholly unjustifiable. Nor was its application of the 

law to the facts irrational, illogical, or wholly unjustifiable. 

5. Refrigerators. The evidence revealed there were two types of 

refrigerators used. One was for storage of medications and another was for 

storage of semen. The Board found the refrigerators were not directly used 

in livestock production because they were one step removed from being 

directly used in production as required by the statute. They were one step 

removed, the Board found, because “[i]t is the semen, medication and 

vaccinations that are used, not the refrigerator.” For these reasons, the 

Board concluded these items were not exempt from tax. 
20

The refrigerators used to store the medication were necessary to 

preserve the medication’s effectiveness. However, as with the washers and 

dryers, this is not the test. The test is that the refrigerators must not be 

remote from the production process. And like the washers and dryers, the 

use of these refrigerators is analogous to repairing or maintaining 

equipment directly used in the production process. We conclude 

substantial evidence supports the Board’s finding that these refrigerators 

were not directly used in livestock production. 

We reach the same conclusion for the same reasons regarding the 

refrigerators used to store the semen. As mentioned, rule 701—

18.48(1)(e)(2)(2) provides that artificial insemination equipment is directly 

used in the production of livestock because it is equipment used in the 

conception of livestock. As the Board found, refrigerators are not directly 

used in the production of livestock; rather, it is the semen itself that is 

directly so used. Unlike artificial insemination equipment, the refrigerators 

are clearly one step removed from the production of livestock. 

We conclude substantial evidence supports the Board’s findings. We 

further conclude that the Board’s interpretation of section 422.45(39), as 

implemented by the administrative rules considered by the Board, was not 

irrational, illogical, or wholly unjustifiable. Nor was its application of the 

law to the facts irrational, illogical, or wholly unjustifiable. 

VI. Exemption Afforded by Iowa Code Section 422.45(26). 

 A. Applicable law. Iowa Code section 422.45(26) exempts from sales 

tax 

[t]he gross receipts from the sale or rental of farm machinery 

and equipment, including auxiliary attachments which improve 

the performance, safety, operation, or efficiency of the 

machinery and equipment and replacement parts, if the 

following conditions are met: 
21

a. The farm machinery and equipment shall be directly 

and primarily used in production of agricultural products. 

 b. The farm machinery and equipment shall constitute 

self-propelled implements or implements customarily drawn or 

attached to self-propelled implements or the farm machinery or 

equipment is a grain dryer. 

 c. The replacement part is essential to any repair or 

reconstruction necessary to the farm machinery’s or 

equipment’s exempt use in the production of agricultural 

products. 

Iowa Code § 422.45(26) (emphasis added). 

B. The merits. What remains to be considered are the mowers. The 

Board determined these items were not exempt pursuant to Iowa Code 

section 422.45(26), which exempts from tax farm machinery directly and 

primarily used in the production of agricultural products. Production of 

agricultural products means “a farming operation undertaken for profit by 

raising crops or livestock.” Iowa Admin. Code r. 701—18.44(2)(a) (emphasis 

added). Therefore, the administrative rules applicable to livestock 

production have application to the mowers. 

The taxpayers rely on section 422.45(26) because the exemption in 

section 422.45(39) does not apply to “self-propelled implement[s] or 

implement[s] customarily drawn or attached to self-propelled implements” 

whereas the exemption in section 422.45(26) does apply to such 

implements. Compare Iowa Code § 422.45(39)(b), with Iowa Code 

§ 422.45(26)(b). The mowers here are either pulled by a tractor or are rider 

mowers. 

Iowa Select uses mowers to cut grass around the hog confinement 

buildings and on the farm for rodent control. Iowa Select also mows around 

sewage lagoons to abide by an Iowa Department of Natural Resources 

regulation requiring mowing there to enable the agency to inspect lagoons. 

These uses consumed well over fifty percent of the mowers’ use. 
22

The Board found that the mowers were one step removed from being 

used directly in the production of livestock. Our reasoning that substantial 

evidence supports the Board’s findings regarding the washers, dryers, and 

refrigerators applies here with equal force. 

We conclude substantial evidence supports the Board’s findings. We 

further conclude that the Board’s interpretation of section 422.45(26), as 

implemented by the administrative rules considered by the Board, was not 

irrational, illogical, or wholly unjustifiable. Nor was its application of the 

law to the facts irrational, illogical, or wholly unjustifiable. 

VII. Disposition. 

Because we reach the same conclusions the district court reached, we 

affirm its decision affirming the decision of the Board. We have carefully 

considered all of the issues. Those we have not addressed were either not 

properly preserved or lack merit. 

AFFIRMED.