Illinois Administrative Code › Title 86 - REVENUE › Part 130 - RETAILERS' OCCUPATION TAX › Subpart C - CERTAIN STATUTORY EXEMPTIONS › Section 130.305 - Farm Machinery and Equipment

Current through Register Vol. 48, No. 28, July 12, 2024
a)
				General: Notwithstanding the fact that the sales may be at retail, the
				Retailers' Occupation Tax does not apply to sales of machinery and equipment,
				both new and used and including that manufactured on special order, used or
				leased for use primarily in production agriculture or for use in State or
				Federal agricultural programs, including any individual replacement part for
				such machinery and equipment. A purchaser must certify to the use of the
				equipment to obtain the exemption.
b) Production Agriculture is the raising of
				or the propagation of: Livestock, crops for sale for human consumption; crops
				for livestock consumption; and production seed stock grown for the propagation
				of feed grains and the husbandry of animals or, for the purpose of providing a
				food product, including the husbandry of blood stock as a main source of
				providing a food product. Production Agriculture also includes animal
				husbandry, floriculture, aquaculture, horticulture and viticulture. (Section
				2-35 of the Act)
c) Horticulture
				means the business of producing vegetables, vegetable plants, nursery stock,
				including the operation of nurseries and orchards, but not the sale of plants
				by retail outlets which do not grow the plant stock.
d) Floriculture means the business of
				producing flowers, Christmas trees or other decorative trees, plants, shrubs,
				sod, including such operations as greenhouses but not the sale of plants by
				retail outlets which do not grow plant stock.
e) Viticulture means the business of growing
				grapes or operating vineyards.
f)
				Production Agriculture, with respect to crops, is limited to activities
				necessary in tilling the soil, planting, irrigating, cultivating, applying
				herbicide, insecticide or fertilizer, harvesting and drying of crops.
				Specialized food production operations which produce plants under controlled
				environments in growing media other than soil, qualify as production
				agriculture. Activities such as the clearing of land, mowing of fence rows,
				creation of ponds or drainage facilities are not included, nor are the
				operations involved in the storing or transporting of crops and produce. The
				processing of crops into food or other products is not production agriculture.
				With respect to the raising of or propagation of livestock and husbandry of
				animals, the animals must be domestic farm animals raised for profit. The
				raising of wild animals, game birds and house pets would not be considered to
				be production agriculture.
g) The
				transport, slaughter and processing of animals or animal food products are not
				considered to be production agriculture.
h) Farm machinery and equipment. The
				exemption applies only to items of farm machinery and equipment, either new or
				used, certified by the purchaser to be used primarily for production
				agriculture or State or Federal agricultural programs, and including machinery
				and equipment purchased for lease. Included in this exemption are implements of
				husbandry defined in Section 1-130 of the Illinois Vehicle Code, fertilizer
				spreaders, and nurse wagons required to be registered under Section 3-809 of
				the Illinois Vehicle Code. Excluded from this exemption are other motor
				vehicles required to be registered pursuant to the Illinois Vehicle Code.
				Registered vehicles other than motor vehicles may qualify for the exemption if
				they are used primarily in production agriculture rather than in transportation
				or other nonexempt activities. Examples of this include implements of husbandry
				used primarily to supply and apply farm chemicals; trailers and nurse tanks
				used primarily to supply spreaders in the fields; and aircraft used primarily
				to apply farm chemicals. All-terrain vehicles (ATVs) may qualify if they are
				used primarily in production agriculture activities such as pulling sprayers
				while they apply chemicals to fields or collecting and mapping soil samples.
				The use of ATVs for farm transportation or recreation purposes does not
				constitute production agriculture. When ATVs are used in both production
				agriculture and nonqualifying activities, the primary use will determine if
				they qualify for exemption. The law exempts only the purchase and use of farm
				machinery and equipment used in production agriculture or State or Federal
				agricultural programs. No other type or kind of tangible personal property will
				qualify for the exemption.
i)
				Machinery means major mechanical machines or major components thereof
				contributing to the production agriculture process or used primarily in State
				or Federal agricultural programs. Farm machinery would include tractors,
				combines, balers, irrigation equipment, cattle and poultry feeders, but not
				improvements to real estate such as fences, barns, roads, grain bins, silos,
				and confinement buildings. A rotary mower which would not qualify for exemption
				if used to mow ditches or fence rows, would qualify for exemption if primarily
				used to mow crops or ground cover grown on acreage in State or Federal
				agricultural programs. Certain machines qualify for the exemption if purchased
				by farmers directly from retailers, even though they are installed as realty
				improvements. Such machines include but are not limited to augers, grain dryers
				(heaters and fans), automated livestock feeder bunks (but not ordinary building
				materials), automatic stock waterers (powered by electricity or water pressure
				and built into a permanent plumbing system), and water pumps serving production
				areas, specialty heating or lighting equipment specifically required by the
				production process, i.e., ultraviolet lights, and special heaters for
				incubation. General heating, lighting and ventilation equipment does not
				qualify as farm machinery or equipment. A person (such as a plumbing
				contractor) who contracts to provide and install an exempt machine or equipment
				permanently into real estate must obtain an exemption certificate from the
				person purchasing the machine. The contractor must furnish certification to the
				seller, attaching the certificate of the purchaser in order to claim the
				exemption.
j) A tractor or other
				machinery which qualifies for the exemption may include options or accessories
				which are not farm equipment. Except for precision farming equipment, these
				items must be installed and sold both as an integral part of the qualifying
				machine and in a single transaction. Agricultural chemical tender tanks and dry
				boxes shall include units sold separately from a motor vehicle required to be
				licensed and units sold mounted on a motor vehicle required to be licensed if
				the selling price of the tender is separately stated. (Section 2-5 of the
				Act)
k) Equipment means any
				independent device or apparatus separate from any machinery, but essential to
				production agriculture. Equipment does not include ordinary building materials
				to be permanently affixed to real estate. However, certain items of equipment
				can qualify for the exemption even though they are installed as realty
				improvements. Such items of equipment include, but are not limited to,
				farrowing crates, gestation stalls, poultry cages, portable panels for
				confinement facilities and flooring used in conjunction with waste disposal
				machinery. Horticultural polyhouses or hoop houses used for propagating,
				growing, or overwintering plants are considered farm machinery and equipment.
				Wheeled, wire-mesh tables and wheeled, non-motorized, multiple-tray carts used
				primarily in floricultural or horticultural growing operations, such as those
				described in Mid-American Growers v. Department of Revenue (143 Ill.App.3d
				600), are considered farm machinery and equipment. Equipment shall include
				precision farming equipment that is installed or purchased to be installed on
				farm machinery and equipment, including, but not limited to, tractors,
				harvesters, sprayers, planters, seeders, or spreaders. Precision farming
				equipment includes, but is not limited to, soil testing sensors, yield
				monitors, computers, monitors, software, global positioning and mapping
				systems, guidance systems, modems, and data communications equipment. It shall
				also include necessary mounting hardware, wiring and antennas. Farm machinery
				and equipment also includes computers, sensors, software and related equipment
				used primarily in the computer assisted operation of production agriculture
				facilities, equipment, and activities such as, but not limited to, the
				collection, monitoring and correlation of animal and crop data for the purpose
				of formulating animal diets and agricultural chemicals. Example: Precision
				farming and computer assisted operation of production agriculture facilities
				includes the collection of crop and soil data, the processing of that data, and
				the use of that data or its products in production agriculture. Thus, machinery
				and equipment such as soil sensors, moisture sensors and yield monitors would
				collect data on a particular field. This information would be precisely
				correlated to a specific location by use of satellite GPS systems linked to a
				computer. These devices would typically be mounted on a tractor or combine.
				These devices could also be hand held or mounted on other types of vehicles
				even though those vehicles, such as pick-up trucks, do not qualify for the
				exemption. The data collected from the farm field would then be transferred to
				a base station computer electronically by modem, or via magnetic media or CD
				ROM disk. The data would be processed by the base station computer and
				integrated into or overlayed on digital maps of the farm field. The farmer
				could use the information to make decisions about what types of crops to plant
				and the type, formula and application rate of fertilizer, pesticide or other
				agricultural chemical to apply to the field. The processed and integrated data
				would then be available for use by the farmer in planting or could be
				transferred to a fertilizer dealer who applies farm chemicals. The fertilizer
				dealer would use the information about the farmer's field and the digital map
				to determine the type and formula of chemical to be applied to the farmer's
				field and the rate of application. That information would be transferred to the
				computer in the fertilizer spreader. With the aid of a GPS system linked to the
				computer in the fertilizer spreader, the fertilizer dealer would be able to
				precisely apply the necessary chemicals and vary the application rate to meet
				crop needs across the field. All of the sensors, computers, software and
				accessories described above would qualify for the exemption. A livestock farmer
				would use microchips and sensors to identify specific animals and determine
				individual growth information for animals. This information would be used by
				computers to determine the optimum feed/diet for the animal and could then be
				used to dispense the proper type and amount of feed to the animal. In
				confinement buildings, temperature and moisture sensors may be linked through
				computers to control heating, ventilation and lighting for livestock as well as
				regulating the automatic stock feeders and waterers. Precision farming
				equipment would include the microchips, sensors, computers and computer
				controlled feeding equipment and environmental controls. The use of computers
				to record and process crop and livestock management information gathered
				through the use of these types of sensors or monitors constitutes precision
				farming. However, the use of computers to record and process other farm related
				information such as accounts payable, correspondence, or marketing does not
				constitute precision farming. When a computer is used for both precision
				farming and nonqualifying purposes, the primary use of the computer will
				determine if it qualifies for the exemption. The use of computers to record and
				process land information about soil types and slope and pesticide, herbicide
				and fertilizer application also constitutes precision farming. Equipment used
				in farm management such as radios and office equipment, in repair and servicing
				of equipment, in security and fire protection, is not farm equipment; nor does
				the exemption apply to equipment used in farm maintenance, administration,
				selling, marketing or the exhibition of products. The exemption does include
				hand-operated equipment such as wheelbarrows, hoes, rakes, pitchforks and
				shovels so long as they are used in production agriculture as that term is
				defined in subsection (b) of this Section. Hand tools used in maintenance
				activities, such as wrenches, pliers, wire stretchers, grease guns, hammers and
				screwdrivers, are not used in production and do not qualify for the exemption.
				Supplies, such as baling wire, baling twine, work gloves, boots, overshoes and
				chemicals for effluent systems are not exempt.
l) New or used repair or replacement parts,
				necessary for the operation of the machine used in production agriculture or in
				State or Federal agricultural programs, qualify for the exemption. With the
				exception of precision farming items, accessories or replacements not essential
				to the operation of the machinery itself, except when sold as an integral part
				of a qualified machine at the time of purchase, such as radios, tool or utility
				boxes, do not qualify for the exemption. Included in the repair or replacement
				parts category are: batteries, tires, fan belts, mufflers, spark plugs, plow
				points, standard type motors and cutting parts. Consumable supplies such as
				fuel, grease, oil and anti-freeze are not repair or replacement
				parts.
m) Exemption certifications
				must be executed by the purchaser. The certificate must include the seller's
				name and address, the purchaser's name and address and a statement that the
				property purchased will be used primarily in production agriculture or in State
				or Federal agricultural programs. Retailers may accept blanket certificates but
				have the responsibility to obtain and must maintain the certificates as a part
				of their books and records. Retailers are required to exercise good faith in
				accepting exemption certificates. If, however, a retailer reasonably believes
				that the purchaser will use farm machinery or equipment in production
				agriculture or in State or Federal agricultural programs and accepts the
				certificate in good faith and the purchaser does not, in fact, use the
				machinery or equipment in production agriculture or in State or Federal
				agricultural programs, the purchaser will be liable to the Department for the
				tax. An item of farm machinery and equipment which is initially used primarily
				in production agriculture and having been so used for less than one-half of its
				useful life, is converted to primarily nonexempt uses, will become subject to
				tax at the time of the conversion. Such tax will be collected on such portion
				of the price of the machinery and equipment as was excluded from tax at the
				time the sale or purchase was made.
n) Leasing. Farm machinery and equipment
				purchased for lease to be used by the lessee primarily in production
				agriculture or in State or Federal agricultural programs qualifies for the
				exemption. The lessor purchasing such equipment must certify that the equipment
				will be so used. Should a purchaser-lessor subsequently lease the machinery or
				equipment primarily to lessees who do not use it in a manner that would qualify
				for the exemption, the purchaser-lessor will become liable for the tax from
				which he was previously exempted.
o) Custom farmers or special service
				operators, i.e., crop dusting, fertilizer spraying, combining or corn shelling,
				who provide a service-for-hire on farms other than their own which is an
				integral part of production agriculture may also claim the exemption if the
				equipment is used primarily in production agriculture.