Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 18 - Taxable and Exempt Sales Determined by Method of Transaction or Usage › Rule 701-18.57 - Exemptions Applicable to the Production of Flowering, Ornamental, and Vegetable Plants

Current through Register Vol. 47, No. 3, July 24, 2024
On and after July 1, 1995, the production of flowering,
				  ornamental, or vegetable plants by a grower in a commercial greenhouse or at
				  another location is considered to be a part of agricultural production. The
				  word "plants" does not include trees, shrubs, other woody perennials, or
				  fungus. The exemption also applies to implements, machinery, equipment, and
				  replacement parts directly and primarily used in the production of flowering,
				  ornamental, or vegetable plants and fuel used for providing heating or cooling
				  for greenhouses or buildings or parts of buildings dedicated to the production
				  of flowering, ornamental, or vegetable plants intended for sale in the ordinary
				  course of business. The following exemptions are applicable to the production
				  of flowering, ornamental, or vegetable plants.
(1) Sales of fertilizer, limestone,
				herbicides, pesticides, insecticides, plant food, and medication for use in
				disease, weed, insect control, or other health promotion of flowering,
				ornamental, or vegetable plants to a commercial greenhouse are exempt from tax.
				For the purposes of this subrule a virus, bacteria, fungus, or insect which is
				purchased for use in killing insects or other pests is an "insecticide" or
				"pesticide." See rules
				701-174.
				(422,423) and 17.9(422,423) for more information regarding these
				exemptions.
(2) Sales of fuel to
				provide heating or cooling for a greenhouse or building or a part of a building
				dedicated to the production of flowering, ornamental, or vegetable plants held
				for sale in the ordinary course of business are exempt from tax. Electricity is
				a "fuel" for the purposes of this subrule. Fuel used in a plant production
				building for purposes other than heating or cooling (e.g., lighting) or for
				purposes other than direct use in plant production (e.g., heating or cooling
				office space) is not eligible for this exemption. For example, assume that
				there is a separate meter for electricity used only for heating or cooling. If
				a greenhouse is used, partially for growing plants and partially for a
				nonexempt purpose, a proportional exemption from sales tax may be claimed based
				upon a percentage calculated from a fraction, the numerator of which is the
				number of square feet of the greenhouse heated or cooled and used for raising
				plants, and the denominator of which is the number of square feet heated or
				cooled in the entire greenhouse. It may be necessary to alter this formula (by
				the use of separate metering, for example) if a greenhouse has a walk-in cooler
				and the cooler is used directly in plant production. Plant production has ended
				when a plant has grown to the point that it is of the size or weight at which
				it will be prepared for shipment to the destination where it will be marketed.
				Examples of nonexempt purposes for which a portion of a greenhouse might be
				used include, but are not limited to, portions used for office space, loading
				docks, storage of property other than plants, housing of heating and cooling
				equipment and portions used for packaging plants for shipment. See rule
				701-153.
				(422,423) regarding fuel exemption certificates and subrule 18.48(8) regarding
				seller's and purchaser's liability for sales tax.
(3) Sales of gas, electricity, steam or other
				tangible personal property for use as a fuel in implements of husbandry used in
				the production of plants in a commercial greenhouse or elsewhere are exempt
				from tax. See 701-subrule 17.9(6), paragraph
"a,"
for a
				definition of "implements of husbandry."
(4) Sales of self-propelled implements. Sales
				of self-propelled implements or implements customarily drawn by or attached to
				self-propelled implements and replacement parts for the same are exempt from
				tax if the implements are used directly and primarily in the production of
				plants in commercial greenhouses or elsewhere. See rule
				701-1844.
				(422,423) for an extensive explanation of this exemption. Implements exempt
				under this subrule include, but are not limited to, forklifts used to transport
				pallets of plants; wagons containing sterilized soil and tractors used to pull
				the same.
(5) Sale of water used in
				the production of plants is exempt from tax. If water is not separately
				metered, the grower of plants must determine by use of a percentage that
				portion which is used for a taxable purpose and that portion which is used for
				an exempt purpose.
Nonexclusive examples of taxable usage would be rest rooms,
				  sanitation, lawns, and vehicle wash.
(6) For sales occurring on or after July
				1,1996, the gross receipts for the sale of property which is a container,
				label, carton, pallet, packing case, wrapping, baling wire, twine, bag, bottle,
				shipping case, or other similar article or receptacle sold for use in
				agricultural, livestock, or dairy production are not subject to sales tax. This
				exemption also applies to producers of ornamental, flowering, or vegetable
				plants in commercial greenhouses or other places which sell such items in the
				ordinary course of business since that activity is considered to be
				agricultural. A noninclusive list of containers and packaging materials would
				include boxes, trays, labels, sleeves, tape, and staples.
(7) Sales of machinery and equipment used in
				plant production which are not self-propelled or attached to self-propelled
				machinery and equipment are also exempt from tax. See rule
				701-1848.
				(422,423) for a thorough explanation of this exemption. Listed below are a
				number of examples of machinery and equipment which are directly and primarily
				used in plant production. Sales of this machinery and equipment to commercial
				growers are usually exempt from tax.
Air-conditioning pads*
Airflow control tubes
Atmospheric CO2 control and monitoring
				  equipment
Backup generators
Bins holding sterilized soil
Control panels = heating and cooling
Coolers used to chill plants*
Cooling walls* or membranes
Equipment used to control water levels for
				  subirrigation
Fans = cooling and ventilating*
Floor mesh for controlling weeds
Germination chambers
Greenhouse boilers*
Greenhouse netting or mesh = used for light and heat
				  control
Greenhouse monorail systems*
Greenhouse thermometers
Handcarts used to move plants
Lighting which provides artificial sunlight
Overhead heating, lighting and watering systems
Overhead tracks for holding potted plants*
Plant tables*
Plant watering systems*
Portable buildings used to grow plants*
Seeding and transplanting machines
Soil pot and soil flat filling machines
Steam generators for soil sterilization*
Warning devices = excess heat or cold
Watering booms
*If not real property. See
				  18.48(1)
"c"
(1).
(8) Miscellaneous exempt and taxable sales.
				Sales of pots, soil, seeds, bulbs, and "starter plants" for use in plant
				production are not the sale of machinery or equipment, but can be sales for
				resale and exempt from tax if the pots and soil are sold with the final product
				or become the finished product. Sales of portable buildings which will be used
				to display plants for retail sales are taxable. Finally, sales of whitewash
				which will be painted on greenhouses to control the amount of sunlight entering
				those houses are taxable sales of a "supply" rather than exempt sales of
				equipment. See 18.48(1)
"c"
(2) relating to "supplies." See
				rule
				701-187.
				(422,423) relating to containers, including packaging cases, shipping cases,
				wrapping materials, and similar items sold to retailers, and see subrule
				18.57(6).
This rule is intended to implement Iowa Code sections
				  422.42(1), 422.42(4), 422.42(11), 422.45(39) and 422.47(4) and Iowa Code
				  section 422.45 as amended by 1996 Iowa Acts, chapter 1145.