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 5-6 - Direct production of agricultural commodities; sales of agricultural machinery

Current through July 10, 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.