Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 284 - Exempt Sales › Rule 701-284.9 - Sales of Breeding Livestock, Fowl and Certain Other Property Used in Agricultural Production

Current through Register Vol. 47, No. 3, July 24, 2024
The gross receipts from the sales of the following tangible
				  personal property relating to agricultural production is exempt from
				  tax.
(1) Sales of agricultural
				breeding livestock.
"Livestock"
means domestic animals which
				are raised on a farm as a source of food or clothing,
Van Clief v.
				Comptroller of State of Md.,
126 A.2d 865 (Md. 1956) and In the Matter
				of Simonsen Mill Inc., Declaratory Ruling of the State Board, Docket No. 211,
				April 24, 1980. The term includes cattle, sheep, hogs, and goats. On and after
				July 1, 1995, ostriches, rheas, and emus are livestock and their sales are also
				exempt from tax. On and after July 1, 1997, fish and any other animals which
				are products of aquaculture are considered to be livestock as well. Effective
				March 6, 2002, and retroactively to April 1, 1995, farm deer and bison are also
				included in the term "livestock." "Farm deer" are defined as set forth in Iowa
				Code section 189A.2 and commonly include
				animals belonging to the cervidae family, such as fallow deer, red deer or elk
				and sika. However, "farm deer" does not include unmarked free-ranging elk.
				Sales of the foregoing are exempt from tax. Excluded from the term are horses,
				mules, other draft animals, dogs, cats, and other pets. Also excluded from the
				term are mink, fish (prior to July 1, 1997), bees, or other nondomesticated
				animals even if raised in captivity and even if raised as a source of food or
				clothing. Also excluded is any animal raised for racing. Effective May 23,
				2003, the definition of "livestock" includes whitetail deer and mule deer, but
				not free-ranging whitetail deer and mule deer.
The sale of agricultural livestock is exempt from tax under
				  this subrule only if the purchaser intends to use the livestock primarily for
				  breeding at the time of purchase. The sale of agricultural livestock which is
				  capable of, but will not be used for breeding or primarily for breeding, is not
				  exempt from tax under this subrule. However, sales of most nonbreeding
				  agricultural livestock to farmers would be a sale for resale and exempt from
				  tax.
EXAMPLE 1: A breeding service purchases a prize bull from a
				  farmer. At the time of sale the intent is to use the bull for breeding other
				  cattle. The sale of the bull is exempt from tax even though three years later
				  the breeding service sells the bull to a meat packer.
EXAMPLE 2: A farmer purchases dairy cows. To ensure
				  production of milk over a sustained period of time, dairy cows must be bred to
				  produce calves. If a farmer purchases dairy cows for the primary purpose of
				  using them to produce milk and incidentally breeds them to ensure that this
				  milk will be produced, the sale of the dairy cows to the farmer is not exempt
				  from tax under this subrule. If the farmer purchases the dairy cows for the
				  primary purpose of using them to produce calves and, incidental to that
				  purpose, at times sells the milk which the cows produce, the sale of the dairy
				  cows to the farmer is exempt from tax under this subrule.
(2) Sales of domesticated fowl.
"Domesticated fowl"
means any domesticated bird raised as a
				source of food, either eggs or meat. The word includes, but is not limited to,
				chickens, ducks, turkeys, and pigeons raised for meat rather than for racing or
				as pets. On and after July 1, 1995, the word includes ostriches, rheas, and
				emus. Excluded from the meaning of the word are nondomesticated birds, such as
				pheasants, raised for meat or any other purpose. The purchase of any
				domesticated fowl for the purpose of providing eggs or meat is exempt from tax,
				whether purchased by a person engaged in agricultural production or
				not.
(3) Sales of herbicides,
				pesticides, insecticides, food, medication, and agricultural drainage tile
				(including gross receipts from the installation of agricultural drainage tile)
				which are to be used in disease, weed, or insect control or health promotion of
				plants or livestock produced as part of agricultural production for market are
				exempt from tax. On and after April 1, 1990, sales of adjuvants, surfactants,
				and other products which enhance the effects of herbicides, pesticides, or
				insecticides used for the reasons listed above are also exempt from tax. As
				used in this subrule:
a.
"Adjuvant"
is any substance which is added to a herbicide,
				pesticide, or insecticide to increase its potency.
b.
"Agricultural production"
is limited to what would ordinarily be considered a farming operation
				undertaken for profit. The term refers to the raising of crops or livestock for
				market on an acreage. See
Bezdek's Inc. v. Iowa Department of
				Revenue
(Linn Cty. Dist. Ct., May 14, 1984). Included within the
				meaning of the phrase "agricultural production" is any feedlot operation
				whether or not the land upon which a feedlot operation is located is used to
				grow crops to feed the livestock in the feedlot, and regardless of whether or
				not the livestock fed are owned by persons conducting the feedlot operation;
				operations growing and raising hybrid seed corn or other seed for sale to
				farmers; and nurseries, ranches, orchards, and dairies. On and after July 1,
				1995, "agricultural production" includes the raising of flowering, ornamental,
				or vegetable plants in commercial greenhouse or elsewhere for sale in the
				ordinary course of business. On and after July 1, 1997, the phrase also
				includes any kind of aquaculture. The following are excluded from the meaning
				of "agricultural production": commercial greenhouses (prior to July 1, 1995);
				logging; catfish raising (prior to July 1, 1997); production of Christmas
				trees; beekeeping; and the raising of mink, other nondomesticated furbearing
				animals, and nondomesticated fowl (other than ostriches, rheas, and emus). The
				above list of exclusions and inclusions within the term "agricultural
				production" is not exhaustive.
c.
"Food"
includes vitamins, minerals, other nutritional food
				supplements, and hormones sold to promote the growth of livestock.
d.
"Herbicide"
means any
				substance intended to prevent, destroy, or retard the growth of plants
				including fungi. The term shall include preemergence, postemergence, lay-by,
				pasture, defoliant, desiccant herbicides and fungicides.
e.
"Insecticide"
means any
				substance used to kill insects. Any substance used merely to repel insects is
				not an insecticide. Mechanical devices which are used to kill insects are not
				insecticides.
f.
"Livestock."
See subrule 17.9(1) for the definition of this
				term. In addition, for the purposes of this subrule, the word "livestock"
				includes domesticated fowl.
g.
"Medication"
is not limited to antibiotics or other drugs
				administered to livestock.
h.
"Plants"
includes fungi such as mushrooms, crops commonly
				grown in this state such as corn, soybeans, oats, hay, alfalfa hay, wheat,
				sorghum, and rye. Also included within the meaning of the term are flowers,
				small shrubs, and fruit trees. Excluded from the meaning of the term are fir
				trees raised for Christmas trees and any trees raised to be harvested for their
				wood.
i.
"Pesticide"
means any substance which is used to kill rodents
				or smaller vermin, other than insects, such as nematodes, spiders, or bacteria.
				For the purposes of this subrule, a disinfectant is a pesticide. Excluded from
				the term "pesticide" is any substance which merely repels pests or any device,
				such as a rat trap, which kills pests by mechanical action.
j.
"Surfactant"
is a
				substance which is active on a surface.
The following are examples of taxable and nontaxable sales
				  related to agricultural production for market:
1. The sale of any substance which is not
				itself an insecticide, herbicide, or pesticide used to make more effective or
				enhance the function of any insecticide, herbicide, or pesticide is subject to
				tax prior to April 1, 1990. On and after April 1, 1990, sales of adjuvants,
				surfactants, and other products which are used to enhance the effectiveness of
				any insecticide, herbicide, or pesticide used in agricultural production are
				exempt from tax.
2. The sale of
				herbicides, pesticides, insecticides, food, medication, drainage tile, and
				exempt products listed in "1" above to any person not engaged in agricultural
				production for market is exempt if the property sold will be used for an exempt
				purpose, e.g., disease control, on behalf of another person engaged in
				agricultural production for market.