North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-04.1 - Sales and Use Taxes › Chapter 81-04.1-01 - General Rules › Section 81-04.1-01-23.2 - Agricultural commodity processing facility

Current through Supplement No. 393, July, 2024
An agricultural commodity processing facility is a
				  manufacturing facility that processes agricultural commodities into marketable
				  products. A facility, such as a grain elevator, that only stores, cleans,
				  dries, or transports agricultural commodities, is not an agricultural commodity
				  processing facility.
Tangible personal property consumed during the construction
				  of an agricultural commodity processing facility or incorporated into the
				  structure of an agricultural processing facility is exempt from sales and use
				  tax. A contractor consuming or installing the materials shall pay the
				  applicable sales or use taxes and the owner of the agricultural processing
				  facility shall apply in writing for a refund of the taxes paid by the
				  contractor unless the tax commissioner has approved the project for exemption
				  and the facility owner has authorized the contractor to utilize the
				  exemption.
The purchase or rental of machinery and equipment used
				  directly in the processing of agricultural commodities into marketable products
				  is regarded as manufacturing machinery and equipment, as provided in section
				  81-04.1-01-23. Machinery and
				  equipment not used directly in the processing of agricultural commodities are
				  subject to sales and use tax. Machinery and equipment not used directly in the
				  processing of agricultural commodities include repair parts and equipment used
				  for repairing, cleaning, or maintaining facilities, machinery, or equipment;
				  handtools; backup or standby power suppliers; computer hardware and software to
				  maintain inventory, production, or scheduling records; waste disposal or
				  treatment facilities; and safety and security equipment, such as fire sprinkler
				  systems and burglar alarms. Items consumed or destroyed in the process and
				  which do not become a part of the finished products do not represent qualifying
				  machinery and equipment and are subject to sales and use tax.
Requests by the manufacturer to purchase or lease machinery
				  or equipment without paying tax or for refunds of tax paid on machinery or
				  equipment which qualify for exemption must be made in writing to the tax
				  commissioner. Only the owner of the agricultural commodity processing facility
				  may apply for a refund of the sales or use tax paid on exempt machinery or
				  equipment. A request for refund must include documentation showing the amount
				  of tax paid by the owner of the agricultural commodity processing facility or
				  the contractor. The tax commissioner reserves the right to make an onsite
				  inspection prior to granting permission to purchase qualifying machinery and
				  equipment without paying tax or prior to approving a refund. An onsite
				  inspection by the tax commissioner does not preclude an audit of the taxpayer's
				  books and records.
The tax commissioner shall respond in writing to each
				  exemption request stating whether or not the machinery or equipment qualifies
				  for the exemption. The owner of the agricultural commodity processing facility
				  may provide the approval letter to its equipment and machinery suppliers or
				  construction contractors to avoid paying sales and use taxes on approved
				  equipment, machinery, and qualifying construction materials. If an owner of the
				  agricultural commodity processing facility or a contractor purchases equipment
				  before the tax commissioner approves the sales tax exemption, the owner or
				  contractor shall pay all applicable sales and use taxes at the time of purchase
				  . Only the facility owner may apply to the tax commissioner for a refund of the
				  taxes paid.
To receive a refund of taxes paid by the contractor, the
				  owner of the agricultural commodity processor must provide documentation
				  showing that the contractor paid North Dakota sales or use taxes on the
				  tangible personal property consumed during construction, or on the tangible
				  personal property qualifying machinery and equipment installed into the
				  manufacturing facility. The tax commissioner may request an onsite inspection
				  of the manufacturing facility before approving the refund of taxes paid by the
				  contractor.
The owner of the agricultural commodity processing facility
				  may request that the refund amount be taken as a credit adjustment on its next
				  sales or use tax return; however, the tax exemption must be approved in writing
				  by the tax commissioner before the tax credit may be applied on a sales and use
				  tax return. A letter from the tax commissioner stating the amount of the
				  approved credit must be attached to the sales and use tax return on which the
				  credit is applied.
General Authority:
NDCC
					 57-39.2-19
Law Implemented:
NDCC
					 57-39.2-01,
					 57-39.2-02.1,
					 57-39.2-04,
					 57-39.2-04.3,
					 57-39.2-04.4,
					 57-39.2-25,
					 57-40.2-03,
					 57-40.2-04,
					 57-40.2-13