New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 24 - SALES AND USE TAX ACT › Subchapter 19 - SALES OF TANGIBLE PERSONAL PROPERTY AND SERVICES USED ON FARMS › Section 18:24-19.5 - Primary use

Current through Register Vol. 56, No. 14, July 15, 2024
(a) In order to be exempt under
				54:32B-8.1 6, a farmer's purchase of
				qualified tangible personal property or services must be used primarily at the
				purchaser's farming enterprise in the production and handling and preservation of
				agricultural or horticultural commodities for sale.
(b) When a service or tangible personal property
				is put to use in more than one way, the service or property is not exempt unless it
				is used more than 50 percent of the time directly in the production and handling and
				preservation of agricultural or horticultural commodities for sale.
(c) Examples:
1.
				A farmer is in the business of raising vegetable plants for sale to garden centers
				and other retail sellers of plants. The farmer buys tilling equipment which is used
				to prepare the soil for planting. The equipment is used directly in the production
				of the horticultural commodities raised for sale. The farmer also occasionally uses
				the tiller to prepare a small decorative flower border at the entrance of the farm,
				adjacent to the road. The tiller is used approximately 90 percent of the time in
				preparing the growing areas for plants raised for sale, and 10 percent in preparing
				the decorative border.
The tiller qualifies for exemption because it is used directly in
				  the production of horticultural commodities for sale more than 50 percent of the
				  time.
2. A partnership breeds
				and raises horses for sale. It also uses a portion of its property as a boarding and
				training facility for customers' horses. It makes the following purchases: food
				additives, horse shoeing tools, and grooming equipment. The food additives are used
				approximately 60 percent of the time in feeding the horses used for breeding for
				sale and 40 percent in feeding the horses being boarded; the horse shoeing tools are
				used approximately 75 percent of the time on the horses being breed for sale and 25
				percent on the horses boarded for customers; the grooming equipment is used
				approximately 20 percent on the horses bred for sale and 80 percent on the horses
				boarded or trained for customers.
The food additives and horse shoeing tools qualify for exemption
				  because they are used more than 50 percent of the time directly in the production
				  and handling and preservation of an agricultural product for sale, that is, horses.
				  The grooming equipment does not qualify because it is used directly for exempt
				  purposes only 20 percent of the time; its use in the boarding and training of
				  customers' horses is not a use in the production and handling and preservation of
				  horses for sale.
3. A
				corporation is in the business of operating a botanical garden. It charges the
				public a fee for admission to its greenhouses to view the plant collections and
				displays. Part of each greenhouse is used for propagating and growing plants. Most
				of the plants are grown for display in the portions of the greenhouses open to the
				public. Approximately 15 percent of the plants are grown for sale in the botanical
				garden's gift shop or for sale to plant stores. The corporation is purchasing
				materials to construct an additional greenhouse in the complex, which will be used
				in the same way as the existing greenhouses.
The materials purchased to construct a greenhouse will not
				  qualify for exemption because they will not be used more than 50 percent of the time
				  in the production and handling and preservation of horticultural products for
				  sale.
4. A corporation operates
				a tree nursery, which raises trees for sale. It uses the land adjacent to the tree
				nursery to operate an arboretum, which grows and maintains trees that are not for
				sale and provides free tours to the public. The corporation contracts with an
				aero-spray service to spray pesticide on the nursery and the arboretum as needed.
				The service is used 70 percent of the time on the tree nursery and 30 percent of the
				time on the arboretum.
The lump sum fee for the service is exempt, since the
				  aero-spraying of pesticides is a production service used directly in the production
				  and preservation of horticultural products for sale 70 percent of the time.
5. A tree nursery and landscaping
				business grows shade trees which it installs for its customers as part of its
				landscaping operation. It purchases tree seedlings, watering equipment, and digging
				equipment. The watering equipment is used during the growing process, and the
				digging equipment is used approximately 70 percent in the growing operations and 30
				percent in the landscaping operations.
The purchase of the watering equipment is eligible for the farm
				  use exemption because it is used directly in production in the nursery's farming
				  operations. The digging equipment also qualifies for exemption because, although it
				  is used part of the time in the landscaping operations, it is used more than 50
				  percent of the time, that is, primarily, in production of an agricultural commodity
				  for sale (trees). The seedlings are not eligible for exemption because they become
				  the property which the business installs in its landscaping operation. When this
				  business installs trees or performs other landscaping jobs on its customers' real
				  property, it is acting as a contractor, rather than as a farmer. Contractors are
				  liable for sales or use tax on the materials they install on their customers' real
				  property.