Idaho Admin. Code r. 35.01.02.083

Current through September 2, 2024

Section 35.01.02.083 - FARMING AND RANCHING

Sections 63-3603, 63-3622, 63-3622D, 63-3622HH, Idaho Code

This rule is intended to illustrate the application of the production exemption to the farming and ranching industry.

The provisions of this rule are based on the usual methods of doing business in the industry. Specific factual differences in the manner in which a specific taxpayer may conduct his business can result in determinations different from those stated in this rule. Cases not covered by this rule are controlled by the general principles stated in Rule 079 of these rules. Some equipment may be used for more than one purpose. Determinations of taxability will be based upon the equipment's primary use.

01.In General. Farming includes custom farming and the operation of a farm or ranch, and includes stock, dairy, poultry, fish, fur, fruit and truck farms, ranches, ranges, and orchards operated with the intention of making a gain or profit. Farming does not include operation of ranches or stables where the sole purpose is showing or racing horses, or the breeding of show or race horses.

02.Property Primarily and Directly Used. As applied to the business of farming, the exemption applies to all tangible personal property which is primarily and directly used to conduct the farming business, and which is necessary or essential to the operation, except those categories of property listed in other sections of this rule.

03.Directly Used. The term "directly used or consumed in or during" farming operation means the performance of a function reasonably necessary to the operation of the total farming business, including the planting, growing, harvesting, storage and removal from storage of crops and other agricultural products, and movement of crops and produce from the place of harvest to the place of initial storage.

04.Transportation Activities. Equipment used to move farm produce to initial storage is exempt, even though it may be mounted on a vehicle which is required to be licensed and is taxable. Equipment qualifies for this exemption if:

a. It is readily removable from the vehicle on which it is mounted;

b. It is separately stated on the vendor's invoice; and

c. It is sold to a qualified farming operation and is supported by a valid exemption claim form.

05.Disinfectants Used in the Dairy Industry. Disinfectants used in the dairy industry to clean cow udders or to clean pipes, vats, or other milking equipment are exempt.

06.Safety Supplies. Safety supplies required by a state or federal agency and directly used in a farming operation are exempt from sales or use tax.

07.Plants. Plants, such as orchard trees and grape vines, are exempt.

08.Quality Control. Equipment and supplies used in the performance of a quality control function which is an integral and necessary step in maintaining specific product standards.

09.The Farming Exemption Does Not Include:

a. Property purchased to meet the personal needs of a farmer, his family, or employees. Examples of items that are excluded from the exemption include, but are not limited to, hand soap, toothpaste, shampoo, blankets, sheets, pillowcases, towels, washcloths, irrigation boots, coveralls, gloves, other clothing, and grocery items.

b. Food and supplies purchased for barnyard and household pets, such as cat and dog food, are taxable. Even though a dog may occasionally be used for herding livestock or a cat may control mice in the barn, the supplies purchased for their care and maintenance do not qualify for the production exemption. Only when a dog's SOLE purpose is the herding or protection of a rancher's livestock may the food and supplies for the dog be purchased tax exempt under the production exemption.

c. Livestock trailers which may be attached to motor vehicles used to transport horses, cattle, sheep, or other farm animals on public roads are transportation equipment and are taxable.

d. Motor vehicles required to be licensed are taxable even when used exclusively in a farming operation. Motor vehicles purchased, but not licensed, by a farmer for use exclusively in an off-road production activity, such as a feed truck, are not taxable.

e. Other items specifically identified as taxable in Rule 079 of these rules.

10.Exemption Certificate. Farmers or ranchers who wish to purchase goods that qualify for this exemption without paying sales tax need to complete an exemption certificate. See Rule 128 of these rules.

Idaho Admin. Code r. 35.01.02.083

Effective March 31, 2022