N.D. Admin. Code 81-04.1-01-23.2
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.
N.D. Admin Code 81-04.1-01-23.2
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