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. (3-31-22)
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. (3-31-22)
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.
(3-31-22)
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. (3-31-22)
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: (3-31-22)
a. It is readily removable from the vehicle
on which it is mounted; (3-31-22)
b. It is separately stated on the vendor's
invoice; and (3-31-22)
c. It is
sold to a qualified farming operation and is supported by a valid exemption
claim form. (3-31-22)
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. (3-31-22)
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. (3-31-22)
07.
Plants. Plants, such as
orchard trees and grape vines, are exempt. (3-31-22)
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.
(3-31-22)
09.
The Farming
Exemption Does Not Include: (3-31-22)
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.
(3-31-22)
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.
(3-31-22)
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. (3-31-22)
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. (3-31-22)
e. Other
items specifically identified as taxable in Rule
079 of these rules.
(3-31-22)
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.
(3-31-22)
