Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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A

110.0000 ANIMAL LIFE AND FEED—Regulation 1587

Annotation 110.0645

(b) FEED

110.0645 Custom Bagging Service. A business activity provides custom bagging service of agricultural products for unrelated third parties. A truck hauls the products to the bagging machine where a conveyor takes the products to a rotor shaft that presses the feed into a bag. It takes two or three hours to fill a 250 ft. long bag. Once the material is put into the bag, the contents ferment (i.e., ensilage takes place) for a period of three weeks. The bagging process keeps the feed from spoiling. The fermenting process inside the bag makes the feed more edible by the cattle it is later fed to. Failure to bag alfalfa may result in either putrefying acids creating an inedible and wasted crop or a poor pack, incomplete fermentation and excess spoilage.

The business is "processing" the agricultural products prior to bagging them. The process preserves and enhances their food quality for the livestock that will ultimately consume it. The bags are "sold with their contents." Since the contents are feed for animal life of a kind the product of which ordinarily constitutes food for human consumption, (i.e., cattle) the business' sales of its products are exempt from sales and use tax. The business may also purchase the material used in this process free of tax by giving its suppliers a resale certificate for each transaction. 9/14/90; 2/15/91.