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Last modified:
10/05/06
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Farm Equipment, Machinery, and Parts - AB 426 and New Sales
Tax Exemption
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- I sell automatic feeding systems, including self-feeding equipment that rely on gravity to dispense food or water to livestock. Do these sales qualify for the farm equipment and machinery partial exemption?
- My company sells squeeze chutes, portable farrowing crates, and other handling equipment to farmers. Will these sales qualify for the partial exemption?
- I am a farmer and I plan to sell some of my used farming equipment. Will my sales be subject to tax? If so, will the partial exemption apply to my sales?
- I sell large quantities of hydraulic hose, fittings, and adapters. If these items are sold and installed on farm equipment as new or replacement parts, will the sale qualify for partial exemption? What about engine oil?
- I am a grape grower who uses wood or paper trays for the harvest and drying of raisin grapes. Does the sale or purchase of these trays qualify for the partial exemption?
- My company sells stainless steel tanks
for wine fermentation and storage. Will sales of these tanks
qualify for the partial exemption?
- My company contracts with various farmers
to remove trees and vines in order to prepare the fields
for planting. Will our purchases of equipment used in these
activities qualify for the partial exemption?
- I sell tip-bed trailers. Will sales of this type of trailer qualify for the partial exemption?
- I sell trucks and truck-tractor units. Do my sales of these vehicles and parts for these vehicles qualify for the partial exemption?
- I sell paint and paint supplies. Do these items qualify for the partial exemption?
- I work for a company that leases all terrain vehicles (ATV). If the ATV is leased to a farmer for use in producing and harvesting agricultural products, will the lease qualify for the partial exemption?
- I am in the business of harvesting pistachios and will lease harvesting equipment for use in our harvesting activities. Will the lease qualify for the partial exemption?
- I work for an Irrigation District that provides water for use by qualified farmers in producing and harvesting agricultural products. Does the Irrigation District qualify as a person that assists the farmer?
- I contract with vineyard owners to manage their vineyards. Do I qualify for the partial exemption as a "person that assists a qualified person" when I purchase farm equipment and machinery for my business?
- We manufacture cotton gins and cotton gin parts and sell such items to cotton farmers and ginners. Will the sales of cotton gins to such persons qualify for the partial exemption?
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- I sell automatic feeding systems, including self-feeding
equipment that rely on gravity to dispense food or water
to livestock. Do these sales qualify for the farm equipment
and machinery partial exemption?
As described, feeding systems, including
self-feeding equipment are considered farm equipment and machinery.
As such, sales of feeding systems may qualify for the partial
exemption as long as the sales meet the other provisions of
Regulation 1533.1.
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- My company sells squeeze chutes, portable farrowing
crates, and other handling equipment to farmers.
Will these sales qualify for the partial exemption?
Generally, animal-handling equipment such as squeeze chutes and portable farrowing crates used for birthing or to hold or restrain an animal while medication or treatment is administered to the animal are considered farm equipment and machinery. As such, sales of these items may qualify for the partial exemption as long as the sales meet the other provisions of Regulation 1533.1.
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- I
am a farmer and I plan to sell some of my used
farming equipment. Will my sales be subject to
tax? If so, will the partial exemption apply to
my sales?
The provisions of Regulation
1533.1 apply to sales of new and used farming equipment.
If the sales meet the other provisions of RTC section 6356.5
and Regulation 1533.1, your sales of farm equipment will qualify
for the partial exemption. In addition, your sales may qualify
as a nontaxable occasional sale under Regulation
1595, Occasional Sales - Sales of a Business - Business
Reorganizations (which can also be obtained from our Information
Center at 1-800-400-7115).
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- I
sell large quantities of hydraulic hose, fittings,
and adapters. If these items are sold and installed
on farm equipment as new or replacement parts,
will the sale qualify for partial exemption? What
about engine oil?
Generally, parts consist of components of equipment or machinery that can be separated from the equipment or machinery and replaced. Normally, a part replaces a previous part and can include repair and maintenance parts that are identical to the parts they replace, as well as parts that are different from the ones they replace, such as replacement parts added for the purpose of improving or modifying the equipment or machinery. Items such as nuts, bolts, hoses, hose clamps, chains, belts, gears, and bearings would ordinarily also be considered parts within the meaning of the partial exemption if used in or on qualifying farm equipment and machinery. The sale or use of parts installed on farm equipment may qualify for the partial exemption when all other requirements of the exemption are met.
On the other hand, items that are consumed (i.e., burned, evaporated, dissolved, or dissipated through the regular use of the equipment and machinery) are ordinarily not considered parts within the meaning of the partial exemptions authorized by AB 426. However, engine oil not consumed (e.g., not consumed as part of fuel for a two-stroke engine) is generally regarded as a component part and its sale or use will qualify for the partial exemption if all other requirements of the statute are met.
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- I
am a grape grower who uses wood or paper trays
for the harvest and drying of raisin grapes. Does
the sale or purchase of these trays qualify for
the partial exemption?
Wood or paper trays used primarily to harvest and dry grapes are considered farm equipment and machinery for purposes of the partial exemption from the sales and use tax. A retail sale of the trays to a qualified person may qualify for the partial exemption as long as the trays are used primarily for the production and harvesting of grapes.
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- My
company sells stainless steel tanks for wine fermentation
and storage. Will sales of these tanks qualify
for the partial exemption?
If the stainless steel tanks are purchased for the purposes of fermenting and storing wine, the sale does not qualify for the partial exemption. Under Regulation 1533.1, Farm Equipment and Machinery,
the partial exemption is authorized only when the
item purchased will be used primarily for producing
and harvesting agricultural products. "Producing and harvesting" are
defined as those activities described by Standard
Industrial Classification (SIC) Codes 0111 to
0291 (farming and ranching) and by activities described in SIC Major Group 07 (agricultural services). In contrast, winemaking is included in SIC Major Group 20, which defines those activities as food processing.
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- My
company contracts with various farmers to remove
trees and vines in order to prepare the fields
for planting. Will our purchases of equipment used
in these activities qualify for the partial exemption?
As described, your company appears to qualify
as a person that assists a qualified person. If the other
requirements of Regulation 1533.1
are met, the sale or use of equipment used in providing the
contract or fee services (tree/vine removal) will qualify
for the partial exemption.
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- I
sell tip-bed trailers. Will sales of this type
of trailer qualify for the partial exemption?
Sales of tip-bed trailers will qualify for the partial exemption if they meet the following criteria: 1) it must be sold to a qualified person, and 2) the qualified person must use the trailer exclusively in the transportation of qualified farm equipment and machinery that is used exclusively in producing and harvesting agricultural products. Trailers sold to non-qualified persons or sold for a use other than as described above will not qualify for the partial exemption.
It should be noted that leases of tip-bed trailers probably do not qualify for the partial exemption. In general, trailers are considered mobile transportation equipment (MTE). Lessors of MTE are consumers of the property being leased and therefore typically do not use the property in a qualified manner. Consequently, lessors of MTE are liable for sales or use tax on the purchase price of the property even where the lessor timely elects to report tax measured by fair rental value. For more information about leases of MTE, see Regulation 1661, Leases of Mobile Transportation Equipment.
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- I
sell trucks and truck-tractor units. Do my sales
of these vehicles and parts for these vehicles
qualify for the partial exemption?
As defined by Regulation
1533.1, a vehicle, the design of which is primarily for
transporting persons or property on a highway, generally
does not qualify for the partial exemption allowed for farm
equipment and machinery. Trucks and truck-tractor units are
designed primarily for transporting persons or property on
the highway and normally do not qualify for the partial exemption.
However, vehicles designated "implements of husbandry" under
the Vehicle
Code and purchased for certain specific uses may qualify
for the partial exemption. For more details see Appendix A
of Regulation 1533.1.
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- I
sell paint and paint supplies. Do these items qualify
for the partial exemption?
The partial sales and use tax exemption allowed under Regulation 1533.1 applies
to the sale or use of farm equipment and machinery
and to parts for farm equipment and machinery. Paint
purchased by a qualified person for the purpose of
maintaining qualified farm equipment and machinery
is considered a "part." Accordingly, a sale of paint
for this purpose may qualify for the partial exemption.
However, Regulation 1533.1 excludes supply items
such as cleaners and towels from the definition of
farm equipment and machinery. Accordingly, the sale
of paint supply items such as thinners/reducers,
sandpaper, and masking supplies does not qualify
for the partial exemption.
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- I
work for a company that leases all terrain vehicles (ATV).
If the ATV is leased to a farmer for use in producing
and harvesting agricultural products, will the lease
qualify for the partial exemption?
For the partial exemption to apply, the ATV must be:
- used in a qualified activity,
- leased to a qualified person as defined in Regulation
1533.1, and
- leased as a "continuing sale" and "continuing purchase,"
as defined in Regulation 1660,
Leases of Tangible Personal Property.
ATV's are vehicles that are considered to
be qualified farm equipment and machinery only when used exclusively
in the conduct of agricultural operations by a qualified person
or by a person that assists such classified person. Assuming
your company reports and pays tax measured by rentals payable,
and the other requirements of Regulation 1533.1 are met, such
leases of ATV's will qualify for the partial exemption.
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- I
am in the business of harvesting pistachios and will
lease harvesting equipment for use in our harvesting
activities. Will the lease qualify for the partial
exemption?
If you qualify as a contract harvester
that assists a qualified farmer in harvesting his or
her agricultural products, your lease of harvesting equipment
used primarily in providing harvesting services may qualify
for the partial exemption as long as the lessor reports
and remits tax based on rentals payable. If the lease
is not a "continuing sale" and "continuing purchase" as
defined in Regulation 1660, Leases
of Tangible Personal Property, the lease payments do
not qualify for the partial exemption.
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- I
work for an Irrigation District that provides water
for use by qualified farmers in producing and harvesting
agricultural products. Does the Irrigation District
qualify as a person that assists the farmer?
No. Under Regulation 1533.1 , to qualify
as a person that assists a qualified person, the person must
be engaged on a contract or fee basis or employed by a qualified
person in an activity described in Major Group 07 (Codes 0711
to 0783) of the SIC Manual. These activities include soil
preparation services, crop services, animal services, landscape
and horticultural services, and farm labor and management
services. The person that assists a qualified person must
also provide physical aid or assistance in the actual producing
and harvesting of agricultural products owned by a qualified
person. An Irrigation District that provides irrigation water
for use by qualified farmers is not engaged in any of these
activities and therefore does not qualify as a person that
assists a qualified person.
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- I
contract with vineyard owners to manage their vineyards.
Do I qualify for the partial exemption as a "person that assists a qualified
person" when I purchase farm equipment and machinery
for my business?
Under Regulation 1533.1 , a person engaged in
providing farm management services, including the management or complete
maintenance of vineyards as described in Code 0762 of the SIC Manual, is a
person that assists a qualified person for purposes of the farm equipment
and machinery partial exemption. As a result, your purchases of farm
equipment and machinery and parts thereof will qualify for the partial
exemption if the items are used primarily in producing and harvesting
agricultural products for your farm management clients.
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- We
manufacture cotton gins and cotton gin parts and sell
such items to cotton farmers and ginners. Will the
sales of cotton gins to such persons qualify for the
partial exemption?
Cotton gins and cotton gin parts qualify as farm equipment and machinery and
parts under Regulation 1533.1. A cotton farmer or a person who gins cotton on behalf of a cotton farmer are qualified persons engaged in the production and harvesting of cotton.
The sale of cotton gins and cotton gin parts to these persons for use
primarily in ginning cotton will qualify for the partial exemption.
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