Farming and Ranching: Production Exemption
Purchases that qualify for the exemption
An item qualifies for the exemption, if it meets all of the following requirements:
- Primarily used in the farming or ranching process. This means it's mostly used for farming or ranching. (See Idaho Code section 63-3607A.)
- Reasonably necessary or essential – you can't produce your goods without it.
- Directly used or consumed in or during the farming or ranching process – includes any operation reasonably necessary to the total business:
- The farming or ranching process begins when you perform an activity that's reasonably necessary to your total business.
- The process ends when you remove the product from initial storage, and it's ready for transportation.
- Tangible personal property – must not become real property
- Allowable by law – must not be specifically excluded from the farming and ranching exemption
Examples of items that qualify:
Example 1: You attach a cultivator to your tractor to prepare the ground for planting. While cultivating, you run over a rock and damage one of the shanks. Cultivating is part of the farming process, so repair parts are exempt.
Example 2: A farmer hires you to harvest wheat and place it in storage. In this situation, you're a custom farmer performing a qualifying farming activity. For you, the farming process begins with harvesting and ends when the wheat is placed in storage. Equipment and supplies you use more than 50% of the time in custom farming activities are exempt.
Example 3: You buy a bulldozer to level some land for planting. You use the bulldozer for this purpose only. It's used as part of the farming process, so it's exempt. (Note: Land-leveling required for agricultural irrigation purposes could qualify.)
Examples of items that don't qualify:
Example 4: You have a spud bed mounted to a truck that's used directly in the production process. It's reasonably necessary and essential, with 45% of its time used to haul potatoes from the field to storage. The rest of the equipment hours are used to haul potatoes from storage to the buyer. The equipment isn't used more than 50% of the time in the production process, so it isn't exempt.
Example 5: You buy a bulldozer to remove a hill. No crops are planted in the flattened area. When an activity occurs outside of the farming process, the equipment used in that activity is taxable. Land-leveling activities that aren't part of the farming process are taxable, so the bulldozer is taxable.
Example 6: You buy a post driving attachment for your tractor along with fence posts and barbed wire to build a permanent fence to keep cattle in a pasture or feedlot. The post driving attachment and the fencing materials are taxable because they're used to make real property improvements. Improvements to real property don't qualify for the farming exemption.
Exempt Purchases — Farming and Ranching
The production exemption guide lists items that are exempt from tax. Qualifying farmers and ranchers can also buy the following items exempt:
- Dry and liquid fertilizer spreaders, combines, discs
- Harvesting and stacking equipment, swathers, harrows, hay balers
- Pesticide applicators, plows, farm wagons
Agricultural irrigation – equipment and supplies
- All irrigation equipment and supplies used directly for agricultural irrigation are exempt.
This includes materials that are attached to real property:
- Concrete for irrigation ditches
- Well casings
- Irrigation equipment and supplies don't qualify if they're:
- Incidental or only indirectly related to the agricultural irrigation process
- Used to install or maintain the irrigation system
- Used on a golf course
The installer must use form ST-101, Idaho Resale and Exemption Certificate, to buy qualifying irrigation equipment and supplies exempt.
The equipment can be installed by either the farmer, the rancher, or the contractor.
Milking activities – equipment and supplies
Includes disinfectants used in clean-in-place systems
Seeds and plants for growing crops
Including seedlings and cuttings for orchard trees and grapevines
Fertilizers and pesticides
If used on crops
Feed and vaccines
Farm produce beds
If easily removed from a licensed vehicle (e.g., spud beds)
If used directly and primarily in the farming or ranching process
- Shovels, pitchforks
- Reusable syringes, emasculators
- Branding irons, cattle prods
- Ropes, whips
Note: Hand tools used in maintenance and repair activities are taxable.
Equipment for transporting produce
Equipment mounted on a licensed motor vehicle and used to move farm produce to initial storage can be purchased exempt from sales tax if:
- It can be easily removed from the vehicle,
- It's separately stated on the vendor's invoice, and
- The buyer is a qualified farmer or rancher that gives the seller a completed exemption certificate.
Note: The licensed motor vehicle is taxable; only the equipment is exempt.