Search Category: Sales Tax
Production Exemption – General
Sales by Producers
Or vendors selling to them
Businesses That Qualify
For the production exemption
Purchases That Qualify
For the production exemption
Change Use
Of an exempt item
Taxable Items
Even with a production exemption
Buyer’s Responsibility
To keep records, pay use tax
Farming and Ranching
Do you operate a farm or ranch that produces farm and ranch goods you’ll sell? Or are you a custom farmer or rancher that performs qualifying activities for a farmer or rancher? If so, you might qualify for the production exemption.
If you qualify for the production exemption, you can buy some equipment and supplies without paying sales or use tax. The production exemption includes special rules for farmers and ranchers.
Sales by Farmers and Ranchers
Or vendors selling to them
Businesses That Qualify
For the production exemption
Purchases That Qualify
For the production exemption
Motor Vehicles
That might qualify for the production exemption
Change Use
Of an exempt item
Taxable Items
Even with a production exemption
Buyer’s Responsibility
To keep records, pay use tax
Exemption Certificates
Laws and Rules
Lumber Manufacturing: Production Exemption
Do you manufacture rough or finished lumber that you’ll sell? If so, you might qualify for the production exemption.
If you qualify for the production exemption, you can buy some equipment and supplies without paying sales or use tax. This guide talks about sales and use tax issues that are unique to lumber manufacturers.
Are you logging instead of producing lumber? See Logging.
Sales
Selling lumber you manufacture or vendors selling to you
Businesses That Qualify
Purchases That Qualify
Change Use
Of an exempt item
Taxable Items
Even with a production exemption
Buyer’s Responsibility
To keep records, pay use tax
Mining: Production Exemption
Do you own or operate a mine that removes minerals from the earth and processes those minerals for sale? Or are you a custom miner that performs qualifying services for a miner? If so, you might qualify for the production exemption.
If you qualify for the production exemption, you can buy some equipment and supplies without paying sales or use tax.
Sales by Miners
Or vendors selling to them
Businesses That Qualify
For the production exemption
Purchases That Qualify
For the production exemption
Change Use
Of an exempt item
Buyer’s Responsibility
To keep records, pay use tax
Taxable Items
Even with a production exemption
Laws and Rules for Logging
Learn more about loggers:
- Idaho Code section 63-3605C — Logging
- Idaho Code section 63-3622HH — Production Exemption Shall Not Apply to Recreation-Related Vehicles
- Idaho Code section 63-3622JJ — Logging Exemption
- Sales Tax Rule 102 — Logging
- Certificates for Resale and Other Exemption Claims
- Application and Payment of Use Tax
Businesses That Qualify for Logging Exemption
Businesses that qualify for the exemption
To be eligible for this exemption:
- Your business must engage in a qualifying logging activity. This includes:
- Cutting forest trees
- Thinning forest trees
- Skidding, decking, and loading forest trees
- The trees you harvest must be intended for sale by whoever owns them.
- You must report your business’ profit or loss on an income tax return.
Note: Logging doesn’t have to be your main business to qualify for the exemption.
- The harvested trees must be sold by their owner.
- The equipment must be primarily used in the logging process. See Idaho Code section 63-3607A.
Businesses that don’t qualify for the exemption
Operations that aren’t eligible for the exemption include:
- Harvesting forest trees for your own use
- Harvesting forest trees for use by your business
- Harvesting firewood for your own use
Purchases that Qualify for Logging Exemption
Purchase Requirements
An item qualifies for the exemption, if it meets all of the following requirements:
- Primarily used in the logging process.
See Idaho Code section 63-3607A. - Necessary or essential – you can’t harvest trees without it.
- Directly used in or consumed during logging – after the beginning and before the end of the process:
- The logging process begins when you first handle forest trees at the site of the activity.
- The process ends when the logs are placed on transportation vehicles at the loading site, ready to be shipped.
- Tangible personal property – must not become real property.
- Allowable by law – must not be specifically excluded from the logging exemption by law or rule.
Exempt Purchases — Logging
Qualifying loggers can buy the following items exempt:
Equipment used for harvesting forest trees for resale
Examples:
- Chain saws and chain saw parts and supplies – including chains, saw parts, oil mix, bar oil, and bar covers
- Skidders, tree harvesters, feller bunchers, log processors, unlicensed log loaders and jammers, and parts for qualifying equipment
Supplies used in harvesting forest trees
- Fuel, oil, and antifreeze for qualifying equipment
- Chokers, skidder cable, and yarders
- Radio Signal System (Talkie Tooters)
- Tree marking paint
Taxable items – Logging
Even if you qualify for the logging exemption, some items are still taxable. The following commonly used items are taxable to loggers:
Safety equipment and supplies, regardless of use
Examples
- Fire suppression equipment, including fire trucks and extinguishers
- Hard hats, helmets, gloves, shoulder pads, ear plugs, calk boots, safety chaps
Equipment and supplies used for slash disposal or brush piling and clearing
Examples
- Brush rakes and clearing machines, including tractors and tractor parts and supplies
- Fuel used in slash disposal equipment
Equipment and supplies used in reforestation activities
Equipment and materials used for road construction
Examples
- Dozers, road graders, loaders, excavators – including parts and supplies
- Fuel used in road construction equipment
- Materials used to build culverts, bridges, gates, fences, guardrails, or anything else that becomes part of real property. This includes fill materials.
- Dust suppression products
- Explosives
Recreational vehicles and aircraft, regardless of use
Examples
- Snowmobiles, ATVs, SOHVs
- Helicopters, airplanes – including any parts and supplies
- Fuel used off-road if tax wasn’t paid
Licensed motor vehicles and trailers
Except trucks and trailers licensed under the International Registration Plan (IRP) or similar pro rata plan and part of a fleet used at least 10% of the time outside Idaho
Examples
- Log trucks and trailers – including parts and supplies
- Log loaders and jammers – if licensed
- Tie downs and slings
Items and supplies for personal use
Examples
- Shirts, pants, suspenders, boots
Office, maintenance, or janitorial equipment and supplies
Marketing, promotional, sales, or transportation equipment and supplies
Equipment and supplies to analyze or model financial results
Motor vehicles
Motor vehicles that are for use on public roads are taxable.
Change Use of Exempt Item – Logging
If you change the primary use of an item
If you buy an item exempt to use in a logging activity, it becomes taxable if you stop using it in a logging activity. You must then pay tax on the fair market value of the item.
Note: The opposite isn’t true. If you pay tax on an item because you use it in a non-logging activity, you can’t claim a tax credit if you begin to use it in a logging activity.
Buyer’s Responsibility for Logging Exemption
Buyer’s responsibility when making exempt purchases
You must keep records of all your purchases, and show whether you paid tax on them.
- Records must show what you bought, when you bought it, how much you paid for the goods, and how much tax you paid.
- Your accounting records must include the standard books and records maintained in a business.
- Keep all your records for at least four years. (You may need to keep them for seven years if you don’t file sales tax returns).
Use tax
When you buy, use, or store taxable goods in Idaho, but didn’t pay sales tax when you bought them, you owe use tax.
You may owe use tax if:
- You buy goods from an internet retailer that doesn’t collect tax
- You buy a taxable item from a seller that didn’t charge sales tax because the seller has your exemption certificate on file
- You buy an item in a state that doesn’t have sales tax, then bring the item to Idaho
- You change how you use an exempt item (See If you change the primary use of an item.)
- You take lumber from your resale inventory and use it in your business.
Learn more about use tax.