Purchases that Qualify for Farming and Ranching Exemption

Purchase Requirements

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.

Examples of items that don’t qualify:

Example 3 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 4 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 5 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:

Farm Implements

Examples:

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-103C – Sales Tax Exemption Certificate – Real Property Contractors, to buy qualifying irrigation equipment and supplies exempt.

The equipment can be installed by either the farmer, the rancher, or the contractor.

Agricultural grain bins – structures and equipment

Grain bin structures and equipment, when used directly and primarily for storing small grains in agricultural production, are exempt. This includes:

Augers
Dryers
Fans
Sweep augers

The structures and equipment can be attached to real property and installed by either the farmer, contractor, or subcontractor.

Agricultural quality control functions – equipment and supplies

Equipment and supplies for performing quality control functions are exempt when the following apply:

Used primarily and directly in agricultural production
Used to prepare a crop for storage in a grain bin structure

The equipment and supplies can be attached to real property and installed by either the farmer, contractor, or subcontractor.

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

For livestock

Farm produce beds

If easily removed from a licensed vehicle (e.g., spud beds)

Hand tools

If used directly and primarily in the farming or ranching process