Tax Type
Retail Sales and Use Tax
Description
Agricultural exemption, available under Va. Code § 58.1-609.2
Topic
Clarification
Exemptions
Date Issued
01-19-2006
January 19, 2006
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you request a ruling on the application of the retail sales and use tax to sales of certain items to farmers by ***** (the "Taxpayer"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a distributor of industrial gases, welding equipment, and supplies to farmers in Virginia. The Taxpayer requests clarification regarding the application of the agricultural exemption, available under Va. Code § 58.1-609.2, to its sales to farmers.
RULING
Virginia Code § 58.1-609.2 1 provides an exemption from the retail sales and use tax for:
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- Commercial feeds, seeds, plants, fertilizers, liming materials, breeding and other livestock, semen, breeding fees, baby chicks, turkey poults, rabbits, quail, llamas, bees, agricultural chemicals, fuel for drying or curing crops, baler twine, containers for fruit and vegetables, farm machinery, tangible personal property, except for structural construction materials to be affixed to real property owned or leased by a farmer, necessary for use in agricultural production for market and sold to or purchased by a farmer or contractor, and agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural productions, which also includes beekeeping and fish, quail, rabbit, and worm farming for market.
Based on this statute, it is apparent that farm equipment and supplies are exempt when used for agricultural production for market. The exemption, however, does not extend to the welding equipment, supplies, and industrial gases because they are not used in agricultural production. Rather, the welding equipment supplies and industrial gases are used to facilitate the farmer's activities and make repairs to exempt farming machinery. This determination is consistent with Public Document 94-301 (9/29/94), in which the Department ruled that the purchase of repair parts for service vehicles is taxable because they are not used to produce agricultural products, but to support exempt farming machinery.
The statutory exemption is administered based on agricultural production and not on the ancillary activities that support such production. While I recognize the important function that the welding equipment and supplies provide in farming activities, they do not qualify for the agricultural exemption. Accordingly, the welding equipment, supplies and industrial gases are taxable when sold to farmers.
The Code of Virginia section and public document cited, along with other reference documents, are available on-line at www.policylibrary.tax.virginia.gov in the Tax Policy library section of the Department's website. If you have any questions about this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
Kenneth W. Thorson
Tax Commissioner
- Sincerely,
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AR/54822.i
Rulings of the Tax Commissioner