Tax Type
Retail Sales and Use Tax
Description
Agriculture; Communications equipment
Topic
Taxability of Persons and Transactions
Date Issued
06-24-1997
June 24, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This will reply to your letter of May 28, 1997, in which ******** (the Taxpayer) requests a ruling on the application of the tax to purchases of two-way radios for use in the business of farming agricultural products for market.
FACTS
The Taxpayer operates a dairy farm. The Taxpayer uses two-way radios to provide communication between the Taxpayer and employees while they are working in the fields. The radios enable the employees to notify the farmer when problems occur such as equipment failure, bad weather, sick livestock, etc. This allows the Taxpayer to respond to the situation in a more quick and efficient manner.
The Taxpayer was informed by the department that the two-way radios do not qualify for the agricultural exemption as they are not critical to farmers for use in agricultural production for market. The Taxpayer believes the radios are necessary for use in agricultural production for market and exempt under the agricultural exemption.
DETERMINATION
Code of Virginia § 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,... agricultural chemicals, fuel for drying or curing crops, baler twine, containers for fruit and vegetables, farm machinery, all other tangible personal property, except for structural construction materials, necessary for use in agricultural production for market and sold, to or purchased by a farmer....
Based on this statute, it is apparent that farm equipment and supplies are exempt when used for agricultural production for market. However, the exemption does not extend to the radios since they are not used in agricultural production. Rather, the two-way radios are used to facilitate the Taxpayer's farming activities. This determination is consistent with Public Document 94-301, copy enclosed, in which the department ruled that the purchase of repair parts for service vehicles was taxable since the vehicles only facilitated farming activities and were not used in agricultural production.
I appreciate that the size of the farming operation presents the Taxpayer with challenges in maintenance of the fields and livestock and repairs to farm equipment. Nevertheless, the statutory exemption is administered based on agricultural production and not on the ancillary activities which support that production. While I recognize the important function that the radios provide in the Taxpayer's farming activities, they do not qualify for the agricultural exemption. Accordingly, the radios are taxable when purchased by farmers.
If you should have any further questions, please contact *****, Office of Tax Policy, at *********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12611T
Rulings of the Tax Commissioner