Tax Type
Retail Sales and Use Tax
Description
Milking and feeding stalls
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
06-02-1987
June 2, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear ******************
This will reply to your letter of March 25, 1987 seeking a ruling on the correct application of the sales and use tax to certain equipment sold by ************** (taxpayer) in the above referenced case. For reasons stated herein, we are treating this case as an application for correction of an assessment under §58.1-1821 of the Code of Virginia.
FACTS
The taxpayer is a regional milk and dairy product marketing cooperative. In this connection, the taxpayer makes sales of equipment and supplies used by dairy farmers for use in the milking process. The taxpayer was audited by the department and held liable for the sales and use tax on its untaxed sales of certain milking/feeding stalls to such farmers.
According to the brochures submitted by the taxpayer, its milking/feeding stalls are used by dairy farmers to improve the economy and efficiency of their milking and feeding process, and to provide for the safety and comfort of livestock involved in this process. In addition, it appears from the brochures that the milking/feeding stalls are anchored in concrete and secured to the ceilings of the dairy barns in which they are installed.
The taxpayer contests the application of the tax to its sales of such stalls, claiming that they are an essential part of a dairy farmer's agricultural production for market and therefore, qualify for exemption from the tax under §58.1-608(3) of the Code of Virginia and §630-10-4(A) of the Virginia Retail Sales and Use Tax Regulations.
DETERMINATION
Section 58.1-608(3) of the Virginia Code provides an exemption from the sales and use tax for "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 or contractor to be affixed to real property owned or leased by a farmer; [and] agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production,...for market."
Section 630-10-4 of the Virginia Retail Sales and Use Tax Regulations then provides that the term "structural construction materials" means but is not limited to "silos, barns and sheds: storage bins; greenhouses; permanent fencing; ...cattleguards; farrowing houses; and bulk tobacco curing barns. These items are therefore subject to the tax." However, this same section also states that the term "structural construction materials" specifically excludes items such as "milking... and...feeding systems." These items are therefore exempt from the tax when they are sold to and purchased by a farmer and when they are necessary for use in agricultural production for market.
Based on all of the information provided, the milking/feeding stalls sold by the taxpayer to dairy farmers in this case, qualify for exemption from the tax since they are an integral part of such farmers' entire milking and feeding operation and are necessary for use in their agricultural production process. Furthermore, the milking/feeding stalls sold in this case are to be distinguished from the materials that comprise the walls, floor and roof of a dairy farmer's buildings which, along with other structural construction materials, remain subject to the tax when sold to such farmers.
Accordingly, the assessment will be revised to remove the taxpayer's sales of milking/feeding stalls to dairy farmers, and a refund will be issued to the taxpayer under separate cover.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner