96-173
Response November 27, 1996
Request
Irene Rees
Office of the Commissioners
210 North 1950 West
Salt Lake City, Utah 84134
Dear XXXXX:
I am the controller for XXXXX located in XXXXX,
Utah. We are requesting an advisory opinion
on the sales tax exemption on equipment placed in turkey production structures.
We sell equipment such as feeding systems, watering
systems, ventilation equipment and heating equipment to growers in the turkey
production business. All of this equipment
is essential for raising turkeys inside the structures. If necessary, the equipment can be removed
and installed in other structures.
Also, we are requesting an opinion on the structures themselves; under IRS Code,
Section 168 (c), single- purpose agriculture or horticultural structures are
considered personal property by the Federal Govern ment. These structures are generally 40 feet wide
and can vary in length from 200 to 500 feet.
Those that are used for brooding newly hatched turkeys are totally
enclosed. After the turkeys reach a
certain age, they are placed in structures that are more open than the
brooders. These structures are called grow-out facilities. The brooders are placed on a cement
foundation but the grow out facilities are on a foundation of compacted
earth. The sole purpose of these
structures is turkey production. They
can be moved to other locations but this is rarely done. Generally they are built from wood with
galvanized corrugated steel roofing.
Some structures are of all steel construction. Would they be exempt from sales tax?
Sincerely,
XXXXX
XXXXX
Advisory Opinion - Agricultural sales tax exemption
Dear XXXXX,
We have
received your request for information pertaining to the agricultural sales tax
exemption. We offer the following
guidance:
With
the exceptions mentioned below, a commercial agricultural producer may purchase
or lease equipment, machinery, supplies and other tangible personal property
used or consumed primarily and directly in agricultural production operations
tax free, whether or not they become part of real property. (See Utah Code Ann. 59-12-104 (21).) The
three exceptions are (1) purchases of vehicles
of a type which must be registered, (2) purchases of items such as hand tools
with a unit price of less than $$$$$, and (3) purchases of items that are only
incidently or indirectly related to the business. Items purchased for use in activities that are not directly
related to agricultural production (e.g. purchases of office equipment,
janitorial supplies, equipment used in the sales or distribution operations,
and equipment or supplies used in research or development) are all taxable.
The
feeding systems, watering systems, ventilation equipment and heating equipment
used in the manner described in your letter are eligible for the sales tax
exemption. Prefabricated or
moveable structures used primarily and directly in agricultural production are
also exemption, as are sales of construction materials to build such structures
on site.
Please
let us know if you have any other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner