PURPOSE: Sections 144.030.2(22), 144.045.1, 144.047, and 144.063, RSMo, exempt certain farm machinery, equipment, repair parts, supplies, lubricants, and fuels from taxation. This rule explains which items qualify for these exemptions.

1. (1) In general, the purchase of farm machinery, equipment, and repair and replacement parts and supplies and lubricants used exclusively, solely, and directly for producing crops, raising and feeding livestock, fish, or poultry, or producing milk for ultimate sale at retail, and motor fuel used for agricultural purposes is exempt from tax.

2. (2) Definition of Terms.

   1. (A) Equipment—Devices that have a degree of permanence to the business, contribute to multiple processing cycles over time, and generally constitute fixed assets, other than land and buildings, that are capitalized and depreciated for purposes of business and accounting practices.
   2. (B) Farm machinery, equipment, and parts—Machinery, equipment, and parts used directly and exclusively in the agricultural production process.
   3. (C) Machinery—Combinations of parts that work together as a functioning unit, even if they are subordinate elements of more complex machinery. Machinery may be simple or complex, but does not include the replacement of an individual part, even if that part becomes an element of a functioning machine.
   4. (D) Motor fuel—Gasoline, diesel fuel, kerosene, and blended fuel, as defined in section 142.800, RSMo.
   5. (E) Repair and replacement parts—Articles of tangible personal property that are components of machinery and equipment, which can be separated from the machinery or equipment and replaced. Like machinery and equipment, parts must have a degree of permanence and durability. Included in the repair and replacement part category are batteries, tires, fan belts, mufflers, spark plugs, oil filters, plow points, standard type motors, and cutting parts. Substances such as coolants that are added to machinery and equipment for operation are not parts. Substances such as paints or adhesives that adhere to the surface of machinery and equipment, but are not distinct articles of tangible personal property, are not parts.
   6. (F) For the purposes of this rule, supplies shall mean—Tangible personal property consumed in producing crops or milk, or raising and feeding livestock, fish, poultry, pheasants, chukar, or quail for ultimate sale at retail.

3. (3) Basic Application of Exemption.

   1. (A) To qualify for exemption pursuant to section 144.030.2(22), RSMo, items purchased must be—

      1. 1. Used exclusively for agricultural pur-

poses;

1. 2. Used on land owned or leased for the

purpose of producing farm products; and

1. 3. Used directly in producing farm prod-

ucts to be sold ultimately in processed form or otherwise at retail or in producing farm products to be fed to livestock or poultry to be sold ultimately in processed form at retail. The term “used directly” encompasses items that are used in some manner prior to the actual commencement of production, during production, or in some manner after the production has terminated. In determining whether items are used directly, consideration must be given to the following factors:

1. A. Where the items in question are

used;

1. B. When the items in question are

used; and

1. C. How the items in question are used

to produce a farm product.

1. (B) Pursuant to section 144.045.1, RSMo, farm machinery or equipment that would otherwise qualify as exempt farm machinery and equipment will not lose its exempt status merely because the machinery or equipment is attached to a vehicle or real property. Such equipment includes, but is not limited to, a grinder mixer mounted on a vehicle or special livestock flooring. When exempt farm machinery or equipment attached to a motor vehicle is sold with the motor vehicle, the part of the total sales price attributable to the farm machinery or equipment is exempt from tax if the farm machinery or equipment is separately invoiced. If not separately invoiced, the total sales price is subject to tax as a motor vehicle.
2. (C) Pursuant to section 144.047, RSMo, farm machinery includes aircraft used solely for aerial application of agricultural chemicals.
3. (D) Pursuant to section 144.030.2(34), RSMo, all sales of grain bins for storage of grain for resale are exempt; pursuant to this section, parts purchased separately for these bins are not exempt. However, grain bins, including all parts, that are used in production of a farm product and qualify as farm machinery and equipment are exempt pursuant to section 144.030.2(22), RSMo.
4. (E) Pursuant to section 144.063, RSMo, fencing and motor fuel used for agricultural purposes are exempt.
5. (F) The fact that particular items may be considered to be essential or necessary will not automatically entitle them to exemption. The following categories of items are excluded from the meaning of the term farm machinery and farm equipment, including 12 CSR 10-110

supplies, and are subject to tax:

1. 1. A motor vehicle and parts for a motor

vehicle do not qualify as exempt farm machinery or equipment. A trailer and parts for a trailer generally do not qualify as tax exempt farm machinery or equipment. The terms motor vehicle and trailer are defined by Chapter 301, RSMo;

1. 2. Containers and storage devices such

as oil and gas storage tanks, pails, buckets, and cans;

1. 3. Hand tools and hand-operated items

such as wheelbarrows, hoes, rakes, pitchforks, shovels, brooms, wrenches, pliers, and grease guns;

1. 4. Attachments and accessories not

essential to the operation of the machinery itself (except when sold as part of the assembled unit) such as cigarette lighters, radios, canopies, air-conditioning units, cabs, deluxe seats, tool or utility boxes, and lubricators;

1. 5. Equipment used in farm management

such as communications and office equipment, repair, service, security, or fire protection equipment;

1. 6. Building materials and general heat-

ing, lighting, and ventilation equipment for nonproduction areas; and

1. 7. Machinery and equipment used for a

dual purpose, one purpose being agricultural and the other being nonagricultural, are not exempt.

1. (G) Example A is a list of items of farm machinery, equipment, and supplies that will usually be exempt if used exclusively for agricultural purposes on land owned or leased for the purpose of producing farm products and used directly in producing farm products or livestock to be sold ultimately at retail.

1. (4) Examples.

   1. (A) Usually Exempt Items. Anti-freeze Artificial insemination equipment Augers Bale loader Bale transportation equipment Baler twine Baler wire Balers Batteries for farm machinery and equipment Bedding used in production of livestock or poultry for food or fiber Binder twine Binders Brooders Bulk feed storage tanks Bulk milk coolers Bulk milk tanks Bulldozers used exclusively in agricultural production Calcium for tires Calf weaners and feeders Cattle currying and oiling machine Cattle feeder, portable Chain saws for commercial use in harvesting timber, lumber, and in orchard pruning Chicken pluckers Choppers Cleansing agents and disinfectants for agricultural process Combines Conveyors, portable Corn pickers Crawlers, tractor Crushers Cultipackers Cultivators Curtains and curtain controls for livestock and poultry confinement areas Debeakers for productive animals Dehorners for productive animals Discs Drags Dryers Dusters Ear Tags Egg handling equipment Ensilage cutters Ether Fans, livestock and poultry Farm tractors Farm wagons Farrowing houses, portable Farrowing crates Feed carts Feed grinders/mixers Feed storage bins Feeders Fencing Materials Fence Posts Fertilizer distributors Field drain tile Flooring slats Foggers Forage boxes Forage harvester Freon Fruit graters Fruit harvesters Fuel additives Gates Generators Gestation crates GPS—Global Positioning System equipment Grain augers Grain bins for storage of grain for resale (but not separately billed parts or addons to these grain bins) Grain binders Grain conveyors Grain drills Grain elevators, portable Grain handling equipment Grain planters Greases and oils Harrows (including spring-tooth harrow) Hay loaders Head gates Heaters, livestock and poultry Hog feeders, portable Hog rings Hoists, farm Husking machines Hydraulic fluid Hydro-coolers Incubators Irrigation equipment Light bulbs Livestock feeding, watering, and han-

      1. (B) Usually Taxable Items.

dling equipment Lubricating oils and grease Manure handling equipment (including front and rear-end loaders and blades) Manure spreaders utility vehicle that does not meet the defini- Marking chalk tion of a motor vehicle, an all-terrain vehicle Milk cans is a motor vehicle because it has a seat that is Milk coolers straddled and handlebars for steering) Milk strainers Milking equipment (including bulk milk refrigerators, coolers, and tanks) Milking machine Motor Fuel (gasoline, diesel fuel, kerosene, and blended fuel) Mowers, hay and rotary blade used exclusively for agricultural purposes Off-road utility vehicles, other than allterrain vehicles (provided the vehicle qualifies as farm machinery or equipment) Panels, livestock Pickers Planters Plows Posthole diggers Poultry feeder, portable Pruning and picking equipment Repair and replacement parts for exempt machinery Rollers Root vegetable harvesters Rotary hoes Scales (not truck scales) Seed cleaners Seed planters Seeders Shellers Silo unloaders Snow Fence Sorters Sowers Sprayers Spreaders Sprinkler systems, livestock and poultry Squeeze chutes Starting Fluid Subsoiler Tarps to protect agriculture products Threshing machines Tillers Tires for exempt machinery Tractors, farm Vacuum coolers Vegetable graders Vegetable washers Vegetable waxers Wagons, farm Washers, fruit, vegetable, and egg Waxers Weeders Wire fencing

Acetylene torches Air compressors Air tanks All-terrain vehicles (unlike an off-road

Automobiles Axes Barn ventilators Brooms Brushes Building materials and building supplies Bulldozers Cement Chain saws Construction tools Electrical wiring Equipment and supplies for home or personal use Fence building tools Field toilets Fire prevention equipment Garden hose Garden rakes and hoes Gasoline tanks and pumps Golf carts Hammers Hand tools Hog ringers Lamps Lanterns Lawnmowers Nails Office supplies and equipment Packing room supplies Paint and decals Personal property installed in or used in housing for farm workers Pumps for household or lawn use Pumps, gasoline Refrigerators for home use Repair tools Road maintenance equipment Road scrapers Roofing Sanders Shovels Silos Small tools Snowplows and snow equipment Staples Supplies for home or personal use Tanks, air Tanks, gasoline Tools for repair construction Tractors, garden Truck beds Water hose Welding equipment Wrenches

1. (C) A farmer purchases a lawnmower. The farmer uses the lawnmower to mow in an orchard, as well as to mow his lawn. The purchase of the lawnmower is subject to tax, because the lawnmower is not used exclusively and directly for agricultural production.
2. (D) A farmer purchases a water chiller for use to control the climate inside the hatchers and setters. The water chiller is also used to cool the administrative areas in the hatchery. The purchase of the water chiller is subject to tax, because it is not used exclusively for agricultural production.
3. (E) A farmer takes his tractor to the implement dealer for routine maintenance, which includes changing the oil, filters, and antifreeze. The sale of the oil, filters, and antifreeze are exempt.
4. (F) A farmer buys a bale spike to be installed on his pickup truck. The bale spike is not subject to tax.
5. (G) A farm supply store sells commercial rabbitry equipment, such as feeders, nest boxes and wire hanging cages used for rabbit cages and feeders, to a farmer who raises rabbits in confinement for human consumption. These items are not subject to tax.

AUTHORITY: section 144.270, RSMo Supp. 2009 and section 144.705, RSMo 2000.* Original rule filed Nov. 18, 1999, effective June 30, 2000. Amended: Filed Oct. 2, 2009, effective May 30, 2010.

*Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961, 2008; and 144.705, RSMo 1959. Charles A. Johnson, Jr. v. Director of Revenue (AHC 1986). A seed cleaner was purchased under a claim of exception to process soybeans. The Commission ruled that although the taxpayer bought the seed cleaner to process his own soybeans, he used the equipment to process other farmers’ seed as well. Processing the seed of others failed to meet the requirement that the equipment be used directly and exclusively for the production of farm products. Crystal Lake Fisheries v. Director of Revenue (AHC 1989). A nearby creek could flood raceways used to raise rainbow trout. A dike prevents the creek from flooding the raceways. A bulldozer was purchased, which was used to repair and maintain the dike. The bulldozer is also used to prevent flooding of pasture, hay, and land containing hardwood and softwood trees, all of which are harvested as required. The court found that the bulldozer in question met the three requirements of the exemption statute. The bulldozer was used exclusively for agricultural purposes, on land owned or leased for the purpose of farming, and directly in producing farm products.