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

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

2. (2) Definition of Terms.

   1. (A) Farm machinery—Machinery and equipment used directly and exclusively in the agricultural production process.
   2. (B) Repair and replacement parts—Items of tangible personal property that are components of exempt farm machinery and equipment. 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.

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;

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; and

1. 4. Farm machinery or equipment that

meet these requirements are exempt from tax, as are repair or replacement parts thereon and lubricants used exclusively for such farm machinery or equipment and one-half (1/2) of any diesel fuel used in such machinery or equipment.

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.
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; however, parts purchased separately for these bins are not exempt. Grain bins and all parts purchased that qualify as farm machinery and equipment are exempt.

4. (E) 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 and are subject to tax:

   1. 1. Under no circumstances can a motor

vehicle or trailer ever be treated as tax exempt farm machinery. The terms motor vehicle and trailer are defined by the titling and licensing laws of Missouri (Chapter 301);

1. 2. Containers and storage devices such

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

1. 3. Hand tools and hand-operated equip-

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

1. 4. Consumable items such as antifreeze,

freon, ether, and starter fluid;

1. 5. 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. 6. Equipment used in farm management

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

1. 7. Drainage tile, fencing material, build-

ing materials, general heating, lighting and ventilation equipment for nonproduction areas; and

1. 8. Machinery and equipment used for a

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

1. (F) Schedule A is a list of items of farm machinery and equipment which 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.

   Schedule A

   Usually Exempt Items

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 Combines 12 CSR 10-110

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 Egg handling equipment Ensilage cutters Fans, livestock and poultry Farm tractors Farm wagons Farrowing houses, portable Farrowing crates Feed carts Feed grinders/mixers Feed storage bins Feeders Fertilizer distributors Flooring slats Foggers Forage boxes Forage harvester Fruit graters Fruit harvesters Generators Gestation crates Grain augers Grain bins for storage of grain for resale (but not separately billed parts or add-ons 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 Hoists, farm Husking machines Hydraulic fluid Hydro-coolers Incubators Irrigation equipment Livestock feeding, watering and handling equipment Lubricating oils and grease Manure handling equipment (including front and rear-end loaders and blades) Manure spreaders Milk cans Milk coolers Milk strainers Milking equipment (including bulk milk refrigerators, coolers and tanks) Milking machine Mowers, hay and rotary blade used exclusively for agricultural purposes Panels, livestock Pickers Planters Plows 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 Sorters Sowers Sprayers Spreaders Sprinkler systems, livestock and poultry Squeeze chutes Subsoiler 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

1. (G) Schedule B is a list of items, which are usually taxable.

   Schedule B

   Usually Taxable Items

Acetylene torches Air compressors Air tanks All-terrain vehicles (3-, 4- and 6-wheel) Antifreeze Automobiles Axes Barn ventilators Brooms Brushes Building materials and supplies Bulldozers Cement Chain saws Cleansing agents and materials Construction tools Ear tags Electrical wiring Equipment and supplies for home or personal use Ether Fence building tools Fence posts Field toilets Fire prevention equipment Freon Fuel additives Garden hose Garden rakes and hoes Gasoline tanks and pumps Golf carts Hammers Hand tools Hog ringers Hog rings Lamps Lanterns Lawnmowers Light bulbs Marking chalk Nails Office supplies and equipment Packing room supplies Paint and decals Personal property installed in or used in housing for farm workers Posthole diggers (except commercial use in tree farms) 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 Snow fence Snowplows and snow equipment Staples Starting fluids Supplies for home or personal use Tanks, air Tanks, gasoline Tools for repair construction Tractors, garden Truck beds Water hose Welding equipment Wire, fencing Wrenches (4) Examples.

1. (A) An implement dealer sells a soilmover to a farmer. The soilmover is going to be used on low-lying agricultural land exclusively for the purpose of controlling drainage. The sale of the soilmover is exempt.
2. (B) A farmer purchases a combine. The farmer later purchases an AM/FM radio to be installed on the combine. The farmer’s purchase of the combine is exempt; however, the farmer’s purchase of the AM/FM radio is taxable. If the radio had been a part of the assembled unit, the total price for the combine would have been exempt.
3. (C) A farmer purchases a lawnmower. The farmer uses the lawnmower to mow around grain bins, as well as mow his lawn. The purchase of the lawnmower is subject to tax, since the lawnmower is not used exclusively and directly for agricultural production.
4. (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, since it is not used exclusively for agricultural production.
5. (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 and filters would be exempt; however, the antifreeze would be subject to tax.
6. (F) A farmer buys a bale spike to be installed on his pickup truck. The bale spike is not subject to tax.
7. (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: sections 144.270 and 144.705, RSMo, 1994.* Original rule filed Nov. 18, 1999, effective June 30, 2000.

*Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961; 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.