After an audit, the Department assessed Taxpayer use tax and
interest for the 2008 tax year on 45 percent of the purchase price of a John
Deere 4120 compact tractor with a loader and backhoe, and a John Deere 673 farm
loader. Taxpayer protested the imposition of use tax and interest on the
transactions because Taxpayer believes the equipment is 100 percent exempt.
...
Upon request by the Department, Taxpayer filed a Form
AGQ-100 with the Department to indicate the manner in which Taxpayer uses the
equipment. Taxpayer indicated seven different uses of the equipment.
Once a month, Taxpayer uses the equipment to haul animal
waste. This activity is explicitly listed above as exempt.
Every day, Taxpayer hauls feed to livestock that are to be
sold for slaughter and twice a week Taxpayer grinds feed for the livestock.
These activities are also exempt. Sales Tax Information Bulletin 9 (August
2008), 20080827 Ind. Reg. 045080655NRA, states that machinery, tools, and
equipment used in feeding livestock for the direct production of food for sale
– by a person occupationally engaged in the production of food – is exempt.
Also, Taxpayer stated that the equipment is used every day
to check on livestock, once a month to check the fencing and clean the barns,
and once a month to fix waterlines. These activities may be necessary to
farming, but they do not meet the "double direct" test. These
activities are not directly in the direct production of agricultural products.
By adding up all the days indicated by Taxpayer on the Form
AGQ-100, the Department came to a total of 882 uses of the equipment a year.
The uses that are exempt from tax equates to 481 exempt uses a year. These
calculations show that the equipment is used in an exempt manner 55 percent of
the time.
Therefore, since sales tax was not paid at the time of
purchase, use tax is due on 45 percent of the purchase price. The imposition of
use tax on 45 percent of the purchase price of the equipment was proper.
