Taxpayer, an Indiana resident, purchased a John Deere
Tractor and mower deck ("tractor") on April 17, 2008. At the time of
purchase Taxpayer filled out an ST-105 exemption form and did not pay sales
tax. Taxpayer also purchased a John Deere Gator ("gator") on April
13, 2009, also filling out an ST-105 exemption form and not paying sales tax at
the time of purchase.
...
The Department determined Taxpayer's purchases of the
tractor and gator were taxable citing to 45 IAC 2.2-5
through 45 IAC 2.2-7
which state that equipment must be used directly in the direct production of
food or commodities that are sold either for human consumption or for further
food or commodity production in order to be exempt. The Department clarified to
Taxpayer that general farm use was not sufficient for exemption.
Taxpayer, to the contrary, claimed that he is entitled to
the agricultural exemptions.
...
Taxpayer believes the tractor qualifies for exemption
because it, as described by Taxpayer in his March 25, 2012, letter to the
Department, has other attachments such as a cultivator, seeder and fertilizing
equipment; i.e., the tractor is used for more than just mowing. However,
Taxpayer filled out an "Agricultural Equipment Exemption Usage
Questionnaire" that asks the Taxpayer to describe the use of the equipment
being claimed for exemption. Taxpayer checked only "running/checking fence
around property" which is not an exempt activity.
In the same letter, Taxpayer also explained that he
purchased the tractor after he joined a wetland conservation project in
conjunction with the U.S. Department of Agriculture and his county FSA in order
to mow and support the wetland maintenance project.
As for the gator, Taxpayer explains in a letter dated July
13, 2012, that he purchased the gator to reduce the use of an 8-cylinder truck
to perform farm chores. Taxpayer points out that he does not have children at
home so the gator is not used as a toy for teenagers. Taxpayer states the gator
is used to "check the fence line and the tree line," to "carry
tools, chain saw, weed eater," and to haul fallen trees and trash.
The Department, however, must respectfully disagree.
Pursuant to the above mentioned statutes and regulations, all purchases of
tangible personal property by persons engaged in the direct production,
extraction, harvesting, or processing of agricultural commodities are taxable,
unless the use of the tangible personal property satisfies the
"double-direct" test; the equipment at issue must be involved in the
direct production of the agricultural commodity and must have a direct effect
upon that commodity.
Taxpayer's documentation demonstrates that Taxpayer used the
tractor for maintaining the land, which does not constitute the direct
production of the agricultural commodity and it did not have a direct effect
upon the commodity. Likewise, the activities for which the gator is used, also
constitute maintenance activities. These activities, while certainly essential
to the operation of Taxpayer's farm, are not activities that meet the
"double direct" test to qualify for exemption. The tractor and gator
would need to be used directly in the direct production process to qualify for
exemption.
In short, Taxpayer's purchases of the tractor and gator are
not exempt from sales tax, and having not paid sales tax at the time of the
purchases, Taxpayer was correctly assessed use tax on the use of the gator and
the tractor.
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