Taxpayer is a farmer. Taxpayer raises calves on his farm. As the result of an investigation, the Indiana Department of Revenue ("Department") issued proposed assessments for use tax on the purchase of a tractor, a "2002 John Deere 6420 Tractor" purchased in the tax year 2009 (the "Tractor").
...
Taxpayer argues that the Tractor was used for farm related activities, inter alia, tilling the land, harvesting crops, and to carry feed to dairy cattle. Therefore, because the Tractor is used for farm related activities, Taxpayer maintains that the Tractor should be equally exempt from sales and use tax.
The tilling of the land and harvesting of crops are farm related activities which do meet the double direct test required by Indiana law. However, the Department has already taken into consideration that these activities were exempt, and based on information provided by Taxpayer, a nineteen percent exemption was granted based on how often the Tractor was used for these purposes. Taxpayer has not provided any new information that shows it is entitled to a greater exemption for these or any other purpose.
Exempt purchases: (1) Feeds–Sales of agricultural machinery, tools, and equipment used by the purchaser directly in feeding exempt animals, poultry, etc., are exempt from tax. This exemption does not extend to machinery, equipment, and tools used for the handling, movement, transportation, or storage of feed prior to the actual feeding process.
Taxpayer says that the tractor "was only used 1 1/2 to 2 hours per day (not continuously) to feed dairy cattle while they were being milked." Taxpayer believes that 45 IAC 2.2-5-6(d) supports his claim that the tractor would be exempt for this purpose. However, this regulation applies to automated feeding equipment, and not equipment used to transport feed to pasture. It is also used prior to the feeding process, not during the feeding process, since the tractor is presumably not functioning while the feeding is occurring.
Taxpayer also maintains that 45 IAC 2.2-5-4(e), where it states that machinery must be "directly used by the farmer in the direct production of agricultural products," supports Taxpayer's position that the tractor is exempt because Taxpayer believes that it is directly used in the direct production of milk. However, the tractor would need to have an "immediate effect" on the production of milk in order to be exempt. 45 IAC 2.2-5-4(e) also states that "[p]roperty has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which produces agricultural products," and that "[t]he fact that a piece of equipment is convenient, necessary, or essential to farming is insufficient in itself to determine if it is used directly in direct production as required to be exempt." Taxpayer has not shown that the Tractor has an immediate effect on the production of milk, and therefore Taxpayer has not met the burden of proof set out in IC § 6-8.1-5-1.
