N.Y. Comp. Codes R. & Regs. tit. 20 § 528.7

Current through Register Vol. 46, No. 45, November 2, 2024

Section 528.7 - Farming and commercial horse boarding operations

Tax Law, §§ 1101(b)(19), (20); 1105(c)(3)(vi), (5)(iii); 1115(a)(6), (15), (16), (c)(2)

(a)Exemption.

(1) All tangible personal property, whether or not incorporated in a building or structure, for use or consumption predominantly either in the production for sale of tangible personal property by farming or in a commercial horse boarding operation (or in both) is exempt from the New York State and local sales and compensating use taxes. (See sections 1115[a][15] and [16] of the Tax Law exempting certain tangible personal property sold to a contractor, subcontractor, or repairperson when the property is to become an integral component part of a structure, building, or real property used predominantly either in the production phase of farming or in a commercial horse boarding operation, or in both.)

(2) The services of installing, maintaining, servicing, and repairing the tangible personal property specified as exempt in paragraph (1) of this subdivision are excluded from the State and local sales and compensating use taxes. (See section 527.5 of this Title for rules pertaining to installing, maintaining, servicing, and repairing tangible personal property.)

Example:

A farmer (or an operator of a commercial horse boarding operation) in this State has a tractor repaired. The tractor is used predominantly in farm production (or in a commercial horse boarding operation). The charge for materials is $100, and the charge for labor is $50. The farmer gives the vendor a timely filed and properly completed exemption certificate and is not required to pay the New York State and local sales and compensating use taxes on the total charge for materials and labor. It does not matter whether the vendor's invoice separately states the charges for the materials and labor since neither is subject to tax.

(3) The services of maintaining, servicing, and repairing real property, property, or land that is used or consumed predominantly either in the production for sale of tangible personal property by farming or in a commercial horse boarding operation (or in both) are excluded from State and local sales and compensating use taxes. (See section 527.7 of this title for rules pertaining to maintaining, servicing, and repairing real property.

(4) Fuel, gas, electricity, refrigeration, and steam, and gas, electric, refrigeration, and steam service of whatever nature for use or consumption either in the production for sale of tangible personal property by farming or in a commercial horse boarding operation (or in both) are exempt from State and local sales and compensating use taxes. (See, however, sections 1115[j] and 1120 of the Tax Law with respect to motor fuel and diesel motor fuel.)

(5) Tangible personal property and services eligible for exemption or exclusion may be purchased without payment of tax upon the issuance to the vendor of a timely filed and properly completed exemption certificate. (See subdivision [e] of this section.)

(b)Farming and commercial horse boarding operation defined.

(1) The term farming means and includes the following types of farming and activities:

(i) agriculture, floriculture, horticulture, aquaculture, and silviculture;

(ii) stock, dairy, poultry, fruit, fur-bearing animal, truck, and tree farming;

(iii) graping;

(iv) ranching;

(v) operating nurseries, greenhouses, vineyard trellises, or other similar structures used primarily for the raising of agricultural, horticultural, vinicultural, viticultural, floricultural, or silvicultural commodities;

(vi) operating orchards;

(vii) raising, growing, and harvesting crops, livestock and livestock products (see section 301[2] of the New York State Agriculture and Markets Law); and

(viii) raising, growing, and harvesting woodland products, including, but not limited to, timber, logs, lumber, pulpwood, posts and firewood.

Example 1:

Breeding, raising and feeding livestock, poultry, or other animals, which produce a product for sale or are themselves a food product, is farming.

Example 2:

The breeding of dogs, cats and other pets or laboratory animals is not farming.

Example 3:

An individual who does not own a farm but does own farm equipment which he uses to perform custom work for a commercial farmer may purchase such equipment tax-free since the equipment will be used in farming.

(2) The term commercial horse boarding operation means an agricultural enterprise, consisting of at least seven acres and boarding at least ten horses, regardless of ownership, that receives $10,000 or more in gross receipts annually from fees generated either through the boarding of horses or through the production for sale of crops, livestock, and livestock products, or through both such boarding and such production. A commercial horse boarding operation does not include any operation whose primary on-site function is horse racing. (See section 301[13] of the New York State Agriculture and Markets Law.)

(c) Production.

(1) The activities in farming may be classified as administration, production or distribution.

(i) Administration includes activities such as sales promotion; general office work; credit and collection; purchasing; maintenance; transporting, receiving and testing of raw materials; and clerical work in production such as preparation of work production and time records. However, tangible personal property used or consumed in administrative activities that are related to farm production, as described in subparagraph (ii) of this paragraph, is considered to be used or consumed in farm production. This includes tangible personal property used in activities such as preparing animal feed, weight, and health records; and performing research related to farm production.

(ii) Farm production begins with the preparation of the soil or other growing medium, or, in the case of animals, from the beginning of the life cycle. Production ceases when the product is ready for sale in its natural state. For farm products that will be converted into other products, farm production ceases when the normal development of the farm product has reached a stage where it will be processed or converted into a related product.

Example 1:

Production ceases when cattle will be processed into meat, raw milk into butter, cheese or bottled milk, grapes into wine or juice, etc., by a related industry, whether such industry is owned by the farmer or another.

Cross-reference:

For a discussion of when farming production stops and manufacturing production begins, see the manufacturers production exemption in section 528.13(b) of this Title.

(iii) Distribution includes all operations subsequent to production, such as storing, displaying, selling, loading and shipping products that are ready for sale.

(2) Production ends for a specific producer (farmer or other person) when the product is in the form in which he will offer it for sale. However, production may again start for a specific purchaser when he gains ownership of the product, and production will continue until the product is in a form in which it, in turn, will be offered for sale.

Example 2:

A farmer raises and sells calves to a feed lot operator who intends to feed and finish the calves into beef cattle.

(d)Predominantly.

(1)Predominantly means that the tangible personal property must be used or consumed; the real property or land must be used or consumed; or the building, structure, or real property into which the tangible personal property has been incorporated must be used, more than 50 percent of the time either in the production for sale of tangible personal property by farming or in a commercial horse boarding operation, or in both.

(2) See section 1115 (a)(6)(B) of the Tax Law concerning motor vehicles used predominantly (i.e., more than 50 percent) either in the production for sale of tangible personal property by farming or in a commercial horse boarding operation, or in both. The percentage of a vehicle's use in such activities may be computed either on the basis of mileage or hours of use, at the discretion of the purchaser or user.

(e)Exemption certificate.

(1) An appropriate and properly completed exemption certificate may be used by a farmer or by an operator of a commercial horse boarding operation to make exempt or excluded purchases of tangible personal property and services described in this section.

(2) An exemption certificate may not be used for purchases of motor fuel. The tax must be paid on such purchases, and the farmer or operator of a commercial horse boarding operation may apply for a refund or credit of the tax paid on motor fuel that is used for exempt or excluded purposes.

(3) An exemption certificate may be used as a blanket certificate or as a single purchase certificate.

(4) An exemption certificate is considered to be properly completed when it contains the following information:

(i) name and address of the vendor;

(ii) name and address of the farmer or of the operator of the commercial horse boarding operation;

(iii) signature of the farmer or of the operator of the commercial horse boarding operation (or of the authorized representative of the farmer or operator) certifying that the property or services will be used or consumed in an exempt or excluded manner;

(iv) date prepared; and

(v) any other information required pursuant to articles 28 and 29 of the Tax Law and Part 532 of this Title.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 528.7