Tax Type
Retail Sales and Use Tax
Description
Agriculture; Farmer vs wholesaler; Livestock sales
Topic
Taxability of Persons and Transactions
Date Issued
04-26-1996
April 26, 1996
Dear*********
This will reply to your letter of February 17,1995 in which you seek correction of a retail sales and use tax assessment for******(the "Taxpayer") for the period May 1988 through April 1994.
FACTS
The Taxpayer, a farmer, purchases livestock from individual farmers and livestock markets. The livestock is then transported to the Taxpayer's farm. The purchased livestock may be placed on pasture land for varying periods of time or be placed in holding pens. Most of the livestock is assembled into groups and resold, in some instances within four days after of the initial purchase. The Taxpayer feeds and inoculates all livestock as required by industry regulations.
The Taxpayer was audited as a dual operator (i.e. farmer and wholesaler) with tax assessed on purchases of supplies used and consumed in the holding of livestock for sale. The Taxpayer maintains that these supplies are for use in the agricultural production of livestock for market, and are exempt.
DETERMINATION
Code of Virginia § 58.1-609.2(1) provides an exemption for:
-
- Commercial feeds; seed; plants; fertilizers; liming materials; breeding and other livestock; . . . [and] tangible personal property ... necessary for use in agricultural production for market and sold to or purchased by a farmer or contractor; and agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production....
In this case, l find that the Taxpayer continues to operate as a farmer when purchasing livestock, and that such activity is "agricultural production." The Taxpayer does not operate as a livestock market or broker, and does not merely hold livestock for others. Rather, the Taxpayer takes title to the livestock and strives to improve its marketability. Accordingly, feed, medicines, and other tangible personal property used by the Taxpayer in its activities, at its farm, are exempt provided that such items are necessary for use in agricultural production for market. I note that a portion of the livestock is purchased and shipped directly to other buyers. In such instances, the exemption is unavailable since the livestock does not become a part of the Taxpayer's agricultural production process.
The audit will be revised in accordance with this determination, and a revised assessment will be issued as soon as possible. If you have any additional questions regarding this matter, please contact ********of the department's Office of Tax Policy at********
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9304Q
Rulings of the Tax Commissioner