Tax Type
Retail Sales and Use Tax
Description
Agriculture; Hog parlor penning and equipment systems.
Topic
Taxability of Persons and Transactions
Date Issued
11-14-1997
November 14, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*****************
This is in reply to your letter in which you seek a correction of the department's assessment issued to *********(the "Taxpayer"), for the period August 1993 through June 1996. I note that the department has received a preliminary payment which has been applied to the assessment. I apologize for the delay in our response.
FACTS
The Taxpayer is a retailer and contractor of hog parlor penning and equipment systems for feed, water, heating and air conditioning. Certain items were assessed as structural construction materials. The Taxpayer contends that these items remain tangible personal property used in agricultural production and are therefore, exempt from taxation pursuant to Code of Virginia § 58.1-609.2(1). I will address each of the contested items separately.
DETERMINATION
Generally
Code of Virginia § 58.1-609.2(1) (copy enclosed) provides an exemption from the retail sales and use tax for:
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- Tangible personal property, except for structural construction materials to be affixed to real property owned or leased by a farmer, necessary for use in agricultural production for market and sold to or purchased by a farmer or contractor. (Emphasis added.)
Farrowing Crates, Penning Panels, Gestation Stalls
The gestation stalls accommodate the care of the sows during the gestation period prior to the birth of the piglets. The farrowing crates are small confined areas where the sows give birth. The farrowing crates have been specially manufactured to accommodate and facilitate the care of the sow as well as the birth and care of the piglets through the infant stage. The penning panels are connected together within the confines of the farrowing house for growing the pigs from the weaning stage until ready for market. The crates, panels and stalls are anchored to the woven wire flooring by the use of a T-bolt and are also bolted to the wall of the building. The Taxpayer contends that the property in question is not taxable structural construction materials.
Based on the information before me, and on the basis of previous rulings, I find that the farrowing crates, penning panels and gestation stalls do not become an integral part of the farrowing house structure and are not structural construction materials. Further, based on the purpose and use of the crates, panels and stalls, I find that they are used in agricultural production for market. The stalls, crates and panels maintain the integrity of the product by preventing harm from coming to the piglets, or other pigs through the growing stages. The confined areas also hinder the activities of the pigs thereby enhancing the fatness of the animal for market.
Accordingly, the department's audit will be revised to remove these items.
Feed Tanks
The Taxpayer maintains that the feed tanks are an Integral part of an exempt feeding system. As the feeding systems would be of no value without the feed tanks, the Taxpayer contends that they should be removed from the audit.
The department's longstanding policy with regard to such tanks is that the tanks must mechanically or automatically supply feed to livestock to qualify for the statutory exemption. As the tanks in question do not perform such a function, and are similar to other tanks held taxable in audits of other similar taxpayers, I can find no basis to adjust the department's audit for this issue. I have enclosed a copy of Public Document 97-17 (01/22/97) which further details the department's position with respect to such tanks.
Specially Designed Flooring
The flooring in question is attached to a floor frame which has been bolted to a concrete floor. The Taxpayer states that the flooring is designed and installed so that it may be easily removed and replaced. Accordingly, the Taxpayer maintains that this item is not a structural construction material.
The raised flooring is designed to allow animal waste to fall through the floor grating. The flooring is secured to a floor frame, which in turn has been bolted to a concrete subfloor. As the flooring in this instance is an integral part of the overall structure and is intended to remain in place for its natural life, I find that the flooring becomes a permanent part of the realty. As such, the flooring constitutes taxable structural construction materials and will remain in the department's audit.
I understand that the department does not have all of the documentation necessary for the auditor to properly determine the exact amounts related to the farrowing crates, gestation stalls, and penning panels. Accordingly, I will have the department's auditor return to the Taxpayer's office to review the necessary information. If you should 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/12225Q
Rulings of the Tax Commissioner