Tax Type
Retail Sales and Use Tax
Description
Feed tanks; Agriculture
Topic
Collection of Delinquent Tax
Date Issued
03-16-1999
March 16, 1999
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This is in reply to your letter in which you request a reconsideration of my prior determination of November 14, 1997.
FACTS
The Taxpayer is a retailer and contractor of animal penning and equipment systems for feed, water, heating and air conditioning. In the department's prior response, it was determined that the sale of feed tanks was properly classified by the auditor as the sale of taxable tangible personal property. The department's position was based on its determination that the feed tanks were not part of an exempt feeding system as provided in Title 23 of the Virginia Administrative Code (VAC)10-210-50(A).
The Taxpayer states that the feed tanks have a capacity of 14 to 18 tons of feed and are refilled an average of every seven days. This contrasts with bins or tanks which are used solely to store feed or grain. Additionally, when the feed in the bins located inside the hog house are depleted to a certain level, switches are automatically activated to replenish the bins with feed from the feed tanks. The Taxpayer contends that the feed tanks are mechanically or automatically activated, are an integral part of an automatic feeding system, and should be removed from the department's audit.
DETERMINATION
Code of Virginia § 58.1-609.2(1) provides an exemption from the sales and use tax for tangible personal property, excluding structural construction materials affixed to real property, necessary for use in agricultural production for market. Title 23 VAC 10-21050 provides that "structural construction materials' include silos, barns and sheds, and storage bins (not portable). The regulation further states that the term "structural construction materials' does not include feeding systems.
A feeding system encompasses a process by which the feed is moved to the interior feed bins. In this instance, the auger drive system is contained within the hog house with the connected tubing and augers attached to the drop boots located at the bottom of the feed tanks. When the feed bins within the hog house need refilling the automatic controls are activated and the auger drive pulls the feed through the tubing. The feed that is moved away from the drop boots is replaced by feed from the tank under the force of gravity; there are no moving parts within the feed tanks.
Based on this information, I must again look to the department's previous ruling in Public Document 97-17 (01/22/97 enclosed in my previous letter), which explains the department's policy. In order for equipment to qualify as a "feeding system,' the system must mechanically or automatically supply feed to livestock. As all of the mechanical or automated function takes place outside of the feed tanks, I must conclude that the tanks themselves are used to hold or store feed and do not mechanically or automatically supply feed to agricultural livestock. Accordingly, I continue to find no basis for classifying the feed tanks as an integral part of a feeding system exempt from the sales and use tax in accordance with the regulations.
The Taxpayer should return its payment for the balance of tax, penalty and interest totaling ***** to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within 30 days from the date of this letter. If payment is not received within that time, interest will continue to accrue on the balance due. 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/13796Q
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This is in reply to your letter in which you request a reconsideration of my prior determination of November 14, 1997.
FACTS
The Taxpayer is a retailer and contractor of animal penning and equipment systems for feed, water, heating and air conditioning. In the department's prior response, it was determined that the sale of feed tanks was properly classified by the auditor as the sale of taxable tangible personal property. The department's position was based on its determination that the feed tanks were not part of an exempt feeding system as provided in Title 23 of the Virginia Administrative Code (VAC)10-210-50(A).
The Taxpayer states that the feed tanks have a capacity of 14 to 18 tons of feed and are refilled an average of every seven days. This contrasts with bins or tanks which are used solely to store feed or grain. Additionally, when the feed in the bins located inside the hog house are depleted to a certain level, switches are automatically activated to replenish the bins with feed from the feed tanks. The Taxpayer contends that the feed tanks are mechanically or automatically activated, are an integral part of an automatic feeding system, and should be removed from the department's audit.
DETERMINATION
Code of Virginia § 58.1-609.2(1) provides an exemption from the sales and use tax for tangible personal property, excluding structural construction materials affixed to real property, necessary for use in agricultural production for market. Title 23 VAC 10-21050 provides that "structural construction materials' include silos, barns and sheds, and storage bins (not portable). The regulation further states that the term "structural construction materials' does not include feeding systems.
A feeding system encompasses a process by which the feed is moved to the interior feed bins. In this instance, the auger drive system is contained within the hog house with the connected tubing and augers attached to the drop boots located at the bottom of the feed tanks. When the feed bins within the hog house need refilling the automatic controls are activated and the auger drive pulls the feed through the tubing. The feed that is moved away from the drop boots is replaced by feed from the tank under the force of gravity; there are no moving parts within the feed tanks.
Based on this information, I must again look to the department's previous ruling in Public Document 97-17 (01/22/97 enclosed in my previous letter), which explains the department's policy. In order for equipment to qualify as a "feeding system,' the system must mechanically or automatically supply feed to livestock. As all of the mechanical or automated function takes place outside of the feed tanks, I must conclude that the tanks themselves are used to hold or store feed and do not mechanically or automatically supply feed to agricultural livestock. Accordingly, I continue to find no basis for classifying the feed tanks as an integral part of a feeding system exempt from the sales and use tax in accordance with the regulations.
The Taxpayer should return its payment for the balance of tax, penalty and interest totaling ***** to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within 30 days from the date of this letter. If payment is not received within that time, interest will continue to accrue on the balance due. 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/13796Q
Rulings of the Tax Commissioner