Which livestock-handling products could qualify for Illinois's farm machinery exemption, and did permanently affixed fencing qualify?

Plain-English summary

Permanently affixed fences and other real-estate improvements were not exempt farm machinery, while qualifying portable livestock equipment could be exempt. The purchaser had to certify that the machinery or equipment was used primarily in production agriculture.

The GIL described machinery as major machines or components contributing to production agriculture and listed cattle and poultry feeders among its examples. It described equipment as a separate device essential to production agriculture.

Portable panels for confinement facilities could qualify even though some specialized equipment can be installed as a realty improvement. Cattle chutes and crowding tubs could also qualify if portable and not sold for attachment to real estate. By contrast, fences, barns, roads, grain bins, silos, and confinement buildings were not exempt farm machinery.

The requester also named gates, catch panels, alleys, bale feeders, corrals, and squeeze chutes. The Department did not issue an item-by-item classification beyond its general categories and examples.

What this means for you

Document the equipment's primary agricultural use and whether it is portable or intended for permanent attachment. A livestock purpose alone does not make ordinary building material or a realty improvement exempt.

Common questions

Q: Were continuous fence panels attached to posts exempt farm machinery?
A: The GIL said fences were real-estate improvements, not exempt farm machinery.

Q: Could portable cattle chutes and crowding tubs qualify?
A: Yes, if used primarily in production agriculture and not sold for permanent attachment.

Citations and references

• 35 ILCS 120/2-5(2)
• 35 ILCS 120/2-35
• 86 Ill. Adm. Code 130.305 and 130.305(a)

Subject

Farm Machinery & Equipment

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0026.pdf

Original ruling text

ST 10-0026-GIL 03/31/2010 FARM MACHINERY & EQUIPMENT
The sale of certain types of tangible personal property used in production agriculture is not
subject to Illinois Retailers’ Occupation Tax and Use Tax. See 35 ILCS 120/2-5(2). (This is a
GIL.)

March 31, 2010

Dear Xxxxx:
This letter is in response to your letter received in this office on October 15, 2009, in which you
request information. The Department issues two types of letter rulings. Private Letter Rulings
(“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning the
application of a tax statute or rule to a particular fact situation. A PLR is binding on the Department,
but only as to the taxpayer who is the subject of the request for ruling and only to the extent the facts
recited in the PLR are correct and complete. Persons seeking PLRs must comply with the
procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code 1200.110. The
purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department regulations or
other sources of information regarding the topic about which they have inquired. A GIL is not a
statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code
1200.120. You may access our website at www.tax.illinois.gov to review regulations, letter rulings
and other types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
We are wanting to update our records and are asking for your assistance. We
manufacture livestock handling equipment. We are being questioned by our customers
as to what should be taxed and what is considered tax exempt. We manufacture
continuous fence panels and gates, which are attached to real property by hanging
them on posts. We also manufacture portable catch panels, crowding tubs, alleys,
portable bale feeders, portable corrals and squeeze chutes. Of the mentioned
equipment, can you please tell us what is considered taxable and what is considered
tax exempt in your state. Our website shows these products if seeing a picture would
be helpful. We are hoping you will be able to specifically address these issues, in writing
by either, fax, e-mail or mail, so we can show our customers. Thank you so much for
your time, we really appreciate your help!

DEPARTMENT’S RESPONSE:
In general, the Illinois Retailers’ Occupation Tax is imposed upon the total gross receipts
received by retailers who make sales of tangible personal property to Illinois end users. Unless the
sales are specifically exempted, such retailers must collect and remit the sales tax. See 86 Ill. Adm.
Code 130.101.

In certain cases, the sale of tangible personal property used in production agriculture is not
subject to Illinois Retailers’ Occupation Tax and Use Tax. Production agriculture is defined under the
Retailers’ Occupation Tax Act as “the raising of or propagation of livestock; crops for sale for human
consumption; crops for livestock consumption; and production seed stock grown for the propagation
of feed grains and the husbandry of animals or for the purpose of providing a food product, including
the husbandry of blood stock as a main source of providing a food product. Production Agriculture
also means animal husbandry, floriculture, aquaculture, horticulture, and viticulture.” See 35 ILCS
120/2-35.
Under 86 Ill. Adm. Code 130.305 “Farm Machinery and Equipment”, Illinois sales tax does not
apply to the sale of machinery and equipment, both new and used and including that manufactured
on special order, used or leased for use primarily in production agriculture or for use in State or
Federal agricultural programs. The sale of individual replacement parts for such machinery and
equipment is also exempt. In order to obtain the exemption, the purchaser must certify to the use
primarily in production agriculture of the equipment or machinery. See Section 130.305(a).
Machinery means major mechanical machines or machine components thereof contributing to
the production agriculture process or used primarily in State or Federal agricultural programs.
Machinery would include such things as tractors, combines, balers, irrigation equipment and cattle
and poultry feeders. Improvements to real estate such as fences, barns, roads, grain bins, silos and
confinement buildings are not considered exempt farm machinery.
Equipment means any independent device or apparatus separate from any machinery, but
essential to production agriculture. Although equipment does not include ordinary building materials
affixed permanently to real estate, certain items of equipment can qualify for the exemption even
though they are installed as realty improvements. Such items of equipment include, but are not
limited to, farrowing crates, gestation stalls, poultry cages, portable panels for confinement facilities
and flooring used in conjunction with waste disposal machinery. In addition, note that other items
such as cattle chutes and crowding tubs may be exempt sales so long as these items are portable
and not sold to be affixed to real estate, inside or outside of farm structures.
I hope this information is helpful. If you require additional information, or want to view any of
the administrative rules mentioned in this letter or other General Information Letters relating to the
subject about which you inquire, please visit our website at www.tax.illinois.gov or contact the
Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk