Does corrugated plastic field tile used to drain farmland qualify for Illinois's farm machinery and equipment sales tax exemption?

Plain-English summary

Someone asked the Department three related questions about buying field tile -- corrugated plastic pipe installed underground to drain farmland -- for use on land in production agriculture: (1) does field tile qualify for the sales tax exemption for farm machinery and equipment; (2) if so, does it matter whether the farmer or a separate landowner entity owns the ground; and (3) if the farming operation and the landowner are separate entities, does it matter whether those entities are related.

The Department's answer resolved all three at once by starting from the exemption's own terms. Illinois's farm machinery and equipment exemption (86 Ill. Adm. Code 130.305) exempts machinery and equipment, new or used, used PRIMARILY (more than 50% of the time) in production agriculture. Ownership of the land where the equipment is used doesn't affect the exemption -- so the landowner-vs-farmer and related-vs-unrelated-entity questions never actually come into play here. What matters instead is whether the item purchased fits the regulation's own definitions of "machinery" or "equipment." And it's here that field tile fails: the regulation specifically lists corrugated plastic pipe and other water-management products used for drainage as things that do NOT count as "equipment" under the exemption. The Department also noted that the statutory definition of "production agriculture" itself doesn't include the creation of drainage facilities among the listed farming activities.

So field tile is taxable -- not because of who owns the land, but because the item itself is expressly excluded from the exemption's definition of qualifying equipment.

What this means for you

Farmers and agricultural landowners buying field tile

Don't assume the general farm machinery exemption covers field tile just because it's used in farming -- the regulation specifically excludes drainage pipe and similar water-management products from the definition of exempt "equipment." Expect to pay sales tax on field tile purchases regardless of how your land ownership is structured.

Multi-entity farm operations (separate landowner and farming entities)

The land-ownership and entity-relationship questions this taxpayer raised don't matter for THIS particular item, since field tile is excluded from the exemption outright. But the underlying principle -- that ownership of the land doesn't itself affect the exemption for qualifying machinery/equipment -- is still useful for other farm purchases that DO meet the "equipment" definition.

Accountants and tax professionals advising agricultural clients

When evaluating whether a farm purchase is exempt, check the item against the regulation's specific "machinery" and "equipment" definitions (86 Ill. Adm. Code 130.305(c)(6)-(7)) rather than relying on a general sense that "anything used on the farm is exempt" -- drainage/water-management products are a named carve-out.

Common questions

Q: Does field tile used to drain farmland qualify for Illinois's farm machinery and equipment exemption?
A: No. The regulation specifically excludes corrugated plastic pipe and other water-management/drainage products from the definition of exempt equipment.

Q: Does it matter who owns the land where the field tile is installed?
A: No. Ownership of the land doesn't affect whether machinery or equipment qualifies for the exemption -- what matters is whether the item itself fits the regulation's definition, and here it doesn't regardless of ownership.

Q: Does it matter whether the farming operation and the landowner are related entities?
A: No, for the same reason -- since field tile doesn't qualify as exempt equipment in the first place, the relationship between the farming and landowning entities doesn't change the outcome.

Q: What activities count as "production agriculture" for this exemption?
A: Things like tilling, planting, irrigating, cultivating, applying chemicals, and harvesting or drying crops. Activities like clearing land, mowing fence rows, creating ponds or drainage facilities, and crop scouting are NOT included.

Q: Can I rely on this letter for my own farm's field tile purchases?
A: No. This is a General Information Letter, not binding on the Department and not tied to any specific taxpayer's facts -- it explains the general rule, but confirm your specific purchase with a tax professional.

Citations and references

Statutes:

• 35 ILCS 120/2 (Retailers' Occupation Tax Act imposition)
• 35 ILCS 105/3 (Use Tax Act imposition)
• 35 ILCS 120/2-35 (definition of "production agriculture")

Regulations:

• 86 Ill. Adm. Code 130.305 (farm machinery and equipment exemption, including the (c)(7)(G) drainage-product carve-out)

Source

• Landing page: Illinois 2025 Sales Tax Letter Rulings
• Original PDF: ST25-0067-GIL.pdf

Original ruling text

ST 25-0067-GIL 12/11/2025 FARM MACHINERY & EQUIPMENT
Corrugated plastic pipe and other water management products used in production
agriculture for drainage are not considered equipment under the farm machinery
and equipment exemption. 86 Ill. Adm. Code 130.305. (This is a GIL).
December 11, 2025
NAME
COMPANY
ADDRESS
Dear NAME:
This letter is in response to your letter dated December 3, 2025, in which you
requested 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 https://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:
I am writing to inquire about the sales tax exemption for agricultural purposes
as outlined in Illinois law. Specifically, I would like clarification on the
following points:
1.
2.

Does field tile installed in the ground for drainage purposes on
land used for production agriculture, qualify for the exemption
for sales tax?
If the purchase of field tile qualifies for the exemption, is this
only for ground that is owned by the individual that is farming
the ground or if the owner is a separate individual or entity does
the landowner qualify if they purchase the field tile? For
example, if the farming operation is in one entity and the farming
operation rents the ground which is held in a separate entity,

COMPANY/NAME
Page 2
December 11, 2025

3.

would tile purchased by the entity that owns the ground qualify
for the exemption?
For question 2, if the land is in a separate entity from the farming
operation does it make a difference if the 2 entities are related?

I appreciate your assistance in this matter and look forward to your prompt
response. Thank you for your attention to these questions.
DEPARTMENT’S RESPONSE:
The Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this State
in the business of selling tangible personal property at retail to purchasers for use or
consumption. 35 ILCS 120/2; 86 Ill. Adm. Code 130.101. Use Tax is imposed on the privilege
of using, in this State, any kind of tangible personal property that is purchased anywhere at
retail from a retailer. 35 ILCS 105/3; 86 Ill. Adm. Code 150.101. These taxes comprise what
is commonly known as “sales tax” in Illinois.
In certain cases, the sale of tangible personal property used in production agriculture
is not subject to Illinois Retailers’ Occupation Tax and Use Tax. 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. See 86 Ill. Adm. Code 130.305. The sale of
individual replacement parts for such machinery and equipment is also exempt. To obtain
the exemption, the purchaser must certify that the equipment or machinery is used primarily
in production agriculture. 86 Ill. Adm. Code 130.305(a). Ownership of the land on which
machinery or equipment will be used does not affect whether the machinery or equipment
qualifies for the exemption. Rather, the exemption hinges on two things: whether the
machinery or equipment will be used primarily, meaning more than 50% of the time, in
production agriculture or in State or Federal agricultural programs, and whether the tangible
personal property in question is considered qualifying farm machinery or equipment. See 86
Ill. Adm. Code 130.305(a), (c).
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,
viticulture, and apiculture.” 35 ILCS 120/2-35; 86 Ill. Adm. Code 130.305(b). Further,
production agriculture, with respect to crops, includes mapping fields, applying farm
chemicals, as well as activities necessary in tilling the soil, planning, irrigating, cultivating,
applying herbicide, insecticide, or fertilizer, as well as harvesting or drying of crops.

COMPANY/NAME
Page 3
December 11, 2025
Activities such as the clearing of land, mowing of fence rows or ditches, creation of ponds
or drainage facilities, scouting crops and tile mapping are not included, nor are the
operations involved in the storing or transporting of crops and produce. See 86 Ill. Adm.
Code 130.305(b)-(c).
Machinery means major mechanical machines or major components thereof
contributing to the production agriculture process or used primarily in State or Federal
agricultural programs, e.g., tractors, combines, balers, augers, and grain dryers. 86 Ill. Adm.
Code 130.305(c)(6). Equipment means any independent device or apparatus separate from
any machinery, but essential to production agriculture. 86 Ill. Adm. Code 130.305(c)(7).
Although field tile installed in the ground for drainage purposes may be used for production
agriculture, it does not qualify for the exemption, because corrugated plastic pipe and other
water management products used in production agriculture for drainage are not considered
equipment under the exemption. 86 Ill. Adm. Code 130.305(c)(7)(G).
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,
Edward Mroczkowski
Associate Counsel
EM:slc